East Tennessee Natural Gas2009 Customer Meeting
Pat GibsonVice President, East Tennessee Natural Gas
September 2, 2009
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 2
Agenda• Introduction• Spectra Energy Highlights• Market Fundamentals• Business Development Update• System Operations• Marketing Update• LINK Enhancements• Q&A
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009
Spectra Energy Highlights
Pat GibsonVice President, East Tennessee Natural Gas
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 4
Spectra Energy Asset PortfolioOne of the Largest Midstream Systems in North America
2008 Natural Gas Pipeline Throughput
3.6 TcfMiles of Transmission Pipe
19,100Miles of Gathering Pipe
62,500Miles of Distribution Pipe
37,000Storage Capacity
285 BcfRetail Customers
1.3 million
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 5
System Overview
• 1.5 Bcf/d capacity
• 1,500 miles of pipe
• Diverse market: Marketers, Producers, Electric Generation, Utilities, Industrial
• Access to diverse and reliable supply sources– Major pipeline interconnections– On-system Appalachian suppliers – On-system LNG storage - ~1.1 Bcf working gas– On-system Storage - 5.5 Bcf
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 6
-
20
40
60
80
100
120
140
160
180
200
2000 2001 2002 2003 2004 2005 2006 2007 2008
MM
Dth
DirectConnectSupply
TETCO
SONAT
TennesseeGas
East Tennessee Natural Gas Projects In-service
• Driven by the need for Appalachian producers to economically deliver Appalachian production to liquid markets (i.e. Transco-Cascade Creek)
– Patriot Uprate• Creates capacity from Jewell
Ridge to Cascade Creek• Uprates MAOP on 146 miles
of 12” & 24” pipelines– Greenway Nora
• Extends mainline path from Jewell Ridge back to Nora Lateral with deliveries to Cascade Creek
• Replaces 6 miles of 8” pipeline with 24”
– Equitable-Glade Spring• Install one 7,600 HP electric
compressor unit • Creates capacity from
Nora/Jewell Ridge to Cascade Creek
• Reflects the shift in supply source
Patriot Uprate40Mdth/dIn-Service 12/2008
Equitable-Glade Springs50MDth/d capacityIn-Service 10/2008Greenway Nora
48MDth/d capacityIn-Service 12/2008
Supply source
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 7
Our Charter• We know we are successful when we are the:
• Supplier of choice for our customers• Employer of choice for individuals• Advisor of choice on policy and regulation for governments and
regulators• Partner of choice for our communities• Investment opportunity of choice for investors
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 8
Natural Gas – The Natural Choice• Naturally Clean• Naturally Abundant• Naturally Reliable• Naturally Versatile• Naturally Efficient • Natural Gas is Safe
• Natural Gas is Needed• Natural Gas is Now
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009
Market Fundamentals
Erika YoungProject DirectorEast Tennessee Natural Gas
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 10
Spectra Energy North America Asset Mapwith Basins and Shale Plays
Data source: Potential Gas Committee (2009)•Value as of year-end 2007 (mean values)
Traditional Natural Gas Resources
1,673.4 Tcf
Coalbed Gas Resources
163.0 Tcf
Total U.S. Resources
1,836.4 Tcf
Proved Reserves (EIA)
237.7 Tcf*
Future U.S. Natural Gas Supply
2,074.1 Tcf
TCF/year
Data source: ICF International July 2009 Compass
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 11
Abundant Domestic Supply Potential
Source: ICF International July 2009 Compass
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 12
North America Regional Gas Demand (Bcf/d)
Source: ICF International July 2009 Compass
Annual Bcf/d
ETNG Specific Regions 2008 2013 2018
2008-2013
CAGR%
2008-2018
CAGR%
Northeast 9.8 10.8 11.0 2.1% 1.2%Southeast 6.1 8.4 10.4 6.7% 5.5%Mid Atlantic 2.9 3.8 4.5 5.4% 4.4%Tennessee 0.7 0.8 0.9 3.7% 3.3%Florida 2.8 3.9 4.9 6.6% 5.7%Lower 48 States 61.9 66.8 72.4 1.5% 1.6%Source: ICF International July 2009 Compass
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 13
Where Will Supply Be Sourced?
A myriad of factors drive each producers’ decision:
Capital access Acreage rights Ultimate resource base Price of liquids Capacity positions LNG
Access to infrastructure Saturated conventional gas vs
drier shale gas International vs. domestic players
No two producers are the same
Shales will help to fill supply gaps and to meet demand growth largely driven by gas-fired electric generation.
