Dan:

With some revision I think this would work for gas.  What do you think?

Teresa 



Teresa G. Bushman
Enron North America Corp.
1400 Smith Street, EB 3835A
Houston, TX  77002
(713) 853-7895
fax (713) 646-3393
teresa.g.bushman@enron.com


----- Forwarded by Teresa G Bushman/HOU/ECT on 12/20/2000 01:01 PM -----

	rainj@tklaw.com
	12/20/2000 08:23 AM
		 
		 To: Alan.Aronowitz@enron.com, Teresa.G.Bushman@enron.com, 
nora.dobin@enron.com, Tim.Proffitt@enron.com
		 cc: 
		 Subject: Master Oil Contract for Brazos VPP Limited Partnership



Here is my attempt to blend together the requirements of our new deal, as
expressed in the term sheet, with the old Cactus oil sales agreement, the
inserts Alan has sent me, and the sections of the Enfolio contract that
seemed to me to be applicable to this kind of financial deal.  This draft
agreement:

1.   has a term that lasts as long as the VPPs.

2.   contemplates written Confirmations only.

3.   provides a price adjustment mechanism for under-deliveries, but does
not characterize under or over-deliveries as breaches that justify damages.

4.   does not give Brazos, as Seller, any special remedies if ERAC fails to
take.

5.   provides for netting across all transactions on a single monthly
payment date that matches the settlement date under the interest rate
swaps.

6.   has a very limited ability for the Buyer to terminate upon default
(and even this may be too much for the Banks).

7.   includes the limitation of damages provisions and arbitration
provisions from the Enfolio Gas Contract.

8.   references the Conoco General Provisions.

9.   in general, recognizes that the party on the other side from ERAC is a
partnership controlled by an Enron general partner.

If this draft agreement represents a good compromise, I suspose no one will
be really happy with it.  In any event, this is my attempt to give the
Banks what we said in the term sheet that we would provide and also give as
much protection as possible to ERAC.

One issue is not covered in the attached draft, and that is what the
Contract Price and the Index Price will be.  In order to fit well with the
other components of the deal, the Contract Price needs to be the floating
price that is swapped with ENA and the Index Price needs to be the spot
market price that is named as the "Index Price" in each Production Payment
Conveyance.  If the Index Price named in the two existing Conveyances is
not satisfactory to ERAC, I suppose that the oil desk and the VPP
origination group will need to settle up outside the boundaries of the deal
documents to which the Banks are parties, because I believe the Banks will
consider it a fatal flaw in the deal if the Adjustment Quantities of Oil
provided under the Conveyances cannot be converted into the necessary
amounts of sales proceeds under this Master Oil Sales Agreement.

Please let me know how you want to proceed from here with this document.
We need to get it to the Banks as soon as possible, but we need to know
first whether it is correct.  Here it is:

(See attached file: Oil Master Agreement Ver 4.doc)

John W. Rain
Thompson & Knight L.L.P.
1700 Pacific Ave.
Dallas, Texas 75201
Phone: 214.969.1644 (Dallas)
Phone: 713.653.8887 (Houston)
Fax:       214.880.3150

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 - Oil Master Agreement Ver 4.doc