Energy Crisis and Solutions for California Oilfield Producers

1. Energy Crisis and Solutions for California Oilfield Producers Gas Supply and Demand and Future Outlook Presented by William J. Keese, Chairman California Energy Commission March 15, 2001

2. Overview • Current California conditions • Natural gas fundamentals • Wrap up

3. 21st Century has Hit California With a Bang • High gasoline prices • High electric prices • High natural gas prices

4. Natural Gas Prices

5. U.S. Gas Prices and Drilling Rigs

6. Power Plants in California

7. 1999 California Natural Gas Demand by Sector MMcfd

8. 1999 California Natural Gas Supply: Production Region Shares

9. California Natural Gas Production • 2000 Proved Reserves - Onshore and Offshore • Estimated 3.46 Trillion cubic feet • Estimated 2000 reserve/production ratio: 10.3 years

10. 1999 California Oil and Natural Gas Production Activity • Well Activity • 1,752 drilled for production and injection • 1,379 completed wells capable of production • 125 wells redrilled to side-track or deepen • 1,307 plugged and abandoned wells no longer available for production or injection

11. 2010 Forecasted California Natural Gas Demand MMcfd

12. 2010 California Natural Gas Supply: Production Region Shares

14. Interstate Pipeline Capacity to California

15. New Interstate Pipelines and Expansions to California • Kern River Expansion • 2002: 125 MMcfd, additional expansion expected • PG&E - GTN Expansion • 2003: 200 MMcfd • Questar Southern Trails Pipeline • Late 2001: 90 MMcfd • El Paso’s All American Pipeline Conversion • Planning stage: 100 MMcfd • North Baja Pipeline • 2003: 500 MMcfd

16. Liquefied Natural Gas Potential • Not yet a viable option for California • Current imports on the East Coast • Operating Terminals • Distrigas’ Everett, MA LNG complex - 535 MMcfd • CMS Trunkline LNG Co., Lake Charles, LA - 200 MMcfd • Scheduled to reopen in next 12-24 months • Williams Gas Pipeline, Cove Point, MD -1,000 MMcfd • Southern LNG’s Elba Island, GA complex-330 MMcfd • Potential in Mexico • El Paso and Phillips Petroleum are in preliminary talks to bring LNG from Australia to the West Coast in 2005

17. Issues for TEOR Production • High natural gas price • Too costly to produce steam for injection • Excess water from not producing steam • Water has to be cleaned and disposed • High electricity prices • Electric pumping of oil is costly • New wells in Kern County now need CEQA review • Result: Higher barriers or costs to production

18. Opportunities for Producers • Marginal wells • Wells not producing in past five years will not have the Division of Oil, Gas and Geothermal assessment for 10 years • Orphan wells • Producers can test an orphan well for 90 days • Firm can decline ownership of well within 90 days without liability concerns • Firm can take ownership after 90 days and accept liability

19. Opportunities for Producers • Explore the 'Stripper Well Consortium' program to obtain funding for specific well improvement projects in the range of $50K - $150$. www.energy.psu.edu/swc • CEC joint venture to assist small California oil and gas producers • Aimed to reduce electricity consumption and lower field operational cost

20. Thank you, Any Questions?