Transwestern Pipeline Company Transwestern Pipeline Company Status of San Juan Expansion & Sun Devil...

Transwestern Pipeline Company

Transwestern Pipeline CompanyStatus of San Juan Expansion

&Sun Devil Lateral

February 2004

www.crosscountryenergy.com

2


Available Capacity to Serve AZ

Texas

Oklahoma

Colorado

New MexicoArizona

Utah

Nevada

California Ignacio

Blanco Hub

NeedlesTopock

Station9

SAN JUAN

ROCKIES

PERMIAN

ANADARKOThoreau

San JuanArea

West of ThoreauArea

East ofThoreau

Area

Supply BasinsRate Areas

Panhandle North

West Texas North

•Phoenix

• Mainline West Capacity of 1,210 MMcf/d. 700 MMcf/day of Mainline West capacity and 350 MMcf/day of San Juan capacity available, subject to ROFR in 2005-2006

• Current Expansions: TW preparing FERC certificate application to expand San Juan capacity by 375 MMcf/day with a mid-2005 in-service date.

• Proposed Expansion: TW is planning a 170 mile lateral from its mainline near Flagstaff to the Phoenix market, capable of flowing 500+ MMcf/day without compression and up to 1.2 Bcf/d with compression.

3


Gas Supply Access• Since 1998, total reserves in the four major supply basins served by TW

have risen dramatically.

Source: Lippman Consulting

Transwestern Supply Basin Analysis

0

20

40

60

80

100

120

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Tril

lion

Cub

ic F

eet

Permian Reserves

San Juan Reserves

Rocky Mountain Reserves

Mid-Continent Reserves

4


San Juan Basin - Reliable Resource Base

• San Juan basin is one of the largest natural gas basins in the United States.

• San Juan total reserves and reserve life (15 years) continue to increase.

• Most active producers include: Devon, BP, Burlington, ConocoPhillips, & XTO

San Juan Basin Reserves

0x

5x

10x

15x

20x

25x

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Res

erve

Life

Ind

ex

0

5

10

15

20

25

Yea

r E

nd R

eser

ves

TC

F

San Juan Basin Year-End Reserves Reserve Life Index


5


San Juan Basin – Economically Attractive

Monthly Gas Index Prices Since the Kern River Expansion

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03

Dol

lar

per

MM

btu

San Juan Permian Rockies Malin Henry Hub

• San Juan gas has been the most economical source of major natural gas supplies for Southwest markets.

• The San Juan gas price has remained more competitive vs. Permian & Rockies despite the Kern River expansion.

• Approximately 61% of gas shipped by TW in 2003 was from the San Juan Basin.

“Rockies" = Inside FERC Northwest Pipeline Rocky Mountain First of the Month Index (FOM Index), "San Juan" = Inside FERC San Juan FOM Index, "Permian" = Inside FERC Permian FOM Index, "Henry Hub" = Settlement Price on Last Day of trading for that month's NYMEX futures contract, "Malin" = Natural Gas Intelligence Malin FOM Index.

6


San Juan Basin - High Utilization• All pipeline capacity for the San Juan Basin is fully contracted.

• TW’s San Juan lateral is 100% utilized.

Total Regional Export Capacity

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Jan-01

Feb-01

Mar-01

Apr-01

May-01

Jun-01

Jul-01

Aug-01

Sep-01

Oct-01

Nov-01

Dec-01

Jan-02

Feb-02

Mar-02

Apr-02

May-02

Jun-02

Jul-02

Aug-02

Sep-02

Oct-02

Nov-02

Dec-02

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

Aug-03

Sep-03

Oct-03

MM

cf p

er d

ay

Actual Export Export Capacity

TRANSWESTERN SAN JUAN EXPORTS


7


Impact of Rockies Imports + San Juan Production Growth on Export Capacity

0

500

1,0001,5002,000

2,5003,0003,500

4,0004,500

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

MMCF/D

Capacity = 4,050 MMcf/dCapacity = 3,960 MMcf/d

Assumptions:Rockies imports, plus Bondad expansion, plus 1% San Juan production increaseSource: Lippman Consulting

8


TW San Juan Expansion is the Best Way to Relieve the Constraint at Blanco

• Existing infrastructure allows lower scale expansion (375 MMcf/d).

• Least cost expansion alternative.

• Can easily be scaled up to handle more volumes in the future by adding HP.

• Low execution risk:

• Experienced project manager.

• Certificate is ready for filing at FERC.

• Tentative Navajo ROW arrangements.

• Market flexibility – East and West markets.

