Oxy meeting

We just finished the meeting with Dale Laurance and Casey Olson. Here's a
recap.

Oxy wanted to meet with Mike for two reasons:

1) Make sure Enron and Oxy had a project team in place asap and the
resources are committed to do a world class job on the January 29 submission
and subsequent presentations. As Mike noted- we are in sudden death overtime
and the 29th could be the end of the tournament.
2) Revisit the "street talk" about Enron redeploying capital.

Mike walked through the EGM organization, talked about our stock multiple
and how an announcement that we were putting huge dollars in Saudi would
hurt our stock price.

Dale talked about their low multiple (between 4 and 5), noted that the market
viewed Oxy as a company that could do deals, buy and sell assets, but really
wasn't a growth company. They now have a stable cash flow, but need a new
beach head in the Middle East to demonstrate they are growing. The point of
this conversation was to tell us that debt reduction is also a top priority
so they were also not interested in a big announcement about money being
dumped into Saudi Arabia

They characterized the Saudi perspective as being one where they are looking
for strategic partners who will be there for a long time and invest capital.
They agree on a division of labor: Oxy can do E&P, processing and
petrochemicals and look to us for pipelines and power plants although Oxy can
do those too. They realize that only Enron has the marketing, structuring
and regulatory expertise.

Casey did revisit his conversation with you about in the end Enron ends up as
some type of "merchant banker." That's OK in the end- Dale even said they
would take over our part of any project-- but we can't project that role
initially. We need to be on the same side of the table as Oxy.

The point here is that we have to be in step with a consistent approach to
the projects. They expect our competitors to say they'll finance things on
balance sheet and we need initially to say the same thing although later we
will open discussions on other ways to finance. Mike and I agree that this is
probably the biggest sticking point in the discussion today. Oxy believes
that such an initial statement will never be public and we aren't really
locked in an on-balance sheet approach. Maybe we can do this, maybe we can't.

They see this as a year long process with PDA's stretching well into next
year, and 2002 when the real money would be spent. The short term crisis is
January 29 and we need a submission with lots of pages: we were criticized
that although our proposal was well thought through and technically superb,
it didn't have enough pages- reams of paper to impress the technocrats. We
will also need to prepare a smaller 15 page digest to be used for our
official February presentation and a three page walk around summary. Casey
thinks the production center has to be in the US.

We also all agreed that the Jan 29 questions allow us to lay out all of our
downstream concerns and establish a placeholder for issues that must be
resolved during the PDA discussions before we would do a project. I have had
the greatest success around the world when we don't try to force immediately
on a country a perfect gas or electric market but adapt to "local
conditions" and implement the most important first couple of steps with the
rest to follow later. In this respect, our projects can include suggested
regulatory concepts that if successful can be used elsewhere in the Kingdom.

Over and over we came back to the project team which they want on the ground
in Saudi. Casey will be 100% Saudi for the foreseeable future and can make
all decisions. Who will be our lead person with the same authority? They
don't want to deal with someone who later says Houston changed it's mind ( a
little arrogant). When can we identify bodies and assignments and location?
They want full time dedicated people. Either Dale or Casey noted that the old
Enron would have parachuted a team in by now (Like South America where we
landed in a swamp and spent the next five years beating alligators over the
head with a stick). This is a very complicated political and technical
effort,. The leader has to be good at both. Casey was excited that Rob would
be assigned to the project (I guess you discussed this with him).

They both were quick to say that the working relationship to date has been
excellent and that they appreciate the effort we have put into this.

Mike committed that we would go balls to the wall for the 29th deadline, I
committed that I would designate a project team by the first week in January
(we had our first conference call yesterday), but Mike said he wanted to
think about the decision point person and process ( we aren't about to
sacrifice a deliberative strategic/consensus thought process because they
are in a hurry).

We spent a lot of time talking about the process. We agree that the Saudi's
will eliminate one or two participants, that each project will have subparts
with different combinations and leads of companies with a master JV on top.

They minimized the capital investment although they are prepared to spent
$200-300 million over the next 3-5 years. They see core project 2 costing
$600 million, 60% Oxy/Enron assuming one other partner and Enron half of
that. We aren't talking billions (spoken like a true major).

They are sure Exxon /Mobil will be our Red Sea partner if only to earn face
with possibly Marathon as the other. Exxon is more interested in the chemical
focus which Oxy will concede to them. Mike noted was that our worst nightmare
was a partner (Exxon) who would throw away money just to have a presence).
We were assured that Oxy's only goal was to make money and if he projects
didn't, they would walk away.

The real danger in the upstream is the risk money for exploration. Oxy hopes
to hedge this risk with downstream investments (pipelines and plants) and
hopes that if the exploration is successful and reserves are added it will
lead to a whole new series of projects.

They are very proud of Oxy's role in this, claim that they were instrumental
in getting Petry Parkman and Morgan selected as advisors, that Irani is the
most respected American Arab business man and has great access in the
Kingdom, and that they already know what investments partners are acceptable
to the Saudi's.

We all left great friends in good Christmas spirit.

From our perspective:

Saudi is the largest economy in the Middle east and the driver in
international oil and liquids markets

Enron needs to get inside and establish relationships with the key Saudi
people. We need a foot print in the Kingdom with which to earn their
respect. Can we do it with minimal capital investment?

Saudi is about to embark of a complete electric and gas restructuring,
regulatory included. They want the repatriation of petro dollars and dollars
held offshore by Saudi nationals. The country can be a tremendous source of
capital.

It looks like 2001 can be managed with a minimum burn rate with the most
intense period of activity being in January. We need to set up the team for
the January effort. I'll have this done by Jan 1. There is the question of
sorting out conflicts with other ME priorities.

Although it may be too soon to answer (we don't know yet what is possible
but we can shape that outcome), what is the end game, what do we want out of
Saudi Arabia?

We seem to have a clear division of labor and strategy with Oxy although we
need to sort out what we say about on balance sheet financing. We also need
to keep in mind that our other yet to be met partners will have a lot to say.

Oxy wants to take the lead on the Core Venture 2 (Red Sea). I agree- this is
a perfect laboratory to address all of the market structure issues that will
make the Kingdom a great place to do business.

Mike- I'm sure you can add more. Rick -it's up to you if you want to send
this around to the Saudi team. Merry Christmas.