David E. Dismukes Center for Energy Studies Louisiana State University The Impacts of the Recent Hurricanes to Energy Infrastructure and Markets September 29, 2005

Pre-Katrina Energy Markets Already on Edge Center for Energy Studies

Factors Affecting Markets Political and Economic Uncertainty, and Weather Center for Energy Studies Iraq post-war insurgency OPEC decisions Nigerian civil strife Venezuelan oil strike Dollar depreciation China’s energy demand growth Weather

Center for Energy Studies Crude Oil Stocks Compared to 5-Year Average (Jan-88 through Sep-05) Source: Energy Information Administration Crude oil stocks are currently 12% above the 5-year average Other: 24.4% Jet Fuel: 9.0% Diesel & Heating Oil: 22.4% Gasoline: 44.2%

World Oil Demand Source: Energy Information Administration Projections World oil demand growth currently surging at relatively high rates and continues to be strong through 2006 Center for Energy Studies China’s demand increases 173 percent from 2003 to 2004

World Oil Spare Production Capacity Source: Energy Information Administration Projections Spare capacity hit its lowest level in 30 years in 2004 and remains fairly low Center for Energy Studies

Center for Energy Studies Gasoline Stocks Compared to 5-Year Average (Jan-95 through Sep-05) Source: Energy Information Administration Gasoline stocks are currently 0.5% below the 5- year average and 0.5% above their 2004 level

Center for Energy Studies US Gulf Coast Conventional Gasoline Regular Wholesale Price, Jan-00 through Jul-05 Source: Energy Information Administration Wholesale gasoline prices were already building over the summer based on high crude prices, tight refining capacity, and strong demand

Center for Energy Studies Crude Oil Spot Price - West Texas Intermediate January July 2005 Note: Gasoline price is US Gulf Coast Conventional Gasoline (Regular) Spot Price Source: Energy Information Administration, Department of Energy Crude spot prices explain gasoline prices; these prices have a correlation coefficient of

Center for Energy Studies US No. 2 Distillate Prices – Average of Sales to End Users, January July 2005 Source: Energy Information Administration Other: 24.4% Jet Fuel: 9.0% Diesel & Heating Oil: 22.4% Gasoline: 44.2%

Center for Energy Studies Source: Energy Information Administration Gasoline stocks are currently 5% above the 5- year average and 6% above their 2004 level Distillate Stocks Compared to 5-Year Average (Jan-88 through Sep-05)

Center for Energy Studies Natural Gas Spot Price – Henry Hub January July 2005 Source: Federal Reserve Bank of St. Louis Hurricane Ivan makes landfall September 16, 2004 Natural gas prices have been increasing steadily since last year’s major hurricane. Big summer time jumps because of high power-related demand.

Center for Energy Studies Utilities Meeting New Record Summer Peak Demand

Center for Energy Studies Wholesale Peak Prices into-Entergy, On Peak Source: Intercontinental Exchange On average, prices were 48% higher during the 2005 summer months (June, July and August) than they were in 2004

Center for Energy Studies Market Clearing Heat Rate into-Entergy, On Peak Source: Intercontinental Exchange On average, the market clearing heat rate was 7% higher during the 2005 summer months (June, July and August) than it was in 2004

Center for Energy Studies Weekly Natural Gas Injections Relative to Prior Year and 5-Year Average Source: Energy Information Administration, Department of Energy For the past 10 weeks, net injections have been 26% below the 5-year average and 37% below 2004 levels

The WORST Case Scenario: Hurricane Katrina Center for Energy Studies

Center for Energy Studies Hurricane Katrina Storm Track Katrina’s path

Center for Energy Studies Hurricanes Ivan, Dennis and Katrina

Center for Energy Studies Katrina at Louisiana Landfall Katrina’s path Platforms Louisiana state offshore wells

Center for Energy Studies Hurricane Katrina Wind Fields

Immediate Energy Infrastructure Impacts of Katrina Center for Energy Studies

Center for Energy Studies Platforms/Structures Impacted by Katrina

Center for Energy Studies Shut-in Statistics Crude Oil Source: Minerals Management Service

Center for Energy Studies Katrina versus Other Major Hurricanes Shut-in Oil Production Source: Minerals Management Service

Center for Energy Studies Katrina versus Other Major Hurricanes - Shut-in Oil Production as a Percent of Daily GOM Production Source: Minerals Management Service

Center for Energy Studies Refineries Impacted by Katrina Gulf Coast, Port Arthur and Lake Charles Source: Energy Information Administration, Department of Energy

