BUILDING A WORLD OF DIFFERENCE ® June 2007 North American 2007 Outlook for Demand and Supply Brazilian Petroleum Institute IBP Logistics Seminar Houston, TX June 13, 2007

BUILDING A WORLD OF DIFFERENCE ® 2 June 2007 Black & Veatch delivers consulting, engineering and construction services to critical infrastructure industries Energy Water Information Government

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BUILDING A WORLD OF DIFFERENCE ® 4 June 2007 Today’s discussion  Review of Winter  Prices  Storage Status  Demand and Supply Outlook  Demand  Production  LNG  Pipeline Infrastructure  Summary/Conclusions

BUILDING A WORLD OF DIFFERENCE ® 5 June 2007 Prices across the US remained volatile in winter although lower than high levels experienced in winter

BUILDING A WORLD OF DIFFERENCE ® 6 June 2007 High price volatility is expected to continue in both natural gas and crude oil markets

BUILDING A WORLD OF DIFFERENCE ® 7 June 2007 Storage inventory correspondingly stayed close to 5-yr highs until late winter drawdown in Feb 07 EIA Weekly Storage Level and 5-yr range

BUILDING A WORLD OF DIFFERENCE ® 8 June 2007 NYMEX seasonal spreads imply market concerns for tightening supplies Abnormally high seasonal spread for current gas year

BUILDING A WORLD OF DIFFERENCE ® 9 June 2007 Today’s discussion  Review of Winter  Prices  Storage Status  Demand and Supply Outlook  Demand  Production  LNG  Pipeline Infrastructure  Summary/Conclusions

BUILDING A WORLD OF DIFFERENCE ® 10 June 2007 Weather normalized residential and commercial natural gas demand growth is expected to grow 1.4% annually between 2007 and 2011 History Forecast Source: EIA

BUILDING A WORLD OF DIFFERENCE ® 11 June 2007 Gas demand for power generation is projected to grow 2.4% annually between 2007 and 2011 – key factors include price levels and emission considerations History Forecast

BUILDING A WORLD OF DIFFERENCE ® 12 June 2007 Industrial natural gas demand is expected to grow 1.3 % annually between 2007 and 2011 as prices drop and economic growth continues History Forecast

BUILDING A WORLD OF DIFFERENCE ® 13 June 2007 Total US natural gas demand is projected to increase by 1.7% annually, with cumulative growth of 7% between 2007 and 2011 Source: EIA AEO 2007

BUILDING A WORLD OF DIFFERENCE ® 14 June 2007 Winter and summer demand peaks are forecasted to grow Source: B&V / LEG Analysis

BUILDING A WORLD OF DIFFERENCE ® 15 June 2007 Peak month residential demand is growing relative to average monthly demand

BUILDING A WORLD OF DIFFERENCE ® 16 June 2007 Supply outlook – new sources, uncertain costs Key sources influencing the North American supply picture : Canada GOM production Rockies Shale plays – Barnett, Fayetteville LNG Frontier gas – Alaska, Mackenzie Valley

BUILDING A WORLD OF DIFFERENCE ® 17 June 2007 Canadian production is expected to decline and the decline is compounded by delay in the Mackenzie Valley project MVP delayed until 2014 MVP delayed until 2014

BUILDING A WORLD OF DIFFERENCE ® 18 June 2007 Alaska pipeline project is delayed and timing is uncertain, build-out is +/- 10 years Source: Platts Pipeline Conference, September 21, 2006

BUILDING A WORLD OF DIFFERENCE ® 19 June 2007 Aggregated production projections for the Lower 48 states indicate an increase between 2007 and 2012, flattening thereafter

BUILDING A WORLD OF DIFFERENCE ® 20 June 2007 GOM Offshore – Deepwater increases offset shallow water declines ForecastedHistorical Source: Lippman Consulting, LEG Analysis

BUILDING A WORLD OF DIFFERENCE ® 21 June 2007 Unconventional reserves include of CBM, Gas Shale, and Tight Gas Sands

BUILDING A WORLD OF DIFFERENCE ® 22 June 2007 Unconventional gas plays lead recent domestic resource discoveries

BUILDING A WORLD OF DIFFERENCE ® 23 June 2007 US Rockies non-conventional production is providing valuable relief to supply constraints

BUILDING A WORLD OF DIFFERENCE ® 24 June 2007 Rockies production growth has largely come from key basins in the northern Rockies Rockies production is expected to grow at about 2.5% per annum in the next ten years Jonah, Pinedale and Piceance will lead the growth with an average rate of 4.5% per year Jonah and Pinedale production increased from 600 Mmcf/d to 1.5 Bcf/d from 2002 to 2006, at an annual growth rate of 25% Piceance production increased from 439 Mmcf/d to 1 Bcf/d in 2006, at an annual rate of 22%

BUILDING A WORLD OF DIFFERENCE ® 25 June 2007 Rockies gas producers are targeting eastern markets Zone 3 – Lebanon to Clarington In Service: Jun-09 Capacity: 2.0 bcf/d FT rate: $1.094 Fuel: 2.22%

BUILDING A WORLD OF DIFFERENCE ® 26 June 2007 Gulf Coast Onshore – Benefiting from Barnett Shale Source: Lippman Consulting, LEG Analysis ForecastedHistorical

BUILDING A WORLD OF DIFFERENCE ® 27 June 2007 Insights into the shale resource: Barnett Shale Dry Production in 2006: 1,421 MMcf/d Current Rig Count: 44 Rigs Wells First Delivered in 2006: 864 Drilling and fracturing technology has driven the Barnett Shale resource development Source: Lippmann Consulting

BUILDING A WORLD OF DIFFERENCE ® 28 June 2007 Barnett Shale – peak production not expected for another 10 years

BUILDING A WORLD OF DIFFERENCE ® 29 June 2007 Mid-Continent production also expected to grow on the strength of non-conventional shale gas plays

BUILDING A WORLD OF DIFFERENCE ® 30 June 2007 Mid-Continent production is projected to increase due to Fayetteville Shale prospects Fayetteville Shale is a Mississippian- age shale accumulation located in Arkoma Basin across several counties of Arkansas. Southwest Energy, the dominant player in the play, has drilled and completed 172 wells as of Dec. 31, 2006, of which 92 are horizontal wells. Assuming average well ultimate recovery of 1.4 Bcf and 80-acre spacing, Southwest Energy estimated an ultimate recovery of over 11Tcf Fayetteville shale production forecast is based on Lippman Consulting projections and an assumed growth rate

BUILDING A WORLD OF DIFFERENCE ® 31 June 2007 Woodford Shale, East OK also provides Mid-Continent production with upside potential Woodford shale is the geological equivalent of Barnett Shale and Fayetteville Shale in East Oklahoma on the west part of the Arkoma basin. Major players in Woodford shale include Newfield Exploration and Devon Energy. Newfield plans to drill 233 to 322 new wells by Newfield Exploration estimates the ultimate recoverable reserves ranges from 2 – 5 Tcf Woodford Shale production forecast is based on Lippman Consulting projections

BUILDING A WORLD OF DIFFERENCE ® 32 June 2007 Producer commitments to new pipeline capacity is a valuable sign of confidence in supply certainty Status: Conducting a binding Open Season, to be completed Jan- 07 Texas Panhandle to Alabama Expected Capacity: 1.4 Bcf/d to CGT, 1.0 Bcf to Transco St 85 Expected in-service date – Feb 2009 Proposed Recourse Rate: Zone 1: Daily Demand $0.31 Zone 2: Daily Demand: $0.24

BUILDING A WORLD OF DIFFERENCE ® 33 June 2007 Additional Pipeline Capacity: Boardwalk/Gulf South – Gulf Crossing Project 355 Miles Interstate Pipeline from Sherman, TX to Perryville Hub Expected Capacity: 1.65 Bcf/d CapEx: 1.1 Billion Expected in service date: 4 th Quarter, 2008

BUILDING A WORLD OF DIFFERENCE ® 34 June 2007 Mid-continent supplies and pipelines are good news for southeast consumers (AND MARKETERS!) OK HSC N. Texas Carthage Perryville Transco Zone 4 Mobile Bay Enbridge 0.7 Bcf/d ETP N. TX to Harden 0.95 Bcf/d KM MidCont Exp 1.1 Bcf/d ETP Sherman Lateral l 1.1 Bcf/d BW Gulf Crossing 1.65 Bcf/d KM MidCont Exp 1.0 Bcf/d BW Gulf Crossing + SE Exp 1.5 Bcf/d Duke- Centerpoint SE Supply Header 1.0 Bcf/d ETP N. TX to Carthage 1.0 Bcf/d Duke Carthage to Perryville 1.2 Bcf/d BW E.TX-MS Exp 1.3 Bcf/d KM MidCont Exp 1.4 Bcf/d

BUILDING A WORLD OF DIFFERENCE ® 35 June 2007 Expectation for LNG imports – the devil is in the details… Several LNG regasification terminals are permitted and under construction in the US The actual volume of LNG imports will be determined by several factors: Delivered cost of LNG Supply sources for LNG Competition for LNG Quality specifications for LNG in the US

BUILDING A WORLD OF DIFFERENCE ® 36 June 2007 LNG import expectations continue to moderate Source: EIA, LEG Analysis

BUILDING A WORLD OF DIFFERENCE ® 37 June 2007 World liquefaction capacity is expected to more than double through 2010 Source: LNG OneWorld Expected Worldwide Liquefaction Capacity

BUILDING A WORLD OF DIFFERENCE ® 38 June 2007 LNG is the lynchpin of a global market for natural gas Source: BP Statistical Review 2006

BUILDING A WORLD OF DIFFERENCE ® 39 June 2007 UK National Balancing Point (NBP) prices compared to Henry Hub; North America will compete for LNG supplies with Europe and Asia

BUILDING A WORLD OF DIFFERENCE ® 40 June 2007 North America & Europe expected to become more import-dependent; Asia (Japan, S. Korea, India, & China) expected to remain import-dependent

BUILDING A WORLD OF DIFFERENCE ® 41 June 2007 Will GOM LNG terminals receive higher volumes in the summer? Source: Lippman, LEG Analysis

BUILDING A WORLD OF DIFFERENCE ® 42 June 2007 While more attractive and restrictive markets maintain high terminal utilization? Source: Lippman, LEG Analysis

BUILDING A WORLD OF DIFFERENCE ® 43 June 2007 Potential for future LNG imports to exhibit seasonality, with larger volumes in the summer Based on Europe’s ability to store LNG Valuation implications for storage facilities located near LNG import terminals Impact physical need? Dependent on import facility, import schedules, and pipeline takeaway capacity. Impact market dynamics? Uneven imports put pressure on market volatility. Source: LEG Analysis

BUILDING A WORLD OF DIFFERENCE ® 44 June 2007 Natural gas storage must provide the critical flexibility and security to optimize LNG sales and satisfy demand Source: Energy Velocity

BUILDING A WORLD OF DIFFERENCE ® 45 June 2007 Golden Triangle Storage New Storage Field Expansion of Previously Built Storage Proposed Storage Field New storage will be justified as LNG imports and markets grow 100% of current Gulf Coast LNG regas capacity

BUILDING A WORLD OF DIFFERENCE ® 46 June 2007 Today’s discussion  Review of Winter  Prices  Storage Status  Demand and Supply Outlook  Demand  Production  LNG  Pipeline Infrastructure  Summary/Conclusions

BUILDING A WORLD OF DIFFERENCE ® 47 June 2007 Summary & Conclusions Natural gas market expected to continue being tight in the near term – largely weather dependent High price volatility will continue in the near term due to combined tight supply-demand balance, and the risk of supply or demand (weather) shocks New gas supplies from shale and Rockies production are key to meeting long-term demand New production areas have triggered new pipeline capacity projects to provide access to markets LNG still has much uncertainty around it, as does an Alaskan pipeline project Storage is more critical than ever to managing demand cycles. Storage value has been increased by supply reliability considerations coupled with: Resurgence in liquidity Expanding number of energy market participants – traders/marketers LNG Imports off-peak

BUILDING A WORLD OF DIFFERENCE ® June 2007 Thank you. Greg W. Hopper Vice President

BUILDING A WORLD OF DIFFERENCE ® 49 June 2007 Louisiana production growing on the strength of results in ELA offshore blocks; others regions maintaining replacement rates