1995 Tax Allocation Agreement - Enron Corp., Enron Oil & Gas Co.


                          1995 TAX ALLOCATION AGREEMENT

         THIS 1995 TAX ALLOCATION AGREEMENT ('Agreement') is entered into
effective as of the Deconsolidation Date being December ___, 1995 between Enron
Corp., a Delaware corporation with its principal place of business being
Houston, Texas ('Enron'), Enron Oil & Gas Company, also a Delaware corporation
with its principal place of business being Houston, Texas ('EOG'), and those
domestic subsidiaries of EOG listed below as additional parties. (Enron, EOG,
and those EOG subsidiaries listed below are hereinafter collectively referred to
as the 'Parties' and singularly as a 'Party', while EOG and its domestic
subsidiaries are collectively referred to as 'EOG').

                                    RECITALS

         WHEREAS, Enron and EOG previously entered into that certain First
Amended and Restated Tax Allocation Agreement (hereinafter the 'Base Agreement')
executed in August 1991 generally providing for the apportionment and allocation
of federal income and other tax liabilities between the Parties; and

         WHEREAS, the Parties subsequently modified the terms of the Base
Agreement, as reflected in Modification 'A' to the First Amended and Restated
Tax Allocation Agreement executed in 1992 (the Base Agreement and Modification
'A' are hereinafter collectively referred to as the 'Earlier Agreements') so as
to further specify their agreement as to the apportionment and allocation of
federal income and other tax liabilities; and

         WHEREAS, Enron is considering selling a certain number of shares of
common stock that it owns in EOG, thus reducing its ownership interest in EOG
below 80 percent and thereby precluding Enron from continuing to include EOG in
the consolidated federal income tax returns prepared by Enron as common parent
for the taxable periods following the Deconsolidation Date;

         WHEREAS, EOG has represented in various public statements that the
Deconsolidation, when coupled with the effectiveness of the Earlier Agreements
and this Agreement, will not have a material adverse effect on its financial
condition or results of operations; and

         WHEREAS, the Earlier Agreements do not fully address the obligations of
the Parties vis-a-vis one another upon Deconsolidation; and

         WHEREAS, the Parties have agreed to change certain of the provisions of
the Earlier Agreements and thus would like to memorialize such agreement
regarding their respective rights, obligations, and intentions as to any tax
payments to be made by EOG to Enron or by Enron to EOG during the
Post-Deconsolidation Date Period but related to the Pre-Consolidation Date
Period and, in particular, the Parties' rights, obligations, and intentions with
respect to (i) paragraph 7 of Modification 'A' and (ii) any refund of Taxes to
be received by the Consolidated Group attributable to the four years from 1988
through and including 1991, and have such terms generally supersede those of the
Earlier Agreements.

         NOW, THEREFORE, the Parties to this Agreement agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         1.1 DEFINITIONS: As used in this Agreement, the following terms have
the following meanings:

         'Code' means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of any subsequent federal tax laws.

         'Consolidated Group' means the 'affiliated group' of corporations of
which Enron is the 'common parent corporation', as such terms are defined in
Code ss. 1504(a)(1).

         'Consolidated Minimum Tax Credit(s)' means the consolidated minimum tax
credit(s) computed in accordance with Code ss.ss. 53, 1502, and 1503, and shown
on a Consolidated Return with respect to those tax periods up to and including
the Deconsolidation Date.

         'Consolidated Return' means the consolidated federal income tax return
of the Consolidated Group for each taxable year as filed or to be filed by Enron
on behalf of the Consolidated Group.

         'Consolidated Tax Liability' means, generally, the consolidated federal
income tax liability computed in accordance with Treasury Regulation ss.
1.1502-2 and shown on a Consolidated Return, taking into account all credits to
which the Consolidated Group is entitled under the Code, but not taking into
account any 'consolidated alternative minimum tax liability' (as provided under
Code ss.ss. 55, 1502, and 1503) or any Consolidated Minimum Tax Credit.

         'Deconsolidation' means that event which causes Enron to no longer have
the requisite ownership interest in EOG so as to allow the Parties to file as a
Consolidated Group.

         'Deconsolidation Date' means that date when Enron and EOG no longer
constitute a Consolidated Group.

         'Earlier Agreements' has that meaning ascribed to it in the Recitals.

         'Party' and 'Parties' have that meaning ascribed to them in the
Recitals.

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         'Pre-Deconsolidation Date Period' means, chronologically, those tax
years prior to the 1995 tax year plus that period in time beginning January 1,
1995 and ending on and including the Deconsolidation Date.

