INTERTANKO and

Council Agenda Overview

Members’ MeetingSingapore

2 November 2009

Peter M. Swift

INTERTANKO OverviewCouncil : 11 November 2009, London

Membership & FinancesExecutive Committee Elections Organisational Review

Greenhouse Gas Emissions (& Virtual Arrival)PiracyPilotageMarine Issues: STS; MSDS; Lifeboat SafetyEU Issues: “0.1% Sulphur at Berth”; “Mutual Recognition”

Criminalization / Fair Treatment Facilitation PaymentsFinancial Crisis / Markets

INTERTANKO OverviewUS Issues: • Massachusetts Lawsuit• EPA Vessel General Permit• CARB Emission Standards

Committee Reports

IACS – EU Competition Law clearance Other Business

PIRACY - Gulf of Aden/Somali CoastINTERTANKO Activities

Providing members with topical information on events and best practice guidance and as part of industry’s liaison with the naval authorities, administrations and other organisations.

Activities include:• Testimony to US Congress on International Piracy• Delegate with UN Contact Group and Working Groups on

Piracy• Industry spokesperson at Djibouti meeting finalising regional

code• Member IMO Correspondence Group revising MSC

Guidance Circulars• Providing MNLO Secondee to MSCHOA• Development of Industry Best Management Practices • Participation in Naval Shared Awareness and De-Confliction

(SHADE) Meetings

PIRACY - Gulf of Aden/Somali CoastINTERTANKO Activities

Activities include: (continued)

• Contributed to production of Anti--Piracy Charts• Developing Merchant Shipping Communication

Plan• Developed Piracy Model Clauses• Providing regular Security Bulletins to Members• Providing Routing Guidance• Developing Industry Positions on Arming of

Ships• Participating at Industry Seminars• Frequent contacts with national governments

Piracy - Somalia

• OCIMF/INTERTANKO/Industry Guide:

Piracy - The East Africa/Somalia Situation

Practical Measures to Avoid, Deter or Delay Piracy Attacks

Best Mangement Practices – Version 2

Best Management Practices to Deter Piracy in the Gulf of Aden

and off the Coast of Somalia

(Version 2 - August 2009)

I n an effort to counter piracy in the Gulf of Aden and off the Coast of Somalia, these best management practices are

supported by the following international industry representatives:-

1. I nternational Association of I ndependent Tanker Owners (I NTERTANKO)

2. I nternational Chamber of Shipping (ICS) 3. Oil Companies I nternational Marine Forum (OCIMF) 4. Baltic and International Maritime Council (BI MCO) 5. Society of I nternational Gas Tanker and Terminal Operators (SI GTTO) 6. I nternational Association of Dry Cargo Ship Owners (I NTERCARGO) 7. I nternational Group of Protection and Indemnity Clubs (I GP&I ) 8. Cruise Lines I nternational Association (CLI A) 9. I nternational Union of Marine I nsurers (I UMI ) 10. J oint War Committee (J WC) & J oint Hull Committee (J HC) 11. I nternational Maritime Bureau (IMB) 12 I nternational Transport Workers Federation (I TF) These best management practices are also supported by:- 1) Maritime Security Centre Horn of Africa (MSCHOA) 2) UK Maritime Trade Organisation (UKMTO Dubai) 3) Maritime Liaison Office (MARLO)

PIRACY – Gulf of Aden/Somali Basin

Guidance for Gulf of Aden / Somalia

• Pre-transit:Assess RiskPlan self-protection/defensive measuresRegister Company and Ship with MSCHOAIF appropriate, join Group Transit

• During transit: Stay alertReport regularly to UKMTO, Dubai (or to MARLO)Follow “best management practices”

Criminalisation – an update

• Captain Mangouras (“Prestige”- Spain) : European Court of Human Rights

• “Hebei Spirit” (South Korea)

• “Tosa” case (NYK VLCC – Taiwan)

• “Full City” (COSCO Bulk carrier – Southern Norway)

Industry-wide support for adherence to the IMO-ILO Guidelines on the Fair Treatment of

Seafarers in the event of a Maritime Accident; and growing support for strengthening of same.

Facilitation Payments

In order to trade efficiently (smoothly) Facilitation Payments are frequently made to Authorities, Pilots, Terminal Officials, Inspectors, and more

But

Owners are expected to warrant that no bribes (and in some cases also no facilitation payments) will be paid during the performance of the contract and that owners are obliged to indemnify charterers from all consequences if any such payments are made.

DocCom is developing model clauses, e.g. for Voyage Charters:….. any waiting time caused by the owners refusal to pay a facilitation payment or bribe shall count as laytime or if on demurrage time on demurrage, even if the vessel formally lacks any local certificates, clearances or there are any other  … circumstances or formalities that ordinarily could prevent laytime from starting, if the reason the owners do not have such approval etc. is because owner has refused a facilitation payment or bribe.

