Intertanko Energy and Tanker Market Review March 2005

Overview Energy Market Overview Tanker Market General Market Trends Crude Oil Supply/Demand Outlook Tanker Market General Market Trends Emerging Trade Patterns VLCC Analysis Summary/Conclusions

Oil Supply Summary Not growing fast enough to meet current and future demand OPEC currently producing near its maximum Little spare production capacity Supply Disruptions Hurricane Ivan disrupted US Gulf Coast offshore Strikes, insurgency in oil producing countries Summer crude supply reductions for Alaskan crude on USWC

Oil Demand Summary/Outlook Overall world energy demand is growing Oil is the largest source of energy and is projected to have highest growth over next several decades Transportation fuel demand growing Energy demand is mostly in the industrialized nations Concentrated in the US, Europe, and Japan Developing nations have the highest growth rate in demand India, China Higher quality products required Low sulfur contents

Emerging Tanker Regulation Trends IMO/Marpol Single-Hull Phase-Outs All non-SBT vessels to be scrapped by April 2005 All other Single-Hull vessels to be scrapped by 2010 All Double-Sided and Double-Bottom vessels to be scrapped by their 25th Anniversaries     These regulations are subject to enforcement by the countries controlling the individual ports. IMO/Marpol Ban on Transport of Heavy Grades of Oil

China: The Waking Giant Estimate China’s growing oil consumption has increased VLCC demand by equivalent 31 vessels over the past 18 months

The World Tanker Market Tanker owners today are enjoying record profits due to a series of events: Increased demand for crude oil and refined products Robust economic growth in China, India and elsewhere Political dynamics in key countries Regulatory changes Fuel substitution is a long-term threat to traditional tanker owners Natural Gas Coal Nuclear Shipyard capacity can lead to overbuilding – depressing rates for years to come

Tanker Market Summary 10 YEAR AVG 12 MONTH AVG % CHANGE VLCC (AG-USG) $34,658 $68,647 + 98.1 % SUEZMAX (WAF-USG) $30,127 $57,345 + 90.3 % AFRAMAX (CAR-USG) $21,962 $34,873 + 58.8 % PANAMAX (CAR-USAC) $19,234 $29,857 + 55.2 % Vessel spot market earnings the past 12 months have been considerably higher than long-term historical averages

Evolving Trading Patterns: Yesterday VLCC trade depended heavily on AG crude exports 15 years ago

What’s a backhaul cargo? Today’s question: What’s a backhaul cargo? 8 76 February 2005 VLCC Movements 4 18 134 38 5 10 3 6 1 1 2 3 1 2 1 1 1 3 1 12 2 3 23 1 3 4 9 1 1 Today the VLCC crude trade patterns are larger, more diverse and require a global operation to support activities

Tanker Rates vs. OPEC Production VLCC rates and OPEC production closely tied and both vary widely. EIA data shows that current worldwide crude demand of 85 mbpd is up 6.0 mbpd from 18 months ago

Monthly Average AG VLCC Spot Market Liftings Estimate that overall VLCC demand is up 75 ships from 2002 levels. The AG is providing about 70% of the demand increase with West Africa the balance

VLCC Spot vs. Timecharter Depending on timing, the average spot market rate has been a more expensive option for owners over the past five years

280kt AG-USG VLCC Cost per Barrel 4.6% 6.9% 8.3% 7.9% VLCCs are currently almost three times more expensive per barrel now versus 2002 averages.

AGE PROFILE V/ULCC FLEET 443 Vessels as of February 2005 Significant number of deliveries (170) over past 4 years has led to a fairly modern fleet Similar number of removals over past 4 years (175) has kept fleet size roughly equal Only 11 vessels are more than 20 years old

VLCC Market Summary Increased crude demand and more complex trading patterns have increased overall VLCC demand China, India and US will remain key to demand growth Fleet supply has been steady for the past four years with scrapping roughly equal to delivery. Fleet has been just barely able to meet significant increase in demand in past 18 months. Sizable orderbook: 2005-2008 – The fleet will begin to increase as limited number of vessels to scrap But 2010 phase-out schedule suggests that more vessels will be needed Most analysts are bullish on the tanker market in the short-run Market participants that have taken long positions over the past 18 months have been correct

Long-Term Tanker Market Outlook Despite some expected new locations for crude sources, the major trading patterns for crude oil are unlikely to change much in the next 10 years Impact of new refinery capacity can have unintended consequences on the tanker market: For example, India is now a major importer of crude instead of refined products Fuel substitution is a long-term threat to traditional tanker owners Natural Gas Coal Nuclear Shipyard capacity can lead to overbuilding – depressing rates for years to come

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