Tidelands Oil

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Tidelands Oil Gas Corporation Michael R.
WardPresident and CEO

• Tidelands experience in the energy sectors
  interconnectivity trend on the Texas-Mexico
  border region
• Monterrey Mexico, April 1, 2004

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Tidelands Oil Gas Corporation

• -Small public company in the US
• -Focuses on project development, construction and
  operation of natural gas/LPG pipelines and
  storage facilities
• -Extensive experience in exploration and
  production in South Texas

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The role of small companies in the
interconnectivity trend in border regions

• The networks in the Texas-Mexico border area are
  growing and they have become an integrating
  factor of the region. Anyone would agree that in
  the case of Texas-Mexico border, the energy
  networks have still a long way to go to be fully
  developed. Here are some issues and challenges we
  have faced in being part of the natural gas
  industry that is building them.
• Currently, Mexico imports around 1 Bcf/day of
  natural gas from the US. The demand for natural
  gas and LPG will continue to increase in the
  short and mid-term due to Mexicos continuously
  growing economic development needs, mainly for
  the supply of power generation facilities and
  industrial processes

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interconnectivity trend

• Among the main actions being implemented by PEMEX
  (MSC) and CFE (LNG facility in Altamira) to
  address the natural gas shortage issue will come
  to fruition in the future, while short term needs
  still need to be addressed. Those imports have
  naturally been coming from the US to cover the
  demand, with small companies recognizing
  opportunities in the building of the
  infrastructure to facilitate it.
• Security concerns in the US are challenging the
  way in which some imports of LPG from the US to
  Mexico are presently being done. The US
  government concerns in this area are only likely
  to increase in the future. We believe this will
  be become an opportunity more than a barrier for
  the energy industry to build the infrastructure
  to carry on those exchanges/exports in an
  economically efficient way.

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interconnectivity trend

• In the current business environment, there is a
  willingness of small and mid-size Texas companies
  to partner with Mexicos private sector and PEMEX
  to develop, finance and build projects which by
  the nature of its size are not attractive
  investments to larger companies to address those
  needs.
• Mexico continues to face limitations and
  weaknesses in its supply of energy to feed its
  industrial development as other developing
  nations challenge Mexicos geographic position as
  a privileged exporting point to the large North
  American Market. If these limitations are not
  addressed, Mexicos industrial development
  potential might suffer and could become a missed
  opportunity.

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interconnectivity trend

• Expectations that in the future should Mexico
  develop its potential as a natural gas producer
  and its local needs are satisfied, those trends
  might be reversed transforming Mexico in a net
  exporter of Natural Gas and LPG to the US. Should
  that happen, the US economy is a mature market
  ready to take any excess production from Mexico.
  The interconnecting infrastructure available will
  play a crucial role in facilitating it.

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The experience of Tidelands Oil Gas in building
the trans-border natural gas pipeline

• Location Eagle Pass - Piedras Negras
• Capacity of the gas pipeline 12-Inch
• Delivering approx. 5 million ft³/day of natural
  gas
• Investment US 6.5 million
• Client in Mexico CONAGAS
• Operator Reef International, LLC
• Regulatory approvals US and Mexico

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Main pipeline specifications

• Approximately 8 miles long from a gas supply
  pipeline to the center of the Rio Grande
• An underground bore was used on the Rio Grande
  River crossing, under three canals and a highway
  crossing

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US Regulatory Approvals

• Presidential permit for the Rio Grande pipeline
  crossing
• Submission of project reports and approval
  letters are necessary from
• Railroad Commission of Texas (RRC)
• US Army Corps of Engineers (USCOE)
• US Fish and Wildlife (USFWS)
• Texas Historical Commission (THC)
• International Boundary and Water Commission
  (IBWC)
• Texas Parks and Wildlife (TPWD)
• US Coast Guard (USCG)
• Texas Commission on Environmental Quality (TCEQ)
• General Land Office (GLO)
• Federal Energy Regulatory Commission (FERC)
• Texas Department of Transportation (TxDOT)
• Environmental Protection Agency (EPA)

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Storm Water Pollution Prevention Plan (SWPPP)
required by EPA

• On site environmental inspector during
  construction
• Sediment barriers
• Restoration
• Reconstruct canals
• Return banks to preconstruction contour
• Re-vegetate
• Do not use fertilizer at crossings
• Crossing procedures
• Maintain adequate flow
• Will not store hazardous materials near water
  bodies
• Refuel vehicles at least 100 feet from water
  bodies
• Spoil pile placement
• Sediment barriers

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Mexico Regulatory Approvals

• Submission of permit requests, project reports
  and approval letters were necessary from
• State of Coahuila and Piedras Negras County
  Governments
• Department of Transportation and Communications
  (SCT)
• US-Mexico International Waters and Limits
  Commission
• National Water Commission (CNA)
• Secretariat of Environment and Ecology
  (SEMARNAT)
• Energy Regulatory Commission (CRE)

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Prospects for Texas-Mexico Interconnectivity in
border regions

• While NAFTA has created a framework simplifying
  cross-border business between US and Mexico for
  all companies, and no technical or political
  barrier can be said to exist to stop this
  expansion of energy networks, Mexico needs time
  to work out its transformation towards a more
  open environment for private investment in the
  energy sector.
• Small companies with expertise and the ability to
  raise capital for a specific project to develop,
  build and operate them, will continue to benefit
  from this energy integration trend between the
  Mexico and the US.
• We believe that PEMEX and CFE will continue to
  recognize opportunities to partner with small and
  mid-size Mexican and US companies as Mexicos
  energy markets continue to expand.

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Interconnectivity in border regions

• A stronger interconnectivity will afford Mexican
  consumers benefits at the level of price and
  access to energy by the expanding border
  infrastructure .
• Tidelands is currently working to develop other
  projects between Texas and Northern Mexico that
  will enhance that growing interconnectivity

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• Tidelands Oil Gas Corporation
• 1862 W. Bitters, Bldg. 1
• San Antonio, Texas 78248
• www.tidelandsoilandgas.com