EU Issues

EU Directive 2005/33/EC requiring use of 0.1% Sulphur Marine Fuel at Berth

1 January 2010 Deadline - (Not aligned to MARPOL Annex VI)

Issues arising:Safety & technical ; 3 grades of fuel ; Supply (logistics)

INTERTANKO-OCIMF Position:• Delay in implementation (6 or 12 months) but subject

to verifying that compliance measures have been initiated

• Port State Control officials to be properly primedPosition is supported by class societies and insurers

Global Financial Crisis

Markets

INTERTANKO’s Anti-Trust/Competition law Compliance Statement

INTERTANKO’s policy is to be firmly committed to maintaining a fair and competitive environment in the world tanker trade, and to adhering to all applicable laws which regulate INTERTANKO’s and its members’ activities in these markets. These laws include the anti-trust/competition laws which the United States, the European Union and many nations of the world have adopted to preserve the free enterprise system, promote competition and protect the public from monopolistic and other restrictive trade practices. INTERTANKO’s activities will be conducted in compliance with its Anti-trust/Competition Law Guidelines.

MarketsMarkets

Credit crunch – liquidity; financing; exposures; covenants & more….

• Oil prices ?• Steel prices ?• Newbuild / scrap prices ?• Economic slowdown (or meltdown !) ?• Green agenda slowdown ?• Markets ?• Other ?

Global Financial Crisis (end 2008)

Global Financial Crisis (end 2009)

• Demand : World trade & by sector

• Supply : Ships on Order & Fleet development

• Tanker market

• Shipbuilding capacity

World Trade & GDP

-16

-12

-8

-4

0

4

8

12

1619

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

10

Wor

ld Im

port

s% y

-y

-1.5

-0.5

0.5

1.5

2.5

3.5

4.5

5.5

6.5

GD

P %

y-y

OECD WorldImports of Goods

IMF GDP

Source: Clarksons (September 2009)

World Oil Demand vs. GDP

-4

-3

-2

-1

0

1

2

3

4

5

619

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

10

% c

hang

e (y

ear o

n ye

ar)

IMF GDP

Oil Demand

Source: Clarksons (September 2009)

Seaborne Crude Imports

040,00080,000

120,000160,000200,000240,000280,000320,000360,000400,000440,000480,000

2003

-Q1

2003

-Q3

2004

-Q1

2004

-Q3

2005

-Q1

2005

-Q3

2006

-Q1

2006

-Q3

2007

-Q1

2007

-Q3

2008

-Q1

2008

-Q3

2009

-Q1

kmt

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

y-o-

y %

cha

nge

seaborneimports

growth

Source: Clarksons (September 2009)

Total Oil Products Imports

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

220,00020

03-Q

1

2003

-Q3

2004

-Q1

2004

-Q3

2005

-Q1

2005

-Q3

2006

-Q1

2006

-Q3

2007

-Q1

2007

-Q3

2008

-Q1

2008

-Q3

2009

-Q1

kmt

-3

0

3

6

9

12

15y-o-y %

change

productsimports

growth

Source: Clarksons (September 2009)

Green Shoots of Recovery ?

Demand increases ?More long-haul crude; more refinery imbalances (and emerging opportunities ?)

CRUDE Production (mbd) 2008 2009 2010OPEC 31.27 29.02 29.19

NON-OPEC (Selected)Brazil 2.40 2.60 2.83Canada 3.35 3.38 3.43The United States 8.51 8.92 9.00Azerbaijan 0.88 1.04 1.18Kazakhstan 1.43 1.51 1.66Russia 9.79 9.78 9.78Mexico 3.19 2.93 2.69North Sea 5.20 4.90 4.54

Orderbook Development

0

50

100

150

200

250

300

350

400

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 now

gros

s to

nnag

e (m

illio

ns)

othergascontainerbulkertanker

Source: Clarksons (September 2009)

Tanker Fleet Development

0

50

100

150

200

250

300

350

400

450

500

550

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

dead

wei

ght (

mill

ion) 10-24 tanker

handyMRPanamaxAframaxSuezmaxVLCC

Source: Clarksons (September 2009)

Orderbook by ship type(as % existing fleet)

Source: Clarksons (September 2009)

33

64

41

15

33

0

10

20

30

40

50

60

70

Tanker Chemical Bulk carrier Container ship LPG carrier

perc

enta

ge o

f cap

acity

Some are advocating

Some are advocating

Compulsory Scrapping Schemes

Compulsory Scrapping Schemes

Tanker sales for demolitionand VLCC freight rate

Source: INTERTANKO

m dwt USD / day

* Until week ending 4 September** Sales for demolition until 4 September*** Clarkson Freight rate AG-Japan week ending 4 September

0

6

12

18

24

30

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09*0

20,000

40,000

60,000

80,000

100,000VLCCs sales for demolition

<200,000 dwt sales for demolition**

VLCC freight rate***

Source: Baltic Exchange/INTERTANKO

USD/dayUSD/day

Average tanker freight rates (based on Baltic Exchange rates)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2001 2002 2003 2004 2005 2006 2007 2008 8m09

VLCC AG-Japan, 250,000 ts

Suezmax Wafr-US 130,000 ts

Aframax N Sea-UKCont, 80,000 ts

Product Caribs-US, 38,000 ts

Other market influences ?