North America consumes ~ 70 Bcf/d
Existing production declines at 20% - 30% a year
14-20 Bcf/d per year of new production is required to replace annual decline
New supply is sufficient to make LNG a price-taker
$0
$2
$4
$6
$8
$10
$12
$14
$16
0 5 10 15 20Annual Replacement Gas Volumes
Mar
ing
al c
ost
of
new
wel
l p
rod
uct
ion
Indicative New Production Price Stack
Other Unconventional
Onshore Conventional
Offshore Conventional
Bcf/d/y
$
AssociatedGas
Shales
Assumes breakeven prices in low to high $3s.
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009
Business Development Update
Bill WickmanDirectorMarketing
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 15
Appalachian Shale and CBM
Marcellus Shale
Devonian Shale
Huron, New Albany Shale
Chattanooga Shale
Coal Bed Methane
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 16
ETNG Supply - Past0.
65
MM
dth/
d
0.04
MM
dth/d
0.05
MM
dth/d
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 17
ETNG Supply - Present
0.22 M
Mdth/d
0.1
9
MM
dth
/d
TGP
+
TETL
P+CGT
1.9
MM
dth/
d
0.04
MM
dth/d
0.03 M
Mdth/d
0.40 M
Mdth/d
0.0
2
MM
dth
/d
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 18
ETNG Supply - Future
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 19
Current State of Capacity• ETNG
– Capacity from the “West End” is limited• No capacity from TGP• Capacity from TETLP only short term (through Dec-09)• Some capacity from SNG
– Long-term capacity from the “East End (3300 Line)” to western delivery points is not available. Short-term winter capacity is available.
– Nora Lateral remains fully subscribed – Limited capacity still exists on Jewell Ridge Lateral and on Stone
Mountain Line– Limited Capacity exists from Saltville/Jewell Ridge to Cascade Creek
(Transco)• Saltville Storage - Some capacity exists
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 20
Business Development Initiatives
• Continue expanding ETNG system to meet emerging market needs
• Explore and develop opportunities to enhance ETNG access to Appalachian Supply
• Incorporate existing customer growth needs into new expansion projects.
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 21
Northeast Tennessee Project (NET)• Overview
– Adds 150,000 Dth/d of firm capacity
– Creates mainline capacity from Jewell Ridge to Flatwoods Compressor Station 3306
– Extends ETNG system 8.5 miles from Flatwoods to a proposed power plant in Hawkins County
– Enhances market reach from growing Appalachian supply basin
• Schedule– 7/1/2009 completed open season– 8/4/2009 completed reverse
open season– March 2010 file FERC Certificate
application– February 2011 commence
construction– September 2011 in-service
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009
Summer 2009 Spectra Energy Operations Review
Ryan JamesDirectorCapacity Services
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 23
East Tennessee Natural GasTop 25 Delivery Days
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Dem
and
(D
th)
06/07 07/08 08/09
2/4
1/16 1/20 3/21/15 2/5 1/21
3/311/21
11/18 2/3 2/23
1/14 1/17
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 24
East Tennessee Natural Gas Top 25 Summer Delivery Days
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
De
ma
nd
(D
th)
S06 S07 S08 S09
7/14 6/24 7/15 6/23 7/16 7/30 6/25
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 25
Seasonal Peak Demand
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
S00 & W00-01
S01 & W01-02
S02 & W02-03
S03 & W03-04
S04 & W04-05
S05 & W05-06
S06 & W06-07
S07 & W07-08
S08 & W08-09
S09 & W09-10
Dem
and
(D
th)
Summer Peak Winter Peak
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 26
Total Seasonal Deliveries
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
100,000,000
110,000,000
120,000,000
S00 & W00-01
S01 & W01-02
S02 & W02-03
S03 & W03-04
S04 & W04-05
S05 & W05-06
S06 & W06-07
S07 & W07-08
S08 & W08-09
S09 & W09-10
To
tal
De
live
rie
s (D
th)
Summer Total Winter Total
Projected
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 27
Cascade Creek Deliveries
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Jan-
07
Ma
r-0
7
Ma
y-07
Jul-0
7
Se
p-07
No
v-0
7
Jan-
08
Ma
r-0
8
Ma
y-08
Jul-0
8
Se
p-08
No
v-0
8
Jan-
09
Ma
r-0
9
Ma
y-09
Jul-0
9
Primary Secondary IT
