INTERTANKO and the tanker Industry WMU Oslo 24 September 2007

Erik.Ranheim@INTERTANKO.com

Manager Research and Projects

International Association of Independent Tanker Owners

A non-governmental organization established in Oslo in 1970 to speak authoritatively and proactively on behalf of tanker

operators at international, regional, national and local level

Membership

260 Members40+ countries

2,650+ tankers220 million dwt

75% of independent tanker fleet300 Associate Members

2. INTERTANKO

MISSION “Provide leadership to the Tanker

Industry in serving the world with safe, environmentally sound and efficient

seaborne transportation of oil, gas and chemical products.”

VISION for the TANKER INDUSTRY“A responsible, sustainable and

respected Tanker Industry, committed to continuous improvement and

constructively influencing its future.”

2. INTERTANKO

Annual General Meeting

Council

Regional PanelCommittee

Member Company

Regional Manager Issue Manager

Member Company

Executive Committee

INTERTANKO Position

Issue

Developing an INTERTANKO Position

2. INTERTANKO

INTERTANKO represents and promotes the interests of the responsible

tanker owners worldwideand

provides members with advice, information and support on technical, operational, documentary, port and other

issuesand

is a meeting place and discussion forum for tanker owners

INTERTANKO Services

25 Secretariat Oslo, London, Washington & Singapore 14 Committee’s and 4 Regional Panels

50+ Work Items on the Agenda

2. INTERTANKO

• advice on charter party questions

• advice on international regulations

• market information– statistics– world economy– oil market– tanker and chemical fleet– casualties and oil spills

• guidance and information publications– 50% off the purchase price of publications

• Freight and Demurrage Information Pool– a database of charterers' records on settlement of freight and demurrage– receive assistance in securing payment of outstanding demurrage claims

INTERTANKO Services: Using INTERTANKO

Air emission

Human element

Criminalisation of seafarer

Liability for oil pollution

Competition rules

International regulations

INTERTANKO’s most important issues

Liaison

• INTERCARGO• International Chamber of Shipping (ICS)• BIMCO

• Oil Companies International Marine forum (OCIMF)• Individual oil companies• Ports Associations (reception facilities, terminal vetting)• Pilots• PSC (MoUs)• Local, National, Regional and International regulatory bodies

2. INTERTANKO

Round Table of International

Shipping Associations (RTisa)

1. Requirements• Independent owners• Entry of all tankers into Membership• IACS Classification Societies• The International Group P&I• Transparency of ownership• Limited detentions in ports• Approved by the council

2. Best Practices • Budget Resources• Breaches of MARPOL• Reporting Deficiencies to Class• Leading Industry Performance• IMO Pilotage Recommendations for Danish Waters• Guide for Correct Entries in the Oil record book• Right Whale Avoidance • Best Practice - Cadet Berths • IMO Guidelines for Lifeboat Safety• Incident Transparency• Ballast Water Management Plan

Emergency Response for Damage Stability

INTERTANKO Membership criteria

The State of the tanker Industry

The State of the tanker Industry

• High safety• Low pollution• Low age• End of high earnings

Tanker incidents by cause 1978-1Q07

Number incidents

Source: Based on incident reports from Lloyd’s Maritime Information Service

0

200

400

600

800

1000

0

100

200

300

400

500

600

700

War

Hull & Machinery

Fire/Expl

Grounded

Coll/Contact

Misc.

Pollution - bars

2007 is a projection based on 8.7 ms

Oil pollution – 1000 ts

Tanker incidents by cause 2006

Source: Based on incident reports from Informa

13%28%

9%

33%17%

Collision

Grounding

Fire/Explosion

Hull & machinery

Misc/unknown

Collision

Groundings

Hull & Machinery (32 engine, 3 hull related)

Misc.

