Permian Basin Overview July 25, 2006 Good Morning. I want to thank Colby for giving me the opportunity to come here today to give you an brief overview of EOR development of the Permian Basin.

Doe Canyon Unit Sheep Mountain Unit McElmo Dome Unit Sheep Moutain PL W Bravo Dome Bravo Dome Unit Cortez PL Bravo PL Denver City Central Basin PL This is the current infrastructure for the supply of CO2 to the Permian Basin. Natural sources are McEmo Dome Unit, Sheep Mountain Unit, Bravo Dome Unit, and in the south, CO2-A Val Verde Gas Plants. The Major pipelines are Cortez PL, Sheep Mountain Pipeline, Bravo Pipeline, Central Basin PL and CRC Pipeline. Additional sources not developed exist at Doe Canyon Unit and West Bravo Dome Unit. CRC PL Val Verde Plants

How did it Happen?

Permian Basin Circa 1970 New Mexico Texas Salt Creek Slaughter Cogdell Wasson Welch Adair New Mexico North Hobbs Seminole Texas SACROC Means Unit Mabee N. Dollarhide Elmar Geraldine Ford S. Cowdan This is the Permian Basin with some of the major fields that eventually started EOR using CO2. At this time, several of the larger unitized areas were in decline from water flooding and work had begun to enhance oil production. Permian Basin Circa 1970 Puckett Plant S Cross Mitchell Plant Yates Grey Ranch Plant Terrell Plant

Permian Basin 1972 New Mexico Texas CRC Pipeline Salt Creek Slaughter Wasson Cogdell Welch Adair New Mexico North Hobbs Seminole Texas SACROC Means Unit Mabee CRC Pipeline N. Dollarhide CRC Pipeline Elmar Geraldine Ford S. Cowdan In 1972, the major owners of the SACROC unit, including the operator Chevron, Sun and Mobil invested in a $40MM CO2 pipeline designed to take approx 70MMcf/d of A-CO2 from gas plants, located South of McCamey to the SACROC unit. The distance from McCamey to SACROC is about 120 miles. CRC Pipeline is a 16” line and was designed to deliver super critical pressured CO2. Reprocessing was done via a hot potassium unit located in the Snyder Gas Plant complex on site at SACROC. Shell’s N&S Cross unit began production in 1972 as well McCamey Permian Basin 1972 Puckett Plant S Cross Mitchell Plant Yates Grey Ranch Plant Southern CRC Terrell Plant

Windfall Profits Tax adopted in 1980 Waterfloods unitized in the 60’s and 70’s had started to decline Owners of Potential EOR Projects aligned with CO2 Source Fields Major Oil Companies operating in Permian Shell, Mobil, ARCO, Exxon, Amoco Source Field Unitizations Shell, Mobil, et al – McElmo Dome ARCO/Exxon – Sheep Mountain Unit Amoco, Hess, et al - Bravo Dome Unit Majors commenced planning and development for their EOR projects In 1980, Congress passed the Windfall Profits Tax. Included in the law was a tax credit for incremental oil produced under enhancement methods, including CO2. Oil companies including Shell, Mobil, ARCO, Exxon, Amoco, Amerada Hess - owned an interest and/or operated many of the large waterflood projects in the Permian, including Wasson, Slaughter, Seminole, Means. Source fields were unitized in McElmo Dome (Shell/Mobil), Sheep Mountain (Arco/Exxon), and Bravo Dome (Amoco, Hess and others).

Permian Basin 1982 - 1989 New Mexico Texas CRC Pipeline Sheep Mountain McElmo Dome Bravo Dome Cortez Pipeline SMPL Bravo P/L Salt Creek Slaughter Denver Unit Wasson Cogdell Denver City Welch New Mexico Seminole Texas SACROC Central Basin Means Unit Mabee CRC Pipeline N. Dollarhide CRC Pipeline Elmar Geraldine Ford S. Cowdan As you can see, a lot changed into the 1980s With the unitizaion of the McElmo Dome, Sheep Mountain and Bravo Dome N-CO2 sources, the major oil companies determined, almost in lock step, to bring CO2 to the Permian Basin. One big reason for this was the Windfall Profits Tax. EOR barrels received a much favorable treatment. To facilitate this move, most of the pipeline infrastructure currently in place today was built during the first half of the decade. Major floods such as Wasson Denver Unit , Seminole, Slaughter, Dollarhide, Means Unit and others began flooding during this time. Cordona Lake McCamey Permian Basin 1982 - 1989 Puckett Plant S Cross Mitchell Plant Yates Grey Ranch Plant Southern CRC Terrell Plant

