1. 1 Is there LNG in California’s Future? “LNG: When East Meets West” Zeus Development Conference Long Beach, CA by David Maul Manager, Natural Gas Office California Energy Commission April 23, 2003

2. 2 Today’s Talk California’s current natural gas situation California’s future natural gas assessment California energy policies LNG’s special energy role in California Unresolved issues

3. 3 California Energy Commission State’s energy policy agency Power plant siting Conducts long term energy supply, demand, and price forecasting Determines implications on gas pipeline capacity Determines need for new infrastructure Considers risks to reliable service and reasonable, stable prices

4. 4 Long term gas supply, demand, and price forecasts Modeling includes US, Canada, and Mexico –Natural gas supply basins –Natural gas demand centers –Pipelines to connect Considerations –Huge amount of proposed electric generation in and about California –Energy efficiency

5. 5 Western North American natural gas pipelines 1ANG 2El Paso 3Kern River 4Mojave 5Northwest 6NOVA 7Paiute 8PG&E 9PG&E GT-NW 10SoCalGas 11SDG&E 12Transwestern 13Tuscarora 14Southern Trails ( Not to scale)

6. 6 California’s Current NG Situation Core demand is moderate Electrical generation (EG) demand is significant Supplies are adequate Infrastructure is adequate Prices have risen Market prices are volatile

7. 7 New Power Plants in California Since 2000 energy crisis: –Many new NG power plants 2701 MW added in 2001 2449 MW added in 2002 5020 MW being added in 2003-2004 4506 MW permitted but not constructed –Additional renewable projects added

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11. 11 California’s Future NG Assessment Core demand is moderate EG demand is increasing and driving overall demand Western US EG demand is increasing faster Supplies are adequate in near term Prices are increasing New infrastructure is needed

12. 12 Historical and Forecasted CA Gas Demand June 2002 Forecast

13. 13 Need for New Infrastructure Results of CEC staff 2002 analysis show: –N. Cal needs more pipeline capacity or LNG by 2007 to meet physical need –S. Cal meets minimum physical criteria through 2012 –Prices will rise –CEC needs to further investigate risk management Current gas financial markets are highly volatile

14. 14 CEC Staff Updating its Analysis Conducting a 2003 - 2013 assessment Preliminary results show higher prices Initiating risk analysis work Including an LNG scenario Report due out in late May Workshop scheduled for mid June Visit CEC webpage at www.energy.ca.gov –Look for IEPR

15. 15 California’s Energy Policies Draft Energy Action Plan Natural Gas Market Price Spike Report Governor’s Natural Gas Working Group Integrated Energy Policy Report

16. 16 Draft Energy Action Plan Issued jointly by CEC, CPUC, CPA Focuses on electricity and natural gas Goal: “Ensure that adequate, reliable, and reasonably-priced electrical power and natural gas supplies, including prudent reserves, are achieved and provided through policies, strategies, and actions that are cost-effective and environmentally sound for California’s consumers and taxpayers.”

17. 17 Draft Energy Action Plan CEC/CPUC/CPA commit to: –“License and, where appropriate, fund construction of new energy facilities that are consistent with the reliability, economic, public health, and environmental needs of the state.” –“Partner with governmental and other groups in western North America to pursue commonly held energy goals.”

18. 18 Draft Energy Action Plan Actions to be undertaken now for NG: –“Evaluate the net benefits of increasing the state’s natural gas supply options, such as liquefied natural gas, –Support electric utilities and gas distribution companies entering into longer term contracts as a hedge against volatile and high spot market prices.”

19. 19 Natural Gas Market Price Spike Report Governor directed CEC and CPUC to investigate rapid increase in spot market prices Report prepared jointly in 2 weeks Recommended further actions: –“Consider a statewide policy on importing LNG and possible construction of LNG receiving terminals in California.”

20. 20 Governor’s Natural Gas Working Group All state agencies involved with natural gas Meet biweekly Monitor markets and NG situation Provide early warning for action by Governor Improved communication/coordination Examining LNG

21. 21 Integrated Energy Policy Report CEC energy policy proceeding Examining all energy sectors Close examination of electricity and NG market issues Numerous workshops/hearings this year CEC website: www.energy.ca.gov

22. 22 LNG’s Energy Benefits for California LNG projects offer: –additional supply, similar to a gas field –delivery capacity, similar to a pipeline –additional storage, similar to a local facility –supply diversity, gas from a new, price- competitive source –fuel diversity, liquid fuel for transportation

23. 23 Unresolved Issues No overall California policy on LNG LNG facilities must meet environmental quality and public health and safety requirements LNG facility permitting processes unclear Energy security issues have not been reconciled yet

24. 24 Summary California needs additional gas by 2007 to meet physical needs California could benefit from additional lower priced gas earlier to meet economic needs LNG offers special energy opportunities for California Significant unresolved issues remain

25. 25 Thank you for listening. Any Questions?

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27. 27 PG&E demand and natural gas demand receiving capacity June 2002 Forecast

28. 28 SoCal Gas natural gas demand and receiving capacity June 2002 Forecast

29. 29 California natural gas supply by source June 2002 Forecast