Center for Energy Studies Refineries Shutdown Due to Katrina

Center for Energy Studies Crude and Product Pipelines Impacted by Katrina

Center for Energy Studies Critical Terminals Impacted by Katrina

Center for Energy Studies Critical Electricity Transmission Lines Impacted by Katrina

Center for Energy Studies Critical Terminals and the Power-Pipeline Infrastructure

Source: American Petroleum Institute Center for Energy Studies Gasoline Price Increases August 30, 2005 to September 6, < > 50 Colonial / Plantation Pipeline Systems Mid-AtlanticNortheastSouth AtlanticMidwestSouthMountainWestUS Regional Changes in Gasoline Prices (cents per gallon)

Center for Energy Studies Impacts to Refineries outside Gulf Coast Midwest Refiners Supplied by Capline Pipeline Source: Energy Information Administration, Department of Energy

Center for Energy Studies Total Immediate Refinery Impact LA/MS/AL Gulf Coast Refiners (reduced runs and shutdowns) 2,528 thousand bbls/day 15% of US operating capacity Port Arthur/Lake Charles (reduced runs and supply loss) 775 thousand bbls/day 5% of US operating capacity Total Refinery Impact 4,931 thousand bbls/day 30% of US operating capacity Remaining US Operating Capacity 12,075 thousand bbls/day 70% of US operating capacity Source: Energy Information Administration, Department of Energy Midwest (reduced runs – supplied by Capline Pipeline) 1,628 thousand bbls/day 10% of US operating capacity

Center for Energy Studies Shut-in Statistics Natural Gas Source: Minerals Management Service

Center for Energy Studies Katrina versus Other Major Hurricanes Shut-in Natural Gas Production Source: Minerals Management Service

Center for Energy Studies Katrina versus Other Major Hurricanes - Shut-in Gas Production as a Percent of Daily GOM Production Source: Minerals Management Service

Center for Energy Studies Number of Natural Gas Processing Facilities Out Source: Energy Information Administration, Department of Energy

Center for Energy Studies Gas, Product & Crude Pipeline Curtailments Source: Energy Information Administration, Department of Energy

Center for Energy Studies Capline – Colonial - Plantation

Center for Energy Studies Power Outages Number of Customers Source: Energy Information Administration, Department of Energy

Center for Energy Studies Power Outages Generating Stations

Center for Energy Studies Power Outages Generating Stations – Entergy Patterson Source: Entergy

Center for Energy Studies Power Outages Substation Damage Source: Entergy

Center for Energy Studies Petrochemical Facilities Impacted by Katrina

Center for Energy Studies Industrial Facilities Impacted by Katrina

Center for Energy Studies Shell Mars Tension Leg Platform Source: Shell.com

Center for Energy Studies Ocean Warwick Dauphin Island, AL

Center for Energy Studies Venice Port, Supply & Crew Bases

Center for Energy Studies Chevron Refinery Pascagoula, MS

Then, Along Comes Rita Center for Energy Studies

Center for Energy Studies Platforms/Structures Impacted by Rita

Center for Energy Studies Rig Damage Assessment Source: Rigzone.com

Center for Energy Studies Shut-in Statistics Crude Oil Note: 1 cumulative production is as of August 26, 2005 Source: Minerals Management Service

Center for Energy Studies Rita versus Other Major Hurricanes Shut-in Oil Production Source: Minerals Management Service

Center for Energy Studies Rita versus Other Major Hurricanes - Shut-in Oil Production as a Percent of Daily GOM Production Source: Minerals Management Service

Center for Energy Studies Refineries Impacted by Rita Port Arthur, Houston and Corpus Christi Source: Energy Information Administration, Department of Energy

Center for Energy Studies Refineries Shutdown Due to Rita

Center for Energy Studies Product & Crude Pipeline Curtailments Source: Energy Information Administration, Department of Energy

Center for Energy Studies Crude and Product Pipelines Impacted by Rita

Center for Energy Studies Impacts from Rita to Refineries outside Gulf Coast Refiners Supplied by Gulf Area Pipelines Source: Energy Information Administration, Department of Energy

Center for Energy Studies Total Immediate Refinery Impact Port Arthur/Lake Charles (shutdowns and damaged facilities) 1,715 thousand bbls/day 10% of US operating capacity Houston/Texas City (shutdowns and damaged facilities) 2,292 thousand bbls/day 13.5% of US operating capacity Total Refinery Impact 5,052 thousand bbls/day 30% of US operating capacity Remaining US Operating Capacity 11,954 thousand bbls/day 70% of US operating capacity Source: Energy Information Administration, Department of Energy Corpus Christi (shutdown and reduced runs) 706 thousand bbls/day 4% of US operating capacity Midwest (reduced runs from supply loss) 338 thousand bbls/day 2% of US operating capacity