         'Post-Deconsolidation Date Period' means, chronologically, that period
following the Deconsolidation Date.

         'Taxes' or 'Tax' means federal income taxes as provided in Code ss. 11,
alternative minimum tax as provided in Code ss. 55, and any state taxes measured
by net income (including state taxes measured by net income reflected in any
Unitary Tax Returns filed by Enron) and any interest or penalties thereon. The
term Taxes or Tax, however, specifically excludes any tax imposed by any foreign
government.

         'Unitary Tax Return' means a state income tax return which reflects the
combined and/or consolidated reporting (either on a domestic or worldwide basis)
of Enron and its affiliates for a state which either (i) imposes its income tax
on its apportioned and/or allocable share of the net income and its United
States affiliates that are engaged in a 'unitary business', part of which is
conducted in the state or (ii) imposes its income tax on its apportioned and/or
allocable share of the net income of a taxpayer and its affiliates--both
domestic and foreign--that are engaged in a unitary business.

         Other terms defined herein have the meanings given them.

                                   ARTICLE II
                               TAX INDEMNIFICATION

         2.1 ENRON'S TAX INDEMNIFICATION FOR THE PRE-DECONSOLIDATION DATE
PERIOD: Enron shall be liable for, indemnify, and hold EOG harmless for all
Taxes (i) imposed on or incurred by EOG for the Pre-Deconsolidation Date Period
and (ii) equitably apportioned to EOG by Enron for all tax periods beginning
before and ending after the Deconsolidation Date. Enron, in turn, shall be
entitled to receive all refunds of Taxes attributable to the Pre-Deconsolidation
Date Period, if any, from either the applicable tax authorities or EOG (in the
event such refund(s) have been made directly to EOG), except with respect to the
$10.5 million amount set forth in Section 2.3(a) below.

         2.2 EOG'S 1995 TAX LIABILITY AND PAYMENT

                  (a) EOG's sole liability for Taxes for the portion of the
Pre-Deconsolidation Date Period attributable to the 1995 tax year shall be based
on EOG's preparation of its portion of Enron's 1995 Consolidated Return and
Enron's review thereof. Any discrepancies between EOG's return position and
Enron's subsequent review shall be resolved by consultation by each Party's
respective tax officers and Enron's ultimate determination shall be controlling
as long as such determination does not have a material adverse effect on EOG's
financial condition or results of operations.

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                  (b) The Parties agree that in determining EOG's allocable
share of the (i) Unitary and (ii) Consolidated Tax Liabilities for the 1995 tax
year that they shall follow the allocation and methodology set forth in the
Earlier Agreements.

                  (c) EOG shall pay Enron its allocable share of the estimated
Unitary and Consolidated Tax Liabilities for the 1995 tax year, net of any 1995
Code ss. 29 credits, within 45 days from the Deconsolidation Date. A 'true-up'
payment, should one be necessary, shall be made by EOG to Enron or Enron to EOG
within 15 days after Enron's subsequent determination of EOG's liability based
on taxable income and tax credits reported as part of Enron's 1995 Unitary and
Consolidated Returns and EOG's separate state Tax returns.

                  (d) Enron shall be liable for, indemnify, and hold EOG
harmless for all Taxes attributable to the event of Deconsolidation.

         2.3 OTHER PAYMENTS TO BE MADE BETWEEN THE PARTIES

                  (a) Enron is obligated to pay to EOG $10.5 million
attributable to a federal income tax refund to be received by Enron for the four
tax years from 1988 through and including 1991.

                  (b) In consideration of Enron's tax indemnification as set
forth in Section 2.1 to this Agreement, EOG shall be obligated to pay to Enron
$8 million no later than on the Deconsolidation Date.

                  (c) In the event Enron has not paid EOG the $10.5 million
refund amount by the Deconsolidation Date, EOG shall have the right to offset
its $8 million indemnification payment obligation to Enron by such $10.5 million
sum thus resulting in a net payment by Enron to EOG of $2.5 million no later
than on the Deconsolidation Date.

