Agenda • Bison Project Overview • Powder River Basin Overview • Bison Construction Hurdles • Summary
Bison Pipeline Project Williston Basin • 289 Miles • 24” Pipeline • $1.3MM/Mile • Capacity 350 MMcf/d • 4,200 HP • Max. Capacity 619 MMcf/d • 47,000 HP • In-Service Date: Nov. 2010 CS #3 CS #4 CS #2 Bear Paw Energy CS #5 ND Bison CS #6 MT Powder River Basin Big Horn SD WY Fort Union Compressor Station
TCGS 450 MCFD FUGG 635 MMCFD Redstone 20 MMCFD BHGG 250 MMCFD WBI BC 150 MMCFD WIC MB 1.08 BCFD Powder River Basin Pipelines 200 MMcfd Sheridan L E G E N D KNI 245 MMCFD CIG 212 MMCFD Gi MIGC 130 MMCFD Gillette WBI 96 MMCFD 1.2 Bcfd Grasslands 80-200 MMCFD Glenrock Casper Bison up to 619 MMCFD Douglas
Powder River BasinGas Production Forecast Source: PACE Global Energy Services WPA – 10/24/2006
Services and Equipment Sourcing • TransCanada’s procurement strategies are focused on obtaining goods and services that offer the best overall value: • Technical • Surety of supply • Competitive pricing / commercial terms • Construction capability • All suppliers sourced by TransCanada must meet our pre-qualification criteria: • Technical • HS&E • Financial • Project specific sourcing strategies are formalized and approved prior to execution of the sourcing strategy
Sourcing Approach • Key services and equipment requirements will be sourced through a formal competitive process. • Leveraging of existing TransCanada preferred supplier arrangements to extract competitive pricing, surety of supply and favorable commercial terms.
Critical Equipment and Services Requirement • Line pipe • Large diameter valves • Compression facility equipment: • Gas turbines • Electrical / controls • Pipeline installation contractors Surety of supply to support construction is a critical deliverable
…Global mill availability continues to be constrained, some mills are now booked 24 months out… Mill Space Availability and Trends
DSAW (Large Diameter) Pipe Prices • …Although prices have somewhat stabilized, waiting too long to secure pipe means being forced to use high cost producers and paying market premiums…
Escalation in Pipeline Projects Costs Pipe and Construction labor costs are main drivers
Forecast – Pipeline Construction Activity in the United States • 20 + large mainline spreads expected in 2007, exclusive of medium-sized jobs and integrity work. • 2008 and 2009 spread demand expected to increase from 2007 levels. • In order to manage shortages, work seasons have been extended. The traditional work season was from May to October. Currently, the work season lasts from January to December.
Critical Path Commitments • Line Pipe Commitments: • 2010 pipe supply January, 2008 commitment • Minimum cancellation fee 33% • Cancellation fee can be 100% near material ship date • Pipeline Construction Contractors: • 2010 construction start Q4, 2008 commitment • Secure construction contractor 5% Upfront • Minimum cancellation fee 25% • Cancellation fee can be 100% near construction start Early project planning and commitment from customers is critical for a successful project
Bison Shipper Benefits - Summary • Competitive netback pricing • Provides transportation and pricing diversity for Powder River Basin Pipeline grid • Efficiently utilizes existing downstream assets to attractive markets • Minimal impact on downstream pricing due to displacement of Canadian production • North outlet enhances existing gathering capability and value • Seamless transportation (one nom, one bill) from PRB to Market
Bison Construction Hurdles - Summary • Mill Space is Constrained • Larger Diameter Pipe Prices have escalated since 2004 • 64% increase in project costs for similar projects • Contract Labor market is highly constrained • Pipe and Contractor Labor commitments to secure resources are required earlier in the project process • Pipeline project environment has become excessively risky • Commitment timing requirements versus regulatory approval process • Excessive cancellation fees on material and labor contracts