On November 6, 2002, approximately 1300 central standard time, a Piper PA-31-350 twin-engine airplane, N698VW, was substantially damaged following an in-flight engine fire while in cruise flight near Kerrville, Texas. The airplane was owned and operated by the private pilot under Title 14 Code of Federal Regulations Part 91. The private pilot, sole occupant of the airplane, was not injured. Visual meteorological conditions prevailed for the local flight, and a flight plan was not filed. The personal flight departed Kerrville, Texas, approximately 1230. On the Pilot/Operator Aircraft Accident Report (NTSB Form 6120.1/2), the pilot reported that during cruise flight at 6,500 feet msl, he heard a "muffled bang on the right engine." The pilot performed the emergency procedures, shut down the right engine, and feathered the propeller. The pilot did not see any evidence of fire. The pilot perfromed a single-engine landing on runway 30 at the Kerrville Municipal/Louis Schreiner Field Airport, Kerrville, Texas, without further incident. During an examination of the airplane by the pilot, a mechanic, and the FAA inspector, oil was found from the right engine propeller aft to the right vertical stabilizer. The outboard portion of the right flap, the right gear door, and the right wing locker were destroyed by the in-flight fire. There was thermal deformation of the aft right wing spar. The oil filter was replaced and 8 quarts of oil were added to the engine for an test run. During the 10-minute test run, the engine was operated throughout the power range of the engine, the propeller was operated throughout its range, and a magneto check was performed. During the test run, oil was observed leaking from the forward area of the engine. Following the test run, examination revealed the oil was leaking from the propeller shaft seal for the right engine.