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 28
Daily Receipt Profile (Excluding Storage)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Jan-
08
Feb
-08
Mar
-08
Apr
-08
May
-08
Jun-
08
Jul-0
8
Aug
-08
Sep
-08
Oct
-08
Nov
-08
Dec
-08
Jan-
09
Feb
-09
Mar
-09
Apr
-09
May
-09
Jun-
09
Jul-0
9
Aug
-09
Rec
eip
ts (
Dth
)
Non-West End Supply TE, TGP, MGT, CGT
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 29
Receipts from TGP
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009
% o
f Y
earl
y S
up
ply
TGP Other Supply
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 30
Outages• Rural Retreat Outage Sept 21-27• Glade Spring Outage Oct 5-12• Estill Springs to Ooltewah ILI Runs: Sept 9 and 16• Estill Springs to Ooltewah DOT Investigations: Beginning
Oct 16• Bristol ILI Runs: August 25 and 27• Bristol ILI DOT Investigations: Beginning October 3• Ooltewah to 3500 ILI Run: Sept 1 and 2• Ooltewah ILI Investigations: Beginning October 26
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 31
Winter Imbalances
-200,000
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
200,000
0 10 20 30 40 50 60
EHDD
Imb
alan
ces
W06-07 No MAD W07-08 No MAD W08-09 No MAD W06-07 MAD W07-08 MAD W08-09 MADW06-07 Adj Mad W07-08 Adj MAD W08-09 Adj MAD
+ Due Pipe
- Due Shipper
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 32
Winter Imbalances – MAD* Not Implemented
-200,000
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
200,000
0 10 20 30 40 50 60
EHDD
Imb
alan
ces
W06-07 No MAD W07-08 No MAD W08-09 No MAD
+ Due Pipe
- Due Shipper
*Maximum Allowed Deliveries
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 33
Winter Imbalances – MAD Implemented
-200,000
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
200,000
0 10 20 30 40 50 60
EHDD
Imb
alan
ces
W06-07 MAD W07-08 MAD W08-09 MAD
+ Due Pipe
- Due Shipper
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 34
Winter Imbalances – Adjusted MAD with TGP OFO
+ Due Pipe
-200,000
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
200,000
0 10 20 30 40 50 60
EHDD
Imb
alan
ces
W06-07 Adj Mad W07-08 Adj MAD W08-09 Adj MADW 06-07 Adj MAD
- Due Shipper
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 35
Imbalances• ETNG has minimal linepack to absorb any overtakes or undertakes on
its system.
• ETNG relies on upstream interconnecting pipelines to help manage any imbalances.
• Flexibility of upstream interconnects will continue to be limited during times of constraints on their systems.– Anticipate upstream interconnect flexibility will be limited during peak and
near peak periods similar to previous few years.– Limitations may also occur during outages and low demand periods.
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009
New ETNG Service Options
George SnyderDirectorETNG Marketing
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 37
Potential Service Options• Enhance Storage Delivery Option
• Creation of No Notice Service
• TETLP upstream capacity
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 38
System Operational Changes• System growth
• Evolving customer contract mix
• Expiration of FTC Agreement Containing Consent Order
– Potential tariff changes
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 39
Imbalance Management Tools• Current Tariff Based Tools
– MAD (LMSMA Agreement): • LMSMA OBA’s tied to MDDO
and scheduled usage• SDO: swing on storage
attached to system• Limited to select peak days
– SSO: upstream storage on TGP • Not currently utilized• Customers can opt in or out so
it has narrow application – Force Balance Letters: Due
shipper imbalance control only– OFO: command and control
• Operational Tools– Line Pack:
• Limited capability• System integrity put at risk to
support overtakes – Upstream OBA
• Dependent on upstream pipes’ capability
• Subjects customers to “cascading OFO’s”
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 40
Potential Service Options Considerations• Enhance Storage Delivery Option
– Year round– Not solely dependent on MAD
• Creation of No Notice Service– New No Notice rate schedule on ETNG – Supported by upstream capacity on TETLP and Moss Bluff or
Egan storage
• TETLP capacity– Alternate upstream capacity– Leverage recent expansions (Kosciusko, etc.)
