U.S. Weekly Natural Gas Storage Data United States – European Meetings to Discuss Oil and Natural Gas Data September 28, 2007 William Trapmann Natural Gas Analysis Team Leader

Presentation Topics The Role of Storage in the Natural Gas Market Natural Gas Storage EIA’s Weekly Natural Gas Storage Data Project Major Issues Related to WNGSR WNGSR Performance The Role of Weekly Natural Gas Storage DataThe Role of Weekly Natural Gas Storage Data Weekly Natural Gas Storage Data IssuesWeekly Natural Gas Storage Data Issues

The Role of Storage in the Natural Gas Market

U.S. Gas Industry at a Glance Industry SegmentParticipants Regulatory Authority Producers Gathering Systems 6,800 U.S. oil/ gas companies; 21 majors; 300,000+ wells 130+ systems Price decontrol completed by 1/1/93 under the Wellhead Decontrol Act State Regulatory Commissions or FERC Interstate Pipelines 90 majors, 109+ total FERC Intrastate Pipelines 100+ State Regulatory Commissions Local Gas Utilities 1,500 State Regulatory Commissions Marketers about 300 Unregulated Natural Gas Storage Underground: 133 operators (390+ Fields); LNG storage 71 operators (roughly 100 sites) FERC if part of interstate system, State Regulatory Commissions for others Gas Consumers Residential 63.6 million Commercial 5.2 million Industrial 205,000 Electric Generators: 670 plants gas fired Interstate commerce – FERC Intrastate commerce – State Commissions

Natural Gas Data Surveys and the Industry EIA-912 Weekly Underground Storage Report EIA-914 EIA-895

Source: Energy Information Administration, GasTran Gas Transportation Information System Producing Basins and Regional Natural Gas Flows

Electric Power Gas Demand Varies Seasonally During the Year (Billion Cubic Feet per Month) Source: Monthly Energy Review, August 2007 Residential Industrial Commercial

Monthly Consumption, Production and Net Imports Consumption Net Imports Production Consumption Total Tcf Daily Bcf/d Projection Source: EIA, Short-Term Energy Outlook, August 2007 History

Natural Gas Storage

Storage Reservoirs by Type

Total Capacity: maximum volume of gas that can be stored in a storage facility, determined by the physical characteristics of the reservoir. Base Gas: volume of gas needed as permanent inventory in a storage reservoir to maintain adequate pressure and deliverability rates throughout the withdrawal season. Working Gas: volume of gas in the reservoir above the designated level of the base gas. It is gas that is temporarily stored in a reservoir with the purpose of being withdrawn at a future date. Storage Terms

Note: Aquifers in the Producing Region have been displayed as depleted oil/gas fields to preserve data confidentiality. Underground Natural Gas Storage Facilities in the Lower 48 States

Critical supply component during heating season Smoothes domestic production of gas throughout the year by enabling storage refill during periods of low demand Withdrawals help satisfy sudden increases in demand or supply declines caused by weather or other factors Support pipeline and hub operations—e.g., peak day service and load balancing Natural Gas Storage

Current Natural Gas Stocks Remain Above The 5-Year Range Working Natural Gas Stocks Note: The shaded area represents the minimum and maximum values from Source: Energy Information Administration, Weekly Natural Gas Storage Report.

EIA’s Weekly Natural Gas Storage Project

EIA Weekly Storage Survey Objective: to provide weekly estimates of natural gas stocks for the Nation and by region Form EIA-912, “Weekly Underground Natural Gas Storage Report” Response is mandatory under Federal law Collect working gas in storage by company by three regions Sample survey – currently about 65 respondents drawn from EIA-191 census survey population Sample drawn such that the standard error would be no more than 5 percent for any region or the total Volume coverage is at least 90 percent in each region Forms due by 5:00 p.m. Monday for previous Friday Primary dissemination via Internet posting

Development Project Milestones October 2001: Project begins November: Working meetings with AGA December: Submit clearance package to OMB January 2002: OMB clearance Feb/Mar: System development and testing Sample design and selection Notification of respondents April: Operational testing May:Initial data release Methodology Report Comparative Assessment Report

WNGSR Project Chronology May 9, 2002: First release of WNGSR May-July 2002: Revisions occur in 5 of the first 10 weeks November 2002: Federal Register notice (FRN) to announce revision policy October 2003: Methodology change July 2004: New sample November 2004: Large revision (the perfect storm) April 2005: FRN to announce new revision policy May 2005: New revision policy takes effect August 2005: Methodology change Sept 2007: WNGSR accepted by OMB as a Principal Economic Indicator for 2008 Sept 2007: EIA announces redesign and new release procedure for WNGSR

