PRIVILEGED AND CONFIDENTIAL:  ATTORNEY-CLIENT COMMUNICATION, ATTORNEY WORK 
PRODUCT

Here's an update (Matt, if any of this appears inaccurate to you, don't 
hesitate to point it out):

1.  The pending joint survey.

 (a) The joint survey has yet to be scheduled.  The reason for the delay is 
an issue concerning whether SGS's Singapore laboratory has the 
resources/competence to carry out the joint analysis.  Steve Jones, ECT's 
choice of chemist, is communicating with SGS in order to make this 
determination.  Although this has delayed scheduling the joint testing, Jones 
feels strongly that it will be most cost-effective for ECT to proceed with a 
joint analysis only after making this determination.  I (and Matt) have 
personally spoken with Jones about this and believe he understands that ECT 
is looking for the quickest, most cost-effective resolution to this dispute 
with Mitsubishi.  Because of the issue with SGS, Jones has waited until now 
to send the proposed testing program to Technichem, Mitsubishi's choice of 
surveyor/chemist  (in a previous report, I mentioned that the testing program 
had already been sent to Technichem; this now turns out not to be the case).  
By today, Jones should have sent the proposed testing program to Technichem, 
in order to get the ball rolling, and with the expectation that Technichem 
will have comments that will require time to incorporate.  

 (b) If things go well with SGS, Jones anticipates scheduling a joint 
analysis about two-three weeks from now.  Jones plan to personally attend the 
joint survey on our behalf, given the complexity of the testing methods.  
Even after that testing, Jones anticipates the possibility of further testing 
in England using highly specialized equipment to determine whether the 
apparent filterable dirt buildup was caused by a malfunction of the vessel's 
inert gas system.

2. Costs.  

 (a)  Surveyors/chemists:

 (1) Jones advises that to date, he and his firm have spent a total of about 
5.5 days at 720 pounds per day, for a total of approximately 3,960 pounds, or 
roughly $5,742 at the current USD/pounds exchange rate of $1.45/1 pound.  
Jones has subcontracted some of his work to Allen Goddard, now with ITS-Caleb 
Brett, who specializes in the type of testing at issue.  Jones estimates that 
Goddard has spent approximately one day on this matter, at a daily rate of 
600 lbs, or $870.
 
 (2)  Jones estimates that from this point until the actual joint survey 
begins, he will spend about two more days, and Goddard will spend about 
another one-half day.  This totals about 1,740 pounds, or $2,523.

 (3)   For the actual joint testing, Jones estimates that he will spend about 
twelve days straight, including transit time; Goddard would not attend, but 
would be available by telephone if Jones had a question.  Twelve days' time 
amounts to 8,640 pounds, or $12,528, not including aire fare, room and board.

 (4)  Afterwards, for the additional testing in England to determine whether 
the inert gas system caused the buildup in filterable dirt, Jones estimates 
another 2,000 pounds for the cost of the lab; he does not know at this point 
whether he would attend the entire testing procedure, which he believes could 
be 
completed in about two days.  If he attended both days, this additional 
testing in England would run to another 3,440 pounds, or $4,988.

 (b) Other experts:
 
 (1) SGS and Caleb Brett's costs to date are being compiled by Matt.  SGS 
will spend another SGD 2,000 purchasing the necessary chemicals for the joint 
testing, and bill for another SGD 2,000 for pre-joint-analysis development 
work (basically, practicing on extra samples from the PACIFIC VIRGO).  This 
comes to a total of SGD 4,000, or  about $2,325 to prepare for the joint 
analysis, based on the current reported SGD/USD exchange rate of 1.72/1.  SGS 
estimates that it will bill us for the joint analysis SGD 9,500, or about 
$5,523.

 (2) Captain Sawant of PacMarine, one of our ship operations experts, will be 
charging us SGD 25,000, or about $14,500  for work done to date, which should 
be largely concluded with the finalization of his report.  