F & E

Reported tanker incidents Jan-Dec 2006 -

total 265

Tanker accidents and trade

Source: ITOPF/Fearnleys

0

100

200

300

400

500

600 '000 Tonnes Trade in Tonne miles

Trade in Tonne-miles (Fearnleys)

1000 ts spilt Bn tonne-miles trade

Pollution rate 1000 ts spilt per bn tonne miles carried

Source: ITOÅF/Fearnleys

10001000ts spiltts spilt

bn bn tonne-mtonne-m

0

400

800

1,200

1,600

1971-76 1977-82 1983-88 1989-94 1995-00 2001-06

-8,000

11,000

30,000

49,000

68,000

Accidental pollution

Tonne-miles

+97%

-52 %

+50 % -26%-80%

Accidental pollution from tankerslargest accidents

Source: ITOPF

0

100

200

300

400

500

600

1967

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Independenta

Amoco Cadiz Castillo de Bellver

Exxon Valdez

Odyssey

ABT Summer

Erika

Erika

Prestige

Tasman Spirit

Atlantic Empress

Assimi

1000 ts spilt

Accidental pollution from tankerslargest accidents and age

Source: Informa/INTERTANKO

0

220

440

660

880

1100

78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

0.0

3.2

6.4

9.6

12.8

16.0

Incidents

Age

Number incidents Average age

Total losses, tankers and bulkers

Source: Clarkson

Number

0

2

4

6

8

10

12

14

16

18

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Tankers 47

Bulkers 155

World CO2 emission, energy use and population - indices

Source: CO2 emission: US Energy Information AdministrationEnergy use: BP ReviewPopulation: UN

CO2 emission increase stronger than energy and population increase due to relatively stronger increase in coal consumption

90

100

110

120

130

140

150

160

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Population

Energy use

CO2 emission

Index

World CO2 emission

Shipping 2%

Other transportation

Eelectricity/heat

Industry +

Industrial processes

Land use change

Agriculture

WasteSource; World Resource Institute

TankerMarket

Oil price and VLCC freight rates

$ per day freight rate $ per barrel oil price

0

40,000

80,000

120,000

160,000

200,0002-

Jan-

01

30-A

pr-0

1

23-A

ug-0

1

17-D

ec-0

1

18-A

pr-0

2

13-A

ug-0

2

4-D

ec-0

2

3-A

pr-0

3

30-J

ul-0

3

20-N

ov-0

3

19-M

ar-0

4

15-J

ul-0

4

5-N

ov-0

4

7-M

ar-0

5

1-Ju

l-05

21-O

ct-0

5

20-F

eb-0

6

16-J

un-0

6

10-O

ct-0

6

7-F

eb-0

7

7-Ju

n-07

28-S

ep-0

7

0

16

32

48

64

80

Oil price, Brent Blend

VLCC rate, 250,000 dwt, AG - Japan

Oil price and VLCC freight rates

$ per day freight rate$ per barrel oil price

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 9m07

VLCC AG-Japan

Suezmax Wafr-US

Aframax N Sea-UKCont

Product Caribs-US

VLCC spot and break-even rates

$ per day freight rate

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1989 19901991 1992 19931994 19951996 1997 19981999 2000 20012002 2003 20042005 20062007

Current VLCC price in any year, interest rate average LIBOR for period + 1.25% (7.1%) , docking costs $1-4 m per 5 year period, residual value $6m after 25 years. Based on NPV calculations

Break-even rates

Freight rates

VLCC break-even rates

$ per day freight rate

21,000

26,000

31,000

36,000

41,000

46,000

1989 19901991 1992 19931994 19951996 1997 19981999 2000 20012002 2003 20042005 20062007

Break-even rates

Source: INTERTANKO

Oil price and freight rate

$/barrel

0

10

20

30

40

50

60

70

80

71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07

Nominell pris Arab Light

Reell pris Arab Light

Nominell frakt rate AG-Vest

Reell frakt rate AG-Vest

Source: INTERTANKO

Gasoline price at the pump

$ per litre

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

USA Japan Germany UK

Long haulfreight ratesMarketing

Oil price

Tax

Cost elements making up the gasoline price:

