Investor Profile

1
Investor Profile
2
AMERICAS NATURAL GASMARKET CHALLENGE 2007

• Christopher B. McGill
• Managing Director, Policy Analysis
• American Gas Association

3
Shut-In Federal Offshore Gulf Natural Gas
Production(EIA, April 2006)
Bcf/d
/Mcf
Forecast
Henry Hub Price (right axis)
Shut In Production (left axis)
Trading on Henry Hub suspended from 9/23
10/6 Bcf/d Billion cubic feet per day, /Mcf
Dollars per thousand cubic feet
4
Natural Gas ConsumptionJanuary 2006 and Prior
5-Yr. Avg. (Bcf/d)

• Consuming Sector 5-Yr. Avg. Jan 06
• Residential 29.637 22.986
• Commercial 15.695 13.068
• Industrial 21.867 18.704
• Power Generation 11.929 9.934
• Lease and Plant 3.056 2.972
• Pipeline/Distribution 2.301 1.777
• Transportation 0.050 0.066
• Total Natural Gas 84.535 69.507
• Consumed (-17.8)

Source Energy Information Administration
5
Natural Gas Supply SourcesActuals and Prior
5-Yr. Avg. for January 2006 (Bcf/d)

• Supply Source Actuals
  5-Yr. Avg.
• L-48 Production 47.575 50.984
• Alaska Production 1.322 1.271
• Pipeline Imports Can. 9.067 10.142
• Pipeline Imports LNG 1.185 0.743
• Underground Storage 8.194 22.032
• Pipeline Exports Mex. -0.899 -0.514
• Total Supply 66.444 84.658

Source Energy Information Administration
6
Natural Gas Heating BillsLower for All Regions
2006-07
Source Energy Information Administration, Winter
Fuels Outlook, October 2006.
7
Population-Weighted Heating Degree Days Daily
Average Basis
Winter Season by Week
Source National Oceanic and Atmospheric
Administration, National Weather Service
http//www.cpc.ncep.noaa.gov/products/analysis
_monitoring/cdus/degree_days/
8
Natural Gas Consumption(Bcf per day)
Source Bentek Energy LLC, Energy Market
Fundamentals, January 29, 2007.
9
Daily Industrial Consumption January 2007 and
Avg. Daily Industrial Consumption January 2001-05
Sources Bentek Energy LLC, January 31, 2007 and
Energy Information Administration.
10
Residential/Commercial Daily Consumption 2007and
Average Daily Res/Com Cons. 2001-2005
Sources Bentek Energy LLC, January 31, 2007 and
Energy Information Administration.
11
Daily Natural Gas to Power Generation January
2007and Average for January 2001-2005
Sources Bentek Energy LLC, January 31, 2007 and
Energy Information Administration.
12
WORKING GAS IN UNDERGROUND STORAGE COMPARED WITH
5-YEAR RANGE

