1. E-COMMERCE STANDARDS: A STRATEGIC IMPERATIVE Ian Anderson Electronic Commerce for Oil & Gas London, January 28, 1999

2. January 28, 1999E-Commerce Standards: A Strategic Imperative2 OUTLINE +Focus on Natural Gas: 6Concepts applicable to oil (and other products and services). +Background. +The Standards: 6Business Practices. 6Electronic Commerce. +Accomplishments. +Q & A.

3. January 28, 1999E-Commerce Standards: A Strategic Imperative3 GasEDI (1) +Sponsored by CAPP, SEPAC, CGA, CEPA: 6Canadian Association of Petroleum Producers (CAPP) and Small Explorers and Producers Association of Canada (SEPAC) - represent Canadas natural gas and crude oil producers. 6Canadian Gas Association (CGA) and Canadian Energy Pipeline Association (CEPA) - represent Canadas natural gas transporters and distributors.

4. January 28, 1999E-Commerce Standards: A Strategic Imperative4 GasEDI (2) +Mission: 6Promote the development and implementation of North American business and electronic information standards to improve the competitive position of natural gas. !We believe all participants in the gas industry - including end use consumers - are best served by a vibrant, efficient, industry - from well head to burner tip.

5. January 28, 1999E-Commerce Standards: A Strategic Imperative5 GISB +Gas Industry Standards Board (US). +Mission: 6Develop business and electronic commerce standards for the gas industry: !Applicable across North America. !Participation by Canadians and Mexicans.

6. January 28, 1999E-Commerce Standards: A Strategic Imperative6 FERC (1) +Federal Energy Regulatory Commission (US). +Public Conference - Sep 21 95: 6Too many differences in basic services. 6Difficult and labour intensive to manage gas.

7. January 28, 1999E-Commerce Standards: A Strategic Imperative7 FERC (2) 6Examples: !Company managing energy - coal, heavy fuel, electricity, gas: customer effort to manage gas = 6 times the customer effort to manage equivalent amount of other energy types. !Nomination: jInstruction to transport gas from point A to point B. jOnly 21 data elements required (Apr 90 industry consensus report). jWithout standards - over 80 different data elements required to transport gas across daisy chain of pipelines.

8. January 28, 1999E-Commerce Standards: A Strategic Imperative8 US GAS: 1967-1997

9. January 28, 1999E-Commerce Standards: A Strategic Imperative9 STANDARDS SUMMARY (1) +GISB has developed business practice and electronic commerce standards. 6US interstate pipelines must implement most standards: !FERC mandate. 6Optional, but often being implemented: !Other US pipelines. !Other gas industry participants. !Canada. !Mexico.

10. January 28, 1999E-Commerce Standards: A Strategic Imperative10 STANDARDS SUMMARY (2) +Transacting in Energy. +Gas Day. +Nominations. +Flowing Gas / Invoicing. +Capacity Release. +Electronic Delivery Mechanisms. +Internet. +Contracts.

11. January 28, 1999E-Commerce Standards: A Strategic Imperative11 TRANSACTING IN ENERGY +Standard units of measure: 6US: Dekatherms (Dth). !1 Dth = 1,000,000 Btu(IT). 6Canada: Gigajoules (GJ). !1 Dth = 1.055056 GJ. 6Mexico: Gigacalories (GC). !1 Dth = 0.251996 GC. 6Btu(IT) = International Btu (British Thermal Unit).

12. January 28, 1999E-Commerce Standards: A Strategic Imperative12 GAS DAY +GISB standard gas day: 6Beginning and ending at 9:00 am central clock time. 6Winter: Standard time. 6Summer: Daylight time.

13. January 28, 1999E-Commerce Standards: A Strategic Imperative13 NOMINATIONS (1)

14. January 28, 1999E-Commerce Standards: A Strategic Imperative14 NOMINATIONS (2) +Firm Evening and Firm Intra-Day 1 Nominations have priority over (can bump) scheduled interruptible service. +Firm Intra-Day 2 Nominations do not have priority over scheduled service.

15. January 28, 1999E-Commerce Standards: A Strategic Imperative15 NOMINATIONS (3) +Use electronic transactions: 6The gas industry can only meet the GISB nomination / confirmation schedule through the use of standard electronic transactions. 6Fax is not electronic, because an inbound fax is not automatically computer processable.

