LNG for Spain

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---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 10/02/2000
02:23 PM ---------------------------

Doug Arnell@ENRON_DEVELOPMENT
09/24/2000 02:57 AM
To: Clay Harris/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Eric Groves@ECT, Joe
Gold@ECT, Eric Gonzales@ECT, Wayne Perry/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT,
Merritt Thomas@ECT
cc: Rick Bergsieker/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Jeffrey A
Shankman@ECT
Subject: LNG for Spain

Some follow up on friday's meeting:

We need to focus quickly on whether or not there is any deal to be done with
Middle East suppliers that can contribute to Enron Europe's power project in
Spain.

Our pending deal with Adgas to ship LNG on the Heogh Galleon could be a good
fit however the current volume being discussed (0.3 MMTA) is only a small
portion of the 1.3 to 1.5 MMTA required for the project in years 03+ (minimum
delivery would be 1.0 MMTA). We should press ADGAS to see if they would
commit to a higher volume. We also need to determine what we believe is the
most effective pricing structure for the ADGAS LNG purchase (both in terms of
supply to our project in Spain, but also for potential diversions to Europe
in 01/02) and for what term. Based on our discussions on friday, it may be
that a crude based purchase price may work the best. We have discussed both
Brent and NYMEX based pricing formulas with ADGAS. Merritt, Eric, lets add
that to the agenda for our monday morning meeting and get some price
structuring done.

The structure of the ADGAS deal will be based on a U.S. delivery. We will
reserve the right to divert to any other market (except TEPCO). We will
likely have to share, in some way the shipping savings, if we divert to a
non-U.S. terminal but I think we can keep any upside made on the indexed
portion of the price for ourselves.

In addition we will be contacting OMAN LNG to determine their ability to
provide quantities to augment the ADGAS supplies, as well as potential
shipping options (Exmar?) Obviously we need to consider shipping
requirements for our Atlantic Basin projects (i.e. Elba Island) when thinking
about shipping for Spain. I would also like to look at how Elba could be
used as part of a potential take or pay avoidance strategy for the Spain
power plant.

I will try to keep everyone updated as the pieces come together.

Thanks