PERMIAN BASIN

PETROLEUM ASSOCIATIONMidland, Texas

May 8, 2001

Barry RussellPresident

Independent Petroleum Association of America

Overview

• The Nature Of The Energy Problem

• The Issues

• Changes In Washington

• IPAA’s Role

Major Focus: Energy Policy

• Domestic Production Of Oil And

Natural Gas

• Meeting Growing Future Demand For Energy

U.S.Natural Gas DemandComparison of 1992 and 1999 NPC Study Results

1990 1995 2000 2005 2010 2015

YEAR

1999 NPC Reference Case 1992 NPC High Case 1992 NPC Low Case Actual

A C T U A L F O C U S P E R I O D E X T E N D E D V I E W

1999 NPC Range of Outcomes

TRIL

LIO

N C

UB

IC F

EET

15

20

25

30

35 ACTUAL FOCUS PERIODFOCUS PERIOD EXTENDED VIEWEXTENDED VIEW

U.S. Natural Gas Demand by Sector

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

TR

ILLIO

N C

UB

IC F

EET

1990 1995 2000 2005 2010 2015

YEAR

Other

Commercial

Residential

Industrial

ElectricityGeneration

F O C U S P E R I O D E X T E N D E D V I E WA C T U A L

0

10

20

30

40

50

60

BC

FD

* Representing 91% of US Production

Drilling Year:1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Pre-1990

Production Decline Rate of Base:

16% 17% 15% 17% 18% 21% 23% 23%18% 19%

U.S. Production History*

1990 1991 19991998199719961995199419931992

Natural Gas Prices(NYMEX)

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

8.00

8.50

9.00

9.50

10.00Ja

n-90

Jan-

91

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Trade Date

Pric

e ($

/mm

btu)

Fwd Curve Apr01 Fwd

(3/9/01)

Forward Pricing: 1 year $5.23 3 year $4.76 5 year $4.6810 year $4.75

898

362

0

200

400

600

800

1000

1200

Oil Rigs

Natural GasRigs

Rigs Drilling for Natural Gas Have Doubled

Natural Gas Producers are Responding

488

1,125

April, 1999 February, 2001

Issue: Building a Sound Energy Policy

• Recognize Importance Of Energy

• Establish Energy Advocacy– Require Consideration Of “Energy Impact”

In Regulatory Decision Making

Critical Factors

• Access

• Technology

• Financial Requirements

• Skilled Workers

• Rigs

• Lead Times

• Requirements Of New Customers

Issue: Resource Base• Knowing How Many Laws, Regulations And

Conflicting Management Plans Are In Play

Issues: Access to Capital

• Increase Spending By $10 Billion A Year Through 2015

• Double Wells Just To Deal With Natural Gas Demand

• Retain As Much Revenue As Possible

• Old And New Tax Reforms

What’s Going On In Washington

• Bush-Cheney National Energy Policy Task Force

• Transition Advisory Teams

• The Administration And The Agencies

• The Congress

Our Role In The Process

• Wildcatters’ PAC

• The Transition

• Congressional Hearings

• Congressional Oil & Gas Forum

Political Effectiveness

• Record-Breaking Fundraising

• Increased IPAA Member Involvement

• The Wildcatters Fund Contributed To 71 Open Congressional Seats And Competitive Races To Ensure A Pro-Business/ Pro-Oil & Gas Congress

Grassroots Activism

• Voter Education Guide

• “Get Out The Vote” Campaign

Hearings & TestimonyThe 107th Congress

• House Energy and Air Quality Subcommittee

• House Resources Committee

• House Energy and Mineral Resources Subcommittee

• Senate Energy and Natural Resources Committee

• Federal Energy Regulatory Commission

Rep. Barbara Cubin (R-Wyoming)Rep. Joe Barton (R-Texas)

Sen. Frank Murkowski (R-Alaska)

Rep. James Hansen (R-Utah)

Congressional Oil & Gas Forum Advocacy

The Oil and Gas Forum Hosted by

IPAA on March 15, 2001

Drew 90 Participants and

7 Members of Congress