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Energy Buyers’ Conference October 27, 2009

Energy Buyers’ Conference October 27, 2009. US Natural Gas Supply US Natural Gas Demand: Driven By Electric Generation Climate Change: Role of Natural Gas. US Natural Gas Supply Increasing Reliance on Unconventional Production. Shale. Took 10 Years to Grow 8 bcf/d.

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Energy Buyers’ Conference October 27, 2009

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  1. Energy Buyers’ ConferenceOctober 27, 2009

  2. US Natural Gas Supply • US Natural Gas Demand: Driven By Electric Generation • Climate Change: Role of Natural Gas

  3. US Natural Gas SupplyIncreasing Reliance on Unconventional Production Shale Took 10 Years to Grow 8 bcf/d Unconventional: Tight Sands, CBM Offshore Conventional Decline Conventional Declines Offset by Increase in Unconventional production; Shale's forms about 10% of total supply Source: U.S. Energy Information Administration, Annual Energy Outlook 2009

  4. Total U.S. Proved Reserves of Dry Natural Gas Source: U.S. Energy Information Administration, U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves Report 2007

  5. Future Production Growth Contingent On Shale Development Horn River Antrim Utica New Albany Mancos Marcellus Woodford Huron Barnett Pierre Fayetteville Lewis Mature Hayneville Early Development Emerging Eagle Ford

  6. The “Shale” StorySignificant Potential, Significant Uncertainty High Decreasing Uncertainty Marcellus Huron Shale Haynesville Woodford Shale Fayettville Shale Barnett Shale Potential Eagle Ford Shale Traditional Reservoirs Reserve Confidence Low High Estimates of recoverable reserves range from 267 Tcf to 842 Tcf; Major differences arise from reserve estimates of two shale formations: The Marcellus and the Haynesville Source: California Energy Commission; Dominion Estimates

  7. Supply Basins Supply Flows Gas Infrastructure Projects New Pipeline Build Investment Exceeds $25 Billion West Region 5.5 Bcf/d, 2,000 miles in service since 2007 0.6 Bcf/d, 30 miles under construction Northeast Region 4.0 Bcf/d, 600 miles in service since 2007 .8 Bcf/d, 40 miles under construction Gulf Region 26 Bcf/d 3,500 miles in service since 2007 1.4 Bcf/d 130 miles under construction Total 36 Bcf/d, 6,100 miles in service since 2007 2.8 Bcf/d, 190 miles under construction Source: Dominion Estimates

  8. Storage Infrastructure Projects Since 2007, storage capacity has increased by 210 Bcf with another 115 Bcf under construction Total 365 Bcf 210 Bcf Operating since 2007 155 Bcf Under construction West Region 7 Bcf 7 Bcf Operating East Region 113 Bcf 83 Bcf Operating since 2007 30 Bcf Under construction Producing Region 245 Bcf 120 Bcf Operating since 2007 125 Bcf Under construction Operating since 1/1/2007 Under Construction Salt Dome Reservoir Source: Dominion Estimates

  9. US Imports From CanadaResource Issues Lead To Declining Pipe Imports Net Canadian Pipe Exports To US Canadian Import Forecast* 2007 2008 -3.5 bcf/d 2009 2009 import volumes decline 1 bcf/d; 3.5 bcf/d Decline By 2011 Source: 2009 actual data reflects EIA data until May’09; Import forecast reflects NEBs Sep’09 view of Canadian deliverability and demand

  10. LNG Markets LNG Imports To US Global LNG Infrastructure Changes 2007 2009 Liquefaction Regasifaction 2008 Anticipated 2009 increase in LNG volumes has not materialized ‘09 –’12:Regasification: 36 Bcf/d ‘09 –’12: Liquefaction:11 Bcf/d Source: EIA; Dominion estimates

  11. Existing Construction Proposed Developing North American InfrastructureNew & Expanding LNG terminals Cove Point Source: FERC, Dominion Estimates

  12. Global LNG SupplyBalance Contingent On Timely Build Of New Pipe LNG Demand View W/ New Pipeline LNG Demand View W/O New Pipeline Projects Not Under Construction New International Pipeline Capacity Liquefaction * 2009 LNG capacity impacted by supply interruptions in various LNG Exporting nations Source: Dominion estimates

