Tanker Market Review: Intertanko Member’s Top 10 “The Short & Long Of It” Intertanko North American Panel Meeting Tanker Market Review: Intertanko Member’s Top 10 “The Short & Long Of It” Poten & Partners, Inc. March 22, 2004

2 Proprietary & Confidential Top Five Short Term Factors Affecting The Oil Tanker Market OPEC Iraq Venezuela Bosphorus/Turkish Straits US Gasoline Supply

3 Proprietary & Confidential Top Five Long-Term Factors Affecting the Oil Tanker Market China Libya Single-hull phase out LNG Industry Consolidation

4 Proprietary & Confidential 1. OPEC Production OPEC production and tanker rates are closely tied

5 Proprietary & Confidential OPEC Production Expect seasonal reductions in production consistent with historical averages The notion of inventory re-build is misleading. Oil companies are now comfortable with low inventories Forward price curve suggests risks are too high to rebuild The good news – no slack in the system

6 Proprietary & Confidential 2. Iraq: Post-war Output is on the Rise Expect Iraq’s Oil production to continue to increase Khor al-Amaya, Iraq’s newly repaired port will increase output to about 1.0 million bpd Expect 1.5 million per day to continue from al-Bashrah Ceyhan pipeline exports have resumes First VLCC loaded at Khor al-Amaya after 13 years SOMO expects total production to be around 2.8 million bpd by end April

7 Proprietary & Confidential 3. Venezuela Currently producing an average of about 2.5 million barrels per day The United States imports about 1.5 million/day of this total Reduced crude exports increase demand for long-haul crude Gasoline prices are likely to increase if supply is reduced

8 Proprietary & Confidential Caribs to US Daily Earnings Spot market activity has fallen as contract coverage has increased.

9 Proprietary & Confidential 4. Bosphorus Bottleneck Weather and daylight related delays of 20 to 25 day in the Bosphorus are quite helpful for reducing tanker supply and hence increasing rates The straights are probably close to crude export capacity, but the Black Sea will continue to be a main conduit for Russian crude 89 million tons in 2003 vs. 44 million in 2000 This crude is finding new sales locations including the Far East Pipeline projects such as the Baku-Tbilisi-Ceyhan (BTC) Pipeline will not provide relief next year – so expect more delays next winter

10 Proprietary & Confidential 5. US Gasoline Supply As US gasoline demand begins to increase clean tanker rates have followed

11 Proprietary & Confidential Summary of the Top Five Short-term Factors The overall crude oil and product supply market is precarious Uncertainty generally works in favor of strong rates Excess European gasoline will come to the states increasing transatlantic demand With crude oil prices near $40.00/bbl, it is hard to complain about high freight rates Expect some seasonal weakness in tanker rates, but the balance of the year looks promising

12 Proprietary & Confidential Top Five Long-Term Factors Affecting the Oil Tanker Market China Libya Single-hull phase out LNG Industry Consolidation

13 Proprietary & Confidential 1. China: The Waking Giant China’s increasing oil demand is sending tanker rates – along with everything else - up

14 Proprietary & Confidential China: Demand, Demand, Demand Petroleum demand in China second only to Japan Current internal production clearly not expected to meet demand growth Should China reach US crude consumption levels, would raise demand by 25 billion barrels/year Most analysts predict that the China “bubble” is not likely to burst until after 2008 Olympics

15 Proprietary & Confidential China – A Factor in Shipbuilding China is becoming a major player in shipbuilding industry Orderbook has 113 ships through 2007: VLCC 9 Suezmax1 Aframax25 Panamax41 Handymax37 Goal is to have 30% of the market by 2015

16 Proprietary & Confidential 2. Libya – An Up and Coming Contender Large Proven Reserves – about 36 billion barrels Most crude currently shipped to Italy and Spain Libyan crude is primarily shipped on Aframaxes, but some suezmax activity to the east We see the trade going to India in larger ships (Suezmaxes) once investment in Libya increases production If actual production increases another 1.0 million by end of decade, the crude will likely flow east in larger quantities

17 Proprietary & Confidential 3. Single-Hull Phase Outs The EU and IMO regulations have had positive impact on rates in the Atlantic Basin tanker market Still a significant number of ships to phase out by 2010 and with some exceptions 2015

18 Proprietary & Confidential Single-Hull Replacements The current orderbook is essentially full through 2006 More orders will still be needed in order to meet the full phase out Regulatory pressure has generally been favorable for overall rates

19 Proprietary & Confidential 4. Global LNG Trade Route Development The global LNG trade has seen considerable growth in the past 30 years. In 1970 only 3 worldwide export locations countries serving 5 import countries By 2000 the trade grew to 12 export countries and 11 import countries with a much more dynamic trading patterns including spot cargo movements The current world fleet of about 155 LNG tankers is still quite small compared to conventional oil tankers

20 Proprietary & Confidential 1970 Global LNG Trade Routes Algeria dominates LNG trade world wide, Libya and Alaska are small players Europe is the main market

21 Proprietary & Confidential 2000 Global LNG Trade Routes US comeback and associated growth in spot trades Korea is second largest importer of LNG worldwide. The Middle East becomes key supplier, able to access both Pacific and Atlantic basins

22 Proprietary & Confidential Transportation Cost: LNG vs. Crude Oil High transportation costs relative to crude have limited development of a liquid spot trade in LNG

23 Proprietary & Confidential LNG Supply/Demand Summary Steady growth Outlook for growth through 2010 is more rapid than in past 10 years The challenge will be to meet “uncovered” demand since large contract coverage expires at the end of this decade, particularly in Asia-Pacific

24 Proprietary & Confidential 5. Industry Consolidation Oil companies merged in the late 90’s at a rapid pace Tanker owners have followed suit Analysis suggests that consolidation and the formation of pools has had positive economic benefits for owners

25 Proprietary & Confidential 1997 Tanker Fleet Profile Top ten companies controlled about 19% of the Dwt of tanker fleet and 9% of the ships

26 Proprietary & Confidential 2004 Tanker Fleet Profile Top ten companies today own about 23% of the Dwt of tanker fleet and still about 9% of the ships Tanker pools have consolidated certain markets

27 Proprietary & Confidential The Good News Equity market historically tracked physical freight market. Both are now at record levels

28 Proprietary & Confidential Top Ten Summary With numerous variables in the tanker transportation network, wild-cards are generally beneficial to owners Short-term crude supply is likely to be reduced, but overall annual demand is expected to be higher thanks to demand growth in key areas such as China and the US Even the bears are getting, if not bullish, at least less bearish

29 Proprietary & Confidential Poten & Partners Poten & Partners New York ● London ● Singapore Athens ● Houston