The State of the tanker industry IMSF Singapore 17 April 2007

Erik.Ranheim@INTERTANKO.comManager Research and Projects

The State of the tanker Industry

• High safety• Low pollution• Low age• High earnings – until now• Surplus of tonnage building up

Pollution rate 1000 ts spilt per bn tonne miles carried

Source: ITOPF/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%

Tanker accidents and trade

0

100

200

300

400

500

600 '000 Tonnes Trade in Tonne miles

Trade in Tonne-miles (Fearnleys)

Source: ITOPF/Fearnleys

1000 ts spilt Bn tonne-miles trade

Ship name Year Pollut.ion

Torrey Canyon 67 119

Amoco Cadiz 78 223

Exxon Valdez 89 37

ABT Summer 91 260

Haven 91 144

Aegean Sea 92 74

Braer 93 85

Sea Empress 96 72

Erika 99 20

Prestige 02 63

Tasman Spirit 03 30

Tanker incidents by cause 1978-1Q07

Number incidents

Source: Based on incidents reports from Informa

0

200

400

600

800

1000

0

100

200

300

400

500

600

700

WarHull & MachineryFire/ExplGrounded Coll/ContactMisc.Pollution - bars

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

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 05 060.0

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

TankerMarket

Oil price and VLCC freight rates

$ per day freight rate $ per barrel oil price

0

40,000

80,000

120,000

160,000

200,00002

/01/

2001

02/0

5/20

0102

/09/

2001

02/0

1/20

02

02/0

5/20

02

02/0

9/20

0202

/01/

2003

02/0

5/20

03

02/0

9/20

03

02/0

1/20

0402

/05/

2004

02/0

9/20

04

02/0

1/20

0502

/05/

2005

02/0

9/20

05

02/0

1/20

0602

/05/

2006

02/0

9/20

06

02/0

1/20

07

0

16

32

48

64

80Oil price, Brent Blend

VLCC rate, 250,000 dwt, AG - Japan

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

1989199019911992199319941995199619971998199920002001200220032004200520062007

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

198919901991199219931994199519961997199819992000200120022003200420052006

Break-even rates

Source: INTERTANKO

Oil price and freight rate

$/barrel

Deflated by the Deflated by the Consumer Price Consumer Price Index (USD)Index (USD)

0

10

20

30

40

50

60

70

80Nominell pris Arab Light

Reell pris Arab Light

Nominell frakt rate AG-VestReell 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

8519

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

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

050

100150200250300350400450500

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

'000bil 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

Seaborne oil trade and tanker fleet

Source: Fearnleys/IEA

40

60

80

100

120

140

160

Tonne-miles

Tonnes crude oil

Miles

Tanker fleet

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

Source: IEA

Sources of Asian oil imports

0.00

2.00

4.00

6.00

1998 1999 2000 2001 2002 2003 2004 2005 2006

Middle East Others America

Europe Africa

Middle East

Others

mbd

Source: IEA

Sources of European oil imports - mbd

0.00.51.01.52.02.53.03.54.04.55.0

Europe

America

Europe

Middle East

Africa

FSU

OthersSource: IEA

mbd

Source: IEA

Sources of US oil imports - mbd

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1998 1999 2000 2001 2002 2003 2004 2005 2006

N America

Europe

M. East

Ven/Ecu

Africa

Others

Source: IEA

Increase in world oil demand in ME*, USA, China and ROW**

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

** Rest of world*Middle EastUSAChina

23% 95% 50% 35% 28% 21% 54% 28%

Source: IEASource: IEAFSU: +0.05FSU: +0.05Other Asia: +0.18Other Asia: +0.18L America: +0.09L America: +0.09Africa: +0.06Africa: +0.06

World oil supply - mbd

Source: IEA

mbd

0

5

10

15

20

25

30

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009

N America

S/C America

N Sea

Middle East

W Africa

Other Africa

Asia Pacific

Others

FSU

TankerSupply

Tanker contracting

$ bn$ bn m dwtm dwt

0

11

22

33

44

55

0

17

34

51

68

85

Handy

Aframaxes

Suezmaxes

VLCCs

m 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

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)

VLCCsmax phase out ,+ 4.5% trade increase, assume balanced marked end 2006

NumberNumber

0

20

40

60

80

100

120

140

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

Newbuilding demand

Deliveries

Surplus

Max phase out

Fleet: 142 m dwt 487 shipsOrderbook: 54 m dwt 177 ”Single hull: 42 m dwt 154 ”Average age: 9.4 years

Suezmaxesmax phase out + 4.5% trade increase , assume balanced marked end 2006

m dwtm dwt

Fleet: 52 m dwtOrderbook: 20 m dwtSingle hull: 9 m dwtAverage age: 9.2 years

Surplus end 2007: 1.8 m dwt ” 2008: 2.6 m dwt ” 2009: 8.1 m dwt ” 2010: 3.7 m dwt

