Manager Research and Projects Russian oil Export in Baltic Sea transits Stockholm 3 November 2005

Russian/CIS oil

Setting the Scene 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

Setting the Scene Scene 2004 Russian oil prevented a 3rd oil crises Safety record of tankers from FSU high Europe completely dependent on Russian oil Change of Scene? Scene 2005 Russian oil export slowing – tension in the oil market Safety record continue to be excellent - no new major tanker casualties Increasing oil export from special projects (Primorks (soon peaking?), Sakhalin, Northern areas) and pipelines? Overinvestment in ice-classed tonnage?

Oil Export

World increase in oil demand supplied by FSU and the rest mbd

World largest crude oil exporters - mbd

FSU crude oil and products export - mbd

European crude oil import mbd

Sources of European oil import 1H05 – 12.9 mbd Source: IEA (The US 0.32 mbd from FSU 1H05) 4.4 mbd

Oil export from FSU 1H05 Source: IEA

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

Safety Performance

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 -1Q04-2Q05 tankers above 50,000 dwt number m dwt Source: Fearnleys/INTERTANKO

Baltic transits18,000-50,000 dwt Q05 Dirty cargoes Source: Riverlake/INTERTANKO YearTransits 65% Transits 12 ms 100% m cargo ts 65% m cargo ts 12 ms 100% ms ,87512, ms861652,5454,893 YearTransitsTransits 12 ms 100% m cargo ts 65% m cargo ts 12 ms 100% ,2429, ,67613, ,33011,685 Clean cargoes

Baltic transits18,000-50,000 dwt Q05 Source: Riverlake/INTERTANKO Clean cargoes UK Continent 34352% Continent11517% W Africa 55 8% Mediterranean 34 5% UK Med 25 4% UK W Africa 5 1% Others 87 13% Total666100%

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

Tanker trade by hull -1Q00-2Q05 Aframax tanker – spot fixtures from Murmansk area Source: Riverlake Movements Movements Movements total92 Russian ships:48 (52%) Average cargo size 99,377 tonnes Average tanker size 109,078dwt Average age years in 2004 Average age years All double hull tankers + a limited number of small tankers carrying products (some 20/year)

Oversupply of ice-class?

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

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