• Strength and timing of the “financial recovery”

• Future energy prices

• The elasticity of demand to energy prices (and taxes)

• Reactions to “Global warming” / Outcomes from UNFCCC-COP15

• Government interventions

Lower Freight Rates & Fleet surpluses (in ALL sectors – not just tankers)

Implications ?

• Challenge to maintain quality and standards

• Challenge to meet the issues of the day

• and government interventions ?

Shipbuilding output and forecast

Source: Worldyards/INTERTANKO Aug 09

m cgtm cgt

2631 33

38

26

26

55

42

15

3 0

914% 26

38%

4876% 62

95%67

99%

0

10

20

30

40

50

60

70

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Available capacityOrderbookHistorical deliveries

Shipyard output potential - surplus

Implications ?

• Distressed sales / lower prices

• Quality and standards maintained or weakened

• Pressure on suppliers and sub-contractors

• Greater customer focus & customisation

• and government interventions ?

Thank you For more information, please visit:

www.intertanko.com www.poseidonchallenge.com

www.shippingfacts.comwww.maritimefoundation.com

London, Oslo. Washington, Singapore and Brussels

United Nations Contact Group (CGPCS)

• Contact Group steers the overall programme • WG 1 : measures to improve the coordination of, and information

sharing between, the various naval forces present in the region and their interfacing with civilian shipping

• WG 2 : programmes to facilitate the prosecution of those caught and suspected of piracy

• WG 3: facilitates development of industry “Best Management Practices” to counter piracy and their application within the international shipping community

• WG 4 : communications and outreach strategies for use within

Somalia and to the wider international community as part of capacity building programmes - this latter to be in conjunction with other UN programmes already on the ground within the region

Piracy – Industry positions

Eliminating piracy is a SHARED RESPONSIBILITY between the maritime industry and governments,

BUT

Establishment of LAW AND ORDER on the high seas is the responsibility of governments

Our first concern is for the safety and welfare of our seafarers, both at sea and in port,while also concerned for the security of our ships and their cargoes !

Role of Governments

• Provide and maintain sufficient assets in the region (EUNAVFOR, NATO, CTF, National Navies)

• Establish and ensure a coordinated approach (via SHaDE and Mercury)

• Establish and ensure a single, or at least compatible, rules of engagement (CGPCS)

• Develop necessary legal authorities to prosecute pirates (e.g. nationally or in third country such as Kenya)

• Develop a long term solution to the Somalia problem on land (CGPCS)

IMO Action

IMO Maritime Safety Committee (MSC) updated guidance to governments and industry

• MSC.1/Circ.1333 - PIRACY AND ARMED ROBBERY AGAINST SHIPS, “Recommendations to Governments for preventing and suppressing piracy and armed robbery against ships”

• MSC.1/Circ.1334 - PIRACY AND ARMED ROBBERY AGAINST SHIPS “Guidance to shipowners and ship operators, shipmasters and crews on preventing and suppressing acts of piracy and armed robbery against ships”

and issued• MSC Circulars endorsing the BMPs from the GCPCS

Arming Ships – Industry position

Armed guards or arming ships’ crews is NOT an INTERTANKO advocated approach

• Legal issues for flag states and port states• Serious potential safety concerns• Major liability and insurance issues in the event of

death or injury• Risk of collateral damage• Potential to provoke an escalation of fire power by

the pirates

Arming Ships

“ INTERTANKO believes that the use of armed guards, security forces or mercenaries onboard merchant ships has to be a matter for each individual owner or manager to assess as part of their own risk assessment, and as a consequence is unable to endorse any of those companies or individuals offering such services. “

Summary and Challenges

• Both industry and governments recognize that eliminating piracy is a shared responsibility and each is doing their part

• Significant progress has been made by both

• BUT, more must be done to eradicate piracy and we must work together to do it

• Maintaining assets and resources will be a challenge for both governments and industry associations over the medium/longer term

• Adherence to Best Management Practices is still incomplete

• Any escalation of activity/levels of violence will create new challenges

• The “solution” to the Somali problem stills seems very distant

• There is a risk that the “Somali” model is copied elsewhere