havmann - lpg claim with underwriters

Please follow up w/ Paul.
----- Forwarded by Richard B Sanders/HOU/ECT on 05/21/2000 11:28 AM -----

John L Nowlan
05/02/2000 09:22 AM

To: Richard B Sanders/HOU/ECT@ECT
cc:
Subject: havmann - lpg claim with underwriters

Richard this is paul comments re the note you sent a couple weeks ago re
clyde and co. I support his conclusion.
---------------------- Forwarded by John L Nowlan/HOU/ECT on 05/02/2000 09:19
AM ---------------------------

Paul Henking
05/01/2000 03:29 PM
To: John L Nowlan/HOU/ECT@ECT
cc:
Subject: havmann - lpg claim with underwriters

john,

sorry it has taken so long to reply to the copy of the fax from clyde & co
which you passed to me some time ago.

basically, i reviewed the paper from sgs on copper corrosion contamination in
lpg which reviewed possible scenarios of the lpg becoming off spec during a
sea voyage. their conclusion was that propane which contained polysulphides
could meet the copper corrosion tests at loading but then decompose during
the long voyage to turn the propane off spec for copper corrosion. this
position would support what clyde & co are saying as a factor against enron's
case.

the whole contamination problem, while possibly an inherent vice, was an
unknown inherent vice. nobody was aware of this problem at the time of
loadings but rather the problem came to light once some of the first ships
reached their discharge ports. the sgs report also brings into account other
reasons for the copper corrosion failure such as:

a) unclean cargo tanks, containing sulfur from previous cargoes,
b) mixing of two grades of lpg, both initially on spec,
c) the use of unclean inert gas, and
d) other incompatible corrosive cargoes (such as ammonia) by improper
cleaning procedures.

i did take the liberty to call chris clucas of dorchester maritime's
technical department whom i met when dorchester was managing the enron owned
ships. it was chris who initially sent me the sgs paper as an update to the
gastech 1988 paper.

it may be a good thing i did call him as he mentioned a subsequent paper
issued by sgs in about 1998, by g.vermeiren, where sgs went to saudi to check
their procedures during the time of these off spec cargo loadings. it appears
the paper's conclusion is that unknowingly saudi may have put some pacifiers
into the propane which would have caused the copper corrosion to show as on
spec. therefore, the product could have actually been off spec before it was
loaded but, due to the pacifiers, tested as on spec.

in summary, i would agree with clyde & co that this should be settled,
especially with the amount being discussed. i do not know where this claim
stands and again apologize for the delayed reply.

regards