                                   ARTICLE III
                               MINIMUM TAX CREDIT
               AND RELATED MATTERS ASSOCIATED WITH DECONSOLIDATION

         3.1 CONSOLIDATED MINIMUM TAX CREDIT

                  (a) As currently calculated by Enron, no Consolidated Minimum
Tax Credits have been allocated to EOG by Enron based on Consolidated Returns
filed through tax year ended December 31, 1994 under the methodology followed
for the Pre-Deconsolidation Date Period and Enron has not made any determination
of EOG's allocable share of Consolidated Minimum Tax Credits for the 1995 tax
year. In the event Consolidated Minimum Tax Credits are allocated to EOG, EOG
shall be obligated to reimburse Enron for the amount of such credits allocated
to EOG upon the occurrence of the earlier of the following two events:

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                           (i) The date of EOG's filing of its federal income
         tax return for the tax year in the Post-Deconsolidation Date Period
         when EOG utilizes any reallocated Consolidated Minimum Tax Credits; or

                           (ii) The date of Enron's filing its federal income
         tax return for the tax year in the Post-Deconsolidation Date Period
         when Enron could have utilized such Consolidated Minimum Tax Credits
         but is precluded from doing so because of the reallocation to EOG.

                  (b) For purposes of Section 3.1(a)(ii), no Consolidated
Minimum Tax Credits will be considered usable by Enron until Enron could have
first utilized all Consolidated Minimum Tax Credits remaining with Enron after
the reallocation. Any minimum tax credits generated by Enron in the
Post-Deconsolidation Date Period shall be disregarded in making this
determination. For purposes of Section 3.1(a)(i), no Consolidated Minimum Tax
Credits will be considered as utilized by EOG until EOG first utilizes all
minimum tax credits it has generated in the Post-Deconsolidation Date Period.

                  (c) For purposes of Section 3.1(a), any payments to be made
between EOG and Enron may be made for more than one tax year of the
Post-Deconsolidation Date Period until the reallocated Consolidated Minimum Tax
Credit is used (or could have been used) in its entirety.

         3.2 CONSOLIDATED MINIMUM TAX CREDIT ALLOCATION ADJUSTMENTS: In the
event the amount of the Consolidated Minimum Tax Credits allocated to EOG are
adjusted resulting in a reduction of Consolidated Minimum Tax Credits previously
utilized by EOG and a payment has been made by EOG to Enron pursuant to the
terms of Section 3.1, Enron shall be obligated to pay EOG for any assessment
made against it by the Internal Revenue Service attributable to such adjustment.
Payment shall be made by Enron to EOG on the day EOG pays the Internal Revenue
Service for such assessment.

                                   ARTICLE IV
                        AUDITS AND OTHER TAX PROCEEDINGS

         4.1 GENERAL COOPERATION AND EXCHANGE OF INFORMATION

                  (a) EOG shall provide, or cause to be provided, to Enron
copies of all correspondence received from any taxing authority by EOG in
connection with the liability of the Parties for Taxes for the
Pre-Deconsolidation Date Period. EOG shall also provide Enron with access to or
copies of any materials requested by Enron which would assist Enron in resolving
any tax matters for the Consolidated Group for the Pre-Deconsolidation Date
Period. Further, the Parties will provide each other with such cooperation and
information as they may reasonably request of each other in preparing or filing
any return, amended return, or claim for refund, in determining liability or
right of refund, or in conducting any audit or other proceeding, in respect of
Taxes

                                      -5-

imposed on the Parties or their respective affiliates including, by way of
example, information relating to net operating losses, foreign tax credits,
overall foreign losses, and excess loss accounts..

                  (b) Enron on one hand and EOG on the other hand and their
affiliates will preserve and retain all returns, schedules, workpapers, and all
material records or other documents relating to any such returns, claims,
audits, or other proceedings until the expiration of the statutory period of
limitations (including extensions) of the taxable periods to which such
documents relate and until the final determination of any payments which may be
required with respect to such periods under this Agreement and shall make such
documents available at the then-current corporate headquarters of such Party to
the other Party or any affiliate thereof, and their respective officers,
employees, and agents, upon reasonable notice and at reasonable times, it being
understood that such representative shall be entitled to make copies of any such
books and records relating to Enron or EOG as they shall deem necessary.

                  (c) Enron on one hand and EOG on the other hand further agree
to permit representatives of the other Party or any affiliate thereof to meet
with employees of such Party on a mutually convenient basis in order to enable
such representatives to obtain additional information and explanations of any
documents provided pursuant to this Section 4.1. Enron on one hand and EOG on
the other hand shall make available to the representatives of the other Party or
any affiliate thereof sufficient workspace and facilities to perform the
activities described in this Section. Any information obtained pursuant to this
Section 4.1 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of returns or claims for refund or in conducting any
audit or other proceeding. Each Party shall provide the cooperation and
information required by this Section 4.1 at its own expense.

