I would request that each of you read the following...........SF please email 
me the answer to Schneider's questionwith respect to purchase contracts;GN 
please provide me with the same concerning transport and storage.......Thanks 
bng
----- Forwarded by Barbara N Gray/HOU/ECT on 08/02/2000 10:29 AM -----

	Steve HPL Schneider
	08/02/2000 06:37 AM
		
		 To: Brian Redmond/HOU/ECT@ECT
		 cc: Barbara N Gray/HOU/ECT@ECT
		 Subject: Re: Processing Value

We have the correct gas quality standards in place today and they are well 
documented.  They should be an exhibit to every physical commodity contract 
HPL generates (sales, purchase, transport, storage) - Barbara, please confirm 
this is happening.

The Exxon processing contract has certain tiers of value established.  At 
greater than 4.0 GPM, we receive 92% percent of the liquids.  Between 3.5 and 
4.0 GPM, we receive 90%.  And so on.  The 100% shrinkage obligation remains 
the same.  Therefore as lean gas is added that drives down the total GPM 
stream below the thresholds, we lose percentages of liquid value back to us.  
Even when these thresholds are not crossed, there is incremental costs (fuel, 
transportation fees, lean gas absorbs light end liquids from rich gas stream, 
etc), yet no financial benefit.  Therefore our net benefit decreases.

We potentially saw the first benefits of this discussion yesterday.  The deal 
that caught my attention initially was the IFHSC minus $.13 that is on my 
desk for execution and the gas is already flowing.  After we have improved 
the process, Jack Simunek worked with Jeff Austin on a similar type of 
package yesterday.  The hurdle price was determined to be IFHSC minus $.55.  
Jeff quoted this to his producer, and really got no negative feedback.  I 
think this potentially confirms what I stated in my original memo.  The 
reason these producers are coming to us with their lean stream trying to get 
into a rich, processable stream is that other competing pipelines have 
already significantly lowered their pricing or have flat told them they would 
not take the gas due to the impact on processing margins.




Brian Redmond
08/01/2000 08:44 AM
To: Steve HPL Schneider/HOU/ECT@ECT
cc:  
Subject: Re: Processing Value  

Steve,

Lets discuss.  I don't understand why the value of the gas stream to King 
Ranch was reduced?

Also, are the correct gas standards set forth somewhere and well defined?

In response to your AMTEL message on the PRC, I am getting the PRC results 
today and will be arranging a few hours/day to meet with everyone to go over 
the results.


Brian