-----Original Message-----
From: 	Leach, Doug  
Sent:	Wednesday, October 24, 2001 9:36 AM
To:	Nowlan Jr., John L.; Maffett, Randal; Goughary, Jim; Lawyer, Larry
Cc:	Robinson, Ted
Subject:	Phillips meeting and tour

Yesterday Ted Robinson, Joe Richards and myself meet with the following people form Phillips Petroleum Company:

Don Halter, Business Manager, Fuel Development Programs
Larry Shoemaker, Technical Manager, Fuel Development Programs
Bill Burns, Chief Process Engineer
Kent Anderson, Project Manager, Technology and Project Development

The purpose of the meeting was to discuss Phillips HF technology and to tour the Morgan's Pt. plant. Our discussion focused on the Phillips HF technology which uses a hydrochloric acid process versus a sulfuric acid process to produce alkylate. CAs between EOTT and Phillips as well as between EGM and Phillips are being circulated, so we can further evaluate a possible JV and conversion of the MTBE plant to an alkylate plant. Phillips is convinced they can get the necessary permitting and they stressed the fact that this is proven technology and not new technology. The HF technology has been in use at the Phillips Woods Crossing, Utah refinery and the ExxonMobil refinery in Torrance, California for the past five years. 

Action items as a result of the meeting include executing the CAs, providing Phillips with a detailed plot plan, product samples and completing a Phillips questionnaire. Once Phillips has evaluated the questionnaire data and the possible land area constraints at Morgan's Pt. we plan to have another meeting to decide how to move forward and in Phillips words "move quickly." 

From EGM's perspective the biggest issues appear to be:
1) Is conversion to alkylate the best conversion option for Enron? Are we better off waiting for California and the federal government to make up their minds on MTBE's future and what if any grant money they are willing to provide for MTBE plant conversions? 
2) If aklylate is the best product to convert to then is Phillips (as a partner) and their HF technology the best choice? Assuming they can get permitted at Morgan's Pt. or another ship channel site, what would be the best JV structure so EGM is not totally exposed to alkylate price risk or alkylate demand risk. 

On the positive side, Phillips believes in their technology, they think they can get permitted, they want to move quickly, they have good access to capital, space permitting they like our site, they are convinced that there will be good long term demand for alkylate within their own refining system (and in the refining industry in general) and they believe that the need for vapor pressure in the future will allow alkylate market prices to justify the necessary capital costs.