         4.2 AUDITS: In the event of an audit by the Internal Revenue Service,
or by any state or local tax authority, of a return filed by Enron for the
Pre-Deconsolidation Date Period, Enron shall give EOG timely and reasonable
notice of audit proceedings and EOG will provide all necessary information and
other assistance reasonably requested by Enron with respect to issues concerning
the activities of EOG. All communications with the Internal Revenue Service
concerning such audit will be made by Enron unless otherwise agreed between the
Parties hereto.

         4.3 MATERIAL ADVERSE IMPACT TO EOG: Notwithstanding the provisions of
Section 4.2, the Parties agree that in no event shall Enron file any amended tax
return, claim for refund, or make any tax election affecting the
Pre-Deconsolidation Date Period that would have any material adverse impact on
EOG's financial condition or results of operations without first obtaining the
written permission of EOG.

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                                    ARTICLE V
                               UNITARY TAX RETURNS
                  FOR POST-DECONSOLIDATION DATE PERIOD FILINGS

         Enron agrees to continue to file any Unitary Tax Returns and allocate
Unitary tax liability for the Post-Deconsolidation Date Period in which the
operations of EOG are reflected in a manner consistent with the methodology
followed for the Pre-Deconsolidation Date Period.

                                   ARTICLE VI
                                OTHER PROVISIONS

         6.1 EFFECT OF THE AGREEMENT: The obligations of the Parties set forth
under this Agreement shall be unconditional and absolute, and shall remain in
effect without limitation as to time. Further, all prior tax sharing and
allocation agreements between Enron and EOG (including the Earlier Agreements)
shall terminate effective as of the Deconsolidation Date, except that those
provisions of the Earlier Agreement regarding the allocation of Consolidated Tax
Liability shall remain in effect for the 1995 tax year until the provisions of
Section 2.2 of this Agreement are fully implemented by the Parties.

         6.2 CONFLICT OR AMBIGUITY: Because the terms of this Agreement
generally supersede the terms of the Earlier Agreements, the Parties agree that
if there is any conflict or ambiguity between the Earlier Agreements and this
Agreement the terms of this Agreement shall control.

         6.3 ASSIGNABILITY: The rights and obligations of the Parties under this
Agreement may not be assigned by a Party without the prior written consent of
the other Party to this Agreement.

         6.4 GOVERNING LAW: This Agreement shall be governed by the laws of the
state of Texas.

         IN WITNESS WHEREOF, the Parties hereto have caused their names to be
subscribed and executed by the respective authorized officers on the dates
indicated, effective as of the date first written above.

                                       ENRON CORP.

                                       By:____________________________________
                                             Robert J. Hermann
                                             Vice President, Tax

                                       ENRON OIL & GAS COMPANY

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       ENRON OIL & GAS INTERNATIONAL, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       EOGI-TRINIDAD, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       EOGI-AUSTRALIA, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       EOGI-FRANCE, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

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                                       EOGI-RUSSIA, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       EOGI-QATAR, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       EOGI-UZBEKISTAN, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       EOGI-KUWAIT, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       ENRON OIL & GAS-CARTHAGE, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

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                                       ERSO, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       ENRON OIL & GAS PROPERTY MANAGEMENT, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       ENRON OIL & GAS MARKETING, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       I N HOLDINGS, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       NILO OPERATING COMPANY

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

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                                       EOGI-TRINIDAD U(a) BLOCK, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

                                       EOGI-ALGERIA, INC.

                                       By:____________________________________
                                             Susan M. Murray
                                             Vice President, Tax

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                                       EOGI TRINIDAD COMPANY

                                       By:____________________________________
                                             Dennis M. Ulak
                                             Assistant Secretary

                                       EOGI AUSTRALIA COMPANY

                                       By:____________________________________
                                             Dennis M. Ulak
                                             Assistant Secretary

                                       EOGI-KAZAKHSTAN, INC.

                                       By:____________________________________
                                             Dennis M. Ulak
                                             Assistant Secretary

                                       EOGI-INDIA, INC.

                                       By:____________________________________
                                             Dennis M. Ulak
                                             Assistant Secretary

                                       EOGI-CHINA, INC.

                                       By:____________________________________
                                             Dennis M. Ulak
                                             Assistant Secretary

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                                       EOGI-UNITED KINGDOM, INC.

                                       By:____________________________________
                                             Angus H. Davis
                                             Assistant Secretary

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                                       ENRON OIL & GAS INVESTMENTS, INC.

                                       By:____________________________________
                                             Douglas Weaver
                                             President

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