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

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

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

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  1. IPAA Mid-Year Meeting Colorado Springs, Colorado June 14, 2004

  2. 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 Operational Metrics • Assets: Pipelines (miles) 14,000+ Tankage (MMbbls.) 36.6 Truck Fleet (units) +/- 500 • Crude handled (MMbpd) 2.4 • Approx. number of grades& varieties handled 50+ • Geographic footprint: USA (states) +/- 40 Canada (provinces) 5 • Employees +/- 2,000 Plains All American Profile (NYSE: PAA) Aggregate Size

  3. Plains All American’s Operations Gathering, Marketing, Terminalling, Storage and Pipelines Pipeline Truck Pipeline Pipeline Gathering Injection Station Terminal / Storage / Exchange Location Barge PAA’s Role in the Crude Oil Distribution Chain Producers Refiners

  4. PAA’s 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 < 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. World Accordingly, in practical terms, the U. S. issue is already resolved. The remaining question is: Is the U.S. Running Out of Oil?

  8. A Popular Topic, but No Clear Public Consensus “Enough oil to last for 500 years.” “We’re draining our reserves dry.” 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. Arab Embargo & U.S. Price Regulated Full Deregulation Texas Production Regulated 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. Actual Price Forward Curve Accuracy of the Market’s 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. 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.

  17. How Complicated is the U.S. Crude Oil Industry? You be the judge.

  18. Refined Products Imports Exports 2.6 1.0 Other Liquids 0.1 Other Liquids 0.9 Oil Exports .001 Residential 0.8 Commercial & Industrial 5.2 Oil Imports 9.6 Crude Oil Refinery Input 15.3 Total Refinery Input 16.6 Output 17.6 Domestic Production 5.7 Transportation 13.3 Electric Power 0.5 Stocks & Net Loss/Gain (0.1) NGPL Refinery Input 0.4 Processing Gain 1.0 NGPL Direct Use & Blends 0.7 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

  19. 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.

  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. Two areas of Focus.

  21. Getting 9.6 mmb/d of Oil to The U.S. Source: BP

  22. Petroleum Administration Defense Districts IV (0.2 mmb/d) II (1.5 mmb/d) (2.8 mmb/d) V I (0.8 mmb/d) III (3.9 mmb/d) 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

  23. C A N A D A IV II V I III 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)

  24. PADD II Supply Shortfall(Millions of Barrels per Day) Refinery Inputs: 3.3 MMbbls Production: .46 MMbbls Supply Shortfall 2.8 MMbbls Source: Energy Information Administration C A N A D A BP Pipeline BP Pipeline Capline Pipeline System PAA Basin Pipeline IV Shell (W. Tulsa) Pipeline II STG Pipeline V Cush-Po Pipeline I Gulf of Mexico Foreign Imports Link Pipeline Phillips Borger Pipeline III Mid-Continent Pipeline PAA Red River Pipeline Osage Pipeline Seaway Pipeline Ozark Pipeline Mid-Continent (Sun) Pipeline PADD II Demand to Be Satisfied by Imports from Canada, Cushing & Gulf Coast

  25. Domestic Foreign Sour Sweet Sweet Sour Bonny Light Mesa 30 Brent Oriente Brass River Maya Oseburg Arab Medium Gullfaks Furiel Cano Limon Leona 24 Cuisana Arab Heavy Forties Mesa 28 Lago Cinco Olmeca Basrah BCF 17 Spraberry W. Tx. Sour Scurry Poseidon W. Tx. Int. Mars Blend Okla. Sweet Okla. Sour Kansas Sweet West Coast OCS N. TX Sweet Sunniland East TX Sweet W. Central TX Light LA Sweet Quitman Sour Heavy LA Sweet San Joaquin Light San Joaquin Heavy Eugene Island Bonita Multiple Crude Grades Add to Complexity

  26. 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.

  27. Variations in Selected Domestic Differentials to WTI

  28. Variations in Selected Canadian Differentials to WTI

  29. Example of an Impending Complication:Storm 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.

  30. Example of an Impending Complication:Storm 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 world’s 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

  31. Chinese Proverb (Curse): “May you live in interesting times.” Oil Industry Prediction (Challenge): “We are going to be living in interesting times.”

  32. Cheap GLA Edit , if the price is high enough. GLA Edit ^ ^ GLA View is that both statements are correct, with slight editing…. “Enough oil to last for 500 years .” Houston Chronicle May 30, 2004 H. Sterling Burnett Senior Fellow National Center for Policy Analysis “We’re draining our reserves dry.” Houston Chronicle May 30, 2004 Llewellyn King Chairman & CEO King Publishing Co. Publisher for: White House Weekly & Energy Daily

  33. Is the U.S. Running Out of Oil? World Not any time soon… …,but it could get REAL expensive.

  34. NYSE: PAA 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.

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