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. The Product Tanker Market and Phase-Out Implications by Erik.Ranheim@INTERTANKO.com Manager Research and Projects 4th Annual Combined Chemical & Product Tankers Conference London, 5 December 2007 ‘

INTERTANKO International Association of Independent Tanker Owners Trade association established in Oslo in 1970 Spokesman, information service, meeting place Membership 280 Members 40+ countries 2,800+ tankers 230 million dwt 75% of independent tanker fleet 300 Associate Members

Product tanker market and phase out Product tanker demand Phase-out review Phase-out consequences 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.

Notes Market trends

Tanker segments Advanced tankers/operators Average tankers Low quality tankers Bad market Newbuildings Alang beach

Product tanker trade '000 m tonnes Source: BP Review

Product tanker trade 2004 5.3% increase 2005 8.9% increase '00 m tonnes 2004 5.3% increase 2005 8.9% increase 2006 5.0% increase 2007 4.7% increase 2008 3.8% increase Source: Fearnleys

Product import to the US, Japan and Europe mbd Biodiesel More mpg Source: IEA/PAJ/EIA

New Refinery distillation capacity projects by region 2007-12 mbd Firm capacity expansion 9.3 mbd + 2.5 mbd planned Source: Source: Petroleum Economist/INTERTANKO

New Refinery distillation capacity projects by region 2007-12 mbd Source: Petroleum Economist/INTERTANKO

The world is moving away from HFO Oil consumption by product - % share mbd % share Source: INTERTANKO/BP Review

Refineries are moving away from HFO ……..company’s early commitment in the mid-1990s to making cleaner fuels, and by being proactive about finding the technology needed to achieve this.

Why switching to distillates? A simple solution : Significant global reduction of emissions SOx, - 60 - 80%, PM, - 80 - 90%, NOx, - 15%, No heavy metals, Less soot A more healthy environment for crew and dockworkers No onboard waste Reduces overall fuel consumption (and CO2 emission)) Better and easier control or monitoring of ships Cleaner, Simpler and more Efficient ships

Why switching to distillates? ..continue: Fewer engine breakdowns and potential pollution accidents Less pollution when spilled Provides opportunity for the development of more efficient engines (with less emissions) Applies to all ships and all current engines No safety problem in connection with switching fuels Cleaner, Simpler and more Efficient ships

Why not scrubbers? Still under testing (2 ship limited scale) Large Expensive Difficult (impossible?) to install CO2 emission (buffering effect) leaves hazardous waste waste disposal – no-one wants it Tonnes of seawater need to be processed/added *For a main engine of 20 MW, seawater up to 22,000 t/day needs to be processed (45 t/hr/MW) (supplemented with some 6,500 t/day to lower pH) Water weill also bee needed to lower the pH value of the waste water to an acceptable level. Up to 100 kg/day of hazardous sludge (5kg/day/MW) data supplied by Krystallon Very complex Guidelines for Exhaust Gas-SOx Cleaning Systems and discharge criteria for water overboard discharge Scrubbers place the burden of handling and disposal of the waste by-products (solid and liquid) on the shipowner ! What we must avoid is another “oily water separator” issue, where the shipowner has to process the “waste”, and where the equipment is often unreliable, suitable reception facilities are not available, and the on-board processing is very burdensome. We are involved in transportation – not waste treatment

Notes Phase-out

Phase-out history After Exxon Valdez, on 18 August 1990, the US President signed into law the US Oil Pollution Act of 1990 (OPA 90). This was the first regulation to mandate double hull design for tankers with a building contract after 30 June 1990 and with a delivery after 31 December 1992. First IMO phase-out initiated by the US OPA 90 - ratified by the IMO March1992 - enforced as from July 1993. Accelerated IMO phase-out initiated by Europe as a result of the ERIKA accident outside France - ratified by the IMO April 2000 - enforced as from September 2001. Further acceleration of IMO phase-out initiated by Europe as a result of the PRESTIGE accident outside Spain - ratified by the IMO December 2003, enforced as from April 2005 - enforced by Europe as from October 2003. The European Union’s Regulation (1726/2003) on single hull tankers took effect on 21st October 2003. Revised Annex II was implemented 1 January 2007 NOT phase-out. Both ERIKA and PRESTIGE carried Heavy Fuel Oils that can pollute up to ten times more than crude oil.  IMO therefore adopted a new regulation – Regulation 13H of Annex I of MARPOL 73/78 – banning the carriage of heavy grade oil as cargo in single hull oil tankers as from 5 April 2005. 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.

