Message-ID: <18639870.1075843976643.JavaMail.evans@thyme> Date: Thu, 8 Jun 2000 10:54:00 -0700 (PDT) From: mike.mcconnell@enron.com To: john.sherriff@enron.com Subject: Re: J-Block Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Mike McConnell X-To: John Sherriff X-cc: X-bcc: X-Folder: \Mark_McConnell_June2001\Notes Folders\Sent X-Origin: MCCONNELL-M X-FileName: mmcconn.nsf John, FYI, Mike ---------------------- Forwarded by Mike McConnell/HOU/ECT on 06/08/2000 05:43 PM --------------------------- From: Mike McConnell 06/08/2000 05:50 PM To: Peter Crilly/LON/ECT@ECT cc: Mary Nell Browning/LON/ECT@ECT Subject: Re: J-Block Mary Nell and Peter, I certainly agree. I don't know if Jeff has called Mulva but that is the right action before we do anything else. John will hear the result of that conversation as soon as it happens. Thanks and good luck. Mike Mike Peter Crilly 06/08/2000 01:27 PM To: Mary Nell Browning/LON/ECT@ECT cc: Mike McConnell/HOU/ECT@ECT Subject: Re: J-Block Yes - let's wait til John gets back on Monday. Thanks P Mary Nell Browning 08/06/2000 17:17 To: Mike McConnell/HOU/ECT@ECT, Peter Crilly/LON/ECT@ECT cc: Subject: Re: J-Block Who would have thought we would ever see the day that the J-Block contract was making so much money that the J-Block parties would intentionally default under it? I guess we were just too good at our jobs... My quick look at the amended contract tells me that our best contractual avenue is to analyze the possibility of wilful default under the contract, in which case the cap on damages would not apply. Peter, as you and I discussed, the Bacton option may help our analysis on this. I definitely would want to get outside counsel advice on the point, and in any event I agree that going to Mulva is the right approach to begin with. Peter, let me know what you want me to do next, i.e., should we let the upper management contact run its course before I go for outside advice? I expect so, but please let me know. Ciao. Mike McConnell 07/06/2000 14:57 To: John Sherriff/LON/ECT@ECT cc: (bcc: Mary Nell Browning/LON/ECT) Subject: Re: J-Block John, Hello from South America. I just got your email and I certainly concur with Jeff making the call. He has maintained a good relationship with Mulva. This was a risk that we had but we did have assurances from Phillips regarding performance. I don't know how much it will help however. Richard Harper and Mary Nell Browning may have some ideas here but I am sure you've already gone through it with them. I am amazed how the details get fuzzy on an old project. When you discussed it, i was trying to think back to our remedies and discussions but the 3 years have made it difficult. I don't know if there is anything I can do but I'm always willing to help. Good luck, Mike John Sherriff 06/06/2000 12:09 PM To: Jeff Skilling/Corp/Enron@ENRON cc: Mike McConnell/HOU/ECT@ECT, Richard Lewis/LON/ECT@ECT, Peter Crilly/LON/ECT@ECT Subject: J-Block I mentioned on our conference call on Monday that J-Block has had problems meeting our nominations from the Judy/Joanne/Janice reservoirs. Up until recent CATS maintenance shutdown on 15 May, they were making up for reduced production volumes by nominating to supply gas at the NBP which they are entitled but not obliged to do. Since return from outage at the end of May they have declined to nominate at the NBP. From 1 January to 15 May, the Sellers use of the NBP delivery option kept underdeliveries to 350 mmcf (ie one day's maximum quantity) in total. Since returning from the maintenance shutdown, underdeliveries have totalled 850 mmcf ( averaging 77mcf/d ). We believe that following the sharp rise in market prices during the maintenance period, they have decided to default on the contract rather than make up deliveries from other sources. They have an effective cap on the penalties of about 5 pence per therm (after taking into account the value of the liquids) and therefore they are not making up the volumes when the daily price is substantially higher than about 16 pence per therm. Prior to the CATS shutdown, we had made them a proposal to enable them to deliver additional volumes at another alternative to avoid default but they have not responded yet. You mentioned that in your negotiations with Phillips they had committed to getting us all the gas regardless of the cap on the penalties. This has cost us about $1.5 million to date and they seem to be institutionalising their non performance. Perhaps a phone call by you might help. By the way I will be in Houston on Thursday and Friday to meet with the delegation from Croatia and I will probably be tied up the entire time but if you need me for a phone call I can break away. John