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Enron Mail |
-----Original Message----- From: Gadd, Eric Sent: Monday, October 08, 2001 6:04 PM To: McCarty, Danny Subject: Sun Devil Danny, I met with Phil Lowry, Jerry Martin, John Keller, and Kevin Hyatt to discuss the revised cost estimates for Sun Devil. My blood pressure has eased somewhat. I'm hopeful that the estimate will be revised downward to a level more consistent with the original by the end of the week. The engineers want to make this project work and have taken some actions away to further squeeze the cost bundle. Here's a quick recap- $580 MM was the Total Project Excl. Int., O/H, etc. used for the open season. $667 MM was the Total Project Incl. Int., O/H, etc used for the open season. $912 MM is the latest Total Project Incl. Int, O/H, etc The difference between $912 MM and $667 MM is $245 MM. Of this, $218 MM relates to- -$65 MM for the Panda lateral (not in original scope) -[$44] MM for 36" pipe vs 30" pipe (not in original scope). This amount to be confirmed by the engineers. -$48 MM for escalation (not broken out per se in the original scope) -$33.2 MM additional cost for Navajo land acquisition -$13.2 MM additional cost for Navajo labor on Navajo lands (not included in original estimate) -$14.5 MM additional cost for gross receipts tax (not accounted for in the original scope) We can reduce the estimate by $109 MM just by returning to the original project scope. Panda will have to pay for the lateral to their plant. We won't overbuild with 36" pipe to provide hourly swing capability unless shippers pay a higher rate (or we are content to hold excess capacity for future shippers). Some additional savings will accrue as a result of reducing the amount of compression (California shippers have shown no interest in paying anything close to full rate). Finally, the engineers haven't given up on finding other potential savings. The remaining $109 MM comes under the category of "identified risks". Estimates are provided in current dollars and the "escalation" component highlights the risk of inflation. The reality is that ETS has had very little recent experience pricing pipelines in the southwest. The additional costs for Navajo land and labor can only be bottomed out through bilateral discussions with the Navajos. I'm still checking the gross receipts tax cost - - - seems that it was not included in the original estimate, which is a bust.
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