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Energy Buyers’ Conference October 27, 2009. US Natural Gas Supply US Natural Gas Demand: Driven By Electric Generation Climate Change: Role of Natural Gas. US Natural Gas Supply Increasing Reliance on Unconventional Production. Shale. Took 10 Years to Grow 8 bcf/d.

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  • US Natural Gas Supply

  • US Natural Gas Demand: Driven By Electric Generation

  • Climate Change: Role of Natural Gas


Us natural gas supply increasing reliance on unconventional production
US Natural Gas SupplyIncreasing Reliance on Unconventional Production

Shale

Took 10 Years to Grow 8 bcf/d

Unconventional: Tight Sands, CBM

Offshore

Conventional Decline

Conventional Declines Offset by Increase in Unconventional production;

Shale's forms about 10% of total supply

Source: U.S. Energy Information Administration, Annual Energy Outlook 2009


Total u s proved reserves of dry natural gas
Total U.S. Proved Reserves of Dry Natural Gas

Source: U.S. Energy Information Administration, U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves Report 2007


Future Production Growth

Contingent On Shale Development

Horn River

Antrim

Utica

New Albany

Mancos

Marcellus

Woodford

Huron

Barnett

Pierre

Fayetteville

Lewis

Mature

Hayneville

Early Development

Emerging

Eagle Ford


The shale story significant potential significant uncertainty
The “Shale” StorySignificant Potential, Significant Uncertainty

High

Decreasing Uncertainty

Marcellus

Huron

Shale

Haynesville

Woodford

Shale

Fayettville

Shale

Barnett

Shale

Potential

Eagle Ford

Shale

Traditional

Reservoirs

Reserve Confidence

Low

High

Estimates of recoverable reserves range from 267 Tcf to 842 Tcf; Major differences arise from reserve estimates of two shale formations: The Marcellus and the Haynesville

Source: California Energy Commission; Dominion Estimates


Supply Basins

Supply Flows

Gas Infrastructure Projects

New Pipeline Build Investment Exceeds $25 Billion

West Region

5.5 Bcf/d, 2,000 miles in service since 2007

0.6 Bcf/d, 30 miles under construction

Northeast Region

4.0 Bcf/d, 600 miles in service since 2007

.8 Bcf/d, 40 miles under construction

Gulf Region

26 Bcf/d 3,500 miles in service since 2007

1.4 Bcf/d 130 miles under construction

Total

36 Bcf/d, 6,100 miles in service since 2007

2.8 Bcf/d, 190 miles under construction

Source: Dominion Estimates


Storage Infrastructure Projects

Since 2007, storage capacity has increased by 210 Bcf with another 115 Bcf under construction

Total 365 Bcf

210 Bcf Operating since 2007

155 Bcf Under construction

West Region 7 Bcf

7 Bcf Operating

East Region 113 Bcf

83 Bcf Operating since 2007

30 Bcf Under construction

Producing Region 245 Bcf

120 Bcf Operating since 2007

125 Bcf Under construction

Operating since 1/1/2007

Under Construction

Salt Dome

Reservoir

Source: Dominion Estimates


Us imports from canada resource issues lead to declining pipe imports
US Imports From CanadaResource Issues Lead To Declining Pipe Imports

Net Canadian Pipe Exports To US

Canadian Import Forecast*

2007

2008

-3.5 bcf/d

2009

2009 import volumes decline 1 bcf/d; 3.5 bcf/d Decline By 2011

Source: 2009 actual data reflects EIA data until May’09; Import forecast reflects NEBs Sep’09 view of Canadian deliverability and demand


Lng markets
LNG Markets

LNG Imports To US

Global LNG Infrastructure Changes

2007

2009

Liquefaction

Regasifaction

2008

Anticipated 2009 increase in LNG volumes has not materialized

‘09 –’12:Regasification: 36 Bcf/d

‘09 –’12: Liquefaction:11 Bcf/d

Source: EIA; Dominion estimates


Existing

Construction

Proposed

Developing North American InfrastructureNew & Expanding LNG terminals

Cove Point

Source: FERC, Dominion Estimates


Global lng supply balance contingent on timely build of new pipe
Global LNG SupplyBalance Contingent On Timely Build Of New Pipe

LNG Demand View W/ New Pipeline

LNG Demand View W/O New Pipeline

Projects

Not Under

Construction

New International Pipeline Capacity

Liquefaction

* 2009 LNG capacity impacted by supply interruptions in various LNG Exporting nations

Source: Dominion estimates


Us natural gas demand electric has driven historical gas demand growth
US Natural Gas Demand Electric Has Driven Historical Gas Demand Growth

18%

29%

Electric Growing

Bcf

37%

Industrial Declining

29%

Commercial Flat to Declining

22%

21%

14%

13%

Residential Flat to Declining

Other*

* Other includes lease & Plant fuel consumption, pipeline & distribution use & Vehicle fuel consumption

