M/V "PACIFIC VIRGO"

Just a note on David's good e-mail. Although I completely agree with item
#3, I have been advised that I need to get John Nowlan's authority (he is the
ultimate business client) before we send this message to Mitsubishi. I am
trying to meet with him tomorrow to get that authority. I'll keep you
closely advised as to my progress.

B.K.D.

----- Forwarded by Britt Davis/Corp/Enron on 08/01/2000 03:22 PM -----

Jo.Moody@clyde.co.uk
08/01/2000 02:19 PM

To: Matthias.lee@enron.com
cc: britt.davis@enron.com, ngregson@wfw.com
Subject: M/V "PACIFIC VIRGO"

Thanks for the detailed information you gave me in our lengthy telephone
conversations today and the exchange of views.

I have not finished reading all the documents yet and set out some preliminary
thoughts to cover the areas we discussed.

1. Experts

I have no problem with Richard Gregory provided he is the one who does the
work.
As for Dr. Mullen of Burgoynes, I do have some reservations. He is
principally,
in my view, a fire expert whilst acknowledging he does have chemistry
knowledge.
I wonder if he is the right man for a technical oil chemistry job. My
preferred choice is Mr. Steve Jones of APC Petroleum in the UK. I have used
him
before and found him clever and objective. I know that John Minton (for whom
I
have a high regard) regards him well. Britt has said that it is important we
take the right decision here even if it means sending a UK chemist out to
Singapore to attend the joint sampling. Mr. Jones therefore has my
recommendation. A potential problem is that he is on holiday from today,
returning to the office on Tuesday morning. He is fairly available after
then.
Since it is unlikely that the joint testing will take place this week, nor the
very early part of next week, perhaps this is not a problem.

I assume the joint testing will be proceeded by agreement between the relevant
nominated experts to the test programme. Mr. Jones, if he is appointed, can
deal with this in the UK by liaising with Mr. Bennett of MTD, whom he knows,
and
others. I wonder if SGS should also be shown a proposed test programme and
they
should also attend the joint testing.

My own thinking is that Mr. Bennett of MTD should perhaps prepare a test
programme, but you may have already dealt with this and taken other decisions.

2. Claim against time charterers

I have looked at the advices. Priority should be given to understanding fully
the exchanges on the charterers' cleaning instructions. It may be worthwhile
taking a statement from Enron's charterers' representation who was responsible
for giving the instructions and corresponding with owners. It does seem that
Enron was annoyed that the vessel did not have sufficient fresh water on board
to carry out a water rinse which Enron wanted to order the vessel to carry
out.
It seems that the vessel simply said that this was not an option because they
did not have sufficient fresh water on board, leaving Enron with no
alternative
but to load on top with stripping/draining encouraged perhaps by owners'
comment
that the last cargo was Cossack crude and the loading operation was load on
top
basis, i.e. no tank cleaning was performed prior to loading the cargo. I
think
we need to explore carefully these telex exchanges before coming to a final
view
on the vessel's responsiblity for the contamination, assuming it is agreed
that
the cargo damage is attributable to the vessel and lack of cleaning (a point
MTD
will be closely looking at with respect to the claim under the policy that
underwriters anticipate). At the moment these telex exchanges look
favourable.

3. Freight/Demurrage

A long with others, I agree that we should not pay this to time charterers.
Probably the time has arrived where we should be sending a message along the
lines that the freight for the second leg and demurrage has been occasioned
solely as a result of time charterers' breach of their charter obligation.
Put
simply, cargo was delivered to them in a sound condition and discharged in a
contaminated condition, most probably because the tanks were not fit and
suitable for the carriage of the cargo. In our message, perhaps we can
suggest
that further discussion on the matter should be put on hold until the outcome
of
the joint testing and the parties should be guided accordingly by the outcome.
In the event of any continuing disagreement, the dispute will have to be
resolved in arbitration. Personally, I think it may well be difficult to
resist
an application for an interim award for freight since it will be argued that
freight for the second leg was paid on existing charterparty terms that, I
think, provides that payment should be made without discount. I think I am
right in saying there was no separate charterparty entered into and we will
also
have to take a closer look at the messages with owners when the second leg was
discussed. The claim for demurrage will be easier to resist assuming it is
attributable to the contamination. Any demurrage that is not attributable to
the contamination should probably be paid.

4. Claim against head owners under B/L

For reasons discussed, we should explore the possibility of an arrest. Britt
would like WFW to ask Ang & Partners if they are conflicted out, and also how
much it will cost to arrest (including how much monies are to be advanced
prior
to securing an arrest). Ang & Partners are not to be instructed yet.

5. Your contract with FGPC

This appears to be unrelated to the contamination in the sense that I note the
cargo passed D3605 with "ashing" methods used and failed on 9th July both with
"ashing" and plain D3605 methods. For reasons probably connected with
Siemens,
FGPC refuse to amend the contract which is obviously the sensible thing to do.
I assume, by the way, SGS are right when they say that "ashing" is a
modification of the test method as opposed to a preparatory step or addition,
i.e. are SGS right in saying that the test method has not been complied with
if
"ashing" is used? It may be that the way to look at this is to focus on
mitigation. It is obvious that Enron are boxed in and cannot find a
condensate
that using this test method will generate an accurate result. It is hit and
miss. I have nof formed a view on how to proceed yet and am anxious to get
this
e-mail off to you as it stands.

Regards,
DAVID BEST
Please reply to david.best@clyde.co.uk

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