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Enron Mail |
Jason,
The following comments are an indicative response to the questions you asked during our phone conversation on Tuesday 4/3. The following comments are NOT an additional pipeline proposal for the Murphy Medusa Project or an addendum to Enron's Medusa Pipeline Proposal. There is insufficient time for Enron to obtain management approval of the following comments before Murphy's estimated recommendation date of Friday 4/6. However, given additional time, or if awarded an LOI, Enron would work quickly to better define the issues discussed herein. AMI Step-down: As you and I discussed, Enron believes that the expected NPV of the risked AMI production volumes are in line with Enron's level of un-garranteed risk. However, Enron would be willing to negotiate an AMI tariff step-down after a defined level of AMI production. Notionally, Enron would be willing to consider a 25 percent AMI tariff reduction after 70 million bbl and 100 million mmBTU of AMI production for the oil and gas export lines respectively. Abandonment: The O&M charges proposed in the Pipeline Structure were set to partially recoup expected abandonment costs. If Medusa produces 70MMBOE, Enron would expect to have some abandonment liability. Moreover, Enron's actual abandonment costs could be significantly higher than initially estimated due to rig availability, inflation or, most importantly, regulatory changes. Secondly, we have assumed no pipeline residual value. No pipeline residual value is a reasonable assumption, given that in the Pipeline Structure, Enron would have no influence over the re-deployment of the FPS. Moreover, even if the pipelines were sold, the sales price would recognize the net value of the pipelines after abandonment. Thus, there would be no double dipping on abandonment costs. Oil Transportation: Enron's understanding is that the $0.70/bbl for transportation from WD 143 is still a reasonable transportation estimate. This transportation cost estimate would be negotiated with Equilon after the execution of an LOI. $30MM CAPEX Scenario: Per your request, Enron has investigated a scenario where Enron would buy the oil and gas export pipelines from Murphy at a fixed price of $15MM each at the start of production. Then, export pipeline capacity would be leased to the Venture, Venture Partners and 3rd party producers. Based on a preliminary investigation, the Medusa production tariffs would reduce proportionately to the CAPEX. Therefore, the tariff traunches for the oil and gas export pipelines would be: $0.40 / bbl, $0.33 / bbl and $0.10 /bbl for the oil export pipeline $0.35 / mmBTU, $0.14 / mmBTU and $0.07 mmBTU for the gas export pipeline Thank you for the opportunity to bid on the Medusa FPS and export pipelines. Please call me if you have any questions concerning the above comments and/or Enron's previously submitted Medusa proposals. Regards, Kenneth Loch 713-345-8962
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