0

2

4

6

8

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

Newbuilding demand

Deliveries

Surplus

Max phase out

Conversion to DH

Total 7. 2 m dwtTotal 7. 2 m dwt

Built 10-30 30-52 60-72 90-113 120-148 VLCCs Total

1970s 3 2 0 0 0 0 5

1980-84 8 36 9 1 0 0 54

1986-89 11 12 0 3 3 1 30

1990-98 2 9 1 18 2 2 34

Total 24 59 10 22 5 3 123

Conversion to FPSO/FSO/bulk carriers, heavy lift ….Conversion to FPSO/FSO/bulk carriers, heavy lift ….(1.9 m dwt in 2006, 1.2 m dwt so far 2007(1.9 m dwt in 2006, 1.2 m dwt so far 2007

Tanker deliveries, removals, min phase-out

m dwtm dwt

-30

-20

-10

0

10

20

30

40

50

Newbuilding tobalance by2015Min phase out

Demolition

Delveries

Surplustonnage

* Assuming all SH tankers are phased out by 2010 and 4.5% increase in demand as from 2007 - a surplus is building up - balance by 2015

Tanker deliveries, removals, max phase-out

m dwtm dwt

-57

-47

-37

-27

-17

-7

3

13

23

33

43

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Newbuilding to balance

Max phase out

Removals

Deliveries

Surplus tonnage

Assumptions: 1.8 m dwt removed annually by conversions in addition to phase out, an overhang of 4.6 m dwt of obsolete ships scheduled to be phased out before 2006, assumed to be phased ut by 2009, trade assumed to increase by 4.5%.

Tanker fleet double-hull development

Source: INTERTANKO

%

6

22

5159

67 68 72 76 79 82 85

94

78

4941

33 32 28 24 21 18 15

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 10SH/DB/DS

DH

% dwt share*:

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

Oil import by Suezmaxes - share of double hull

%

Source : Fearnleys

0

10

20

30

40

50

60

70

80

90

100

1998 1999 2000 2001 2002 2003 2004 2005 2006

Europe US Atlantic

Far East Others

Average

Tanker deliveries, removals, max phase-out

m dwtm dwt

0

92

184

276

368

460

0

1,040

2,080

3,120

4,160

5,200dwt

number

Conclusion

• Strong safety performance• Relatively strong demand development• Very strong fleet increase• Reduced earnings

Tankers 30,000 - 59,999 dwtmin phase out, + 6 % trade increase , assume balanced marked end 2006

m dwtm dwt

..if 4.5% increase, no new orders needed before 2012

0

2

4

6

8

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

Newbuilding demand

Deliveries

Surplus

Max phase out

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 06P07P08P09P10420

462

504

546

588

630

dwtnumber

m dwt

Aframaxesmax phase out + 4.5% trade increase , assume balanced marked end 2006

m dwtm dwt

Fleet: 72 m dwtOrderbook: 28 m dwtSingle hull: 14 m dwtAverage age: 9.2 years

Surplus end 2007: 1.5 m dwt ” 2008: 5.5 m dwt ” 2009: 12.0 m dwt 15% ” 2010: 5.3 m dwt 6%

0

1

2

3

4

5

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

Orders to balance

Deliveries

Increase

max phase out

Aframaxesmax phase out + 4.5% trade increase , assume balanced marked end 2006

m dwtm dwt

Fleet: 72 m dwtOrderbook: 28 m dwtSingle hull: 14 m dwtAverage age: 9.2 years

Surplus end 2007: 1.5 m dwt ” 2008: 5.5 m dwt ” 2009: 12.0 m dwt 15% ” 2010: 5.3 m dwt 6%

0

1

2

3

4

5

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

Orders to balance

Deliveries

Increase

max phase out

Tankers 30,000 - 59,999 dwtmin phase out + 6 % trade increase , assume balanced marked end 2006

NumberNumber

end 2007, 145 del - 45 phase out*, 75 increase demand = surplus 25 ships “ 2008, 157 “ - 17 “ 80 “ = “ 85 “ “ 2009, 127 “ - 18 “ 84 “ = “ 110 “ “ 2010, 56 “ - 93 “ 90 “ = “ 1 “

1,253 tankers 487 orders 228 phase out 11.1 years

0

20

40

60

80

100

120

140

160

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

Newbuilding demand

Deliveries

Surplus

Max phase out

Oil import by Panamaxes - share of double hull

%

0

10

20

30

40

50

60

70

80

90

100

1998 1999 2000 2001 2002 2003 2004 2005 2006

Europe US Atlantic Far East Others

Average

Source : Fearnleys

Oil import by Suezmaxes - share of double hull

%

Source : Fearnleys

0

10

20

30

40

50

60

70

80

90

100

1998 1999 2000 2001 2002 2003 2004 2005 2006

Europe US Atlantic

Far East Others

Average