Mary Nell and Peter,

I certainly agree.  I don't know if Jeff has called Mulva but that is the 
right action before we do anything else.  John will hear the result of that 
conversation as soon as it happens.

Thanks and good luck.
Mike

Mike




Peter Crilly
06/08/2000 01:27 PM
To: Mary Nell Browning/LON/ECT@ECT
cc: Mike McConnell/HOU/ECT@ECT 
Subject: Re: J-Block  

Yes - let's wait til John gets back on Monday.

Thanks

P




Mary Nell Browning
08/06/2000 17:17
To: Mike McConnell/HOU/ECT@ECT, Peter Crilly/LON/ECT@ECT
cc:  

Subject: Re: J-Block  

Who would have thought we would ever see the day that the J-Block contract 
was making so much money that the J-Block parties would intentionally default 
under it?  I guess we were just too good at our jobs...  My quick look at the 
amended contract tells me that our best contractual avenue is to analyze the 
possibility of wilful default under the contract, in which case the cap on 
damages would not apply.  Peter, as you and I discussed, the Bacton option 
may help our analysis on this.  I definitely would want to get outside 
counsel advice on the point, and in any event I agree that going to Mulva is 
the right approach to begin with.  Peter, let me know what you want me to do 
next, i.e., should we let the upper management contact run its course before 
I go for outside advice?  I expect so, but please let me know.  Ciao.



Mike McConnell
07/06/2000 14:57
To: John Sherriff/LON/ECT@ECT
cc:  (bcc: Mary Nell Browning/LON/ECT)

Subject: Re: J-Block  

John,

Hello from South America.  I just got your email and I certainly concur with 
Jeff making the call.  He has maintained a good relationship with Mulva. This 
was a risk that we had but we did have assurances from Phillips regarding 
performance.  I don't know how much it will help however.  Richard Harper and 
Mary Nell Browning may have some ideas here but I am sure you've already gone 
through it with them.  I am amazed how the details get fuzzy on an old 
project.  When you discussed it, i was trying to think back to our remedies 
and discussions but the 3 years have made it difficult.

I don't know if there is anything I can do but I'm always willing to help.

Good luck,
Mike



John Sherriff
06/06/2000 12:09 PM
To: Jeff Skilling/Corp/Enron@ENRON
cc: Mike McConnell/HOU/ECT@ECT, Richard Lewis/LON/ECT@ECT, Peter 
Crilly/LON/ECT@ECT 
Subject: J-Block


I mentioned on our conference call on Monday that J-Block has had problems 
meeting our nominations from the Judy/Joanne/Janice reservoirs.

Up until recent CATS maintenance shutdown on 15 May, they were making up for 
reduced production volumes by nominating to supply gas at the NBP which they 
are entitled but not obliged to do.  Since return from outage at the end of 
May they have declined to nominate at the NBP.  

From 1 January to 15 May, the Sellers use of the NBP delivery option kept 
underdeliveries to 350 mmcf (ie one day's maximum quantity) in total.  Since 
returning from the maintenance shutdown, underdeliveries have totalled 850 
mmcf ( averaging 77mcf/d ).

We believe that following the sharp rise in market prices during the 
maintenance period, they have decided to default on the contract rather than 
make up deliveries from other sources.   They have an effective cap on the 
penalties of about 5 pence per therm (after taking into account the value of 
the liquids) and therefore they are not making up the volumes when the daily 
price is substantially higher than about 16 pence per therm.

Prior to the CATS shutdown, we had made them a proposal to enable them to 
deliver additional volumes at  another alternative to avoid default but they 
have not responded yet.

You mentioned that in your negotiations with Phillips they had committed to 
getting us all the gas regardless of the cap on the penalties.  This has cost 
us about $1.5 million to date and they seem to be institutionalising their 
non performance.    Perhaps a phone call by you might help.  

By the way I will be in Houston on Thursday and Friday to meet with the 
delegation from Croatia and I will probably be tied up the entire time but if 
you need me
for a phone call I can break away.

John