The Outlook for Houston s Economy

1. The Outlook for Houston’s Economy July 24, 2008

2. Houston’s Strategic Location

3. Houston Area Profile 10 Counties 125+ Cities and towns Most Populous Harris County City of Houston Austin 26,123 Brazoria 278,484 5.3% Chambers 28,411 Fort Bend 442,620 8.3% Galveston 277,563 Harris 3,693,050 69.9% Liberty 75,141 Montgomery 378,033 7.2% San Jacinto 24,801 Waller 34,821 Austin 26,123 Brazoria 278,484 5.3% Chambers 28,411 Fort Bend 442,620 8.3% Galveston 277,563 Harris 3,693,050 69.9% Liberty 75,141 Montgomery 378,033 7.2% San Jacinto 24,801 Waller 34,821

4. Metro Area – 10,062 Square Miles Population – 5.6 million Jobs – 2.6 million Gross Area Product - $416.6 Billion Houston Area Profile

5. Houston in Perspective Even if you have lived in Houston all your life, you probably don’t realize how big Houston is.Even if you have lived in Houston all your life, you probably don’t realize how big Houston is.

6. If Houston were a state . . .

7. . . . it would be larger than

8. . . . but somewhat smaller than

9. If Houston were a state . . .

10. . . . it would be more populous than

11. . . . but less populous than

12. If Houston were a state . . .

13. . . . it would have more jobs than

14. . . . but fewer jobs than

15. If Houston were a nation . . .

16. . . . its GDP would be larger than

17. . . . but somewhat smaller than

18. If Houston were a state, it would rank . . . 44th in land mass 19th in population 19th in jobs If it were a sovereign nation, Houston would have the world’s 22nd largest economy.

19. Value of the Dollar Energy Prices U.S. Economy External Drivers of Houston’s Economy Over the past two decades, in which our economy has become more diversified than it was in the early ’80s, Houston has become more responsive to three external economic drivers… The health of the national economy; Energy prices, which continue to be important locally to both upstream and downstream sectors; and The value of the dollar against major foreign currencies.Over the past two decades, in which our economy has become more diversified than it was in the early ’80s, Houston has become more responsive to three external economic drivers… The health of the national economy; Energy prices, which continue to be important locally to both upstream and downstream sectors; and The value of the dollar against major foreign currencies.

20. Value of the Dollar

21. International Houston $53.3 billion in metro exports (2006) Second in nation behind New York MSA 3,000+ companies doing business overseas 476 Houston companies with operations in 122 countries 640 Houston companies with foreign parents 21 foreign banks representing 10 nations 56 of the 100 largest foreign corporations One in five residents foreign-born Nationwide, fewer than one in eight is foreign-born. Rank order of foreign-born population Miami-Fort Lauderdale-Miami Beach – 36.55 Los Angeles-Long Beach-Santa Ana – 34.69 New York-Northern New Jersey-Long Island – 27.89 Houston-Sugar Land-Baytown – 21.45%Nationwide, fewer than one in eight is foreign-born. Rank order of foreign-born population Miami-Fort Lauderdale-Miami Beach – 36.55 Los Angeles-Long Beach-Santa Ana – 34.69 New York-Northern New Jersey-Long Island – 27.89 Houston-Sugar Land-Baytown – 21.45%

22. International Trade -Houston-Galveston Customs District $182.5 billion in foreign trade (’07) 4th in value in the U.S. Up from $57.3 billion in 1997 34 countries with $1+ billion in trade 16 commodities with $1+ billion in trade Oil, industrial equipment, computers, chemicals, plastics, rubber, iron and steel products, copper products, motor vehicles, scientific instruments, beverages, grains Los Angeles, CA $398,938.1 New York, NY $315,798.6 Detroit, MI $235,580.4 Houston/Galveston, T $161,591.7 Laredo, TX $155,577.9 Seattle, WA $145,472.2 Algeria, Angola, Argentina, Belgium, Brazil, Canada, Chile, China, Colombia, Ecuador, Egypt, France, Germany, India, Iraq, Italy, Japan, Kuwait, Mexico, Netherlands, Nigeria, Norway, Peru, Russia, Saudi Arabia, Singapore, South Korea, Spain, Taiwan, Trinidad & Tobago, Turkey, United Arab Emirates, United Kingdom, Venezuela Los Angeles, CA $398,938.1 New York, NY $315,798.6 Detroit, MI $235,580.4 Houston/Galveston, T $161,591.7 Laredo, TX $155,577.9 Seattle, WA $145,472.2 Algeria, Angola, Argentina, Belgium, Brazil, Canada, Chile, China, Colombia, Ecuador, Egypt, France, Germany, India, Iraq, Italy, Japan, Kuwait, Mexico, Netherlands, Nigeria, Norway, Peru, Russia, Saudi Arabia, Singapore, South Korea, Spain, Taiwan, Trinidad & Tobago, Turkey, United Arab Emirates, United Kingdom, Venezuela