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 41
Benefits of Potential Service Options• Higher priority imbalance management service
• Preservation of flexibility
• Supply diversity
• Available in 2011/2012
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 42
Next Steps• One on one customer meetings
• Assess opportunity for a new service
• Refine scope and structure of new service or enhancements
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009
East Tennessee LINK® Update
Michael WolfCommercial Business Analyst
LINK® Systems
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 44
TeamLeaderJeff Pekar
ProductionSupportTrish MeigsSandra BryantAdriel CervantesBlanca RiveraJoyce SchubrickMichael Wolf
Project TeamElias MacalEugene BrennanJoe CaseyRobert GardnerClaude MundyMichael Wolf
LINK® Support Team• The LINK® System is continually being enhanced to reflect changing business
requirements, customer needs, and advancements in technology, with many of our enhancements prompted by our customers.
• LINK® Group support personnel average over 19 years of industry experience. This provides a unique ability to understand and address customer needs.
• All of our application designers and developers are located on-site which allows quicker turnaround time and higher quality.
• LINK® Group personnel are involved in all enhancements from inception to implementation and are also responsible for conducting LINK® Training, ensuring they are in constant contact with our customers and are attuned to their needs
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 45
Customer Service Application Enhancements
– Nomination Customization– Cross Pipeline Nomination– Password Self-Service– Activity Roll– ETNG Default Time– BA Level Nominations– Graphical ETR Maps– Graphical Capacity Release
There have been 37 meaningful customer enhancements implemented since 2007. The following are just a few of the enhancements that have been implemented since the Fall 2008 Shipper meeting:
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 46
Customer Service Application Enhancements The following enhancements are planned for the remainder of 2009:
– Auto-Confirmation improvements– Package ID Confirmation– LINK® Mobile – Priority Modeling– Auto-Renomination– Report Subscription– Know Your Account Manager (Phase II)
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 47
Customer Service Application Enhancements
– Automated Validation/Approval of Retro-Active Adjustments– Graphical Nomination Priority Communication and Modeling– Additional Capacity Release/ETR Map Enhancements– Cross Pipeline Nomination Enhancements– Ad Hoc Reporting– Projected Allocations/Imbalances– Automatic Activity Roll– Entity Level Confirmations
What enhancements do you recommend for 2010?
Potential enhancements already identified for 2010 include:
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 48
LINK® Business Strategy• Consistent with Spectra Energy’s goal of becoming the “Supplier of Choice” in
the Natural Gas Industry, the LINK® Group is dedicated to ensuring the LINK® System is the leading Customer Interface System in the Industry and that our customer service levels exceed management and customer expectations.
• To achieve these goals, we focus on:– Identifying and implementing system enhancements that benefit customers.– Integrating customer feedback into system design, quality control and
service.– Promptly addressing customer issues/concerns.– Maintaining quality measures.– Providing customer training at geographically diverse sites.– Implementing changes that increase internal efficiency and reduce costs.– Continually enhancing the technical and business expertise of internal
staffing.
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 49
Quality Improvement Efforts Continue
• Quality measures are tracked and evaluated.
• Project Managers are challenged to find 95% of all project defects.
• Employee incentive goals are keyed to quality.
• Overall defects reduced 22% over last year.
Does your experience with LINK® coincide with our tracking statistics?
91.04%
93.36%
98.08%
86.00%
88.00%
90.00%
92.00%
94.00%
96.00%
98.00%
100.00%
2007 Projects 2008 Projects 2009 Projects
Project Defects Identified During Testing
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 50
Business Continuity/Disaster Recovery
• Business Continuity/Disaster Recovery plans are in place and routinely tested.
• We have a redundant LINK® site located in Austin, Texas.
• In the event of a major operational, environmental, or other crisis situation, a secondary site for LINK® staff is located in Nashville.
Hurricane Ike Recovery in Nashville
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 51
Training
• This year, East Tennessee focused training was provided in Nashville during the week of June 15.
• Attendance was low.
• Do we need to change our offerings, locations or frequency?
• Should we consider any of the following?
– Provide East Tennessee focused training every other year unless there are major system/business changes.
– Provide training every year in Nashville, but include Texas Eastern, East Tennessee and Southeast Supply Header in the same week?
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 52
How are we doing? What can we do better?
http://link.spectraenergy.com/enhancements/suggestion.asp
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 53
LINK® Model Demo
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 54
Q & A
East Tennessee Natural Gas 2009 Customer Meeting | September 2, 2009 55