In re M/V PACIFIC VIRGO

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.

© 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.