9


Proposed San Juan Expansion

Bloomfield CS15,000 Hp Add

72 miles Of 36” loop

Bisti CS 1,500 Hp Add

10


Sun Devil Lateral

Ignacio

Blanco

Permian

Anadarko

Thoreau

San Juan

California

Phoenix

Existing TW systemSun Devil LateralSan Juan ExpansionEl Paso Natural Gas

TW Sun Devil Lateral - 500+ MMcf/d - 170 miles of 36” line, no compression - Deliveries to industrials, power generators, LDC’s and El Paso south system

11


Comparative Total Delivered Gas Cost 1)2005 2006 2007 2008

Transwestern Blanco to Phoenix:

Gas Cost - San Juan $4.588 $4.312 $4.204 $4.170Commodity + ACA + GRI $0.0225 $0.0225 $0.0225 $0.0225Reservation $0.4150 $0.4150 $0.4150 $0.4150

Illustrative Fuel @ 2.0% $0.094 $0.088 $0.086 $0.085Total Cost @ 2.0% Fuel $5.119 $4.837 $4.727 $4.693

El Paso Permian to Phoenix:

Gas Cost - Permian $4.939 $4.655 $4.539 $4.506Commodity + ACA + GRI $0.0291 $0.0291 $0.0291 $0.0291Reservation $0.25975 $0.25975 $0.25975 $0.25975

Fuel @ 3.2% $0.163 $0.154 $0.150 $0.149Total Cost @ 3.2% Fuel $5.391 $5.098 $4.978 $4.944

KM Silver Canyon Blanco to Phoenix:

Gas Cost - San Juan $4.588 $4.312 $4.204 $4.170Commodity + ACA + GRI $0.0175 $0.0175 $0.0175 $0.0175Reservation $0.4900 $0.4900 $0.4900 $0.4900

Fuel @ 1.38% $0.064 $0.060 $0.059 $0.058Total Cost @ 1.38% Fuel $5.159 $4.880 $4.770 $4.736

Kern/El Paso Opal to Daggett to Phoenix:

Gas Cost - Rockies/Opal $4.592 $4.245 $4.151 $4.124Kern Commodity + ACA + GRI $0.064 $0.064 $0.064 $0.064Kern Reservation (2003 Expansion Rate) $0.5831 $0.5831 $0.5831 $0.5831

Kern Fuel @ 1.89% $0.088 $0.082 $0.080 $0.079Total Cost to Daggett @ 1.89% Fuel $5.327 $4.974 $4.878 $4.850

El Paso Commodity + ACA + GRI $0.0197 $0.0197 $0.0197 $0.0197El Paso Reservation $0.30863 $0.30863 $0.30863 $0.30863

El Paso Fuel @ 0% $0.000 $0.000 $0.000 $0.000Total Cost to Phoenix @ 0% Fuel $5.656 $5.302 $5.206 $5.179

1) Gas Costs based on 1/28/2004 quotes from trader/major customer.

12


TW Sun Devil Lateral is the Best Wayto Achieve Gas-on-Gas Competition for

Phoenix• Lowest Capital cost requirements

• $250mm vs $750mm for Kinder-Morgan

• 170 miles vs 455 miles

• Lower project cost = lower execution risk = lower cost to AZ ratepayers

• Leveraging existing infrastructure allows smaller scale expansion to get started (500 MMcf/d).

• No compression initially required.

• Able to utilize existing unsubscribed mainline capacity.

• TW’s Sun Devil Lateral provides to Phoenix:• Experienced, safe, reliable pipeline alternative

• Competitive pricing

• Access to multiple gas supply sources

• Promotes gas-on-gas competition

13


ACC Action Items

• Support the efforts of your customer base to access lower cost gas supplies• Arizona electric utilities

• Arizona gas utilities

• Large industrial users

• Merchant power generation model is dead• TECO / Gila Bend

• Promote development of utility infrastructure corridors using existing highway, railroad, and power line ROW• Minimizes environmental damage

• Minimizes private landowner involvement

• Promote and support ROW Quick-take legislation• Iowa

• Utility establishes eminent domain condemnation rights via court petition, posts bond

• Judge appoints 3-person independent commission to hear case

• Right-of-way costs established and landowner compensated within 30 days

• Provides surety of construction timeline and avoids litigation delays

Transwestern Pipeline Company Transwestern Pipeline Company Status of San Juan Expansion & Sun Devil...

Documents

Transcript of Transwestern Pipeline Company Transwestern Pipeline Company Status of San Juan Expansion & Sun Devil...