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Enron Mail |
Dan,
Note Force Majeure issue at Elba. Lets discuss. ---------------------- Forwarded by Phil DeMoes/Corp/Enron on 11/20/2000 07:58 AM --------------------------- Les Webber @ ENRON_DEVELOPMENT 11/20/2000 07:24 AM To: Phil DeMoes/Corp/Enron@ENRON cc: Subject: SALES OF LNG - Force Majeure ---------------------- Forwarded by Les Webber/ENRON_DEVELOPMENT on 11/20/2000 07:30 AM --------------------------- Delivery Failure Report Your document: SALES OF LNG - Force Majeure was not delivered to: Phil DeMoes because: User Phil DeMoes (Phil DeMoes@enron.com) not listed in public Name & Address Book What should you do? You can resend the undeliverable document to the recipients listed above by choosing the Resend button or the Resend command on the Actions menu. Once you have resent the document you may delete this Delivery Failure Report. If resending the document is not successful you will receive a new failure report Unless you receive other Delivery Failure Reports, the document was successfully delivered to all other recipients. EDC_NMAIL01/ENRON_DEVELOPMENT, EDC_NMAIL01/ENRON_DEVELOPMENT ________________________ To: Nancy Corbet cc: Daniel R Rogers, Doug Arnell/ENRON_DEVELOPMENT, Phil DeMoes From: Les Webber/ENRON_DEVELOPMENT Date: 11/19/2000 04:45:17 PM Subject: SALES OF LNG - Force Majeure Nancy: As we move forward with sales opportunities for our vaporized LNG at Elba, the issue of force majeure protection will surface. On the one hand, we want to present ourselves as a credible and reliable supplier of natural gas to any US customers. I believe these customers will be looking for force majeure language that is standard in the industry, which should include force majeure on the pipelines transporting the gas to their facilities, on the production facilities, to the extent they are dedicated or are affected by some large event (such as a hurricane or a major storm) in the region, and on the LNG terminalling and storage facilities at Elba. They will not, however, be looking for a non-standard force majeure clause that deals with possible situations in foreign lands and waters, i.e. as described, more or less, in our force majeure langauge in the El Paso Merchant Energy agreement. If we try to include that kind of protection, the customer will see the supply as risky and uncertain, therefore less valuable, in the first instance. Our LNG strategy is focused on establishing a merchant activity, which requires both supply and market aggregation. Such an activity will give us protection against individual force majeure events by its very nature (i.e. through diversification). The basic question, then, is when do we start acting as if we are an bonafide LNG merchant? We can mitigate for the need to build in unique force majeure safeguards in several ways: lower relative price alternative, albeit interruptible, sources of natural gas supply alternative fuels selection of customers with alternative fuels or replacement production. business interruption insurance selling the gas to El Paso instead of directly to a customer. However, I believe this issue also needs to be addressed in the context of our probable need to "lock-in" our pricing through the use of financial instruments. What's more, our customer may elect to do the same, quite independent of us. As I understand it, there is very limited force majeure protection available to either of us in this regard. I know you are working on the force majeure provisions of the draft Definitive Agreement with El Paso, so I believe it is opportune at the present time to extend this assessment to address the issues set forth above (and others?). When can we discuss? Regards. Les
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