2012 Pipeline Outlook

Impacts & Drivers

Robert Carpenter
Presented by

The Numbers
2013: Beginning to see interest in larger pipelines (more oil). For gas, short to medium projects 2014: Improved economy = power generation = increased natural gas consumption 2015-20: Good years?

Pipeline Numbers
Current Worldwide Pipelines Construction/Planned/Proposed
Planned/Construction Miles

89,000

$195 billion

Estimated Cost

Pipeline Costs running up to 3 times more than 2004

*Land-based projects only.

Pipeline Numbers
Underway/Proposed N. American Pipeline Construction 2012-16
Underway/Proposed Estimated Cost

32,000

$80 billion

*Land-based projects only.

Elephant in the Room

Keystone O-Factor The Gulf Coast Project: 485-miles Cushing, OK, south to Nederland, TX, built as a stand-alone project Approximate cost $2.3 billion; inservice late 2013

Other Projects At Risk

Denali (BP/Conoco Phillips) cancelled Mackenzie Valley still in serious doubt ANGP long time coming By-product of enhanced oil/gas recovery from shale

Notable Projects
DCP Midstreams 700-mile Sandhills Pipeline complete 2nd quarter 2013

Greencore CO-2 Pipeline, Fremont County, WY, to Powder River, MT; 231 miles of 20-inch; to be completed late 2012

Notable Projects
Enterprise Products Partners planning 1,230-mile pipeline to transport ethane from Marcellus/Utica shale to Mont Belvieu, TX. Operations set for first quarter of 2014 Oneok Partners investing up to $1.2 billion by late 2013 to build, among other projects, a 570-mile, 16-inch Sterling III NGL Pipeline from Midcontinent to the Texas Gulf Coast

Notable Projects
Texas Express Pipeline: 580- miles, 20-inch, from Carson County, TX, to Mont Belview, TX. In-service mid 2013 Will also include 2 new NGL gathering systems. Joint venture of Enterprise Products Partners, Enbridge Energy Partners, Anadarko Petroleum

Shale Factor
At 2010 rate of U.S. consumption (24.1 Tcf per year), enough supply for more than 100 years. Conservative estimate, revised downward from 150 years However, shale gas resource and production estimates are likely to increase in the future

Coal Competition
Coal remains a top fuel source for

power generation Coal use continues to drop. Now well below 50% No new coal-fired power plants beyond those under construction or supported by clean coal incentives

Coal Competition
EPA rules inhibit use of coal;

environmental concerns growing Estimated that 40 GW of coal plant retirements in next 10 years Clean coal still a dream Coal ash can contain poisons; 20 more dump sites recently revealed

Energy Trends & Impacts

U.S. energy consumption will jump

21% by 2035 Cheaper prices for natural gas, along with relatively low capital construction costs make gas more attractive than coal for all purposes, but especially power generation

Energy Trends & Impacts

High oil = high gasoline costs

= drain on economy? In 2035, the average real price of crude estimated at $125 per barrel in 2009 dollars

Natural Gas Resources

EIA expects gas production to average 66 Bcf/d in 2011, a 6.7 percent increase over 2010 Offsetting steep decline of over 15 percent from Gulf/Alaska EIA predicts will growth to continue at slower pace in 2012

Natural Gas Resources

Rush has unleashed a flood of natural gas onto the U.S. market Caused price to dive Some gas wells uneconomical Started to close gas wells and pull rigs out of gas fields

Natural Gas Resources

Creating a gas bubble

Is this bubble different? 1982 - 85 vs. 2011 2013

Oil Resources
After declining to 1940s levels, U.S. crude production began rising again in 2009. EIA has upgraded forecast of U.S. crude production in 2025 to 6.4 million barrels per day 1 million barrels more than were pumped in 2010.

Oil Resources
EIA forecasts U.S. will soon challenge Saudi Arabia as the worlds top oil producer (all types) Other estimates as high as 9.1 million b/d by 2015 U.S. also the worlds top oil consumer at 20 million b/d

Oil Resources
Even with oil boom, nation still falls far short of its energy demands Reason for varying projections about U.S. crude potential is uncertainty about how much oil is underground and whether technological advances will make it reachable Also causes debate about future crude oil prices.

What About LNG?

Was only feasible when U.S. projected gas supply was 30 years. Now, 4 applications pending (up from 2 in 2011) Freeport, Cheniere converting existing facilities, filing applications to become exporters by 2015

Integrity Management
Post San Bruno, PA, others: New rules, regulations beginning to emerge
Obama budgeted 61% increase in PHMSA budget for 2012 PHMSA Director Cynthia Quarterman says increased funding will allow adding 150 employees primarily for inspection

World Energy Demands

China increasing dependence on foreign oil China projected to reach U.S. levels of demand by 2040. China energy policies not effective

Fracking
EPA To Consider Shale Gas

wastewater
Pavillion, WY States adopting comprehensive

chemical disclosure rules for hydraulic fracturing chemicals

Alternatives Support Falls

Poll: 52 percent say boosting alternative energy is more important than increasing fossil fuel production down from 63 percent Poll: Percentage who view boosting oil, gas and coal as more important of the two options jumped from 29 percent to 39 percent

Alternatives Support Falls

Result: Margin held by alternative energy shrunk 32 percentage points since March 2011

Public Perceptions
University of Texas study revealed interesting public opinions, trends

Perspectives continue to shift back to more favorable opinion of fossil fuels