NW Natural Gas Market OutlookDan Kirschner, Executive DirectorNorthwest Gas Association

5335 SW Meadows Rd., #220

Lake Oswego, OR 97035(503) 624-2160www.nwga.org

NWGA Members:

Avista Corporation

Cascade Natural Gas Co.

Intermountain Gas Co.

NW Natural

Puget Sound Energy

Duke Energy Gas

Transmission

Terasen Gas

TransCanada’s GTN System

Williams NW Pipeline

3

Gas a Vital Part of NW Energy Scene

PNW Energy ConsumptionSource: EIA

0

100

200

300

400

500

600

700

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Tri

llio

n B

tus

ElectricEnd Use GasTotal Gas

4

Recent Gas DemandCumulative PNW Gas Deliveries* (source: USA-EIA, CAN-StatCan)

0

100

200

300

400

500

600

700

800

900

1,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Mill

ion

Dth

IndustrialGenerationCommercialResidential

*2005 BC estimated from preliminary StatCan data

5

% Generating Capacity by Fuel

Source: NW Power and Conservation Council, June 2006

Biomass2%

Coal14%

Nat Gas14%

Hydro64%

Nuclear3%

Wind2%

Other1%

6

Res: +2% Gen: +11% Ind: -12% Com: -1%

1999 Actual

Generation12%

Industrial45%

Commercial18%

Residential25%

2005 Actual

Generation23% Residential

27%

Commercial17%

Industrial33%

4.3% overall reduction in gas demand from 840 MMdth/year to 804 MMDth/year

Source: EIA, StatCan

Actual Load Composition

7

Demand ForecastProjected Annual Demand by Case

(Source: EIA, NWGA 2006 Outlook)

500

600

700

800

900

1,000

06-07 07-08 08-09 09-10 10-11

Mil

lio

n D

th

Low Projected Demand

Base/Expected Demand

High Projected Demand

8

Gas Demand Forecast(2006-07 through 2010-11)

Low Growth Case Base (expected) Case High Growth Case

Average Annual

Cumulative Average Annual

Cumulative Average Annual

Cumulative

Total 1.0% 4.1% 2.1% 8.1% 2.7% 10.2%

Residential 1.9% 7.3% 3.2% 11.9% 4.2% 15.2%

Commercial 1.3% 4.9% 2.5% 9.3% 3.1% 11.5%

Industrial 0.0% 0.1% 0.5% 2.0% 0.6% 2.4%

Generation(2005 projection)

1.1%(5.5%)

4.1%(19.4%)

2.6%(5.9%)

9.7%(20.4%)

3.2%(10.2%)

11.9%(32.1%)

9

Demand Forecast by SectorProjected Regional Demand By Sector - Base Case

100

120

140

160

180

200

220

240

260

280

2006-07 2007-08 2008-09 2009-10 2010-11

Mil

lio

n D

th

ResidentialCommercialGenerationIndustrial

10

Projected Load Composition: 2010-2011

Composition of PNW Demand - Base Case

Industrial29%

Generation23%

Residential30%

Commercial18%

Change from 2005:

Residential

3%

Commercial

1%

Industrial

4%

Generation

11

Northwest Gas Supply

SumasKingsgate

AECO

Stanfield

Malin

Western Canadian

Sedimentary BasinStation 2

RockiesBasins

Opal

6

7

8

9

10

11

2005 2006 2007 2008 2009 2010 2011

Bcf/d

EEA EIA Wood MackenzieOther Consultants Avg Consensus Forecast

WCSB Production Forecasts

15

16

17

18

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Bcf

/Day

Canadian Energy Research Inst. Wood MackenzieNEB (04 Techno Vert) TransCanadaNEB (04 Supply Push) Duke EnergyConsensus Forecast Actual

Actual Forecast

Rockies Production Forecasts

SumasKingsgate

AECO

Stanfield

Malin

Western Canadian

Sedimentary BasinStation 2

RockiesBasins

Opal

SumasKingsgate

AECO

Stanfield

Malin

Western Canadian

Sedimentary BasinStation 2

RockiesBasins

Opal

6

7

8

9

10

11

2005 2006 2007 2008 2009 2010 2011

Bcf/d

EEA EIA Wood MackenzieOther Consultants Avg Consensus Forecast

WCSB Production Forecasts

15

16

17

18

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Bcf

/Day

Canadian Energy Research Inst. Wood MackenzieNEB (04 Techno Vert) TransCanadaNEB (04 Supply Push) Duke EnergyConsensus Forecast Actual

Actual Forecast

Rockies Production Forecasts

12

Supplies Flow to Demand

474

1392

461

250716502730

2336

1186

1983

1379

2122

4298

1510

6324

2013

4794

1885

1637

1312

391

1768

669

2576

2396

1721

5083

453

426

1063

124

2165

1889

10821213

180

224

28

Pipeline Flow (MMcfd)2005

1884

3308

54

1598

238

1205

107

747

94401

99

2570912

899

811

6203

3381

1598

570

375

740

565

223

203

2564

5007

51

433

208332

117

512529

81

921

793

Elba Island

Cove Point

Everett

Blue Lines indicate LNGGray Lines indicate an increaseRed Lines indicate a decrease

