SPECIAL BENTEK STUDY

NATURAL GAS PRODUCTION IN KEY BASINS SKYROCKETS, POWER GENERATION DEMAND KEEPS PACE

BENTEK gas market fundamental study reveals notable supply/demand developments

DENVER (February 10, 2006) – BENTEK Energy, LLC, a leading energy market information company, announced findings from the company’s latest report covering the most significant developments in the 2005 gas market, and the impact of those developments in 2006. The report, titled “U.S. Natural Gas Supply/Demand 2004-2006” reveals that while natural gas production declined slightly in 2005, it nevertheless responded dramatically to higher natural gas prices. The study indicates that had it not been for the hurricanes of 2005, total U.S. gross withdrawals would have increased by 1.4 Bcfd or 2.7% over 2004. This would have been the largest production increase since 1994. The report also exposes an equally important development on the demand side of the gas market: U.S. consumption by end users – residential, commercial, industrial and power generators – increased by 2.2%. Demand growth in all regions was largely due to an increased use of gas as a fuel for power generation. While some industrial markets declined, particularly in the Texas and Southeast regions, the increase in power generation demand was greater, offsetting the losses.

“When we drilled down to the detailed gas flows in 2005, it was clear that hurricane related damage masked some very important changes in the gas market,” commented Porter Bennett, BENTEK president. "Several basins achieved double digit increases in production. Storage was filled, in spite of hurricane related damage. Power generation drove demand increases in the Midwest, Northeast and Southeast.” Additional findings of the study include:

• Increasing power generation demand has added new volatility pressures to gas prices.
• While supply is building, demand and supply are delicately balanced. Sudden demand increases due to weather, or supply curtailments due to storm damage or other incidents will rapidly disrupt the balance and significantly impact prices.
• Production gains in the West and East Texas basins will alter historical flow patterns in the U.S., requiring additional infrastructure investments to alleviate bottlenecks. Incremental production may hit the market before new pipeline capacity is completed, resulting in significant disruption to basis differentials.

“The bottom line of this study is volatility,” noted Rusty Braziel, Managing Director of BENTEK. “Our analysis of supply and demand is based on detailed gas flow information at almost 20,000 individual points across the pipeline grid that we derive from BENTEK’s Pipe2Pipe Gas Transportation Intelligence Service. We drill down into this data to reveal the most important natural gas supply, demand, transportation and storage developments. This year, all roads lead to the potential for increased volatility.”

For more information about BENTEK’s U.S. Natural Gas Supply/Demand Study, please contact Rusty Braziel at 888-251-1264 or click here.

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