Presentation to the Joint Committee on Natural Gas

Pipelines

Bill VanDyke, Petroleum ManagerTim Ryherd, Geologist

Will Nebesky, Commercial Analyst

Alaska D.N.R. - Division of Oil and GasNovember 8, 2001

Alaska Department of

NaturalResources

http://www.dog.dnr.state.ak.us/oil/index.htm

Cook Inlet Activity

Oil Field / Accumulation

Gas Field / Accumulation

Unit Boundary

Map Legend

Platform

Production Facility

Proposed / Active Wells

Pipelines

Map Area

Selected Wells

tjr 11/20012

Cook Inlet Gas Production and

Reserves

FIELD NAME 2000 PRODUCTION RESERVES(BCF) (BCF)

(AS OF 1-1-01)

BEAVER CREEK 5 92

BELUGA RIVER 39 460

IVAN RIVER, STUMP LAKE,PRETTY CREEK, LEWIS RIVER 3 17

KENAI, CANNERY LOOP 18 207

MCARTHUR RIVER 65 318

NORTH COOK INLET 53 770

STERLING 0.3 30

SWANSON RIVER 29(net) 79

TRADING BAY 0.1 27

WEST FORELAND 0 20

ALL OTHERS 5 128

TOTAL 217(net) 2148

WVDDNR/DO&GNOV. 8, 2001

3

Gas Hypothetically Available for Local Utility Use ASSUMED DATES GAS USERS CEASE OPERATIONS

GAS USER SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4**

AGRIUM 2005 2010 2015 2015

LNG 2009 2009 2015 2015

OIL FIELDOPERATIONS 2009 2015 2015 2015

GAS REMAINING FOR UTILITY USE (BCF) 1060 690 -100 900**

YEARS OF SUPPLYFOR UTILITY USE 17 11 0 15**

NOTES:1) THESE SCENARIOS ARE HYPOTHETICAL. 2) ASSUMED SHUT DOWN DATES ARE NOT BASED ON ACTUAL GAS SUPPLY OR ECONOMIC REALITIES. 3) GAS REMAINING FOR UTILITY USE IS BASED ON CURRENT RESERVE AND USE ESTIMATES.4) YEARS OF UTILITY SUPPLY BASED ON CURRENT UTILITY CONSUMPTION RATES.5) POTENTIAL FUTURE GAS DELIVERABILITY CONCERNS ARE IGNORED.

**SCENARIO 4 ADDS AN ASSUMED 1000 BCF OF YET-TO-BE DISCOVERED GAS.

WVDDNR/DO&GNOV. 8, 2001

4

Cook Inlet Activity

Oil Field / Accumulation

Gas Field / Accumulation

Unit Boundary

Map Legend

Platform

Production Facility

Proposed / Active Wells

Pipelines

Map Area

Selected Wells

tjr 11/20015

Cook Inlet Exploration Summary – 2001• Ninilchik Unit and Falls Creek Unit – Marathon (Gas)

– G.O. #1 well completed as gas well, G.O. #2 well planned

• South Ninilchik Unit and Deep Ck. Unit – Unocal (Gas)– Possible State/CIRI joint administration, up to 3 wells planned for 2001-02

• Pretty Ck./Lewis Riv./Ivan Riv. – Unocal (Gas)– Re-entered 1 well each in Lewis Riv. and Ivan Riv., drilling P.C.U. #4, new well, in Pretty Ck. field

• Swanson River Unit Gas Satellites Project – Unocal (Gas)– Proposal to develop two gas fields north and east of Swanson River oil field on Federal and Native owned lands

• Redoubt Unit – Forest Oil (Oil discovered in 1968 by Pan Am)– R.U. #1, #2, & #3 wells completed by Forest, R.U. #4 is planned– Field is bigger than originally thought, up to 193 MMBO recoverable reserves– Forest has other prospects at Sabre, Corsair, and Valkyrie

• Pioneer Unit – Evergreen Exploration (Coalbed gas, no proven reserves)– Formerly operated by Ocean Energy, ownership and operations transferred to Evergreen in mid-2001.– 2 production wells & 1 injection well drilled in 1999; committed to drill 6 more wells, at least 1 in each of 2 new areas

