We just finished the meeting  with Dale Laurance and Casey Olson. Here's a 
recap.

Oxy wanted to meet with Mike for two reasons:

 1) Make sure Enron and Oxy had a project team in place asap and the 
resources are committed to do a world class job on the January 29 submission 
and subsequent presentations. As Mike noted- we are in sudden death overtime 
and the 29th could be the end of the tournament.
 2) Revisit the "street talk" about Enron redeploying capital.

Mike walked through the EGM organization, talked about our stock multiple  
and how an announcement that we were putting huge dollars in Saudi  would 
hurt our stock price.

Dale talked about their low multiple (between 4 and 5), noted that the market 
viewed Oxy as a company that could do deals, buy and sell assets, but really 
wasn't a growth company. They now have a stable cash flow, but need a  new 
beach head in the Middle East to demonstrate they are growing. The point of 
this conversation was to tell us that debt reduction is also a top priority 
so they were also not interested in a big announcement about money being 
dumped into Saudi Arabia

They characterized the Saudi perspective as being one where they are looking 
for strategic partners who will be there for a long time and invest capital. 
They agree on a division of labor: Oxy can do E&P, processing and 
petrochemicals and look to us for pipelines and power plants although Oxy can 
do those too. They realize that only Enron has the marketing, structuring  
and regulatory expertise. 

Casey did revisit his conversation with you about in the end Enron ends up as 
some type of "merchant banker." That's OK in the end- Dale even said they 
would take over our part of any project-- but we can't project that role 
initially. We need to be on the same side of the table as Oxy.


The point here is that we have to be in step with a consistent approach to 
the projects. They expect our competitors to say they'll finance things on 
balance sheet and we need initially to say the same thing although later we 
will open discussions on other ways to finance. Mike and I agree that this is 
probably the biggest sticking point in the discussion today. Oxy believes 
that such an initial statement will never be public and we aren't really 
locked in an on-balance sheet approach. Maybe  we can do this, maybe we can't.

They see this as a year long process with PDA's stretching well into next 
year, and 2002 when the real money would be spent. The short term crisis is  
January 29 and we need a submission with lots of pages: we were criticized 
that although our proposal was well thought through and technically superb, 
it didn't have enough pages- reams of paper to impress  the technocrats.  We 
will also need to prepare a smaller 15 page digest to be used for our 
official February presentation and a three page walk around summary. Casey 
thinks the production center has to be in the US.

We also all agreed that the Jan 29  questions allow us to lay out all of our 
downstream concerns and establish a placeholder for issues that must be 
resolved during the PDA discussions before we would do a project. I have had 
the greatest success around the world when we don't try to force immediately 
on a country  a perfect gas or electric market but adapt to "local 
conditions" and implement the most important first couple of steps with the 
rest to follow later. In this respect,  our projects can include suggested 
regulatory concepts that if successful can be used elsewhere in the Kingdom.

Over and over we came back to the project team which they want on the ground 
in Saudi.  Casey will be 100% Saudi for the foreseeable future and can make 
all decisions. Who will be our lead person with the same authority? They 
don't want to deal with someone who later says Houston changed it's mind ( a 
little arrogant). When can we identify bodies and assignments and location? 
They want full time dedicated people. Either Dale or Casey noted that the old 
Enron would have parachuted a team in by now (Like South America where we 
landed in a swamp and spent the next five years beating alligators over the 
head with a stick). This is a very complicated political and technical 
effort,. The leader has to be good at both. Casey was excited that Rob would 
be assigned to the project (I guess you discussed this with him).

They both were quick to say that the working relationship to date has been 
excellent and that they appreciate the effort we have put into this.

Mike committed that we would go balls to the wall for the 29th deadline, I 
committed that I would designate a project team by the first week in January 
(we had our first conference call yesterday), but Mike said he wanted to 
think about the decision point person and process ( we aren't about to 
sacrifice a deliberative strategic/consensus  thought process because they 
are in a hurry).

We spent a lot of time talking about the process. We agree that the Saudi's 
will eliminate one or two participants, that each project will have subparts 
with different combinations and leads of companies with a master JV on top.   

They minimized the capital investment although they are prepared to spent 
$200-300 million over the next 3-5 years. They see core project 2 costing 
$600 million, 60% Oxy/Enron assuming one other partner and Enron half of 
that. We aren't talking billions (spoken like a true major).

They are sure Exxon /Mobil will be our Red Sea partner if only to earn face  
with possibly Marathon as the other. Exxon is more interested in the chemical 
focus which Oxy will concede to them. Mike noted was that our worst nightmare 
was a partner (Exxon) who would throw away money just to have a presence).  
We were assured that Oxy's only goal was to make money and if he projects 
didn't, they would walk away.

The real danger in the upstream is the risk money for exploration. Oxy hopes 
to hedge this risk with downstream investments (pipelines and plants) and 
hopes that if the exploration is successful and reserves are added it will 
lead to a whole new series of projects.

They are very proud of Oxy's role in this, claim that they were instrumental 
in getting Petry Parkman and Morgan selected as advisors, that Irani is the 
most respected American Arab business man and has  great access in the 
Kingdom, and that they already know what investments partners are acceptable 
to the Saudi's.

We  all left great friends in good Christmas spirit.

From our perspective:

 Saudi is the largest economy in the Middle east and the driver in 
international oil and liquids markets

 Enron needs to get inside and establish relationships with the key Saudi 
people. We need a foot print in the Kingdom with which to earn their 
respect.  Can we do it with minimal capital investment?

 Saudi is about to embark of a complete electric and gas restructuring, 
regulatory included. They want the repatriation of petro dollars and dollars 
held offshore by Saudi nationals.  The country can be a tremendous source of 
capital.

 It looks like 2001 can be managed with a minimum burn rate with the most 
intense period of activity being in January. We  need to set up the team for 
the January effort. I'll have this done by Jan 1. There is the question of 
sorting out conflicts with other ME priorities.

 Although it may be too soon to answer (we don't know yet what is possible 
but we can shape that outcome), what is the end game, what do we want out of 
Saudi Arabia? 

 We seem to have a clear division of labor and strategy with Oxy although we 
need to sort out what we say about on balance sheet financing. We also need 
to keep in mind that our other yet to be met partners will have a lot to say.

 Oxy wants to take the lead on the Core Venture 2 (Red Sea). I agree- this is 
a perfect laboratory to address all of the market structure issues that will 
make the Kingdom a great place to do business.



  Mike- I'm sure you can add more. Rick -it's up to you if you want to send 
this around to the Saudi team.  Merry Christmas.