Arizona Corporation Commission Workshop on Natural Gas Infrastructure

Arizona Corporation Commission Workshop on Natural Gas Infrastructure NOI February 13, 2004 Phoenix, Arizona RB: UMT 2 -04 1

Focus on Southwestern US Market RB: UMT 2 -04 2

Natural Gas Infrastructure To Serve Arizona Unocal’s Keystone Gas Storage Facility EPNG System Phoenix Keystone Gas Storage Keystone is well positioned to serve the growing Arizona Market. RB: UMT 2 -04 3 Keystone Gas Storage • Located on the suction side of the EPNG Keystone Compressor Station • Access to San Juan and Permian Supply • Access to EPNG Southern Mainline Markets

Keystone Gas Storage Facility Storage Caverns Working Gas Capacity 4 2005 2 BCF 5 BCF Injection (MMCFD) 100 167 Deliverability (MMCFD) 200 333 Pipeline Interconnects: RB: UMT 2 -04 Current El Paso Northern Natural Transwestern

Keystone Gas Storage Benefits To Arizona Customers • Security of supply – Supply Diversity • • Manage daily and intraday load swings Optimize pipeline capacity utilization Manage Price Volatility Meet Seasonal needs RB: UMT 2 -04 5

Keystone Gas Storage Services Offered • Firm Storage – Customer has firm injection, withdrawal and capacity rights and access to all three interconnects • Park and Loan – Customer and Keystone agree to a specific injection and withdrawal schedule, receipt and delivery points, and fee schedule – can be firm or interruptible • Examples: cash to next month, weekend to next week, and intraday to next trading day • Wheeling – Customer can make use of the Keystone interconnects on an interruptible basis to move gas between El Paso, NNG and TW RB: UMT 2 -04 6

Keystone Gas Storage Firm Storage Service Rate Structure • Demand Charges – Capacity – Injection – Withdrawal $0. 05/mmbtu $1. 50/mmbtu/d $0. 75/mmbtu/d • Commodity Charges – Injection – Withdrawal $0. 01/mmbtu plus 1. 5% fuel retention $0. 01/mmbtu • Overrun Charges* (Maximum Rates) – Injection – Withdrawal $0. 10/mmbtu Typical 60 day cycle service capability $1. 50/MMBTU of Capacity per year * Overrun Charges are in addition to the applicable commodity charges RB: UMT 2 -04 7

Does Arizona need Market Area Storage? • Yes! – Keystone can meet much of Arizona’s needs – Market area storage gives Arizona greater security of supply and real time load following capability – Arizona needs a mix of market area and production area storage options RB: UMT 2 -04 8

Unocal’s Storage Development Activities in Arizona • Provide 3 -6 BCF of high deliverability storage capacity to serve the Phoenix-Tucson market • Serve Load following requirements of power generators, peaking requirements of LDC’s and provide market supply security • Focus is Picacho Basin • Significant potential for pipeline interconnects and potential direct connections • In Service 2006 -2007 RB: UMT 2 -04 9