23. International Services United States - $851 billion in 2007 21.5% of all U.S. trade Houston Data not available 1,500 local firms providing international services Engineering, construction, transportation, consulting, law, accounting, etc.

24. Location of Consulatesin Texas

25. Value of Dollar AgainstMajor Foreign Currencies Averages of daily figures A weighted average of the foreign exchange value of the U.S. dollar against a subset of the broad index currencies that circulate widely outside the country of issue Major currency index includes the Euro Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden. Averages of daily figures A weighted average of the foreign exchange value of the U.S. dollar against a subset of the broad index currencies that circulate widely outside the country of issue Major currency index includes the Euro Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden.

26. Energy Prices

27. Energy’s Presencein Houston 3,300+ energy-related establishments 500+ exploration and production firms 700+ chemical, plastic, rubber plants and refineries 150+ oil field equipment manufacturers 10 of the 25 largest public exploration firms 12 of the 20 largest oil pipeline companies 15 of the 20 largest gas transmission companies Companies without headquarters in Houston but with significant operations here #1 ExxonMobil = 15,000 with subsidiaries, chemicals (2,750), refining (2,000), pipeline (1,300), development (1,000), exploration (5,800), etc. 1 in 6 of 83,000 emps worldwide #2 Chevron = 7,000 of 59,000 worldwide; 1 in 9 #7 Occidental = 1,400 #11 Hess = 1,000 #14 Kerr McGee = 800 10 of top 25 account for 32% of industries assets Exxon & Chevron account for 41% While the nation’s energy industry has shrunk over past 25 years, it has contacted into Houston. Corporate headquarters, research and development, upstream energy operations now concentrated in Houston We have garnered a larger share of a shrinking national pie Companies without headquarters in Houston but with significant operations here #1 ExxonMobil = 15,000 with subsidiaries, chemicals (2,750), refining (2,000), pipeline (1,300), development (1,000), exploration (5,800), etc. 1 in 6 of 83,000 emps worldwide #2 Chevron = 7,000 of 59,000 worldwide; 1 in 9 #7 Occidental = 1,400 #11 Hess = 1,000 #14 Kerr McGee = 800 10 of top 25 account for 32% of industries assets Exxon & Chevron account for 41% While the nation’s energy industry has shrunk over past 25 years, it has contacted into Houston. Corporate headquarters, research and development, upstream energy operations now concentrated in Houston We have garnered a larger share of a shrinking national pie

28. Economic Base Employment Nation’s energy industry has contacted into Houston. We have a larger share of a shrinking pie. Houston focal point for corporate headquarters, research and development, upstream energy operations Large shares of upstream and downstream insulates Houston from shock due to price volatility. Exploration and refining respond in opposite directions. Buffeted less than metro areas more geared to extraction, i.e. Midland/Odessa or Tulsa.Nation’s energy industry has contacted into Houston. We have a larger share of a shrinking pie. Houston focal point for corporate headquarters, research and development, upstream energy operations Large shares of upstream and downstream insulates Houston from shock due to price volatility. Exploration and refining respond in opposite directions. Buffeted less than metro areas more geared to extraction, i.e. Midland/Odessa or Tulsa.

29. Spot Market Crude OilAverage Annual Price

30. National Economy

31. Unemployment RateHouston & U.S. 1980-2008 1990 recovery – the two have tracked together ever since.1990 recovery – the two have tracked together ever since.

32. U.S. Real GDP andLocal Employment Growth Spot Market Crude Spot Market Natural Gas Oil Price ($/bbl) (Price $/MMBtu) $30.48 $4.33 26.02 3.90 Spot Market Crude Spot Market Natural Gas Oil Price ($/bbl) (Price $/MMBtu) $30.48 $4.33 26.02 3.90

33. U.S. Real GDP National economy will not be a major impetus for Houston’s economy next year. Energy prices and the exchange rate will help keep job growth at around 2.8 percent.National economy will not be a major impetus for Houston’s economy next year. Energy prices and the exchange rate will help keep job growth at around 2.8 percent.

