1. The State of Natural Gas Supply APPA Meeting March 15,2011 Phoenix, AZ 1 Dave Risser, Marathon Mark Quartermain, Shell

2. A Decade Makes A Difference Then  Shale known but uneconomic  Storage rates regulated  Four LNG ports, not all active  Conventional gas dominates  63-year supply  Incomplete price transparency  Limited means to respond to sudden demand changes Now  Burgeoning production  Market-based storage rates  Eight-plus active LNG ports  Shale gas growing fast  100-year supply  Most transparent fuel market in world  Highly market-responsive supply 2 2

3. Decade of Growing Natural Gas Infrastructure 3

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6. How Shale Produces Natural Gas 6SouSource: Energy Tomorrow 6 6

7. Technology’s role: Why the revolution Traps vs. shales Migrating hydrocarbons Shale Frack Porous and permeable reservoir layer Hydrocarbon Trap Impermeable sealing layer organic rich source layer Fracture stimulation 5,000’ – 15,000’ below the surface

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10. Changes in price Source: CME Group, a CME/Chicago Board of Trade Company Ebb and Flow of Commodity Prices Natural Gas 2002-2010 10

11. Source: CME Group, a CME/Chicago Board of Trade Company Ebb and Flow of Commodity Prices Natural Gas compared to Crude Oil & Coal 2002-2010 11

12. Ebb and Flow of Commodity Prices Natural Gas compared to other Major Commodities 2002-2010 Source: CME Group, a CME/Chicago Board of Trade Company 12

13. Natural Gas Myths MYTH #1 –”There’s not enough natural gas to meet demand from manufacturers and electrics” –U.S. supply up 40 percent since 2006 due to shale – 100-year supply with potential to grow MYTH #2 – “Offshore drilling ban will hurt natural gas customers” –Most GOM gas production located in shallow water and excluded from ban MYTH # 3 – “Heavy-handed regulation of shale could stop its production” –States are heavily invested in shale production – 50,000 jobs created in 2009 in Pennsylvania alone MYTH #4 – “Natural gas is vulnerable to Middle East policies” –Between 1 and 3 percent of U.S. demand is met by LNG imports –75 percent of those imports are from Trinidad & Tobago, remainder from Norway, Algeria, Egypt, Nigeria and Qatar. 13

14. NYT/Radium Issue  New York Times alleges that radium from produced shale water ends up in Pennsylvania drinking water  Producers take all such allegations seriously –PA authorities subsequently published test results showing water meets fed/state radium standards –Producer goal: Recycle 100% produced water—up to 65% now –Support further state testing 14

15. Final Thoughts  Entire gas industry significantly expanded since 2000  Industry takes “Fracking” issue seriously, but believes it can be managed  Competitive market has dampened price volatility  “Dash to Gas” issue overstated  U.S. enjoys most robust, transparent, and reliable natural gas industry in world 15

16. Thank You 16

17. Backup Slides 17

18. 18 Natural Gas Among Cleanest Electric Generation Alternatives Most emissionsMiddle emissionsLeast emissions Source: R.W. Beck Tons /year/thousand households Biomass (Wood) CoalNatural Gas Nuclear & Renewables CO 515.81.50.0 CO2) 0.09,3623,5580.0 NOx 283.40.30.0 Particulate Matter 2.70.90.0 VOCs 5.60.20.0 SO2 2.85.00.20.0 Mercury 0.00.0001trace0.0