1. Overview & Status for: International Association of Energy Economists Alaska Chapter October 25, 2001 Anchorage, Alaska

2. September 2001 2 Team Objectives Assess the economic viability of a pipeline project Focus on route evaluation – Cost and environmental considerations Prepare sufficient information to support potential permit applications Safe and Environmentally Responsible

3. September 2001 3 Miles 0510152025 TAPS Northstar Endicott Prudhoe Bay Kuparuk Milne Point NPRA ANWR Coastal Plain (1002 Area) Colville River LJL (April, 1997) Pt. Thomson Developments Major Discoveries Alpine Liberty Badami Location Map Alaska Gas Resources & Major Producers North Slope discovered resource = 35 Tcf Prudhoe Bay – 8 Bcf/d of production, currently reinjected into reservoir Ultimate ANS resource estimates ~100 Tcf Alaska Gas Owners ExxonMobil Phillips State Others BP

4. September 2001 4 Preliminary Comparison of Two Pipeline Routes Southern Route 2,139miles Northern Route 1,803miles Pipeline Design Basis Diameter 52” High pressure 2,500 psi Buried line Throughput 4-6 bcf/d Note: Mackenzie Valley Pipeline 1,140miles

5. September 2001 5 Route Attribute Elements 1.Economics 2.Revenues 3.Gas Access 4.Jobs 5.Environment 6.Safety 7.Timing

6. September 2001 6 Total Project Cost ($bn) (4.0bcf/d from Alaska, 0.8bcf/d from MD) South North Gas Treatment Plant 2.6 2.7 Alaska to Alberta 9.0 6.8 Alberta to Market 5.3 5.3 NGL Extraction Facilities 0.3 0.3 Alaska Project Total 17.2 15.1 Mackenzie Delta Line 2.3 0.9 Pt.Thomson Development 1.3 1.3 Notional Toll ($/mcf) (Alaska North Slope to US L-48 Market) South North Gas Treatment Plant 0.300.32 Alaska to Alberta 1.310.97 Alberta to Market 0.780.78 Total 2.39 2.07 All number in US dollars Price Assumptions Based after EIA, ~$3.00/mmbtu, escalating with inflation. View 2000 price spike as an anomaly. Total Governments * Owners Project Discounted Cumulative Cash Flows ($bn) (at 15% discount rate) 200020052010201520202025203020352040 -10.0 -8.0 -6.0 -4.0 -2.0 0 2.0 4.0 6.0 8.0 10.0 EIA Price Scenario North South North South Owner’s investment not repaid. Additional risk from price and cost uncertainty. Team is still working to improve economics by lowering costs. * Includes Mackenzie Delta Benefits Element 1: Economics Neither Route Is Economic

7. September 2001 7 Element 1: Economics Gas Price History and Forecast Demand growth encouraging Highly volatile commodity Intense market competition Successful project must have competitive cost of supply 199019931996199920022005200820112014 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 Henry Hub Gas Price ($/mmbtu) Average ‘90-‘95 $1.80/mmbtu Average ‘96-‘99 $2.27/mmbtu Average ‘00-‘01 $4.09/mmbtu Based after EIA, 2001

8. September 2001 8 Total Undiscounted Revenue South $66.2bn, MoD $22.7bn $1.7bn $23.7bn State of Alaska US L-48 States US Federal $6.9bn Canadian Provinces $11.2bn Canada Federal Total Undiscounted Revenue North $68.0bn, MoD $24.1bn $1.7bn $24.2 $6.7bn $11.3bn State of Alaska US L-48 States US Federal Canadian Provinces Canada Federal Element 2: Revenues Substantial Government Revenues Regardless of Route Assumptions: Both routes include MD upstream and midstream revenues.

9. September 2001 9 Total State of Alaska RevenuesDifference in Alaska State Revenues North vs. South 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 020406080100120 ANS Developed Reserves (Tcf) Delta Cum. Revenues ($bn, MoD) Current Project Element 2: Revenues State of Alaska Revenues 0.0 5.0 10.0 15.0 20.0 25.0 SouthNorth Total Revenues ($bn, MoD) Royalty Severance Tax Ad Valorem Tax Income Tax 4.0

10. September 2001 10 U.S. Regulatory Enabling Legislation Creates market-driven, expedited regulatory process for any viable project(s) –Subject to FERC regulation; fair and reasonable terms and conditions; open access –Subject to all environmental laws and regulations; 18 month EIS completion Producer participation in Senate Energy Committee testimony on October 2 Senate Energy Bill now going straight to floor –Language developed by producers in current mark up Creates best possible structure for successful Alaska Pipeline Project

11. September 2001 11 Way Forward Feasibility study underway – expect engineering to be completed by year-end. Update of project economics / route attribution comparison to follow Then open season decision to be made: –Project economic? –Enabling legislation been enacted? –State fiscal certainty progressed? –Route selected?