1. IOGCC 2003 Outlook for Natural Gas & Petroleum Guy Caruso Administrator Energy Information Administration IOGCC Conference Williamsburg, Virginia May 19, 2003 (Corrected August 2003) www.eia.doe.gov

2. IOGCC 2003 Presentation Coverage Petroleum: World Oil Market U.S. Petroleum Stocks Short-Term Outlook Long-Term Outlook Natural Gas: Current Supply Short-Term Outlook Long-Term Outlook

3. IOGCC 2003 WTI Crude Oil Price Expected to Drop Source: Reuters Spot Prices, EIA Short-Term Energy Outlook, May 2003 Proj. History

4. IOGCC 2003 Annual World Oil Demand Growth Sources: EIA; Short-Term Energy Outlook, May 2003 History

5. IOGCC 2003 OPEC Production Highly Uncertain in 2003 History Sources: EIA; Short-Term Energy Outlook, May 2003 Million Barrels per Day

6. IOGCC 2003 Demand Growth Expected in 2003 and 2004 for Most Petroleum Products (Change from Year Ago) Sources: History: EIA; Projections: Short-Term Energy Outlook, May 2003. 0.2%2.4% 0.2%2.4%

7. IOGCC 2003 U.S. Crude Inventory Expected to Remain Close to Minimum Operating Levels Through 2003 Sources: EIA, Short-Term Energy Outlook, May 2003 History Million Barrels

8. IOGCC 2003 Distillate Stocks Could Begin Next Winter on the Low Side Sources: EIA, Short-Term Energy Outlook, May 2003 Proj. History Million Barrels

9. IOGCC 2003 U.S. Propane Stocks Show Strong Winter Draw & Need to Rebuild Propane Lower Operational Inventory Source: EIA Proj. History

10. IOGCC 2003 Near-Term Petroleum Market Outlook World Oil Supply:Global stock build expected World Oil Prices: No near-term collapse expected; U.S. Stocks:Crude, distillate expected to be tight for several months; Slow recovery expected Consumption:U.S. petroleum demand expected to increase 2.3 percent in 2003 and 2004

11. IOGCC 2003 197019801990200020102025 0 5 10 15 20 25 30 Domestic supply Consumption History Projections Net imports 55% 68% Petroleum Supply, Consumption, and Imports, 1970-2025 (million barrels per day)

12. IOGCC 2003 U.S. Petroleum Consumption by Sector, 1990-2025 (million barrels per day) Industrial Electric generators Residential and Commercial Transportation Projections History

13. IOGCC 2003 NATURAL GAS

14. IOGCC 2003 U.S. Natural Gas Price Projection Shows Continued Market Tightness Source: Reuters Spot Prices, EIA Short-Term Energy Outlook, May 2003 Proj. History

15. IOGCC 2003 Factors Driving Natural Gas Prices Prices encourage drilling, but must both fill depleted storage and meet demand Demand expected to fall slightly in 2003 then increase in 2004 –Economic recovery will increase industrial demand in 2004 –High crude price (less fuel switching) –Growing gas-fired electricity capacity Supply picture is mixed –Need increasing completion rates to offset high decline rates of new wells –Expect net imports in 2004 to remain at 2003 level –Storage refill is a question

16. IOGCC 2003 Demand Growth Expected in 2004, But Level Stays Below 2000 Peak Proj. History

17. IOGCC 2003 Projected Natural Gas Demand Increases Stem from Several Factors Sources: Federal Reserve Board, EIA March Short Term Energy Outlook, RDI Corporation (2003 Electricity Capacity)

18. IOGCC 2003 U.S. Natural Gas Production Growth Requires High Rig Growth Sources: EIA, Baker Hughes Gas Rig Counts, Short-Term Energy Outlook, May 2003

19. IOGCC 2003 Natural Gas Storage Source: EIA HistoryProjections Billion Cubic Feet

20. IOGCC 2003 Natural Gas Stocks are Beginning to Recover from Winter Lows

21. IOGCC 2003 Natural Gas Volumes Needed For Selected Storage Refill Targets 2,700 Bcf 3,000 Bcf Volume needed if target is: Working Gas Refill Volumes By Year

22. IOGCC 2003 Near-Term Natural Gas Market Issues Supply:Will supply increase enough to satisfy growth in consumption? Will Boom and bust cycles discourage investment? Weather:The possibility of a hot summer or cold winter would put upward demand pressure on gas markets. Storage:Will refill be adequate for next winter’s demand? Consumption:Will forecasted growth in natural gas consumption be realized? How will consumption be affected by price volatility, fuel competition and service requirements of electric generators? Pipelines: Will necessary capital investments be made to expand delivery capability?

23. IOGCC 2003 Natural Gas Supply, Consumption, and Imports Are Projected to Expand Through 2025 (Trillion cubic feet)

24. IOGCC 2003 U.S. Natural Gas Consumption by Sector, 1990-2025 (trillion cubic feet) History Industrial Electric generators Residential Commercial CNG vehicles Projections