INQUIRY TO KEN LAY RE GAS STORAGE

In referring to your e mail to Ken Lay, the reason we see total US gas
storage volumes BY month in 2000 decrease by .200 TCF to .400 TCF
below the levels by month in 1999 is due to the following reasons:

A. STORAGE COSTS Putting gas into storage for a several month period
typically costs 50 cents to $1.00 per MCF or more;

B. GAS COSTS This cost becomes too high to put gas into storage
when average U.S. prices start rising because the need to USE the gas
itself, not store it, becomes greater than the need to put it into
storage and pay storage costs for future needs.

For example at $2.00 plus 50 cents or $1.00 for heat season storage
this cost combination is typically economic; but the situation becomes
cost prohibitive when demand in the market for gas is so great to USE it
that it moves the price to $3.00 or more or as high as $4.60 -- to
which one would then also have to add 50 cents or another dollar to
store it.

TOTAL GAS IN STORAGE Source: Table 10 US DOE EIA November 2000; Gas
Prices per Table 4

APRIL 1999 5.876 TCF $1.86 MCF US Avg Gas Wellhead Price
MAY 6.206 2.16
JUNE 6.519 2.12
JULY 6.749 2.18
AUG 6.978 2.49
SEP 7.292 2.61
0CT 7.443 2.50
NOV 7.445 2.67
DEC 6.906 2.20

JAN 2000 6.088 $ 2.12
FEB 5.672 2.30
MAR 5.514 2.36
APR 5.547 2.55
MAY 5.782 2.90
JUNE 6.061 3.73
JULY 6.351 3.70
AUG 6.544 3.67
SEP 6.827 4.26
OCT 7.072 4.61
NOV 6.779

Per Table 3, U.S. gas consumption rose .500 TCF in year 2000
versus 1999; but additional supply from US and Canada Table 2, was
just .100 TCF so to meet the market demand .400 TCF of gas had to
come out of storage.
Hope this helps clarify. You can see these reports on the DOE web
site at www.eia.doe.gov and click on Natural Gas Monthly Statistics.
Regards, M Carson Enron Competitive Analysis