1. Risk of Infrastructure Failure in the Natural Gas Industry Aileen Alex (aileen.alex@eia.doe.gov) Energy Information Administration U.S. Department of Energy Society for Risk Analysis Annual Meeting December 5, 2000

2. Scope of Presentation n n EIA’s mission n n Importance of natural gas infrastructure n n Infrastructure failure n n Remediation

3. The Energy Information Administration (EIA), created by Congress in 1977, is a statistical agency of the U.S. Department of Energy. We provide policy- independent data, forecasts, and analyses to promote sound policy making, efficient markets, and public understanding regarding energy and its interaction with the economy and the environment. Mission Statement

4. Weekly Market Update EIA's Specialized Natural Gas Geographic Information System (EIAGIS-NG) Natural Gas http://www.eia.doe.gov EIA Web and Natural Gas Products Links

5. Natural Gas Supply and Disposition, 1998

6. Market Trends n n Consumption - 2% growth from ‘99 level (for 1 st 9 months of 2000) n n Storage - stocks are down about 10% from 5 year average n n Supply - production and import levels similar to last year n n Commodity Prices - high and volatile spot price, $6 per mcf wellhead price is over 50% higher than a year ago

7. Outlook for the Short-Term n n Current storage levels are not extraordinarily low but may prove to be tight if gas demand surges n n Domestic and Canadian gas developments should address market tightness (timing is an issue) n n With normal weather, consumption will be higher than last winter n n Expanded import capacity into Northeast & Midwest adds to supplies (Sable Island, Alliance Pipeline) Barring extreme weather, pipeline capacity will be adequate n n Prices will be higher than last winter

8. Major Natural Gas Producing Basins and Associated Transportation Corridors

9. Estimated 2000 Interregional Pipeline Capacity and 1999 Average Flows

10. n n Variables include the start date, end date, location, type, and size of the interruption n n Source is a patchwork of items from the trade press, company web sites, contacts from our data collection efforts, and DOE’s Emergency Operations Center Infrastructure Failure - Data

11. n n Small events that have no impact on supplies n n Events that require supply/demand responses n n Events that result in a shortfall despite supply/demand responses Infrastructure Failure - Types and Frequency

12. El Paso Disruption August 19, 2000

13. The Lower 48 Pipeline System in DELIVER 7 Projects - 2.4 Bcf/d

14. Stylized State Node in DELIVER 13 Projects - 4.1 Bcf/d 7 Projects - 2.4 Bcf/d Transshipment Node Storage Production Liquefied Natural Gas Peak Shaving Imports Exports Firm Residential Firm Ind Int Ind Interruptible Electric Utility Firm Electric Utility Int Com Firm Com Transmission Arcs

15. A major pipeline disruption leads to re- direction of pipeline flows and some delivery curtailments 13 Projects - 4.1 Bcf/d 7 Projects - 2.4 Bcf/d BLUE indicates States experiencing curtailments RED designates pipeline corridors at maximum flow

16. In Summary: Risk of Infrastructure Failure in the Natural Gas Industry n Increasing demand could put additional stress on capacity-constrained areas n Data from a number of sources document a continuum in the type of infrastructure failure and the associated risk n DELIVER, EIA’s natural gas network flow model identifies possible actions industry may take as the “invisible hand” rectifies the situation

17. Supplemental: Why Have Natural Gas Prices Surged in 2000? n n Supply Tightness n n Consumption increases n n Storage Stocks - lower than average n n Oil Price Increases n n Market Perceptions