294

EEA0406Lake Charles

622

3865

4333

840

13

Gas Production by Region

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Year

Tri

llio

n C

ub

ic F

eet

Gulf of Mexico

Gulf Coast

Mid- Continent

Rocky Mountain

Permian

San Juan

Eastern US

West Coast

Source: Lippman Consulting via AGA

14

Production per U.S. Rig

100

125

150

175

200

225

Mc

f/d

ay

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: EIA, Distribution of Wells by Production Rate Class, 1990-2004

40

45

50

55

Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07

Bcf

d

Gas Production Productive Capacity

Productive CapacitySource: Energy and Environmental Analysis, Inc.

BubbleTight Market

16

$1

$3

$5

$7

$9

US

$/M

MB

tu

Wyoming Henry Hub Sumas

Source: Platts Gas Daily and EIA Natural Gas Weekly Update

Price Correlation

Shut in Rockies production

17

Growing Demand, Slowing Supply

Projected US Supply/Demand Balance(EIA Annual Energy Outlook 2006)

0

5

10

15

20

25

30

Year

Qu

ad

rill

ion

Btu

Other Supplies

Canadian Supply

Domestic Supply

US Demand

LNG imports are the marginal resource

Frontier gas (Mackenzie, Alaska)

18

PortWestward LNG Skipanon LNG Jordan Cove LNG④ Northern Star LNG ⑤ Tansy Point⑥ Kitimat LNG⑦ WestPac Terminal

Why LNG?• Vast reserves

no local market pipelines not viable

• decreasing costs

Challenges include:• Local acceptance• Regulatory/Permitting• Commercial considerations:

• economics/financing• takeaway infrastructure• worldwide competition • supplier commitment

NorthwestLNG Proposals

19

Northwest Gas Infrastructure

100

PipelinesDEGT BC PipelineWilliams NWPTransCanada - GTNTerasen S. Crossing

Storage Facilities

Jackson Prairie

Mist

LNG FacilitiesPlymouthNewportPortlandTilburyNampa

Sumas1306 Kingsgate

2796

Stanfield638

Malin2119

884

Kemmerer653

Starr Road165305

Station 21995

440

62

60

120

154

Capacity at Major Interconnects & Storage Facilities (MDth /day)

South Flow

160

North Flow

493

20

Capacity to Serve NW Demand:

Average Winter Day

Pipeline & Storage Capacity vs. Avg. Winter Day Demand

0

1

2

3

4

5

6

2006-07 2007-08 2008-09 2009-10 2010-11

Winter Year (Dec-Feb)

Mil

lio

n D

th/d

ay

Low Base High Pipeline Capacity Pipeline + Storage

Includes Mist and potential JP expansions

21

Capacity to Serve Demand: Region-wide Peak

NW Total Firm Peak Day Demand/Capacity Balance(ID, OR, WA, BC)

0

1

2

3

4

5

6

7

2006-07 2007-08 2008-09 2009-10 2010-11

Year (Nov-Oct)

Mil

lio

n D

th/d

ay

Low Base High Pipeline Underground Storage Peak LNG

22

I-5 Extended Winter – Base/Cold

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

1-N

ov

21-N

ov

11-D

ec

31-D

ec

20-J

an

9-Fe

b

29-F

eb

20-M

ar

9-A

pr

29-A

pr

19-M

ay

Dth

/da

y

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sto

rag

e S

tatu

s (%

)

Pipeline Capacity Served by Storage Served by Peak FacilitiesDemand Min Storage Status (%) Actual Storage Status

23

I-5 Extended Winter – Base/Low

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

1-N

ov

21-N

ov

11-D

ec

31-D

ec

20-J

an

9-Fe

b

29-F

eb

20-M

ar

9-A

pr

29-A

pr

19-M

ay

Dth

/da

y

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sto

rag

e S

tatu

s (%

)

Pipeline Capacity Served by Storage Served by Peak FacilitiesDemand Min Storage Status (%) Actual Storage Status

24

I-5 Extended Winter – High/Cold

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

1-N

ov

21-N

ov

11-D

ec

31-D

ec

20-J

an

9-Fe

b

29-F

eb

20-M

ar

9-A

pr

29-A

pr

19-M

ay

(mm

cfd

)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sto

rag

e S

tatu

s (%

)

Pipeline Capacity Served by Storage Served by Peak ResourcesUnserved Demand Demand Min Storage Status (%)Actual Storage Status

25

I-5 Extended Winter – High/Low

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

1-N

ov

21-N

ov

11-D

ec

31-D

ec

20-J

an

9-Fe

b

29-F

eb

20-M

ar

9-A

pr

29-A

pr

19-M

ay

(mm

cfd

)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sto

rag

e S

tatu

s (%

)

Pipeline Capacity Served by Storage Served by Peak ResourcesUnserved Demand Demand Min Storage Status (%)Actual Storage Status