Tanker supply until 2015 OECD working party on shipbuilding Paris by Erik.Ranheim@INTERTANKO.com Manager Research and Projects Paris 4-5 December 2008 INTERTANKO is the International Association of Independent Tanker Owners INTERTANKO has been the voice of independent tanker owners since 1970, ensuring that the oil that keeps the world turning is shipped safely, responsibly and competitively. Membership is open to independent tanker owners and operators of oil and chemical tankers, i.e. non-oil companies and non-state controlled tanker owners, who fulfil the Association's membership criteria.  Independent owners operate some 80% of the world's tanker fleet and the vast majority are INTERTANKO members. The organisation has 270 members, whose combined fleet comprises more than 2,700 tankers totalling 225 million dwt, which is 70% of the world's independent tanker fleet. INTERTANKO's associate membership stands at some 300 companies with an interest in shipping of oil and chemicals. INTERTANKO is a forum where the industry meets, policies are discussed and statements are created. It is a source of first-hand information, opinions and guidance. INTERTANKO has a vision of a professional, efficient and respected industry, that is dedicated to achieving Safe transport, cleaner seas  and free competition. INTERTANKO industry spokesperson The strong support that INTERTANKO enjoys allows it to speak authoritatively and proactively on behalf of tanker operators at international, regional, national and local level. It is also able to maintain a 26-strong secretariat and a network of 14 committees and four regional panels that coordinate an extensive work programme that comprises more than 50 agenda items. Governments and shipping regulators have taken a closer interest in tanker shipping in recent years. INTERTANKO has responded by establishing, strengthening and maintaining relationships with legislators on all levels, working with them to ensure a fair and equitable distribution of the responsibilities and liabilities involved in carrying oil and chemicals by sea. Underlining its commitment to representing its members where key decisions are made, INTERTANKO opened offices in Singapore and Washington DC in 1999, in addition to its principal offices in Oslo and London. Within the shipping industry itself, INTERTANKO participates in discussions within the International Maritime Organisation (IMO) where we have NGO status and the International Oil Spill Compensation Fund.  In addition, it has consultative status at the United Nations Conference on Trade and Development. Oil and its derivatives will remain the world’s most critical commodity in the foreseeable future and tankers will be needed to distribute it to where it is needed.  As long as tankers are vital to this distribution INTERTANKO will provide leadership in the development and implementation of industry standards and practices, and international regulations  for maritime safety and environmental protection. Erik Ranheim has been with INTERTANKO for 25 years and has been involved in both the technical and commercial aspects of tankers shipping. He is an economist and has also sailed as an officer in the merchant navy. He has been involved in both technical and commercial issues and has written several INTERTANKO publication on specific topic related to the tanker market and the tanker industry.

Tanker contracting bn $/ m dwt Av 7.3 17.5 19.9 38.9 $ 38.4 61.1 dwt Source. Clarkson Shipyard Monitor

Tanker fleet, orderbook, SH tankers m dwt 58.7 169.8 377.7 m dwt Average age 10.9 years 89% <20 years old 75% <15 years old 61% <10 years old

Tanker deliveries, removals, max phase-out 25,000 – 59,999 dwt m dwt Fleet 1,614 66 m dwt Orderb. 435 20 “ 30% Not DH 287 11 ” 19% Assumed balanced market end 2007

Tanker deliveries, removals, max phase-out Panamaxes 60,000 – 79,000 dwt m dwt Fleet 377 25 m dwt Orderb. 132 10 “ 38% Not DH 72 5 ” 19% Assumed balanced market end 2007

Tanker deliveries, removals, max phase-out Aframaxes 80,000 – 119,999 dwt m dwt Fleet 762 79 m dwt Orderb. 271 30 “ 38% Not DH 99 9 ” 12% Assumed balanced market end 2007

Tanker deliveries, removals, max phase-out Suezmaxes 120,000 – 199,999 dwt m dwt Fleet 359 55 m dwt Orderb. 186 29 “ 53% Not DH 38 6 ” 10% Assumed balanced market end 2007

Tanker deliveries, removals, max phase-out VLCCs 200,000 dwt + m dwt Assumed balanced market end 2007 Fleet 503 149 m dwt Orderb 261 81 “ 54% Not DH 103 28 ” 19%

Tanker deliveries, removals, max phase-out All tankers > 25,000 dwt m dwt Assumed balanced market end 2007

Investment in new tankers Some $ 327 billion invested since 2000 with the result that 96% of tanker fleet double hulled in 2010* *Assuming only DB/DS tankers continue to trade beyond 2010, some SH tanker will most probably continue until the age of 25 years old

Tanker fleet development m dwt number Tanker fleet increase 2003-2010: 61%

Need for new contracts assuming 4% increase in demand m dwt Assumptions: All SH out by 2010 (questionable) Balanced market end 2007 (some slack existed) Current orderbook 24 years life time DH tankers as from 2016

Notes Conclusion

Conclusion A tanker surplus is building up unless demand is strong Crises probably means abating demand No need for additional tanker orders over the next couple of years

Notes Appendix

The tanker market facing Financial and economic turmoil Abating demand Demand firstly powered by China Probably cancellation of contracts, Increasing fleet 2009-2011 Scrapping up, as Conversions to dry bulk halted

Single-hull phase-out regulation U.S. OPA 90 DH for new tankers SH phase-out by 2010 (by in 2015 LOOP, lightering areas) IMO – MARPOL Accelerated phase out as from 2005 SH phase-out by 25 years or latest 2010, or by 2015 subject to administrations (flag/port) IMO – MARPOL 13H Bans HGO as cargo in SH tankers

Flag/Port States positions MARPOL 20 Trading until the age of 25 years SH trading beyond 2010? Flag/Port States positions MARPOL 20 Trading until the age of 25 years Bahamas Yes Barbados Yes Liberia Yes Marshall Isl. Yes Panama Flag Yes Japan Yes Singapore Yes India Yes Hong Kong * Yes *20 years Australia No China No EU No Mexico No Romania No S Korea No Philippines No UAE No no official note to IMO on Notes 1. Naturally understands the concerns associated with and threats posed by oil transportation, with the reminder that the accidental pollution and incident records have shown very considerable and sustained improvements for more than 10 years. 2. Stresses the imperative that all involved maintain strict adherence to international (maritime) law and review processes. 3. Advocates the conducting and completion of an impartial, comprehensive accident investigation. Stresses the necessity, before any new measures are proposed or introduced, for rigorous analysis and understanding of the risks and consequences involved based on sound technical grounds, and where appropriate encourages a full impact analysis of each such measure. 4. As a matter of principle, rejects unilateral and/or regional, ill-considered, (and frequently expeditious/opportunistic and reactionary) measures. 5. Reminds that shipowners receive only a very small proportion of the economic benefit from oil supply and distribution, and that the principal beneficiaries in this value chain are oil companies and traders. United States N/A OPA90

Global Financial Crisis Tanker Fleet Removals m dwt 6 12 18 24 30 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Conversions Scrapping ? Conversions 2005 2006 2007 2008 2009 Small 2 0 13 23 Aframax 0 4 19 14 Suezmax 0 6 13 9 VLCC 2 9 15 30 Source: INTERTANKO ?