Major Issues Related to WNGSR Security issues Operational procedures and issues Release time and day Revision policy Data quality

Security Is a Dominant Factor The storage data are highly sensitive given their timely nature and commercial value All compilation and processing are conducted in a secure work room Data collection – data are collected under the Confidential Information Protection and Statistical Efficiency Act (CIPSEA) No disclosure of individual company identification or data – except with consent of the companies Standard distribution is limited to team members only Conforms to policies established by the Office of Management and Budget for Principal Economic Indicators

Operational Procedures and Issues Focus on Timeliness, Quality, and Security Survey forms are collected via FAX or (written copies are essential) Initial quality checks on data Estimation meeting on the day prior to release – includes rigorous quality checks Non-response by sample companies – imputation Questionable/suspect data are identified for followup Estimates are established on the day prior to release Pre-release status check Release – secure delivery of files for posting

Release Time and Day Were Established To Accommodate Various Interests Standard release: 10:30 a.m. on Thursday Occurs during floor trading on the New York Mercantile Exchange (NYMEX) Before the end of spot trading for the day (approximately 12:30 p.m. Eastern Time)

Public Comments Were Received Prior To Establishing the Revision Policy Revisions to previously published data may occur for various reasons including resubmissions from respondents and late submissions from respondents Changes that total 7 billion cubic feet (Bcf) [about 200 million cubic meters (mcm)] or more for any region or total Lower 48 States trigger a revision All revisions to date have been reported in the next scheduled release Changes of 10 Bcf [about 283 mcm] or more can trigger an out-of-cycle release – this policy became effective on May 19, 2005

Data Quality Is an Ongoing Concern The weekly natural gas storage data are subjected to considerable scrutiny by EIA – submissions are evaluated with respect to individual company trends and relative to other companies Other relevant information such as weather reports and expectations of others are considered also EIA continually monitors survey performance Weekly, monthly, and annual storage data are compared with respect to anomalous patterns or inconsistent results—e.g., stocks exceeding capacity

WNGSR Performance

Natural Gas Stocks Are Estimated With A Relatively Small Sampling Error Note: Coefficient of variation equals the ratio of the standard error divided by the mean. Source: Energy Information Administration, Weekly Natural Gas Storage Report. MonthMeanStandard Error Coefficient of Variation July % August % September % October % November % December % January % February % March % April % May % June %

EIA Monthly Storage Survey Form EIA-191, “Monthly Underground Gas Storage Report” Census survey, not a sample Reported by storage operators Almost 400 individual underground storage fields Approximately 2-month lag from report month to publication Provides the population frame for the weekly sample

Volume Differences Between Weekly and Monthly Natural Gas Storage Data Source: EIA, Natural Gas Division.

Percentage Differences Between the Weekly and Monthly Natural Gas Storage Data Source: EIA, Natural Gas Division.

The Role of Weekly Natural Gas Storage Data

Weekly Natural Gas Storage Data Serves A Number of Roles in the Industry Storage operators and others in the industry rely on the weekly data to understand the status of this critical supply element Industry analysts use weekly storage as an indicator of relative supply and demand Financial traders use the information to establish their trading positions

Weekly Natural Gas Storage Data Can Have a Significant Impact on Trading Source: INO.com EIA released the WNGSR at 10:30

Weekly Natural Gas Storage Data Issues

EIA Provides as Much Data As Possible Without Disclosing Company Data Release schedule Methodology documentation Historical data: weekly stock data and 5-year statistics Revision policy Comparison of weekly and monthly data Background information on storage

How “Full” Is Storage? Not a Straightforward Concept There are at least three ways to measure full, and each yields a different value One can measure full as working gas stocks as a percentage of – Design capacity – Working gas capacity – Historical maxima EIA does not report a measure of “full” EIA has published a report with a “conservative” estimate of useable storage capacity

Methodology: Estimation and Quality Issues Extrapolation method: the sum of working gas reported by respondents multiplied by a scale factor Refined extrapolation method (Oct-03): similar to the first method, but certain respondent companies were not included in the extrapolation Model-based method (Aug-05): Non-respondent companies are estimated on an individual company basis based on recent monthly stocks and individual company measure of variation The methodology documentation is located at: