1. 1 Energy Crisis and Solutions for California Oilfield Producers Gas Supply and Demand and Future Outlook Presented by William J. Keese, Chairman California Energy Commission March 15, 2001

2. Petroleum Technology Transfer Center March 15, 20012 Overview zCurrent California conditions zNatural gas fundamentals zWrap up

3. Petroleum Technology Transfer Center March 15, 20013 21st Century has Hit California With a Bang zHigh gasoline prices zHigh electric prices zHigh natural gas prices

4. Petroleum Technology Transfer Center March 15, 20014 Natural Gas Prices

5. Petroleum Technology Transfer Center March 15, 20015 U.S. Gas Prices and Drilling Rigs

6. Petroleum Technology Transfer Center March 15, 20016 Power Plants in California

7. Petroleum Technology Transfer Center March 15, 20017 1999 California Natural Gas Demand by Sector MMcfd

8. Petroleum Technology Transfer Center March 15, 20018 1999 California Natural Gas Supply: Production Region Shares

9. Petroleum Technology Transfer Center March 15, 20019 California Natural Gas Production z2000 Proved Reserves - Onshore and Offshore yEstimated 3.46 Trillion cubic feet xEstimated 2000 reserve/production ratio: 10.3 years

10. Petroleum Technology Transfer Center March 15, 200110 1999 California Oil and Natural Gas Production Activity zWell Activity y1,752 drilled for production and injection y1,379 completed wells capable of production y125 wells redrilled to side-track or deepen y1,307 plugged and abandoned wells no longer available for production or injection

11. Petroleum Technology Transfer Center March 15, 200111 2010 Forecasted California Natural Gas Demand MMcfd

12. Petroleum Technology Transfer Center March 15, 200112 2010 California Natural Gas Supply: Production Region Shares

13. Petroleum Technology Transfer Center March 15, 200113

14. Petroleum Technology Transfer Center March 15, 200114 Interstate Pipeline Capacity to California

15. Petroleum Technology Transfer Center March 15, 200115 New Interstate Pipelines and Expansions to California zKern River Expansion x2002: 125 MMcfd, additional expansion expected zPG&E - GTN Expansion x2003: 200 MMcfd zQuestar Southern Trails Pipeline xLate 2001: 90 MMcfd zEl Paso’s All American Pipeline Conversion xPlanning stage: 100 MMcfd zNorth Baja Pipeline x2003: 500 MMcfd

16. Petroleum Technology Transfer Center March 15, 200116 Liquefied Natural Gas Potential yNot yet a viable option for California yCurrent imports on the East Coast xOperating Terminals Distrigas’ Everett, MA LNG complex - 535 MMcfd CMS Trunkline LNG Co., Lake Charles, LA - 200 MMcfd xScheduled to reopen in next 12-24 months Williams Gas Pipeline, Cove Point, MD -1,000 MMcfd Southern LNG’s Elba Island, GA complex -330 MMcfd yPotential in Mexico xEl Paso and Phillips Petroleum are in preliminary talks to bring LNG from Australia to the West Coast in 2005

17. Petroleum Technology Transfer Center March 15, 200117 Issues for TEOR Production zHigh natural gas price xToo costly to produce steam for injection zExcess water from not producing steam xWater has to be cleaned and disposed zHigh electricity prices xElectric pumping of oil is costly zNew wells in Kern County now need CEQA review zResult: Higher barriers or costs to production

18. Petroleum Technology Transfer Center March 15, 200118 Opportunities for Producers zMarginal wells yWells not producing in past five years will not have the Division of Oil, Gas and Geothermal assessment for 10 years zOrphan wells yProducers can test an orphan well for 90 days xFirm can decline ownership of well within 90 days without liability concerns xFirm can take ownership after 90 days and accept liability

19. Petroleum Technology Transfer Center March 15, 200119 Opportunities for Producers zExplore the 'Stripper Well Consortium' program to obtain funding for specific well improvement projects in the range of $50K - $150$. www.energy.psu.edu/swc www.energy.psu.edu/swc zCEC joint venture to assist small California oil and gas producers yAimed to reduce electricity consumption and lower field operational cost

20. Petroleum Technology Transfer Center March 15, 200120