Tanker recycling by receiver country No. Ships burn HFO that contain aromatics- organic unsaturated low combustibility molecules that will attach to anything. The particulates contained in HFO include: Sulphates Nitrates Heavy metals Switshing to distillaltes

Tanker recycling 10,000- 79,999 dwt m dwt Ships burn HFO that contain aromatics- organic unsaturated low combustibility molecules that will attach to anything. The particulates contained in HFO include: Sulphates Nitrates Heavy metals Switshing to distillaltes

Phase-out of small tankers from carrying heavy grade oil as cargo as from 2008 Tankers 600 - 4,999 dwt by hull - 3,429 tankers – 8 m dwt No. Ships burn HFO that contain aromatics- organic unsaturated low combustibility molecules that will attach to anything. The particulates contained in HFO include: Sulphates Nitrates Heavy metals Switshing to distillaltes

Tankers 600 - 4,999 dwt by type - 3,429 tankers No. Ships burn HFO that contain aromatics- organic unsaturated low combustibility molecules that will attach to anything. The particulates contained in HFO include: Sulphates Nitrates Heavy metals Switshing to distillaltes

Tanker deliveries, phase-out, demolition 5,000 - 9,999 dwt – 1095 tankers, 385 SH Number Fragmented, many geographical segments Cabotage trade Phase-out overhang, 118 tankers

Tanker deliveries, phase-out, demolition and 10,000 - 24,999 dwt Number Fleet - 5.2 m dwt, 419 tankers Phase-out – 0.6 m dwt, 187 tankers Orderbook - 3.1 m dwt, 39 tankers Phase-out overhang 70 – removed 2008 – 2001

Tanker deliveries, phase-out, demolition and 25,000 - 34,999 dwt Number Fleet – 18.4 m dwt, 776 tankers Phase-out – 3.7 m dwt, 124 tankers Orderbook - 2.3 m dwt, 123 tankers Phase-out overhang - 3.9 m dwt, 70 – assumed removed 2008 – 2011

Tanker deliveries, phase-out, demolition and 35,000 - 52,999 dwt Number Fleet – 53.0 m dwt, 1,225 tankers Phase-out – 7.0 m dwt, 168 tankers Orderbook – 24.8 m dwt, 533 tankers Phase-out overhang - 0.7 m dwt, 9 – removed 2008 – 2010

Tanker deliveries, phase-out, demolition, 53,000 dwt - 79,999 dwt Number Fleet – 27.3 m dwt, 399 tankers Phase-out – 6.1 m dwt, 95 tankers Orderbook – 8.4 m dwt, 166 tankers Only handful on order 53,000 dwt – 73,000 dwt

Tanker deliveries, max. phase -out, demolition and 5,000 - 79,999 dwt Number Fleet – 111.8 m dwt, 3,914 tankers Phase-out – 22.3 m dwt, 957 tankers Orderbook – 38.7 m dwt, 1,131 tankers

Tanker deliveries, min. phase-out, demolition and 5,000 - 79,999 dwt M dwt Fleet – 111.8 m dwt, 3,914 tankers Phase-out – 22.3 m dwt, 957 tankers Orderbook – 38.7 m dwt, 1,131 tankers

Position of administrations Notes Position of administrations

Flag/Port States positions Trading until the age of 25 years SH trading beyond 2010? Flag/Port States positions 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 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

Notes Hulls

Tankers 5,000 - 79,999 dwt by hull Ships burn HFO that contain aromatics- organic unsaturated low combustibility molecules that will attach to anything. The particulates contained in HFO include: Sulphates Nitrates Heavy metals Switshing to distillaltes

Tankers 5,000 - 79,999 dwt phase-out - orders - fleet m dwt Ships burn HFO that contain aromatics- organic unsaturated low combustibility molecules that will attach to anything. The particulates contained in HFO include: Sulphates Nitrates Heavy metals Switshing to distillaltes of which overdue 3.7 m dwt

Notes Conclusion

Conclusion Structural changes in the product tanker market Phase-out on schedule with no major problems Phase-out minor market impact 2010 situation still unclear 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.