If the last Hoegh Galleon cargo of this year is diverted to Puerto Rico, the economics of sending non-Cabot LNG to Puerto Rico are different than those mentioned in my prior note.

Based on current prices, there is $0.7 MM of value that could be captured between Enron LNG and Eco on the diversion. This represents the price difference between what it would cost to buy back our sale to ENA at CMS and what Eco would have had to pay Cabot for a Winter Cargo. If CMS would let us out of the terminal fee or let it apply to a future delivery, that would add an additional $1 MM of value. If Cabot had to give up its Demand Charge and Demand Surcharge (hard to imagine) on the Winter Cargo, that adds another $4.7 MM.

A second Hoegh Galleon cargo should add $1.5 MM but would need to be sourced from Nigeria or Algeria(???). 

Cabot controls the date of the Last Cargo delivered in 2001. It can be November 23-December 15 (unless another date is mutually agreeable). The date of this last delivery determines the earliest date that Eco would be able to receive the Hoegh Galleon. The earliest that Eco could receive the Hoegh Galleon should therefore be between December 20 and January 11 - depends on Cabot. 

Eco would be able to receive a second Hoegh Galleon cargo as soon as 29 days after the first Hoegh Galleon cargo delivery or as late as 45 days after. Two Hoegh Galleon cargoes should give Eco enough fuel (barely) to get them to the dates where they are eligible to receive the Early Spring cargo (100 days after the Last Cargo of 2001). 

In addition to the $$$'s available to be captured, this program removes Eco's risk of not receiving a Winter Cargo from Cabot.

Economics and Timing -  The amount of value to be captured is most heavily influenced by December-January NYMEX prices. These impact our cost to buy back gas at the CMS tailgate and our cost to buy the second Hoegh Galleon cargo. Our gas cost is more subject to change than is the Cabot contract price we are trying to beat. If we had a crystal ball, we would lock-in the economics of the diversion and of the purchase of the second cargo when the NYMEX bottoms-out. The front of the price curve has lost ~$1.00/MMBtu in the last 2 weeks. Where will it go from here?

In order to be prepared to execute when market conditions are right, we need to get Eco on board and initiate discussions with a producer about supply for the second cargo. Also, we should talk with Gene Massey to confirm that the contract says what we think it says and to get his thoughts on what we are trying to do.

I would appreciate any insights that you may have regarding this opportunity.

Regards,

Paul