Richard,

FYI. Per my voice-mail of a moment ago, while I appreciate Matt having raised 
the possibility of ECT making a bad situation worse by finding a "bug", I am 
not inclined to stop the testing.  I agree with David Best's sense that if 
there is a "bug" in the product at the time it was loaded from the supplier's 
mooring facility, and if Mitsubishi or an end-user comes after ECT with a 
claim that, e.g., the "bug" contaminated the ship's later cargoes, the 
presence of  "bug" in the product would seem to give us a pretty good 
argument against the supplier, in this case, a Phillips entity.

Please also keep in mind that our testing is not just for a "bug", but also 
to see whether the possibility of the aging of the cargo may have caused the 
loadport samples to fail.

If we stop the testing now, our chances of recovering any settlement from 
Mitsubishi or the cargo underwriters are remote.  In fact, Jim Studdert just 
advised that he spoke with the local adjuster for our cargo underwriters,and 
was told, "I don't think it was an insurable claim if it was contaminated 
when it was loaded aboard the ship."  This statement was not a surprise to 
Jim or me.  

By copy of this, I wonder if Mike could send to me a copy of the general 
terms and conditions that David Best references below.

Britt



	Helen.Godel@clyde.co.uk
	01/23/2001 12:46 PM
		 
		 To: britt.davis@enron.com, Paul.Henking@enron.com, ngregson@wfw.com, 
Matthias.lee@enron.com, Alan.Aronowitz@enron.com, JamesP.Studdert@enron.com
		 cc: 
		 Subject: PACIFIC VIRGO


We are into the third day of testing in a series of analytical tests that
will be complete on Friday with full results available by the middle of
next week.

It is not possible at this stage to point a finger at anyone since testing
is only midway.  Matt Lee has raised a concern about carrying on testing,
particularly biological testing to be undertaken on Friday, if it is only
going to expose Enron further without any recourse against the suppliers.
Were the testing to stop now, we will have incomplete analyses with two
sets of loadport data that are in conflict.  This will make the chances of
a recovery against ship and suppliers very difficult in my view.  Jim
Studdert has offered the opinion that it would be very difficult to make a
recovery from underwriters with the results as they are at present.  Steve
Jones' inclination is to carry on to try and get a firmer view.  It may be
that the ship is still the villain of the piece because even the loadport
results that have just come out do not match the kind of filterable dirt
that is present in the discharge samples, i.e. there is an increase.
Biological contamination, if present, could also mean involvement of the
ship, particularly if the loadport results are clean or not nearly as bad
as the discharge port results.  On the other hand, if biological
contamination is shown to be present in the loadport samples at the same
kind of level as the discharge port samples, clearly the finger points
straight at the suppliers and not at underwriters and at the ship.  I think
the suppliers will have a case to answer, bearing in mind they contracted
to sell Elang blend ultralight crude oil of normal export quality at time
and place of loading.  I will be surprised if normal export quality means
that the cargo can carry "bugs".  Can someone fax to me the Enron General
Terms & Conditions applicable to crude oil, petroleum and petrochemical
transactions effective 1st January 2000 which are incorporated in the
Phillips Petroleum Contract with Enron Capital & Trade Resources Singapore?
I should like to take a look at them.

Were we to break now midway through the anlaysis, I am sure underwriters'
expert would immediately talk to his principals who will ask the obvious
question why we stopped.  To this extent, I think we shall have to carry on
to try to get nearer to the truth, or something that approaches it.

If anybody has different views and wants to stop right now, will they
please let me know immediately.

Regards,
David Best.



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