FW: EGEP

-----Original Message-----
From: Detmering, Timothy J.
Sent: Friday, November 16, 2001 9:54 AM
To: Detmering, Timothy J.
Subject: FW: EGEP

-----Original Message-----
From: Detmering, Timothy J.
Sent: Friday, November 16, 2001 9:48 AM
To: Sherrick, Jeffrey
Subject: EGEP

As you know, BG has been diligently attempting to get waivers from Reliance and ONGC that would ensure that BG would be the operator of the concessions after closing of the sale. We currently have an agreement with BG that all negotiations must be completed by November 20 or the deal will lapse.

Reliance has been actively negotiating with BG while ONGC has been stonewalling at the direction of the GOI. We believe that the GOI ultimately wants this transaction to happen, but not before DPC is resloved.

Now that the merger with Dynegy has been announced it is possible that ONGC will continue to stonewall with BG and attempt to become the operator. (The merger will cause a change of control and entitle the partners to remove us, or our successor, as operator - all of which was disclosed to Dynegy.)

BG has yet to reach final agreement with Reliance. We anticipate that BG and Reliance will ultimately reach an agreement.

The Chairman of BG, Dick Giordano, now wants us to extend the deadline until December 21 and allow him time to personally go to India and make a concerted effort to conclude negotiations. BG further wants us to provide an additional indemnity on cost recovery and to reduce the purchase price by $10 million to give the room to offer more value to Reliance and ONGC.

Our recommendation is as follows:

Have Giordano call Lay and ask for the extension, let Lay give it but deliver the "this is it" message.

Refuse to modify the agreement - no reduction in purchase price or additional indemnity.

Use what leverage we may have with the GOI to put pressure on ONGC to grant BG the waiver.

Prepare the Ratings Agencies and investors for a failed deal.