 (3)  Captain Gregory of Noble Denton, the ship operation expert we would 
probably use for testifying, has been asked to do no work on this matter at 
this time. 

 (c) Attorneys:

 (1) David Best is out of town on vacation, but his office advises that his 
time and expenses to date amounts to approximately 8,300 pounds, or about 
$12,035.  This is subject to being adjusted up or down, once Best gets back 
in the office and has time to review the bill.  I imagine that this bill does 
not include the time incurred by a barrister that Best called for advice on 
the FGH issue.  Neither Best nor anyone from his firm will need to attend the 
joint testing.

 (2) Neale Gregson's firm, Watson, Farley, has incurred fees and expense to 
date of SGD 105,000, or about $61,000.  Matt has not yet seen an itemized 
bill for this time, but feels that while it is high, it is not unexpected, 
given the time-intensive nature of this matter.  Matt will be asking Gregson 
whether the time also includes time spent on the FGH matter.
 
 (3) My and my legal assistant's fee and expenses through today amount to 
approximately $12,500.  This also includes time spent on the FGH matter, 
although, pursuant to Alan's instructions, I am no longer spending time on 
that matter, except where necessary to keep Janice Moore apprised. 

 (d) Summary of Costs.

 In sum, no less than approximately $106,000 has been spent to date, and this 
figure will increase once I get the SGS and Caleb Brett costs to date, and 
once David Best comes back from vacation on September 11 and reviews his bill 
(although these figures probably include a heavy overlap of time spent on the 
FGH matter).  Another $5,325 will be necessary to get ready for the joint 
analysis; another $18,000 to perform the joint analysis in Singapore, and 
another approximately $5,000 to perform specialized testing in London after 
the joint analysis is done (if Steve Jones determines that such further 
testing is necessary).

3.  Recent Sale of Thailand cargo.  

 (a) You will recall that the bulk of the product from the M/V PACIFIC VIRGO 
was discharged in to shore tanks in Thailand and has not been tendered to 
FGH, given the problems with the product discharged later in the Phillipines, 
which was tendered to FGH, who rejected it.  Samples from the shore tanks in 
Thailand have recently been tested by SGS's laboratory in the U.S. and 
reportedly found on spec.  All of the Thailand product has recently been sold 
to Caltex, Singapore, for delivery September 7-9, reportedly for use in 
Caltex's refinery, which makes the risk of rejection of that product by 
Caltex very low.  

 (b) Unfortunately, Matt advises that the trader cannot give us even a 
ballpark figure for the sales price of the Thailand product until the end of 
the month, given that the price is tied to some market index.  Lacking this, 
it is difficult to estimate what total diminution in market value of the 
Elang crude ECT has sustained until then.  We were previously told that the 
product discharged in Singapore sustained a diminution in market value of 
about $288,000.  For my own purposes, based on nothing more than speculation, 
and given that the bulk of the cargo was discharged in Thailand, I am using 
the working hypothesis that ECT's total damages for diminution of market 
value of all the product discharged from the M/V PACIFIC VIRGO is in the 
range of $600,000-$750,000.  Again, this may later turn out to be very 
inaccurate.       

4.  Expert witness supplemental opinion

  At my request, Captain Sawant, our consulting expert on ship operations, 
was asked whether he believed that ECT's instructions to the ship regarding 
tank washing would have been sufficient to prevent the type of contamination 
that occurred had such instructions been properly carried out (i.e., if the 
ship had access to fresh water).  Captain Sawant has opined that he does not 
believe such instructions were sufficient to have prevented the type of 
contamination that occurred.   While we can protect Captain Sawant's opinion 
from discovery by using him only as a consulting expert, it strikes me that 
Mitsubishi will likely not overlook this issue.  Despite this, however, ECT 
still has some argument that the Carriage of Goods by Sea Act puts a 
non-delegable duty to provide a cargoworthy ship on Mitsubishi.