Energy Information Administration’s Outlook On Gas Pricing and Storage Deliverability

1. Energy Information Administration’s Outlook On Gas Pricing and Storage Deliverability Infocast Conference Boston, Massachusetts June 17, 2003 William Trapmann Energy Information Administration www.eia.doe.gov

2. Presentation Coverage • Natural Gas Supply • Natural Gas Markets in the Northeast • Natural Gas Storage • Status of Working Gas Storage • U.S. Natural Gas Markets • Natural Gas Market Outlook

3. NATURAL GAS SUPPLY

4. Producing Basins AndRegional Natural Gas Flows

5. Gas Rigs Tend To Follow Spot Prices With A Lag Source: Natural Gas Intelligence Weekly Gas Price Index, Baker-Hughes Weekly US Rig Report.

6. Most Production Flows from Wells Not More Than Three Years Old Source: Energy Information Administration.

7. NATURAL GAS MARKETS IN THE NORTHEAST

8. Interstate Natural Gas Pipeline Capabilities in the Northeast Maine New Brunswick Quebec 445 MMcf/d Ontario 52 MMcf/d Vermont 178 MMcf/d New Hampshire 1,368 MMcf/d 1,011 MMcf/d 628 MMcf/d New York Massachusetts Capacity 1,059 MMcf/d 3,077 MMcf/d (in Million Cubic Feet per Day) Pennsylvania 2,041 MMcf/d Rhode Island 6,000 3,495 MMcf/d 4,800 4,495 MMcf/d 3,600 2,400 5,157 MMcf/d Connecticut 1,200 0 1,800 MMcf/d New Jersey 2,556 MMcf/d Total Capacity Into the Region – 12,567 MMcf/d Note: Capacity is as-of December 2002. MMcf/d = Million cubic feet per day Source: Energy Information Administration, GasTran Gas Transportation System, Gas Pipeline Capacity Database.

9. Underground Natural Gas Storage in the Northeast 2002 State Number Working Gas Withdrawal Name of Sites Capacity Capability ----------- ---------- ----------------- ------------- Maine New York 23 98 Bcf 1,682 MMcf/d Pennsylvania 59 390 7,570 Total 82 488 9,252 Vermont New York Bcf = Billion cubic feet; MMcf/d = Million cubic feet per day New Hampshire Massachusetts Pennsylvania Connecticut Rhode Island New Jersey Source: Energy Information Administration, GasTran Gas Transportation System, Underground Natural Gas Storage Database.

10. Liquefied Natural Gas Storage Facilities in the Northeast 2002 State Sites Capacity Sendout Rate Connecticut 3 2.5 Bcf 127 MMcf/d Maine 1 .1 14 Maine Massachusetts 21 9.4 985 New Hampshire 3 .1 18 New Hampshire New Jersey 8 4.7 624 New York 3 3.4 261 Pennsylvania 3 4.5 634 Rhode Island 3 2.5 261 Vermont Total 46 27.2 2,924 New York Bcf = Billion cubic feet; MMcf/d = Million cubic feet per day Everett LNG Import Facility 3.5 Billion Cubic Feet Capacity 450 Million Cubic Feet per day Deliverability 100 Million Cubic Feet per day by Truck Massachusetts Satellite Facilities Peaking Facilities Pennsylvania LNG Import Site Connecticut Rhode Island New Jersey Note: Satellite facilities must have LNG trucked to the site since they do not have liquefaction capabilities. Source: Energy Information Administration, GasTran Gas Transportation System, LNG Facilities Database.

11. Northeast Natural Gas Consumption by Customer Sector - 2001 Total Deliveries to Consumers – 3,102 Bcf 2001 Peak Monthly Delivery – 388 Bcf (January) Annual – 23 Bcf (2001) vs 19 Bcf (1998) 2001 Peak Month – 2.8 Bcf (January) Annual - 8 Bcf (2001) vs 8 Bcf (1998) 2001 Peak Month – 1.2 Bcf (January) Annual – 95 Bcf (2001) vs 5.7 Bcf (1998) 2001 Peak Month - .87 Bcf (January) Annual – 364 Bcf (2001) vs 359 Bcf (1998) 2001 Peak Month - 44 Bcf (January) Annual – 1,171 Bcf (2001) vs 1,232 Bcf (1998) 2001 Peak Month - 134 Bcf (January) Annual – 96 Bcf (2001) vs 131 Bcf (1998) 2001 Peak Month - 10 Bcf (March) Consumption by Customer Sector - 2001 (Total Volume – Billion Cubic Feet (Bcf)) Annual – 146 Bcf (2001) vs 132 Bcf (1998) 2001 Peak Month - 17 Bcf (January) Annual – 635 Bcf (2001) vs 644 Bcf (1998) 2001 Peak Month - 96 Bcf (January) Annual - 564 Bcf (2001) vs 680 (1998) 2001 Peak Month - 82 Bcf (January) Sources: Energy Information Administration: Annual - Form EIA-176, “Annual Report of Natural and Supplemental Gas Supply and Disposition;”Monthly – Form EIA-857, “Monthly Report of Natural Gas Purchases and Deliveries to Consumers.” (2001 Preliminary).

