Certainly, Lisa. I've been working very closely with Emilio Vicens and Guido 
Caranti, the leaders of the project. Please let me know what specific 
questions do you have and perhaps I could help you better. As a general 
overview, though, these are the highlights:
This is a joint project between PDVSA, the State-owned petroleum company, and 
Enron. So far, no other investors are on board. It is part of the commercial 
strategy, however, that as soon as the project starts, there will be a 
selldown.
As of yet, no agreement has been signed but final drafts or near final 
documents have been negotiated:
Methane gas supply to the plant and natural gas liquids back to PDVSA (i.e., 
Gas Supply Agreement) is final, ready to sign. This document includes, among 
other terms and conditions, the pricing structure with all the escalators, 
delivery terms, the quality of gas, penalties for non-delivery, and service 
fee for processing and returning the gas liquids.
Rights to plant site at Jose and rights to use existing pier (i.e., LNG Sites 
and Pier Agreement, Usufruct and Servitude Agreement), both final and ready 
to sign
PDVSA participation in the project, involving equity option, commercial 
oversight and offtake term sheets (i.e., Participation Agreement) is near 
final. PDVSA has an option of up to 25% ownership, in 5% steps, including 
cero percent. PDVSA has to exercise this option within 180 days (or so, 
please do not quote me on this date) from date of agreement
These documents, as well as clearance from the Ministry of the Environment 
(for environmental requirements) and the Ministry of Infrastructure (for 
utilization of port facilities), are ready to be approved but on hold until 
the project is approved by the Ministry of Energy and Mines (MEM).
MEM is delayed because it is performing a national energy balance, i.e., 
supply and demand of natural gas for the short, medium and long term (as in 
any good centralized economy. Any resemblance to Eastern Europe ghosts is 
pure coincidence). The argument goes that there's a short-term gas deficit 
(these are the kind of things that happen when you don't let the market 
work!) Every person we talk, though, has a different story, and the numbers 
vary greatly. The latest version is that, with the accomplishment of a few 
projects by PDVSA, the deficit would disappear in two-three years (the 
project would require from three and a half to four years from signing date.) 
There is no official position on this issue, however, and the numbers are 
extremely hard to get. Meanwhile, there are huge distortions in the pricing 
mechanisms (both by type of customer as well as by geographical location.) 
Please note that Venezuela has reserves of 146 TCF, making it the seventh 
largest country in the world in terms of reserves. Moreover, there has not 
been exploration for gas, and therefore it is expected that the amount of 
reserves would increase. Clearly, the reserve base is there.
Some efforts are being made to partially remove these distortions such as 
escalate the price to more realistic levels and remove cross-subsidies among 
customer classes and industries. A gas tariff is pending for approval by the 
president. It should be out in the next few days. This resolution will tell a 
lot about the development of gas projects in Venezuela, especially upstream, 
because it sets the prices of gas independently of its origin (associated to 
oil production vs. non-associated gas). It would also set a fixed floor at 
which PDVSA would buy all the gas not marketed.
PDVSA has not been very effective in pushing the project in the MEM. We've 
been shocked on how uninformed the MEM is. Given the traditional impositions 
that PDVSA exerted on the MEM, the latter is weary of PDVSA's actions and 
consequently is acting with lots of precaution. Our participation (we're 
doing PDVSA's legwork) has provided significant momentum, such as the 
creation of working groups to study its details. In any event, high ranking 
officials told us that they are very interested and that we should get an 
answer soon.
The meeting between Venezuela's Vice-President (Chavez himself, regretfully, 
couldn't assist), the head of PDVSA Mr. Lameda, Mark Frevert, Mike McConnell, 
and the head of the project Emilio Vicens went very well. Mr. Lameda at one 
point said that this project represents a win-win-win situation for PDVSA, 
the MEM, and Enron.
If you need any further assistance, please just let me know. Thanks,
ALF


From: Lisa Yoho on 02/26/2001 09:34 AM
To: Alberto Levy/SA/Enron@Enron
cc:  

Subject: Re:  

Alberto - I wanted to get an update on our LNG project in Venezuela.   Have 
you been involved in that project?   Thanks, lisa