Russian oil export and tankers by Manager Research and Projects Russian shipping 2008 St. Petersburg 17 June 2008

Russian oil World largest exporter World strongest expansion Europe’s largest supplier West, South, East, North Large tanker companies Enormous energy infrastructure ports, trains, rivers, pipelines

World largest oil exporters – 30.3 mbd 35% of consumption - 58% of export mbd Saudi Aramco/VELA Pemex PdVSA KOTC Statoil NIOC/NITC Gasprom/Sovcomflot Independent major oil companies losing control of resources?

World largest net oil exporters mbd

Increases in world oil demand supplied by FSU, Saudi Arabia and othersmbd Source: IEA Since 2000, FSU has contributed with supply 55% of the oil demand increase, Saudi Arabia 18% and others 27%

FSU oil consumption and production mbd Source: BP Review/IEA Russia oil reserves 7th in the world R/P ration 22 years (world 42)

FSU total net petroleum export mbd mbd Source: IEA

FSU petroleum export by export outlet Source: IEA mbd mbd

Russian Crude oil export by outlet 4.2 mbd 1.26 mbd 0.86 mbd Source: OECD

Oil consumption per capita Liters per year

Sources of European crude oil - mbd mbd Source: OECD

Sources of European crude oil - mbd mbd Source: OECD

Russian oil production stagnating? or institutional? Stagnation, geological or institutional? May Russian oil production of 9.95 mbd (year-on-year decline for the 5th straight month IEA Russian production flat in 2008 at 10.1 mbd Higher and potentially year-round production from Sakhalin 2 counteracts (decline expected from Sakhalin 1) Other 2008 increments from Vankor* and Salym W Siberia (0.12 mbd) : Rosneft expects: 2.02 to 2.23 mbd in mbd in mbd in 2015, and 3.4 mbd by 2020 ) (*The Vankor oil will have to make the distance of 5,800 km (including 3,300 km – along the newly constructed pipelines) to come to the border with China near Skovorodino where the first stage of ESPO ends )

FSU petroleum Black Sea export 07 mbd mbd 957 tankers 75.8m ts 56,000 ships/10,000 tankers (incl. 800 LPG), 150 m ts liquid cargoes 324 tankers 13.4m ts Tuapse 451 tankers 12.7 m ts Tanker transits >200M 2,140 per year 95% double hulls 31% Suezmaxes 96% take pilot 214 tankers 9.1 m ts 153 tankers 2.8 m ts Yuzhny 250 tankers 9.7 m ts 154 tankers 6.2m ts

A slight decrease in overall traffic, more so by “hazardous vessels” and a significant drop in Gas Carriers, but….., (Note; all LNG carriers are >200m) Turkish Straits – transit profiles – 4Q06/07 Number ships

Turkish Straits – Transit Profiles 4Q07 Number Source: Chevron

2007 Black Sea crude outlets Approx m ts/year Crude Oil “remain” in Black Sea as import to Black Sea Countries Total m ts/year

2007 Black Sea crude exporters

Russia opening new frontier The first tanker was loaded September Since then, on average every 3-4r days tankers have been departing with the Sakhalin-1 crude oil, Sokol, delivering the oil to global markets. Each tanker carries up to 720,000 barrels (100,000 tons) of crude.. Yuzhno-Sakhalinsk, Russia, September 27, 2007 To ensure safe export of crude in the severe winter conditions of the Tatar Strait, a dedicated fleet of double hull Aframax class tankers is made of cold weather steel to protect against fractures.

Pipeline Eastwards threat to tanker shipping Eastern Siberia Pacific Ocean Pipeline (ESPO): Taishet - Skovorodino - Kozmino Bay Dec 2009? $12.5 bn/fill 1.5 m bbls 1 Stg: 1,200 miles 0.6 mbd Dec 2009? $12.5 bn/fill 1.5 m bbls 43-mile, 0.3 mbd spur from Skovorodino to the Chinese border Dec 2009? $12.5 bn/fill 1.5 m bbls 1 Stg: 1,200 miles 0.6 mbd Dec 2009? $12.5 bn/fill 1.5 m bbls 2 Stg: 1,300 miles 1.6 mbd 1 mbd PG - Japan 20 VLCC, Nakhodka - Japan 6 VLCCs

Seaborne Crude Oil Trade Flows 2006

Exporting from difficult areas Baltic - narrow waters, ice Black Sea - narrow waters, weather - politics North - weather and ice East – long pipelines – short sea routes Druzba - political Enormous infrastructure ports, trains, rivers, pipelines – tankers often a small part

Market effect (pipeline effect) of one mbd transported various trades

Russian tanker owners Sovcomflot and Novoship among 15 largest tanker owners in the world Average 25.8 years Average 6.8 years Average 6.6 years Average 12.5 years Average 27 years Total average age Russian tankers 22.5 years m dwt + some 150 other tanker owners with mainly small tankers World average age tankers 12.2 years

Conclusion Russia the energy superpower economic political Energy and politics goes hand in hand oil east and/ or westwards? New frontiers may be expensive and slow to open Strong Russian tanker companies Future? I cannot forecast you the action of Russia. It is a riddle wrapped in a mystery inside an enigma; but perhaps there is a key? The key is Russian national interests. Sir Winston Churchill, 1939

Tanker incidents World wide and FSU related Collisions, grounding, Hull & Machinery, Fire & Explosions, others

Tanker incidents and pollution Baltic, Black Sea, Bosporus, East Med

Tanker trade by hull -1Q00-2Q05 tankers above 50,000 dwt Baltic Sea Black Sea m dwt Source: Fearnleys/INTERTANKO

Tanker trade by hull -1Q00-2Q05 tankers above 50,000 dwt Baltic Sea Black Sea% Source: Fearnleys

Tanker trade by hull -1Q00-2Q05 tankers above 50,000 dwt from Murmansk area m tonnes Source: Fearnleys

Ice Class Number of Aframaxes available and needed for Primorsk trade (including 1A/1B/1C tankers) Number Source: Riverlake, Geneva 2003/04 addition 17 handysize tankers available 1C tankers may have problems in January/February

Conclusion

Russia the energy superpower Energy and politics is hand in hand – east and or west New frontiers my be expensive and slow to open Strong Russian tanker companies Enormous infrastructure ports, trains, rivers, pipelines

Conclusion S lower expansion in FSU oil export, but M ost Russian oil goes to Europe P ipelines will in medium to long term take market shares S afety record very good, trade served by modern tonnage M any projects – u ncertainty with regard to technical, geological, commercial as well as political factors