IPAA Mid-Year Meeting

1

• IPAA Mid-Year Meeting
• Colorado Springs, Colorado
• June 14, 2004

2
Plains All American Profile (NYSE PAA)
Aggregate Size

• Annual Revenue (2003) 12.6 B
• Total Assets (3/31/04) 2.2 B
• Enterprise Value 3.0 B
• Equity Market Cap. 2.1 B
• 2003 Fortune 500 Rank 155
• Unitholders (approx.) 30,000

3
PAAs Role in the Crude Oil Distribution Chain
Producers
Refiners
4
PAAs Principal Business Strategy
Paraphrased Excerpt

• Provide efficient solutions to the numerous
  complexities inherent in the crude oil industry
  and the regional crude oil supply and demand
  imbalances that exist in the U.S. and Canada..

5
Is the U.S. Running Out of Oil?
6
News Flash

• The United States
• Comprises lt 5 of World Population
• Generates 10 of World Petroleum Production
• Consumes 25 of World Petroleum Production
• Currently Imports 62 of Its Daily Crude Oil
  Consumption

7
Is the U.S. Running Out of Oil?
Accordingly, in practical terms, the U. S. issue
is already resolved. The remaining question is
8
A Popular Topic, but No Clear Public Consensus
Were draining our reserves dry.
Enough oil to last for 500 years.
Houston Chronicle May 30, 2004 Llewellyn
King Chairman CEO King Publishing
Co. Publisher for White House Weekly
Energy Daily
Houston Chronicle May 30, 2004 H. Sterling
Burnett Senior Fellow National Center for
Policy Analysis
9
GLA Working Hypothesis
NO

• Why Not?
• Free markets work.
• Changing unit economics impact both supply and
  demand.
• There are significant, recoverable crude oil
  resources remaining at the right price.

10
Free Markets At Work
Sample Factors

• Impact of Rising Prices
• Conservation Demand destruction
• Fuel switching
• Reserve production expansion
• Increase in service costs
• Innovation technology are rewarded ()

• Impact of Low Prices
• Unrestrained use Demand stimulation
• Fuel switching
• Reserve production contraction
• Pressure on service costs
• Low cost operators are rewarded ()
  technology advances

11
Elasticity of Oil Supply and Demand
United States Oil Consumption Commodity Prices
Price
Price-
Price
?
Demand
Demand
Demand
Price
Sources EIA, BP, WTRG, Bloomberg, various.
12
Audience Participation

• Conservation
• Demand Destruction
• Lottery Tickets

13
The Forecasts of Today Seldom Become the Reality
of Tomorrow
14
Accuracy of the Markets Vision on Prices
15
Economic Jaws of Inventory Price Leading
Indicator or Symptomatic Result?
U.S. Crude Oil Inventory vs Oil Price(The Last
10 years)
Source Bloomberg
16
(No Transcript)
17
OK Greg, if it is that simple, why is it so hard
to drive a consensus on the subject?
Economic theories (and realities) are simple, but
the inner workings of the oil industry are very
complex.
18
How Complicated is the U.S. Crude Oil Industry?
You be the judge.
19
The U.S. Demand Side of The EquationVolumes
Approximate 2003 Daily Average (MMBLS) (1)
Aggregate Output Mogas 44 Distillate
20 LPG 10 Jet 8 Resid 4 Other 14
(1) Source EIA BP GLA estimates
20
Additional Complicating Factors Affecting Supply,
Demand Product Slate

• Changes in natural gas frac spreads affect
  availability of blendstock and raw products
• Seasonality (changing feedstock demands)
• Weather
• Transportation scheduling logistics
• Competing fuels (natural gas, coal, etc.)
• Restrictions on product specifications
• Product imports/exports
• Multiple varieties of crude
• Metals content
• Emmission issues
• Scheduled/Unscheduled downtime
• Etc., etc., etc.

21
Additional Complicating Factors Affecting Supply,
Demand Product Slate

• Changes in natural gas frac spreads affect
  availability of blendstock and raw products
• Seasonality (changing feedstock demands)
• Weather
• Transportation scheduling logistics
• Competing fuels (natural gas, coal, etc.)
• Restrictions on product specifications
• Product imports/exports
• Multiple varieties of crude
• Metals content
• Emmission issues
• Scheduled/Unscheduled downtime
• Etc., etc., etc.

Two areas of Focus.
22
Getting 9.6 mmb/d of Oil to The U.S.
Source BP
23
All Regions are Supply Deficient, but the
Landlocked PADD II Region is the Focus Area for
Transportation
mmb/d Total Refinery Inputs 15.3 Domestic
Production 5.7 Reliance on Imports 9.6
24
U.S. Pipeline Infrastructure Designed to Displace
Crude to Meet PADD II Demand

• Inter-PADD Movements Driven Primarily by
  Economics of
• Transportation differentials
• Quality issues (inter-grade surplus/shortage
  refinery constraints)

25
PADD II Demand to Be Satisfied by Imports from
Canada, Cushing Gulf Coast
26
Multiple Crude Grades Add to Complexity
27
Not All Crude Oil Is Equal
Gross Product Value in /bbl
43. 31
39.59
10
32
45
38
45
30
Note Values shown are approximate based on
estimated yields and Platts indicated values on
June 8, 2004.
28
Variations in Selected Domestic Differentials to
WTI
29
Variations in Selected Canadian Differentials to
WTI
30
Example of an Impending ComplicationStorm
Clouds Forming or Light Shower?

• Situation
• U.S. market is currently balanced with foreign
  waterborne imports.
• Canada is projected to ramp up oil sands
  production 500,000 b/d
• U.S. GOM is projected to ramp up deepwater
  production 500,000 b/d
• U.S. demand is not projected to simultaneously
  grow by 1 million b/d.
• Mideast Politcs are highly unstable.

31
Example of an Impending ComplicationStorm
Clouds Forming or Light Shower? Continued.
Possible Outcomes
1. The U.S. begins exporting over 500,000 b/d.
2. U.S. producers shut-in over 500,000 b/d or
reduce drilling activities (at 40.00/bo) to
make room for incremental volumes.
3. Foreign sources of waterborne imports happily
withdraw 500,000 b/d from the market (thus losing
market share in the worlds most critical
market?).
4. Inventories begin to build price pressure
hits the U.S. market and competition among
grades and qualities intensifies.
5. Something unexpected happens to balance the
market (strike, Mideast disturbance, explosion in
demand, etc.)
6. Some combination of all of the foregoing
32
Chinese Proverb (Curse) May you live in
interesting times.
Oil Industry Prediction (Challenge) We are
going to be living in interesting times.
33
GLA View is that both statements are correct,
with slight editing.
Were draining our reserves dry. Houston
Chronicle May 30, 2004 Llewellyn King Chairman
CEO King Publishing Co. Publisher for
White House Weekly Energy Daily
Enough oil to last for 500 years . Houston
Chronicle May 30, 2004 H. Sterling
Burnett Senior Fellow National Center for
Policy Analysis
34
Not any time soon
,but it could get REAL expensive.
35
Except for the historical information contained
herein, the matters discussed in this
presentation are forward-looking statements that
include risks and uncertainties. These risks and
uncertainties include, among other things, market
conditions, governmental regulations and other
factors discussed in Plains All American
Pipeline, L.P.s filings with the Securities and
Exchange Commission.