Permian Basin 1990 - 1999 New Mexico Sheep Mountain McElmo Dome Bravo Dome Cortez Pipeline SMPL Bravo P/L Salt Creek Slaughter Este Cogdell Denver City Welch Adair Sharon Ridge New Mexico Seminole SACROC Reinecke Means Unit N. Dollarhide Central Basin Mabee CRC Pipeline CRC Pipeline Elmar Geraldine Ford S. Cowdan During the 1990s floods still began. Shell and Amoco formed Altura. ExxonMobil and its partners built the Este pipeline that serviced the Welch units and Salt Creek. Two floods along the CRC came online in the late 1990s: Reinecke and Sharon Ridge. Hess built Adair PL and began a flood at Adair. Cordona Lake McCamey Permian Basin 1990 - 1999 Puckett Plant S Cross Mitchell Plant Yates Grey Ranch Plant Val Verde Terrell Plant

Permian Basin 2000 - 2006 New Mexico Sheep Mountain McElmo Dome Bravo Dome Cortez Pipeline SMPL Bravo P/L Slaughter Este Salt Creek Este Cogdell Denver City Centerline PL Welch Adair Sharon Ridge New Mexico North Hobbs Seminole SACROC Reinecke Central Basin Means Unit N. Dollarhide Mabee CRC Pipeline CRC Pipeline Elmar Geraldine Ford S. Cowdan With the new Millennium the pace of new floods slowed. Oxy purchased the Altura assets in 2000. Oxy purchased more assets in 2003 and 2005 and is the largest producer in the Permian, focusing on EOR. Oxy injects 1 bcfd including recyled CO2. KMCO2 purchased the SACROC unit in 2001. Current purchases at SACROC are 260-300 mmcfd and ~800 mmcfd including recycle. Anadarko began flooding the H.T Boyd in 2001, Oxy started the North Hobbs Unit and Cogdell Unit during this time, and KMCO2 began flooding Yates in 2004. Cordona Lake McCamey Permian Basin 2000 - 2006 Puckett Plant S Cross Mitchell Plant Yates Grey Ranch Plant Val Verde Terrell Plant

EOR Projects started in 1983 are still purchasing CO2. Original projections indicated these projects would be on total recycle but HCPV Slugs have steadily increased. Projects such as Denver Unit and Seminole San Andres Unit have been expanded into the Transition Zone and Residual Oil Zone respectively Higher oil prices have justified startup of smaller and/or previously marginal projects

2005 was record year, supplies pro-rated on occasion Current Denver City CO2 supply from all sources 1,420 MMCFD With oil price increasing, project expansions as well as new projects are justifying expansion of CO2 source fields Kinder Morgan and partners are expanding McElmo Dome Unit by 200 MMCFD and initiating development of Doe Canyon Unit to 100 MMCFD. Kinder Morgan and co-owners are planning expansion of Cortez Pipeline to accommodate SW Colorado source field expansions Expansion and development opportunities also exist in NE New Mexico at Bravo Dome Unit operated by Oxy and West Bravo Dome Unit operated by Hess 2005 was record year, supplies pro-rated on occasion

How does the Permian Basin success story translate to Wyoming? Supply, Transportation and Demand have to be aligned. The 80’s had the Supply and Demand fields mostly owned by the same companies. It is different today. Must be a win-win proposition for all What is the catalyst for EOR expansion in Wyoming - oil price, emissions regulation, other?

CO2-A (emissions) is more expensive to capture and compress than CO2-N is to develop and produce CO2-A is likely to cost $2.00 - $2.50/MCF Delivered 6-10 MCF/BBL has been a “rule of thumb” utilization rate for new projects in the Permian Basin

End

Permian Basin 2000 - 2003 New Mexico Sheep Mountain Bravo Dome McElmo Dome Cortez Pipeline S. Mouontain Bravo P/L Salt Creek Slaughter Este Este Cogdell Denver City Welch Sharon Ridge New Mexico Center Line Central Basin Means Unit SACROC Reinecke N. Dollarhide Mabee CRC Pipeline CRC Pipeline Elmar Geraldine Ford S. Cowdan With the new Millennium the pace of new floods slowed. Many of the units originally flooded have been expanded or CO2 moved to other areas within the units. KMCO2 purchased the SACROC unit in 2001 and has more than doubled CO2 injection. Anadarko began flooding the H.T Boyd in 2001, Oxy just started the North Hobbs Unit, and KMCO2 is balloting its partners in Yates to begin flooding in 2004. Permian Basin 2000 - 2003 Cordona Lake McCamey Puckett Plant S Cross Mitchell Plant Yates Grey Ranch Plant Val Verde Terrell Plant