Source :EIA


U s natural gas demand outlook growth driven by electric generation
U.S. Natural Gas Demand OutlookGrowth Driven By Electric Generation

Demand Growth Driven by Electric Generation

Electric

Industrial

Commercial + Residential

Fuel

Sources: EIA, Dominion Estimates


Electricity capacity growth fueled by natural gas
Electricity Capacity Growth Fueled By Natural Gas

1990 Capacity = 783 GW

2008 Capacity = 1,100 GW

Renew 2%

Renew 4%

Hydro 9%

Hydro 9%

Coal 31%

Nuclear 14%

Nuclear

10%

Coal 43%

Gas 20%

Gas 41%

Oil

6%

Oil

11%

Natural Gas Approaching 50% of total capacity

Source: EIA


Us electric profile gas gains share although coal still dominates
US Electric Profile Gas Gains Share Although Coal Still Dominates

Electric Generation By Fuel

2008

13%

21%

% Share of Total Electric Generation

% Share of Total Electric Generation

52%

48%

Source: EIA


Us electricity generation continued development of gas fired generation
US Electricity GenerationContinued Development of Gas Fired Generation

Renewable

Renewables

Gas

Operating (Gas)-Online 2007-2009 24 GW (14 GW CC)

Under Construction (Gas) 14.5 GW (12 GW CC)

Source: Energy Velocity & Dominion estimates; Units are sized by capacity


Us electricity generation coal fired generation
US Electricity GenerationCoal Fired Generation

Renewable

Renewables

Gas

Operating Online 2007-2009 5 GW

Under Construction scheduled on line 2009-10 7 GW

Under Construction scheduled on line 2011-12 6 GW

Source: Energy Velocity & Dominion estimates; Units are sized by capacity


Greenhouse gas climate change and energy
Greenhouse Gas, Climate Change and Energy

Global Warming

Climate Control

Cap & Trade

????


Greenhouse gases how much is up there
Greenhouse GasesHow Much Is Up There?


Greenhouse gases or how little
Greenhouse Gases…Or How Little


Co 2 impact on climate change the believers
CO2 & Impact on Climate ChangeThe Believers


Co 2 impact on climate change vs the alternate view
CO2 & Impact on Climate Change… vs. The Alternate View


Co 2 impact on climate change
CO2 & Impact on Climate Change


Renewable portfolio standards 29 states and d c mandatory 6 additional states have non binding
Renewable Portfolio Standards29 States* and D.C. Mandatory, 6 Additional States Have Non-Binding

Florida

PSC submitted draft RPS

to Legislature

1/30/2009

Standard

Voluntary Goal

*Note: Including Hawaii’s Renewable Standard


Renewable projects under development new projects to meet renewable portfolio standards

Wind

Other

Renewable Projects Under DevelopmentNew Projects to Meet Renewable Portfolio Standards

Source: Energy Velocity


Co 2 intensity tons mwh gas has half the co2 intensity of coal
CO2 Intensity (Tons/mwh) Gas Has Half the CO2 Intensity of Coal

12,000 HR

10,000 HR

7,000 HR CC

Source: Dominion Estimates


Natural gas as a generation fuel continued growth in near future
Natural Gas as a Generation FuelContinued Growth in Near Future

Change in Generation Development Projects

Since June 2006

+62 GW

Coal Generation

Gas Generation

Operating

Operating

Proposed

Net

Net

Proposed

Cancelled

Cancelled

-35 GW

Note: As of July 2009, Energy Velocity & Internal Database, July 2009


Historical black eyes for natural gas
Historical “Black eyes” for Natural Gas

  • Reserves – “We’re running out of gas”

  • Infrastructure

  • Price Volatility


What s changed
What’s Changed

  • Shale Production: Historic

  • Infrastructure: More Pipelines

    • More Storage

    • LNG Capability

  • Cleanest Fossil Fuel (By Far!)

  • Price Volatility: CFTC Oversight / Congressional Actions??


  • Evolving risk to gas markets
    Evolving Risk To Gas Markets

    2010

    2000

    2005

    2015

    Consumer

    Behavior

    Natural Gas Market Uncertainty

    Increasing

    Uncertainty

    +

    +

    +

    Shale/LNG

    Supply

    CO2 & RPS

    Winter

    Summer

    New Market Influences

    +

    Consumer

    Behavior

    Winter

    Weather US

    Winter/Summer

    Weather US

    Weather Europe

    Japan Nuclear Outage

    Hydro Conditions in Europe

    Russian Natural Gas Supply

    Liquefaction Outages & Shortfalls

    Shipping Prices & Interruptions

    Rising influence of Unconventional Resources

    Economic Downturn

    +

    CO2 Allowance Prices

    Regulatory Objectives

    New Generation Build

    International Carbon Offset Price & Availability

    +


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