• Cosmopolitan Unit – Phillips (Oil discovered in 1967 by Penzoil)– Hansen #1 well permitted to drill to bottom location on State lease

• Nikolai Ck. Unit – Aurora Gas (Gas)– Production started in Oct., NCU #3 well produces at rate of 2 MMCF/day

• North Fork Unit – Gas Pro (Gas)– Project apparently on hold

• Trading Bay Unit/McArthur River Field – Unocal (Oil)– T.B.U. #K-13 came on production at 7,100 BOPD, highest rate of any well in Cook Inlet

tjr 11/20016

Cook Inlet Areawide 2001Sale Results

Currently Leased Acreage

Cook Inlet Areawide 2001 Leases

mep 01/20017

Timeline of Cook Inlet Exploration

COOK INLET EXPLORATION WELL DATA AND IMPORTANT EVENTS

0

5

10

15

20

25

30

35

40

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

YEAR

N0

. OF

EX

PL

OR

AT

ION

WE

LL

S D

RIL

LE

D Three year moving average.

First commercial oil discovery in Cook Inlet at Swanson River field (1957).

West McArthur River and Tyonek Deep (Sunfish) oil fields discovered (1991), last major oil discoveries in Cook Inlet.

First (and largest) commercial gas discovery in Cook Inlet at Kenai field (1959).

Cannery Loop and Pretty Creek gas fields discovered (1979), last commercial gas discoveries in Cook Inlet.

Largest oil discovery at McArthur River field (1965).

1

2

2

3

2

3

21

2 1

Number of GAS exploration wells drilled in this year.

11

3

tjr 11/20018

Cook Inlet Gas Exploration History

267 oil & gas exploration wells drilled in CI through 2000 Of these, 24 were GAS exploration wells

Of largest 10 CI gas fields (based on current gas reserves), only Cannery Loop (smallest of the 10) was found by exploring FOR gas

Much of Cook Inlet basin area is underexplored

tjr 01/20019

Areawide sales make entire area available for exploration and development

Independents will become an increasing influence More competition for prospects and leases New thinking and inventive technology and business climate

Independents will drive exploration and development costs lower This may mean less money for the State of Alaska, as well as service companies

Oil continues to be an elusive target in Cook Inlet

Conventional gas exploration will extend beyond the core developed areas

Coalbed gas will continue as an emerging exploration target Viability of this exploration play is yet to be determined

Outlook and Predictions For Cook Inlet

tjr 11/200110

Cook Inlet Historic Gas Consumption by Major Disposition Category1971 - 2000

wen 11/200111

Alaska D.N.R.0

50

100

150

200

250

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999

Billion Cubic Feet (Bcf)

Field Operations and Other

Power generation

Gas Utilities

Ammonia-Urea

LNG

Royalty Value for Natural Gas Utility and Industry Dispositions in Cook InletVersus Henry Hub Spot Price

Aug 1997 - Aug 2001

Utility = Electric and Space Heat.Industrial = Urea, LNG, and Field Operations.Henry Hub located at U.S. Gulf of Mexico.

Alaska D.N.R.

wen 11/200112

Royalty Value for Natural Gas Utility and Industry Dispositions in Cook InletVersus Henry Hub Spot Price

Aug 1997 - Aug 2001

-

1.00

2.00

3.00

4.00

5.00

6.00A

ug-9

7

Oct-

97

Dec-9

7

Feb-9

8

Apr-

98

Jun-9

8

Aug-9

8

Oct-

98

Dec-9

8

Feb-9

9

Apr-

99

Jun-9

9

Aug-9

9

Oct-

99

Dec-9

9

Feb-0

0

Apr-

00

Jun-0

0

Aug-0

0

Oct-

00

Dec-0

0

Feb-0

1

Apr-

01

Jun-0

1

Aug-0

1

$ / M

cf

(No

min

al)

UTILITY

INDUSTRY

HENRY HUB

Royalty Value for Electricity and Space Heat Dispositions in Cook InletVersus Henry Hub Spot Price

Aug 1997 - Aug 2001

wen 11/200113Electric = CEA and MLP.Space Heat = Enstar, Aurora, and Other LDC Direct Sales.DOR PV for CEA, MLP, and ENSTAR.

