Matt advised me today that John Nowlan and John Chismar have decided that 
they want to try to settle this case before the joint survey takes place and 
that they will likely appoint Paul Henking, their new head chartering person 
in Singapore (formerly of Enron's Houston office) to contact Mitsubishi about 
this.

A.  A number of new developments may have influenced this decision (although 
I would rely on Matt's knowledge about this, as he actually spoke with Nowlan 
and Chismar):

1.  SGS's Singapore lab  continues to struggle with trying to implement the 
joint survey test program that Steve Jones, our chemist, wants to use.  In 
order to determine if SGS is up to it, Jones feels that it will be necessary 
to send Alan Goddard (another one of our experts) to SGS's Singapore lab and 
assist in the trials, at an additional cost of about $7,250.  Goodard can't 
leave for another ten days or so, causing further delay.  Goodard may or may 
not conclude at the end of his stay that SGS is up to it.  ECT's other 
options are clearly second choices in terms of cost and strategy.

2.  ECT's damages now appear to be harder to prove.  As to the Elang Crude 
cargo at issue, ECT was recently able to calculate that it actually 
reportedly made over $500,000 more than if ECT had sold the cargo to FGH.  
ECT's big loss was having to substitute a naptha cargo for the Elang Crude 
that FGH had rejected.  That loss is reportedly in the range of about 
$1,300,000.  However, this seems to raise a number of issues:

(a)  Is this a recoverable consequential damage?  I haven't yet looked at the 
charter to see if there is any contractual limitation on damages.

(b)  can we prove that we in fact had to substitute naptha for condensate 
(our contract with FGH reportedly requires us to sell the naptha at a big 
discount)?  Our traders would reportedly have a tough time stating under oath 
that there was no condensate available; our key problem was lack of 
confidence what the D3605 test would show even with condensate that we 
thought was on spec.

3.  ECT has determined that it may need to recharter vessels from Mitsubishi 
in the future for strategic routes.

There may be other reasons for Nowland and Chismar's decision, and I invite 
Matt to report on anything else of which he is aware.

B.  Settlement Strategy

     Matt advises that Nowlan and Chismar want to offer to settle for a net 
payment of $250,000 by Mitsubishi to us (Matt, I would appreciate your 
helping me out with the numbers on how that figure was calculated).  I have 
told Matt in the past that I believe a drop hands agreement between ECT and 
Mitsubishi would be a very good result, and I think he and I agree.  David 
Best also agreed with a drop hands agreement when I mentioned it to him in 
the past (although he will not be aware until receipt of this e-mail of the 
recent revelation regarding the damages figures).

I will keep you advised.

Britt