Gas in North America & the Potential Impact on the International Energy Trade

1. Gas in North America & the Potential Impact on the International Energy Trade

2. Analysis of Production History Initial Production & Decline Rates Reserve Adds Cumulative Production Remaining Reserves Field Size Distribution => Yet To Find (YTF) All Content  2003 IHS Energy

3. North American Gas Reserves - 2000 TCF 1200 Mex 1000 800 USA 600 400 200 Can Original Remaining YTF YTF >300 BCF All Content  2003 IHS Energy

4. Gas Reserves vs. Production Remaining Production Remaining Reserves Rate R/P Ratio YTF (tcf) (tcf/yr) (yrs) (tcf) Canada 71.3 7.5 9.5 169.5 USA 197.9 24.1 8.0 401.2 Mexico 50.0 1.7 29.4 58.2 Note: combined USA & Canada R/P is 7.4 without Alaska and Canadian Frontier All Content  2003 IHS Energy

5. Natural Gas Reserves Added to the System TCF Avg. Prod. 35 30 25 20 15 10 5 2001 1990 USA & Canada by Region (Avg. Prod. = 31.5 TCF/Y) All Content  2003 IHS Energy

6. North American Gas in 2000 4 TCF Storage (78 BCFD in/out) 14 BCFD Fuel & Extr. Losses 67 BCFD Gas Delivered to Consumers 91 BCFD Raw Gas Production 120 BCFD Pipeline System 3 BCFD LNG Re-gas Capacity 10 BCFD Alaska USA, Canada & Mexico combined All Content  2003 IHS Energy

7. Existing InterstatePipeline Network Largely Unconstrained Year to Year All Content  2003 IHS Energy

8. Total US Gas Storage 8,241 BCF Total Capacity Little Growth since 1980, Except in Swing Volume

9. Monthly Demand is Variable Annual Swing can be 40 BCFD All Content  2003 IHS Energy

10. US Raw Gas Demand Sensitivity Delta Low Gas Price (relative to Fuel Oil) Power 6.0 BCFD High Gas Price (relative to Fuel Oil) Low Gas Price Industrial 3.3 BCFD High Gas Price Severe Weather Residential 4.0 BCFD Mild Weather 5 15 20 25 30 10 BCFD All Content  2003 IHS Energy

11. US Power & Alt. Fuels Other 5.4 % Oil 8.0 % Coal 37.2 % Hydro 10.6 % Nuclear 11.6 % Gas 27.2 % About 50% of Gas can shift to Oil – for a 150% increase in oil requirements, while 10% of Coal and 40% of Oil can shift to Gas – for a 25% increase in Gas. All Content  2003 IHS Energy

12. Gas Balance by Region Canada Mexico Data for 2001 – some numbers are rounded All Content  2003 IHS Energy

13. Raw Gas Demand All Content  2003 IHS Energy

14. Gas Supply – Current Activity Level BCFD 120 100 80 1990 2020 (Note: Alaska gas production shown as pipeline only) All Content  2003 IHS Energy

15. Gas Supply – Maximum Activity Level BCFD 120 100 80 2020 1990 (Note: Alaska gas production shown as pipeline only) All Content  2003 IHS Energy

16. Supply Demand All Content  2003 IHS Energy

17. Frontier Canada Gas • Reserves (Discovered Undeveloped) • 8.9 tcf in NWT – Mackenzie Delta • 17.7 tcf in East Coast Canada • Labrador, Grand Banks, & Scotian Basins • Depends upon Pipelines for Development • Expect 1-2 BCFD from NWT – Mackenzie Delta • Expect 2-3 BCFD from East Coast Canada • Economic to Develop in $3 - $4.5 Price Range • Consistently Robust Price is Key to Investment • Expected Timing – Late in this Decade at Best All Content  2003 IHS Energy

18. Canadian Export Potential All Content  2003 IHS Energy

19. Alaska Gas Potential • 44.1 TCF Remaining Reserves (41.4 on N. Slope) • Almost all Production Currently Re-injected • Gas in Cook Inlet Exported as LNG to Asia • Gas Pipelines must Traverse Canada • 26.6 TCF Competing Reserves Closer to Market • Long Term Contracts & Gov’t Support before Investment • Free Trade Issues are Rising Between US & Canada • Expected Volume & Timing – 2 to 4 BCFD post 2010 All Content  2003 IHS Energy

20. Mexican Gas All Content  2003 IHS Energy

21. LNG Import Potential 9 BCFD 7 BCFD New 5 BCFD Convert Expand 3 BCFD Existing 1 BCFD 2001 2010 LNG valid in $3.50 - $5.00 Price Range All Content  2003 IHS Energy

22. World Gas Situation Reserves Production 5% of the World’s Gas Reserves Produce 32% of the World’s Gas Production Population Consumption 7% of the World’s Population Consumes 31% of the World’s Gas Production All Content  2003 IHS Energy

23. Gas Price Forecast • Continental gas supply will be marginally adequate with sustained gas prices @ $3.50/ mcf • High decline rates make the system unstable at gas prices below $3.00/mcf • Large supplies of LNG are available at gas prices around $4.50-$5.00/mcf, but normally require longer term agreements All Content  2003 IHS Energy

24. Conclusions • US-Canadian trade relations are critical to continued gas exports to the USA and future development of frontier gas reserves in Alaska, NWT and the East Coast of Canada • Mexico must re-invent itself soon or face rising costs for gas imports from either the USA or via LNG or both • LNG import volumes to the USA will cause a shift in both the world gas trade and the way gas is contracted in the USA (long term contracts similar to European markets) • Logistical constraints of alternative fuels and steep domestic gas decline rates will strain the traditional gas to oil price linkage All Content  2003 IHS Energy

25. Gas in North America & the Potential Impact on the International Energy Trade