16. January 28, 1999E-Commerce Standards: A Strategic Imperative16 NOMINATIONS (4) +Concerns: 6Feasibility of concurrently nominating on many pipelines. This concern relates to both human issues (dealing with a multitude of last minute decisions) and communication issues. 6Pipelines ability to complete all tasks necessary to provide timely shipper scheduled quantity statements.

17. January 28, 1999E-Commerce Standards: A Strategic Imperative17 FLOWING GAS / INVOICING (1) +GISB Standards: 6Measurements by the 5th business day. 6Allocations before or with the invoice. 6Invoice by the 9th business day. 6Settlement not standardized (anti-trust issue). 6Prior period adjustments limited to 6 months. !Settle within 3 more months.

18. January 28, 1999E-Commerce Standards: A Strategic Imperative18 FLOWING GAS / INVOICING (2) +Clarify the predetermined allocation methodologies currently in place at interconnects between pipelines to ensure the best choices are in place. +Implement OBAs (Operational Balancing Agreements) at more interconnects.

19. January 28, 1999E-Commerce Standards: A Strategic Imperative19 FLOWING GAS / INVOICING (3) +Gas production: 6US: !Well owners produce gas. !Production per individual owner instructions. !Unmarketed gas stays in the ground. 6Canada: !Wells produce gas. !Production in working interest shares. !Unmarketed gas carried with marketed gas.

20. January 28, 1999E-Commerce Standards: A Strategic Imperative20 CAPACITY RELEASE +US: 6FERC: !Pipeline spare capacity released and bid for using complex, open, offer / bid process. +Canada: 6National Energy Board, Feb 2 95: !Secondary market … working well without regulatory oversight … continue to evolve according to the needs of the parties involved ….

21. January 28, 1999E-Commerce Standards: A Strategic Imperative21 ELECTRONIC DELIVERY MECHANISMS +GISBs standard formats for transferring electronic documents: 6EDI = Electronic Data Interchange. +Data transfer over the internet.

22. January 28, 1999E-Commerce Standards: A Strategic Imperative22 INTERNET (1) +Already in use for data gathering and sharing. +Communication layer for transferring EDI documents. 6EDI = computer application to computer application exchange of ordinary business documents (purchase orders, invoices, etc) in a public standard electronic format.

23. January 28, 1999E-Commerce Standards: A Strategic Imperative23 INTERNET (2) +FERC regulated pipelines must migrate from proprietary EBBs (Electronic Bulletin Boards) to the internet. +Developing electronic contracting - expect to implement in early 2000.

24. January 28, 1999E-Commerce Standards: A Strategic Imperative24 CONTRACTS (1) +Not mandated by FERC. +Developing usage momentum. +Trading Partner Agreement (EDI): 6On paper, signed in ink. 6Parties agree to be obligated to perform per electronic documents.

25. January 28, 1999E-Commerce Standards: A Strategic Imperative25 CONTRACTS (2) +Short Term Gas Purchase / Sale Agreement: 6On paper, signed in ink. 6Standardized contract designed for gas purchase / sale up to 1 month. 6Actually being used for gas purchase / sale up to 1 year. 6Could be used as basis for electronic contract.

26. January 28, 1999E-Commerce Standards: A Strategic Imperative26 CONTRACTS (3) +Electronic Contracting: 6Under development. 6Initially intended for executing proforma gas transportation contracts - largely non-negotiable. 6Digital signature. 6Usage expected early 2000.

27. January 28, 1999E-Commerce Standards: A Strategic Imperative27 ACCOMPLISHMENTS +North America wide consensus on: 6Over 200 business practice standards. 6EDI Implementation Guides. +Extensive training. +Adoption - both per FERC mandate and voluntary.

28. January 28, 1999E-Commerce Standards: A Strategic Imperative28 SUMMARY +Focus on Natural Gas: 6Concepts applicable to oil (and other products and services). +Background. +The Standards: 6Business Practices. 6Electronic Commerce. +Accomplishments.

29. January 28, 1999E-Commerce Standards: A Strategic Imperative29 Q & A +Questions?

30. E-COMMERCE STANDARDS: A STRATEGIC IMPERATIVE Ian Anderson Principal Consultant - I. S. Anderson & Associates Limited Business Reengineering Electronic Commerce EDI 100 - 1039 - 17 Avenue SW, Calgary, Alberta, Canada T2T 0B2 Tel: 403-243-1079 Fax: 403-243-0546 http://www.isanderson.comhttp://www.isanderson.com Cell: 403-860-5941 Email: ian@isanderson.comian@isanderson.com