1. SHORT - TERM NATURAL GAS OUTLOOK National Association of State Energy Officials State Heating Oil and Propane Conference August 7, 2006 Barbara Mariner-Volpe, Energy Information Administration (EIA) Barbara.MarinerVolpe@eia.doe.gov www.eia.doe.gov

2. FACTORS AFFECTING GAS MARKET OUTLOOK Returns to drilling; Recovery from hurricanes Weather Economic Growth Demand robustness/destruction/switching International markets pipeline and lng supplies world oil market/prices

3. Wellhead Natural Gas Prices, 1990-2007 Source: EIA Short-Term Energy Outlook, July 2006 Wellhead Natural Gas Prices, 1990-2007

4. Source: Natural Gas Intelligence Weekly Gas Price Index, Baker-Hughes Weekly US Rig Report. Gas Prices Have Led to Record-High Drilling Rates

5. Hurricanes Katrina and Rita Relative to Offshore Oil and Natural Gas Production Platforms Source: Government Accounting Office

6. Production was reduced 800 Bcf as a result of 2005 Hurricanes Source: MMS; Ocean Warwick Production was reduced 800 Bcf as a result of 2005 Hurricanes

7. Contiguous U.S. LNG Import Terminals Everett Import Facility - Massachusetts 3.5 Billion Cubic Feet Storage Capacity 715 Million Cubic Feet per day Vapor. 100 Million Cubic Feet per day by Truck Lake Charles LNG Import Facility - Louisiana 9 Billion Cubic Feet Capacity 2.1 Billion Cubic Feet per day Vaporization (Expansion complete) Elba Island LNG Import Facility - Georgia 7.3 Billion Cubic Feet Storage Capacity 1.2 Billion Cubic Feet per day Vaporization (Expansion completed) Cove Point LNG Facility - Maryland 7.8 Billion Cubic Feet Storage Capacity 1 Billion Cubic Feet per day Vaporization (Expansion underway) Excelerate Energy Bridge No Storage Capacity 500 Million Cubic Feet per day

8. LNG import facilities in the continental United States had spare capacity through much of 2005 and early 2006 –The spot market is still a small part of the market. –Low utilization rates at lower 48 facilities. –The expected volumes under long-term contracts have not materialized. –New LNG production facilities in Nigeria and Trinidad and Tobago have taken longer than expected. –The new Excelerate Energy Bridge has delivered only two cargoes of LNG to date.

9. Production Recovering From Hurricane Loss in 2005 Sources: EIA, Short-Term Energy Outlook, July 2006 Projections

10. Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006. Imports are Expected to Increase in 2007 LNG Imports: 2005: 630 Bcf 2006: 760 Bcf 2007: 1000 Bcf Imports are Expected to Increase in 2007

11. Natural Gas Stocks Are Well Above Five-Year Average Source: Short-Term Energy Outlook, July 2006 Projection 5-Year Range The blue area represents the minimum and maximum range of historical gas storage levels during the years 2000-2004. The red line represents actual storage from Jan 2004 to May 2006 and projected storage from May 2006 through December 2007

12. Natural Gas Henry Hub Spot Prices (Base Case and 95% Confidence Interval*) *The confidence intervals show +/- 2 standard errors based on the properties of the model. The ranges do not include the effects of major supply disruptions. Sources: History: Natural Gas Week; Projections: Short-Term Energy Outlook, July 2006. Natural Gas Henry Hub Spot Prices (Base Case and 95% Confidence Interval*)

13. Natural Gas Spot & West Texas Intermediate Crude Oil Prices Sources: EIA Short Term Energy Outlook Jnly2006 HistoryForecast WTI Crude Oil Henry Hub Natural Gas

14. ProjectionsHistory Sources: History: EIA; Projections: Short-Term Energy Outlook, July 2006. * Gas used for electricity generation AFTER DECREASING IN 2005 and 2006, GAS CONSUMPTION IS EXPECTED TO INCREASE IN 2007 Annual Percent Change in Total Natural Gas Demand 2005-2.23% 2006-1.64% 20074.22% Change in Natural Gas Consumption (trillion cubic feet) AFTER DECREASING IN 2005 and 2006, GAS CONSUMPTION IS EXPECTED TO INCREASE IN 2007

15. Residential Sector Expenditures During The Heating Season, 2001-2007 (Billion Dollars)

16. Natural Gas Prices to Electric Generators Fell in 2006 Relative to Oil Prices Source: Short-Term Energy Outlook, July 2006. The decline in natural gas prices reflects some easing of market tightness while petroleum product prices have been high because of global market conditions. Delivered price to electric generators for residual fuel oil and natural gas HistoryProjection Residual Fuel Oil Price Natural Gas Price

17. To Sum Up: EIA expects no significant relief in gas market tightness through 2007. To Sum Up:

18. Recent Natural Gas Reports www.eia.doe.gov -Natural Gas Processing: The Crucial Link Between Natural Gas Production and Its Transportation To Market -Overview of the Federal Offshore Royalty Relief Program - Impact of the 2005 Hurricanes on the Natural Gas Industry in the Gulf of Mexico Region Watch for upcoming reports on storage and pipeline infrastructure! Recent Natural Gas Reports