Source Energy Information Administration
13
Underground Storage as Supply Source 2006
Compared to Prior Five-Year Average
Source Energy Information Administration
14
Daily Net Storage Withdrawals January 2007
andAvg. January Daily Storage Withdrawals
2001-2005
Sources Bentek Energy LLC, January 31, 2007 and
Energy Information Administration.
15
Average Lower 48 Production 2006 Compared to
Prior Five-Year Average
Sources Lippman Consulting, Inc. and Energy
Information Administration
16
Lower-48 Daily Production January 2007and
Average Daily Production January 2001-2005
Sources Bentek Energy LLC, January 31, 2007 and
Energy Information Administration.
17
U.S. NATURAL GAS-DIRECTED DRILLING ACTIVITY
Source Short-Term Energy Outlook, Oct. 2005
18
U.S. ANNUAL PERCENTAGE OF GAS VS. OIL RIGS
OPERATING
Source Lippman Consulting, Inc.
19
LOWER-48 DRY GAS PRODUCTION VS.DRY GAS
PRODUCTIVE CAPACITY
Source Energy and Environmental Analysis, Inc.
20
Daily Natural Gas Imports from Canada January
2007and Average January Imports January 2001-2005
Sources Bentek Energy LLC, January 31, 2007 and
Energy Information Administration.
21
CANADADRY GAS PRODUCTION AND U.S. PIPELINE
EXPORTS
Source Lippman Consulting, Inc.
22
EXISTING AND PROPOSED NORTH AMERICAN LNG TERMINALS
23
Daily Imports LNG January 2007and Average Daily
Imports LNG January 2001-2005
Sources Bentek Energy LLC, January 31, 2007 and
Energy Information Administration.
24
EXISTING NORTH AMERICAN IMPORT CAPACITY
Total Current Capacity 5.2 Bcfd Capacity Under
Construction 2.3 Bcfd
Bcfd
Sources FERC, US Coast Guard, LNG Express, WGI,
LNG Observer
25
NEW NORTH AMERICAN IMPORT CAPACITYUNDER
CONSTRUCTION(JULY 2006)
Bcfd
Total Phase 1 Capacity 8.6 Bcfd Planned Phase 2
Capacity 7.6 Bcfd
Sources FERC, US Coast Guard, LNG Express, WGI,
LNG Observer, Cheniere, State of TX
26
Natural Gas Net Exports Mexico2006 Compared to
Prior Five-Year Average
Sources Lippman Consulting, Inc. and Energy
Information Administration
27
NATURAL GAS CONSUMPTION COULD GROW BY MORE THAN
20 BY 2020
Source Energy Information Administration
28
NATURAL GAS SUPPLY/DEMANDBALANCE COMPARISON
Bcfd
Storage
LNG
_
Gas from Storage

Canada
Gas to Storage
Elec Gen
Industrial
Domestic Production
Commercial
Residential
29
OCS BOUNDARIES
30
Scientific Inventory of Onshore Federal Lands
Oil and Gas Resources and the Extent and Nature
of Restrictions or Impediments to Their
Development (2006)

• USDOI, BLM, USGS, USDA, U.S. Forest Service, US.
  DOE and EIA multi-agency study in compliance
  with Energy Policy Acts of 2000 and 2005.
• Cumulative inventory includes federal lands from
  Northern Alaska to Rocky Mountains to
  Appalachians to Florida 99 million acres in
  total.

31
Natural Gas Est. Resource (187 Tcf)
Source Scientific Inventory of Onshore Federal
Lands Oil and Gas Resources and the Extent and
Nature of Restrictions or Impediments to Their
Development, 2006.
32
NORTHERN NATURAL GAS OPTIONS
33
POTENTIAL INCREMENTALNATURAL GAS SUPPLY
34
WHAT CAN WE DO?SHORT-TERM OPTIONS

• Encourage natural gas storage
• Promote energy efficiency and conservation
• Encourage diversified gas supply portfolios,
  hedging in many forms
• Diversify sources of energy for power generation

35
West Texas Intermediate Crude Oil Price


The confidence intervals show /- 2 standard
errors based on the properties of the model.
Source Energy Information Administration,
February 2007.
36
Natural Gas Henry Hub Spot Prices
The confidence intervals show /- 2 standard
errors based on the properties of the model.

Source Energy Information Administration,
February 2007.
37
SOURCES OF CURRENT U.S. NATURAL GAS SUPPLY
2005 22.1 Quads
Canada 3.3
LNG .6
Lower-48 18.2
Source Energy Information Administration
38
SOURCES OF PROJECTED U.S. NATURAL GAS SUPPLY
ALASKA 2.3
2020 27.3 Quads
LNG 3.8
CANADA 1.4
LOWER-48 19.8
Source Annual Energy Outlook 2006, Energy
Information Administration
39
Attractive Investment
40
Growth of AGA Index (vs. SP 500 Dow Jones
Industrials)Since Dividend Tax Legislation
Enacted
41

• Utilities are not a place to invest in if you
  want to get rich, but theyre a pretty good place
  to invest if you want to stay rich.
• -- Warren Buffett

42
THANK YOU!
Christopher B. McGill Managing Director, Policy
Analysis cmcgill_at_aga.org 202.824.7132