  13. US Natural Gas Demand Electric Has Driven Historical Gas Demand Growth 18% 29% Electric Growing Bcf 37% Industrial Declining 29% Commercial Flat to Declining 22% 21% 14% 13% Residential Flat to Declining Other* * Other includes lease & Plant fuel consumption, pipeline & distribution use & Vehicle fuel consumption Source :EIA

  14. U.S. Natural Gas Demand OutlookGrowth Driven By Electric Generation Demand Growth Driven by Electric Generation Electric Industrial Commercial + Residential Fuel Sources: EIA, Dominion Estimates

  15. Electricity Capacity Growth Fueled By Natural Gas 1990 Capacity = 783 GW 2008 Capacity = 1,100 GW Renew 2% Renew 4% Hydro 9% Hydro 9% Coal 31% Nuclear 14% Nuclear 10% Coal 43% Gas 20% Gas 41% Oil 6% Oil 11% Natural Gas Approaching 50% of total capacity Source: EIA

  16. US Electric Profile Gas Gains Share Although Coal Still Dominates Electric Generation By Fuel 2008 13% 21% % Share of Total Electric Generation % Share of Total Electric Generation 52% 48% Source: EIA

  17. US Electricity GenerationContinued Development of Gas Fired Generation Renewable Renewables Gas Operating (Gas)-Online 2007-2009 24 GW (14 GW CC) Under Construction (Gas) 14.5 GW (12 GW CC) Source: Energy Velocity & Dominion estimates; Units are sized by capacity

  18. US Electricity GenerationCoal Fired Generation Renewable Renewables Gas Operating Online 2007-2009 5 GW Under Construction scheduled on line 2009-10 7 GW Under Construction scheduled on line 2011-12 6 GW Source: Energy Velocity & Dominion estimates; Units are sized by capacity

  19. Greenhouse Gas, Climate Change and Energy Global Warming Climate Control Cap & Trade ????

  20. Greenhouse GasesHow Much Is Up There?

  21. Greenhouse Gases…Or How Little

  22. CO2 & Impact on Climate ChangeThe Believers

  23. CO2 & Impact on Climate Change… vs. The Alternate View

  24. CO2 & Impact on Climate Change

  25. Renewable Portfolio Standards29 States* and D.C. Mandatory, 6 Additional States Have Non-Binding Florida PSC submitted draft RPS to Legislature 1/30/2009 Standard Voluntary Goal *Note: Including Hawaii’s Renewable Standard

  26. Wind Other Renewable Projects Under DevelopmentNew Projects to Meet Renewable Portfolio Standards Source: Energy Velocity

  27. CO2 Intensity (Tons/mwh) Gas Has Half the CO2 Intensity of Coal 12,000 HR 10,000 HR 7,000 HR CC Source: Dominion Estimates

  28. Natural Gas as a Generation FuelContinued Growth in Near Future Change in Generation Development Projects Since June 2006 +62 GW Coal Generation Gas Generation Operating Operating Proposed Net Net Proposed Cancelled Cancelled -35 GW Note: As of July 2009, Energy Velocity & Internal Database, July 2009

  29. Historical “Black eyes” for Natural Gas • Reserves – “We’re running out of gas” • Infrastructure • Price Volatility

  30. What’s Changed • Shale Production: Historic • Infrastructure: More Pipelines • More Storage • LNG Capability • Cleanest Fossil Fuel (By Far!) • Price Volatility: CFTC Oversight / Congressional Actions??

  31. Evolving Risk To Gas Markets 2010 2000 2005 2015 Consumer Behavior Natural Gas Market Uncertainty Increasing Uncertainty + + + Shale/LNG Supply CO2 & RPS Winter Summer New Market Influences + Consumer Behavior Winter Weather US Winter/Summer Weather US Weather Europe Japan Nuclear Outage Hydro Conditions in Europe Russian Natural Gas Supply Liquefaction Outages & Shortfalls Shipping Prices & Interruptions Rising influence of Unconventional Resources Economic Downturn + CO2 Allowance Prices Regulatory Objectives New Generation Build International Carbon Offset Price & Availability +

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