Alaska D.N.R.

Royalty Value for Electricity and Space Heat Dispositions in Cook InletVersus Henry Hub Spot Price

Aug 1997 - Aug 2001

-

1.00

2.00

3.00

4.00

5.00

6.00

Aug-9

7

Oct-

97

Dec-9

7

Feb-9

8

Apr-

98

Jun-9

8

Aug-9

8

Oct-

98

Dec-9

8

Feb-9

9

Apr-

99

Jun-9

9

Aug-9

9

Oct-

99

Dec-9

9

Feb-0

0

Apr-

00

Jun-0

0

Aug-0

0

Oct-

00

Dec-0

0

Feb-0

1

Apr-

01

Jun-0

1

Aug-0

1

$ / M

cf

(No

min

al)

HENRY HUB

DOR PV

ELECTRICITY

SPACE HEAT

Royalty Values for Urea Plant, LNG and Field Operations Gas Dispositions in Cook InletVersus Henry Hub Spot Price

Jan 1989 - Aug 2001

wen 11/200114Note: Royalty Values are Netted Back to the Wellhead.

Alaska D.N.R.

Royalty Values for Urea Plant, LNG and Field Operations Gas Dispositions in Cook InletVersus Henry Hub Spot Price

Jan 1989 - Aug 2001

-

1.00

2.00

3.00

4.00

5.00

6.00

Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01

$ p

er M

CF

LNG PLANT NB

UREA PLANT NB

FIELD OPS

HENRY HUB

Destination and Royalty Values for Ammonia-Urea Plant Dispositions in Cook InletJan 1991 - Aug 2001

wen 11/200115

Alaska D.N.R.

Destination and Royalty Values for Ammonia-Urea Plant Dispositions in Cook InletJan 1991 - Aug 2001

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01

$ p

er M

CF

$0

$50

$100

$150

$200

$250

$300

$ p

er T

ON

NH

3 F

OB

New

Ore

lan

s

UREA PLANT NB

NH3 SPOT MARKET DV

Destination and Royalty Values for LNG Gas Dispositions in Cook Inlet Jan 1991 - Aug 2001

wen 11/200116

Alaska D.N.R.

Destination and Royalty Values for LNG Gas Dispositions in Cook Inlet Jan 1991 - Aug 2001

-

1.00

2.00

3.00

4.00

5.00

6.00

Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01

$ p

er M

CF

PAC-RIM LNG MARKET DV

LNG PLANT NB

wen 11/200117

Alaska D.N.R.

DOR Prevailing Value and Avg Royalty NB Value in Cook InletVersus Henry Hub Spot Price and US Avg WH Price

Jan 1992 - Aug 2001

Alaska D.N.R.

DOR Prevailing Value and Avg Royalty NB Value in Cook InletVersus Henry Hub Spot Price and US Avg WH Price

Jan 1992 - Aug 2001

-

1.00

2.00

3.00

4.00

5.00

6.00

Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01

$ p

er M

CF HENRY HUB

USWELLHEAD

DOR PV

AVG ROYALTY NB ALLDISPOSITIONS

wen 11/200118

Cook Inlet Supply and Demand Typical Production Scenario With 1 TCF Reserve Appreciation

Alaska D.N.R.

Cook Inlet Supply and Demand Typical Production Scenario With 1 TCF Reserve Appreciation

0

50

100

150

200

250

BC

F

Potential ANS Gas Demand

1000 Bcf Appreciation

No Reserve Appreciation

Demand

Potential ANS Gas Demand For Cook Inlet

wen 11/200119

Comparison of Gas Supply and Demand in Alaska

Alaska D.N.R.

Comparison of Gas Supply and Demand in Alaska

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

PBU Gas Recycling Major Gas Sale SOA Royalty Share Cook Inlet Demand Fairbanks PotentialDemand

Bcf

per

Day

8 Bcf / Day

4 Bcf / Day

0.5 Bcf / Day

0.6 Bcf / Day

0.04 Bcf / Day