mbd

Source: IEA

World oil demand - mbd

65

70

75

80

85

901993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

litres

Source: BP Review

Oil consumption per capita

0

2

4

6

8

10

12

US Japan UK World FSU China Africa

mbd

Oil consumption if world populations consumed oil as Americans

0

50

100

150

200

250

300

350

400

450

500

World oil cons Oil cons. if all consumed as Americans

mbd

s

86 mbd 451 mbd

Seaborne oil trade and Middle East oil production

mbd

Source: Fearnleys/IEA

'000

bil tm

0

5

10

15

20

25

0

2,600

5,200

7,800

10,400

13,000

Tonne miles

Middle East Oil Production - mbd

Tanker productivity – tonne-miles/dwt

Source: Fearnleys/IEA

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 P07

mbd

Source: IEA

Sources of European oil imports - mbd

0.0

1.0

2.0

3.0

4.0

5.0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2Q07

0.00

2.70

5.40

8.10

10.80

13.50

America

Europe

Middle East

Africa

FSU

Others

Total

mbd

mbd

Source: IEA

Sources of US oil imports - mbd

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.519

98

1999

2000

2001

2002

2003

2004

2005

2006

2Q07

N America

Europe

M. East

Ven/Ecu

Africa

Others

Source: IEA

Source: IEA

Sources of Asian oil imports

3%

6%82%

5%

4%

Indonesia

Middle East

Africa

Others

Asia

Source: IEA

World oil demand increase - mbd

mbd

0.0

0.4

0.8

1.2

1.6

2.0

2.4

2.8

3.2

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

** Rest of world

*Middle East

USA

China

95% 7% 50% 35% 19% 19% 61% 30% 20%

Increase 2008 Rest of world:Other Asia: 0.23 mbdLatin America: 0.14 mbd Africa: 0.11 mbdEurope: 0.26 mbdOthers 0.34 mbdTotal 1.08 mbd

Source: IEA

Chinese net oil imports - mbd

mbd

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

1985

198619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

Products

Crude

Source: BP Review/IEA

World oil supply - mbd

Source: IEA

mbd

0

3

6

9

12

15

18

21

24

2719

65

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

N America

S&C America

Europe

FSU

Middle East

Africa

Asia Pacific

TankerSupply

Tanker contracting $ bn$ bn m dwtm dwt

VLCC VLCC 13. 4 $ bn 13. 4 $ bnSuezmax: 5.9 ”Suezmax: 5.9 ”Aframax: 8.8 ”Aframax: 8.8 ”Panamax: 2.8 ”Panamax: 2.8 ”Handy: 22.9 ” (43%)Handy: 22.9 ” (43%) Source: INTERTANKO/Clarkson Shipyard MonitorSource: INTERTANKO/Clarkson Shipyard Monitor

0

10

20

30

40

50

60

70

80

Handy

Chem/Spec)

Panamaxes

Aframaxes

Suezmaxes

VLCCs

1993 and earlier sizes except VLCCs were defined differently

Tanker fleet, orderbook and phase outtankers above 30,000 dwt

m dwtm dwt

0

50

100

150

200

250

300

350

SH - 23% Orders - 39% Fleet - 100%

VLCC

Suezmax

Aframax

Panamax

Handy

29%

42%

79 m dwt 133 m dwt

Phase out SH tankers above 30,000 dwt

m dwtm dwt

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 2013 2014 2015

Min phase out

Max Phase out

MARPOL phase out assumes SH tankers to trade after 2010 until the age of 25 years old, EU+ phase out assumes that SH tankers all are removed from the market by end 2010 (except DB or DS ones)

Tanker fleet double-hull development

Source: Clarkson

%

622

5159

67 68 71 74 77

9478

4941

33 32 29 26 23

0

20

40

60

80

10019

91

1997

End

02

End

03

End

04

End

05

End

06

End

07

End

10*

DH SH/DB/DS

% dwt share*:

* Assumes phase out according to regulations (rounded upwards, 25 years after 2010.

Tanker deliveries, removals, max phase-out

m dwtm dwt

-40

-30

-20

-10

0

10

20

30

40

50

-02 03 04 05 06 07 08 09 10 11 12 13 14 15

Newbuilding tobalance

Max phase out

Deletions

Delveries

Surplustonnage

year

Removals in addition to phase out

Tanker fleet developmentOil and chemicals

m dwtm dwt

0

98

196

294

392

490

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 P07 P08 P09 P100

1,180

2,360

3,540

4,720

5,900

dwt

number

VLCC fleet development

Number

Source: INTERTANKO

122

137

152

167

182

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 P07P08P09P10420

462

504

546

588

630

dwt

number

m dwt

Conclusion

• High safety performance• Strong earnings – until now• Strong fleet increase• Reduced earnings