34. The outlook for Houston depends on the . . . The Dollar Energy Prices, and the U.S. Economy And two of the three remain quite strong. In summary . . . Over the past two decades, in which our economy has become more diversified than it was in the early ’80s, Houston has become more responsive to three external economic drivers… The health of the national economy; Energy prices, which continue to be important locally to both upstream and downstream sectors; and The value of the dollar against major foreign currencies.Over the past two decades, in which our economy has become more diversified than it was in the early ’80s, Houston has become more responsive to three external economic drivers… The health of the national economy; Energy prices, which continue to be important locally to both upstream and downstream sectors; and The value of the dollar against major foreign currencies.

37. Business Infrastructure & Key Industries

38. Houston-Area Industry Mix Aerospace Health Care/Biotechnology Electronics and Technology International Business Engineering Chemicals Energy

39. Aerospace Home to NASA’s Johnson Space Center 17,000+ employees (3,000 civil, 14,000 contract) Major contractors: Boeing, Lockheed, Raytheon, SPACEHAB Lead center for design, development and construction of Orion, the new generation crew exploration vehicle

40. Health Care Texas Medical Center - among the world’s largest 31 million gross sq ft physical space 73,300 employees 45 member institutions, including 13 hospitals 11 educational institutions, 22,000 students $9.2 billion capital investment $3.5 billion committed to research from ’00-’04 5.2 million patient visits annually

41. Electronics & Technology 300+ establishments Major employers include: HP, Benchmark, BMC, Foxconn, Texas Instruments Software development centers include Texas Medical Center, JSC, Rice, UH, Texas A&M

42. International Business $53.3 billion in metro exports (2006) $182.5 billion in trade via customs district 3,000 companies doing business overseas 88 consulates 56 of the 100 largest foreign corporations One in five residents foreign-born

43. Engineering 1,900 engineering and architectural firms All 20 U.S. top have Houston offices Operations in every region of the world 67,000 engineers and architects Engineering location quotients Houston - 1.58 U.S. Average - 1.00

44. Chemicals 40% of the U.S. base petrochemical manufacturing capacity, triple that of nearest competitor 400+ chemical plants producing 600+ chemicals 36,000+ employees (refining & chemicals) Comprehensive, developed infrastructure

45. Energy International center for every aspect of the oil and gas industry Nearly 3,000 energy-related establishments: 29.3% of U.S. jobs in oil and gas extraction 13.5% of U.S. jobs in oil field services 12.5% of U.S. jobs in O&G and construction machinery manufacturing

46. Fortune 500 Headquarters Anadarko Petroleum Apache Baker Hughes BJ Services Cameron International CenterPoint Energy ConocoPhillips Continental Airlines El Paso Enbridge Energy Partners Enterprise Products FMC Technologies Frontier Oil Group 1 Automotive Halliburton KBR Knight Marathon Oil National Oilwell Varco Plains All American Pipeline Reliant Energy Smith International Spectra Sysco Targa Resources Waste Management

47. Economic Momentum Metro Population Growth 120,000 new residents per year 840,000 since 2000 Census Metro Employment Growth 100,000 net new jobs ’07 250,000+ jobs past three years Infrastructure Investments Doubling Bayport container capacity Increased international air service

48. Houston’s Long-Term Outlook

49. Population and Employment ForecastHouston MSA 2005-2030 1,000 people per week due to excess births over deaths 1,000 people per week due to excess immigration over out migration 109,000 new residents per year Every hour, Houston adds another 12.5 people, Every day, there are 300 more people living here than the day before. Every week, 2,100 more people. Every month, another 9,000. Every year, another 109,000. While we are at this symposium, Houston has gained another 100 people. 1,000 people per week due to excess births over deaths 1,000 people per week due to excess immigration over out migration 109,000 new residents per year Every hour, Houston adds another 12.5 people, Every day, there are 300 more people living here than the day before. Every week, 2,100 more people. Every month, another 9,000. Every year, another 109,000. While we are at this symposium, Houston has gained another 100 people.

50. Real Gross Area Product 

51. The Outlook for Houston’s Economy July 24, 2008