FYI,

This is my evaluation of the process.

Let me know what you think.

thanks

bob

 -----Original Message-----
From: 	Miller, Kevin  
Sent:	Monday, October 29, 2001 10:25 AM
To:	Mrha, Jean; Bryan, Gary; Roberts, Linda
Cc:	Rainer, Eva; Snow, Karen; Hall, Bob M; Superty, Robert
Subject:	Havre Pipeline Outsourcing Update


Over the past several weeks we have had several meetings regarding Ocean's Havre Pipeline system.  We have met with Greg Nelson, the Ocean accountant who handles all the day to day and monthly settlement activities on the Havre Pipeline. In addition, we have had several internal meeting to discuss this potential opportunity.  Ocean was interested in possibly outsourcing the scheduling, balancing and other back office activities related to the Havre Pipeline.  Based upon these internal and external meetings the following concerns and/or issues were raised. 

According to ENN, with the sale of HPL, ENA no longer has the internal expertise to manage the daily logistics and monthly settlements associated with a small intrastate pipeline.   It is not a core part of ENA's back office functions.  Obviously, Enron's GPG has the expertise to operate large interstate pipelines.  I have contacted Brad Holmes to determine if GPG  has any interest in this type opportunity.
It was stated that ENA could perform the services, but since the required services are not core to our back office that it would not be efficient for  ENA to perform the services.  The tasks to manage, balance and account for the transactions on the Havre Pipeline currently consume only  25% to 50% of Greg Nelson's time.  It was thought that it cost more for ENA to provide the required services than for Ocean to continue to do it themselves.  
The proposed transaction made more sense when connected to an HMS wellhead automation project.  HMS bid on installing 300 EFMs which would have been a milestone project for HMS.  However, as a standalone outsourcing transaction it is not as attractive.
Outsourcing the back office functions on the Havre Pipeline is not high priority for Ocean.  It was more of a "side bar" to the wellhead automation project which has been postponed. 
           
 Given that the proposed transaction is not core to ENA's back office, is a very small transaction and does not integrate with another component of the Producer One program, I do not think ENA should pursue this transaction at this time.  GPG may desire to pursue the transaction.  However, based upon my preliminary discussions with Brad Holmes I do not think GPG is very interested.  If Ocean decides to go forward with their EFM project in the spring, I think ENA should review the potential transaction at that time.  

ENA future opportunities with Ocean should not be impacted by our decision not to pursue this transaction.  Ocean did not initially want to outsource the back office functions of the Havre Pipeline.  Ocean should respect ENA's honest evaluation of the situation.

If you have any questions please give me a call at ext 33541.

Thanks  ... Kevin