Message-ID: <25037087.1075844135654.JavaMail.evans@thyme> Date: Wed, 20 Dec 2000 06:05:00 -0800 (PST) From: kevin.hyatt@enron.com To: michelle.lokay@enron.com Subject: Gomez to Puckett Tie-In strategy Issues Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Kevin Hyatt X-To: Michelle Lokay X-cc: X-bcc: X-Folder: \Michelle_Lokay_Dec2000_June2001_2\Notes Folders\All documents X-Origin: LOKAY-M X-FileName: mlokay.nsf ---------------------- Forwarded by Kevin Hyatt/ET&S/Enron on 12/20/2000 02:05 PM --------------------------- Christine Stokes 12/08/2000 02:15 PM To: Steven Harris/ET&S/Enron@ENRON, Kevin Hyatt/ET&S/Enron@Enron cc: Subject: Gomez to Puckett Tie-In strategy Issues Here is the latest status of Transwestern's Gomez to Puckett project on the south-end and some of the strategic issues behind this project: Project Overview: Tranwestern's Gomez-Puckett Tie-Over project would connect Transwestern's Lone Star compressor toTW's most southerly south-end 20" line (currently a sour line). The sour line would be first be cleaned and tested for MAOP. Potential plant connects to this line include the Coyanosa plant (currently owned by Koch) and Western's Gomez plants. Potential incremental plant supplies would be 100-150 MMcf/d of supplies. Scenario 1: If Transwestern is willing to be completely at risk for the $2 MM required for the sour line conversion and compression tie-in costs, this options currently exists and we could move forward. These costs do not include the individual plant connections, which could easily be $400,000-500,000 each. This would be a relatively high-risk decision. Scenario 2: If Transwestern wants shipper contracts to support this project in part, or in full, the following significant issues need to be considered: - Possible ownership changes of the Koch Coyanosa plant to Richardson Products Company. There is a moderate to high probability that Richardson Products Company will purchase the Coyanosa plant, currently owned by Koch. It is in close proximity to their MiVida system which they purchased last year and have recently indicated an interest to interconnect with Transwestern at the Lone Star, Ward location (cost estimates were complete this week). Koch has confirmed this rumor of potential acquisition. Currently Koch has 100 MMcf/d of its own equity gas at the plant, but if the rumor of the sale of the plant is correct, I may be dealing directly with Richardson Products rather than Koch. Another factor to be considered with this scenario is that if Richardson Products company owns and operates the Coyanosa plant, they will already have made some strategic decisions about where their 100 MMcf/d of equity gas will go. It is possible that through their MiVida system, Transwestern could have access to this plant gas at another locational interconnect with Transwestern without having to spend a penny for the line conversion and connection to the Coyanosa Plant. Bottom line is, if Richardson Products does acquire this plant, we needs to take a step back and look at other scenarios which may be cheaper for accessing this plant's gas. - Western Gas Resources contract participation issues: Western Gas Resources will eventually have two plants that could be tied into the converted sour line: 1) Western's existing Gomez plant, and, 2) the newly to-be-acquired plant sold to them by NNG. The sale of NNG's Gomez to Mitchell line and the NNG Gomez plant to Western Gas Resources must occur first. Western will not focus its business attention to the possible connection of either Gomez plant to Transwestern's south-end line prior to this event. They will eventually prepare a Declaratory Order to make the newly acquired plant and pipeline facilities from NNG non-jurisdictional. NNG & Western have signed the Sale Agreement and the transfer of funds is expected 1st quarter of 2001 subject to due-diligence result. NNG is currently preparing the abandonment filing for these assets and Western is in the process of their field due-diligence. Environmental issues (some contamination) relative to the asset sale have arisen and must be corrected prior to transfer of assets. All of these issues may take a good part of 2001 to be resolved. To Do's: Monday (when I assume my beautiful, song-bird voice will return), I plan to discuss the interconnect costs of tying in Richardson's 20" MiVida line to Transwestern at the Lone Star Ward location. We received Richardson's request for this estimate a couple of weeks ago and the estimate is about $320,000 (for facilities) plus $100,000 (tax gross-up)*. In my conversation, I will try to get Brad Brigham to indicate the timing or validity of Richardson's possible purchase of this Koch plant. Once a new facts can be obtained, it will make the decision making and risk evaluation process of implementing the Gomez to Puckett tie-in project easier to understand and take a position on.