12. NATURAL GAS STORAGE

13. Natural Gas Storage Attributes • Critical supply component during heating season • Helps satisfy sudden shifts in demand and supply • Accommodates stable production rates • Supports pipeline operations and hub services

14. Storage Supplies Help Satisfy Demand Peaks

15. Natural Gas Storage in the United States Underground Storage • Depleted reservoirs in oil and/or gas fields • Aquifers • Salt cavern formations (high deliverability) Additional Storage • Liquefied natural gas (LNG) facilities • Propane and CNG • Pipeline line pack

16. Total Capacity Working Gas in Storage Working Gas Capacity Base Gas Storage Capacity and Volumes January 1999-January 2003 Natural Gas In Underground Storage

17. Natural Gas Storage Facilities in the Lower 48 States West Region East Region Depleted Fields Salt Caverns Aquifers LNG Storage Facilities Producing Region Note: Aquifers in the Producing Region have been displayed as depleted oil/gas fields to preserve data confidentiality.

18. STATUS OF WORKING GAS STORAGE

19. Natural Gas Stocks are Beginning to Recover from Winter Lows

20. Assuming Average Refill Rates, Natural Gas in Storage on Nov. 1 Will be Low Relative to Recent History Estimate: 2,617 Bcf Average Refill Rate 1998-2002 Working Gas in Storage (billion cubic feet) Level as of June 6, 2003 1,324 Bcf Storage Stocks as of November 1 Source: EIA data and estimate assuming average refill rate from June 7 – Oct. 31.

21. Maximum Refill 1998-2002 Average Refill 1998-2002 Working Gas Stock Projections 3,004 Bcf 2,617 Bcf 1,324 Bcf in Underground Storage as of June 6, 2003

22. Natural Gas Storage • Injections and withdrawals from storage occur throughout the year. • Inventories at the start of the past 5 winters have been 2.7-3.2 Tcf . • With an average refill rate for the remainder of the refill season, Nov 1 stocks will exceed 2.6 Tcf • EIA projects that the refill rate this summer will be slightly higher than the average, yielding almost 2.9 Tcf in storage on Nov 1, 2003.

23. U.S. NATURAL GAS MARKETS

24. High Natural Gas Prices in Winter 2002-2003 • High crude prices • Cold temperatures in major gas markets • Relatively low storage volumes • Weak production • Low net imports

25. This Winter Was Colder Than Last Winter(Cumulative Heating Degree Days, Heating Season 2002-2003) Source: Energy Information Administration, derived from Heating Degree Day Monitoring, National Climatic Center.

26. Natural Gas Net Imports in 2002 Declined for the First Time Since 1986 U.S. Natural Gas Net Imports

27. NATURAL GAS MARKET OUTLOOK

28. Short-Term Outlook: Natural Gas • Consumption expected to be essentially flat in 2003 and 2004 • Prices encourage supply activities, but supplies must fill depleted storage and meet current demand • Supply picture is mixed • Need increasing completion rates to offset decline from producing wells • Expect net imports to remain fairly steady through 2004 • Storage refill is a question

29. Demand Growth Expected To Be Flat in 2003 and 2004 History Proj.

30. Natural Gas Spot Prices Will Decline FromThe Level of the First Quarter of 2003 (Base Case and 95% Confidence Interval) Sources: History: Natural Gas Week; Projections: Short-Term Energy Outlook,June 2003.

31. Natural Gas Market Outlook Summary • Demand is projected to be flat through 2004 • Domestic production is expected to expand with rising gas rigs drilling • Net imports are projected to remain generally stable • Storage refill will depend on weather and other market conditions this summer

32. Near-Term Natural Gas Market Issues • Supply:Will supply increase enough to satisfy potential growth in demand? 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?