Jeff -- Here is an update on our discussions with Phillips over their lack of 
performance on
delivery of gas during high price periods.   I will see you next week at the 
PRC and give you
a further update on our progress with them.

John
---------------------- Forwarded by John Sherriff/LON/ECT on 24/07/2000 08:30 
---------------------------


Peter Crilly
20/07/2000 12:50
To: John Sherriff/LON/ECT@ECT, Richard Lewis/LON/ECT@ECT
cc: Gail Hill/LON/ECT@ECT, Matthew Ferguson/LON/ECT@ECT 

Subject: J-Block Update

Following the meeting Richard and I had with Jim Simpson of Phillips and the 
letter we subsequently sent requesting more information, Phillips have 
proposed a technical meeting to discuss production problems and a commercial 
meeting to discuss alternative solutions.

The technical meeting is scheduled for Friday of this week and we will be 
taking advisers so that we can assess the extent of the problem and the 
adequacy of the Sellers plans for remedial action.

The commercial meeting took place on Tuesday.  The Sellers took the position 
that they were happy to continue discussions regarding deliveries at Bacton 
or at the NBP but that they would need compensating for any additional 
risks/costs that they would incur.  Essentially, if they have alternative 
sources of gas available, they do not want to sell it to us at the contract 
price when they can get significantly more value in the market.  We made it 
clear that we were looking for a commercial solution which would enable them 
to deliver contract gas at the contract price at an alternative location.

At the end of the meeting, the Sellers agreed to respond to our previous 
proposal on Bacton deliveries, and to formulate an additional proposal on NBP 
deliveries.  This will probably take a couple of weeks.

In the meantime, following the technical meeting on Friday, we will be able 
to take a more informed view regarding the extent to which the Sellers are to 
blame for the current problems - eg lack of investment, failure to act as an 
RPO etc.  

My current thinking is that we then exert pressure on them to deliver the gas 
at the alternative locations at contract price through management pressure 
(Mulva) and contractual pressure (failure to act as RPO etc).

I will update you early next week when we have reviewed the information from 
the technical meeting.


Regards

Peter