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Pacific Northwest Waterways Association Mid-Year Meeting Salishan Lodge June 22, 2006

Pacific Northwest Natural Gas Market and LNG Developments Dan Kirschner, Executive Director, Northwest Gas Association. Pacific Northwest Waterways Association Mid-Year Meeting Salishan Lodge June 22, 2006. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org

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Pacific Northwest Waterways Association Mid-Year Meeting Salishan Lodge June 22, 2006

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  1. Pacific Northwest Natural Gas Market and LNG DevelopmentsDan Kirschner, Executive Director, Northwest Gas Association Pacific Northwest Waterways Association Mid-Year Meeting Salishan Lodge June 22, 2006

  2. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. Intermountain Gas Co. NW Natural Puget Sound Energy Duke Energy Gas Transmission Terasen Gas TransCanada’s GTN System Williams NW Pipeline

  3. Gas a Vital Part of NW Energy Scene

  4. Recent Gas Demand *2005 BC estimated from preliminary StatCan data

  5. Proportion of Gas Demand by Sector - 2005

  6. Gas Demand Forecast(2006-07 through 2010-11)

  7. Demand Forecast

  8. Demand Forecast by Sector

  9. The Good News (but for how long?) Source: Platts Gas Daily and EIA Natural Gas Weekly Update

  10. Price Drivers: Production Source: Baker Hughes, 06/09/2006

  11. Price Drivers: Storage (Supply) Source: EIA, 06/15/2006 11

  12. Recent Gas Prices Source: EIA

  13. The Price of Oil Has an Impact… Source: EIA

  14. As Does the Weather Hurricane Katrina landfall August 29, 2005 Hurricane Rita landfall September 24, 2005 Source: Energy Information Administration

  15. Productive CapacitySource: Energy and Environmental Analysis, Inc. Bubble Tight Market

  16. Production per Rig - mcf/day 2500 2000 1500 mcf/day 1000 500 0 Jul-03 Jul-88 Jul-93 Jul-98 Apr-02 Oct-89 Apr-92 Oct-94 Apr-97 Oct-99 Jan-01 Jun-01 Jan-91 Jun-91 Jan-96 Jun-96 Feb-03 Mar-90 Feb-93 Mar-95 Feb-98 Mar-00 Aug-00 Sep-02 Dec-88 Aug-90 Sep-92 Dec-93 Aug-95 Sep-97 Dec-98 Nov-01 Nov-91 Nov-96 May-89 May-94 May-99 Production per Rig Source: EIA, Baker Hughes Rotary Rig Counts

  17. Western CanadianSedimentary Basin Station 2 AECO Sumas Kingsgate Stanfield Malin Opal Rockies Basins Northwest Gas Supply

  18. WCSB Production

  19. Rockies Production

  20. Supplies Flow to Demand

  21. Growing Demand, Slowing Supply

  22. Why LNG? • Large reserves with little or no local market. • Pipelines to markets impractical (Source: BP Statistical Review of World Energy, 2005)

  23. LNG enables long distance shipping • Liquefying natural gas: • Super-chilling it to -260°F • Reduces volume of gas 620 times • LNG weighs less than one-half that of water

  24. It Must Make Economic Sense Total = $2.00 - $3.70/MMBtu (Source: Center for Energy Economics)

  25. Existing/Under Construction Proposed Pacific Basin Sources of LNG Kenai Sakhalin Qatar Iran Abu Dhabi Oman Yemen Brunei Arun Donggi Bintulu Tangguh Bontang Darwin LNG Bolivia LNG Sunrise Scarborough Peru LNG Browse Basin Gorgon Australia NWS 5 Australia NWS 1-4 Investment in new LNG liquefaction capacity is growing

  26. NorthwestLNG Proposals • PortWestward LNG •  Skipanon LNG •  Jordan Cove LNG • Northern Star LNG • Tansy Point • Kitimat LNG • WestPac Terminal • Challenges include: • Local acceptance • Regulatory/Permitting • Commercial considerations: • economics/financing • takeaway infrastructure • worldwide competition • supplier commitment

  27. A Bit About Process… • FERC is lead agency; consults w/state agencies • USCG serves as subject matter expert for maritime safety and security for EIS • USCG validates Waterways Suitability Analysis (WSA) • Provide USCG and Maritime Stakeholder input • USCG issues Letter of Recommendation (LOR)

  28. Waterways Suitability Analysis • Risk-based analysis: • Identify risks that arise from introduction of LNG operations into port • What can go wrong? • What is the likelihood? • How severe are consequences? • The goals: • Understand individual risks in terms of: • probabilities, threats, vulnerabilities, consequences • Use info to develop effective risk management strategies

  29. WSA Includes: • Transportation through the vessel’s arrival in US waters to LNG facility • Navigation and environmental safety issues • Safety and security issues that might affect entire port; detailed review of specific points of concern

  30. Conclusions • Gas a critical part of NW energy mix • NW demand is growing • Gas-fired generation continues to be important • Volatile commodity prices: tight supply/demand balance • Production struggling to match growing demand • NW part of integrated N. American market • Increased LNG imports a vital component of energy portfolio; will help dampen volatility • LNG imports must make economic sense • Regulatory processes are comprehensive and rigorous • NW projects making progress; still a ways to go

  31. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. Intermountain Gas Co. NW Natural Puget Sound Energy Duke Energy Gas Transmission Terasen Gas TransCanada’s GTN System Williams NW Pipeline

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