Tanker performance Instituto Iberoamericano de Derecho Maritimo

XII Congress/XX AnniversarySeville 14 November 2007

Erik.Ranheim@INTERTANKO.com

Manager Research and Projects, INTERTANKO

International Association of Independent Tanker OwnersA non-governmental organization established in Oslo

in 1970 to represent tanker owners Membership:280 members40+ countries

2,800+ tankers226 million dwt

75% of independent tanker fleet300 Associate Members

Oslo – London - Singapore – Washington

Spokesman – information service – meeting place

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

Tanker challenges

Carrying the world’s most strategic raw material from some of the most politically tense areas in the world

Carrying liquids and gases that pollute and are potentially hazardous

Operating in a very volatile and uncertain market.

Introduction to the tanker industry

Seaborne Crude Oil Trade Flows 2006

Seaborne oil trade and Middle East oil production

mbd

Source: Fearnleys/IEA

'000

bil tm

0

5

10

15

20

25

1970 1973 1976 1979 1982 1985 1988 1991 1994 19972000200320060

2,600

5,200

7,800

10,400

13,000

Tonne miles

Middle East Oil Production - mbd

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

Tanker shipping cost efficientOil prices and tanker rates – real and nominal

$/barrel

0

10

20

30

40

50

60

70

80

90Nominell pris Arab Light

Reell pris Arab Light

Nominell frakt rate AG-Vest

Reell frakt rate AG-Vest

Tanker shipping cost efficientUS CIF oil price/freight costs -

0.00

10.00

20.00

30.00

40.00

50.00

60.00

1973 1988 1992 1999 2000 2001 2002 2003 2004 2005 2006 2007

Freight costs Persian Gulf - US

Oil price FOB

$/barrel

43% 5% 6% 7% 6% 5% 4%

Tanker shipping cost efficientGasoline price at the pump

Euro per litre

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

USA Japan Spain Germany UK

Long haulfreight rates

Marketing

Oil price

Tax

Cost elements making up the gasoline price:

Based on Sept. 2007 figures from IEA and the Baltic Exchange

Tanker ownership

0

50

100

150

200

250

300

350

2000 2007

State Oil

Oil

Independ.

State

China239 m dwt

286 m dwt

m dwt

Current value fleet :~ $200 bnFreight income 2006:~ $45 bn

Tanker contracting by segment

Source: Clarkson Shipyard MonitorSource: Clarkson Shipyard Monitor

m USD m dwt

0

11

22

33

44

5519

85

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

9m07

0

17

34

51

68

85

Handy

Aframaxes

Suezmaxes

VLCCs

m dwt

Source: Clarkson Shipyard Monitor

m dwt

Tanker fleet, orderbook and phase outtankers above 25,000 dwt

m dwtm dwt

84 m dwt 138 m dwt

0

60

120

180

240

300

360

SH - 25% Orders - 41% Fleet - 100%

VLCC

Suezmax

Aframax

Panamax

Handy

34%

65%

40%

339 m dwt

Tanker phase out, deliveries, scrapping tankers >25,000 dwt, assume 2.5% trade growth

m dwtm dwt

-35

-25

-15

-5

5

15

25

35

45

55

-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

SH VLCC trading after 2010

Tanker fleet by hull

%%

* Assumes phase out according to regulations and trading until the age of 25 * Assumes phase out according to regulations and trading until the age of 25 years after 2010 except that 10 SH aframaxes/VLCCs/suezmaxes are years after 2010 except that 10 SH aframaxes/VLCCs/suezmaxes are assumed to be removed in addition to phase out 2008-2010 (conversions).assumed to be removed in addition to phase out 2008-2010 (conversions).

622

5159

67 68 73 77 82 88 9494

78

4941 33 32 27 23 18 12 6

0

20

40

60

80

100

1991

1997

End

02

End

03

End

04

End

05

End

06

End

07

End

08

End

09

End

10

SH/DB/DS

DH

% dwt share*:

Source: IEA

World oil demand increase - mbd

mbd

Increase 2008 Rest of world:Other Asia: 0.19 mbdLatin America: 0.16 mbd Africa: 0.11 mbdEurope: 0.21 mbdOthers 0.4 0mbdTotal 1.94 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% 55% 39% 22%

Tanker safety and the environment

Tanker trade and accidental oil spills99.99998% of the cargo arrives safely

0

400

800

1,200

1,600

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

0

17,000

34,000

51,000

68,000

Accidental pollution

Tonne-miles

Source: ITOPF spills, Fearnleys: Tonne miles

+97% -52 % +50 %

-26%-80%

Percentages refers to changes compared to previous year

10001000ts spiltts spilt

bn bn tonne-mtonne-m

Amoco Cadiz 78 – 223 4Amoco Cadiz 78 – 223 4Independenta 79 - 95Independenta 79 - 95Atlantic Empress 79 – 287Atlantic Empress 79 – 287 1 1

Exxon Valdez 89 – 37Exxon Valdez 89 – 37Haven 91 - 144Haven 91 - 144ABT Summer 91 – 260 2ABT Summer 91 – 260 2

Tanker incidents – all sizes all types

0

220

440

660

880

110078 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 07

0

140

280

420

560

700War

Hull & Machinery

Fire/Expl

Grounded

Coll/Contact

Misc.

Pollution - bars

2007 is a projection based on 10 ms

No incidents ‘000 ts oil spills

Tanker incidents by cause 1978-1Q07

Number incidents

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

Oil pollution – 1000 ts

31%

10%

20%

27%

12%0

50

100

150

200

250

300

350

98 99 00 01 02 03 04 05 06 07

0

10

20

30

40

50

60

70Hull & MachineryFire/ExplGrounded Coll/ContactMisc.Largest pollutionPollution - bars

Erik

aE

rika

Bal

tic C

arrie

rB

altic

Car

rier

Pre

stig

eP

rest

ige

Tas

man

Spi

ritT

asm

an S

pirit

Al S

amid

oon

Al S

amid

oon

DB

L 15

2 D

BL

152

Brig

ht A

rtem

is

Brig

ht A

rtem

is

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

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

Trends – Co2 emission, energy use, global trade

Source: Fearnleys/INTERTANKO

IndexIndex

80

90

100

110

120

130

140

150

160

170

180

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Population

Energy use

CO2 emission

Seaborne trade

World CO2 emission

Shipping 2%

Other transportation

Eelectricity/heat

Industry +

Industrial processes

Land use change

Agriculture

WasteSource; World Resource Institute

Shipping and the environment

Fuelled by the dirtiest part of the barrelresulting in emissions of:• SOx• NOx• un-combusted hydrocarbon• Heavy metals• Soot

Reducing harmful emissions from ships

• Onboard abatement technology– Scrubbers, filters, separators, catalysts

• SECAs/NECAs– Sulphur/Nitrogen Emission Control Areas

• Type and quality of fuel – Heavy fuel oil = a blending of refinery residues and

distillate (up to 30% dist.)– Distillates = gasoil and diesel

Parties in the current regulatory and governance structures

Paris MoUParis MoU

1x2x3

Regulatory changes

Accidents

Political interference

Bureaucracy-driven-drivenSelf-regulation

Unlikely Mistrust of shipping

Ideal regulatory/governance system

• Global, simple, clear regulations created by competent people based on knowledge and analysis

• Strong, effective, regular controls by responsible bodies• Port State - Control of last resort?• Centralised comprehensive accident registration,

investigation and analysis• Transparency – obligation to report incidents

Tankers perform

Tankers serve the major oil companies, which today are some of the most difficult clients in the world to satisfy, and tanker owners are under a great deal of pressure from the authorities.

Zero tolerance for oil spills