Center for Energy Studies Shut-in Statistics Natural Gas Note: 1 cumulative production is as of August 26, 2005 Source: Minerals Management Service

Center for Energy Studies Rita versus Other Major Hurricanes Shut-in Natural Gas Production Source: Minerals Management Service

Center for Energy Studies Rita versus Other Major Hurricanes - Shut-in Gas Production as a Percent of Daily GOM Production Source: Minerals Management Service

Center for Energy Studies Number of Natural Gas Processing Facilities Out Source: Energy Information Administration, Department of Energy

Center for Energy Studies Gas Processing Facilities Impacted by Rita

Center for Energy Studies Natural Gas Pipeline Curtailments Source: Energy Information Administration, Department of Energy

Center for Energy Studies Power Outages - Number of Customers as of September 26, 2005 Note: Arkansas and Mississippi outages are for Entergy customers only. Source: Energy Information Administration, Department of Energy

Center for Energy Studies Petrochemical Facilities Impacted by Rita

Source: Energy Information Administration Center for Energy Studies Immediate Impact in Crude Oil Prices West Texas Intermediate Katrina Landfall: August 29, 2005 Rita Landfall: September 24, 2005

Source: Energy Information Administration Center for Energy Studies Immediate Impact in Gasoline Wholesale Prices US Gulf Coast Conventional Gasoline Regular Katrina Landfall: August 29, 2005 Rita Landfall: September 24, 2005

Immediate Impact in Natural Gas Prices Henry Hub Source: Energy Information Administration Center for Energy Studies Katrina Landfall: August 29, 2005 Rita Landfall: September 24, 2005

Center for Energy Studies Henry Hub, September 25, 2005 Source: LIOGA

Center for Energy Studies Entergy Transmission Source: Entergy.com

Center for Energy Studies Chevron Typhoon TLP

Longer Run Impacts of Hurricanes Katrina and Rita Center for Energy Studies

Estimated Decrease in Refining Production from both Katrina and Rita Center for Energy Studies Refining capacity should return to normal soon, but there will be a stubborn five percent of total capacity that has unknown return date – not good for tight markets Source: Assumes 95 percent capacity factor; assumes 4 week recovery for facilities damaged by Rita.

Cumulative Refining Production Center for Energy Studies Source: Assumes 95 percent capacity factor Impacts of Katrina result in a loss of million barrels, or 4 percent of total production, by the end of the year. Impacts of Katrina and Rita result in a loss of million barrels, or 6 percent of total, by the end of the year.

Cumulative Refining Production Impacts on Products Center for Energy Studies Source: Assumes 95 percent capacity factor

Center for Energy Studies Decrease in Drilling Activity During the Post-Hurricane Period Katrina makes landfall August 26, 2005 Katrina makes landfall August 26, 2005 Louisiana Offshore Rig CountRemaining GOM Rig Count

Center for Energy Studies Note: Assuming recovery of 2,685 barrels per day for 150 days. Estimated Return of Existing Crude Production If crude production returns follow path similar to Ivan, we could still be experiencing production shut-ins for some time.

Forecast versus New Forecast Crude Oil Center for Energy Studies Note: Assuming recovery of bcf per day for 150 days.

Center for Energy Studies Note: Assuming recovery of bcf per day for 150 days. Estimated Return of Existing Natural Gas Production If crude production returns follow path similar to Ivan, we could still be experiencing production shut-ins for some time.

Center for Energy Studies Note: Assuming recovery of bcf per day for 150 days. Forecast versus New Forecast Natural Gas

Estimated Decrease in Natural Gas Storage Center for Energy Studies

Economic Impact – Decreased Mineral Revenues Due to Decreases in State Production (Katrina Only) Center for Energy Studies

Preliminary Estimate of Louisiana Severance Revenue Impacts (Katrina and Rita) Center for Energy Studies

State of Current Markets Center for Energy Studies

Center for Energy Studies Crude Oil Stocks Source: Energy Information Administration

Center for Energy Studies Distillate Stocks Source: Energy Information Administration

Center for Energy Studies Gasoline Stocks Source: Energy Information Administration

Center for Energy Studies NYMEX Monthly Natural Gas Futures Prices

Center for Energy Studies Questions, Comments, & Discussion