1. 1 Oil Tanker Outlook and Newbuilding Demand in a Changing Environment Fallout from the Prestige Incident

2. 2 Changing Environment Post Prestige Pressure to Accelerate the Phase-out of SH Oil Tankers The current IMO Reg. 13g required phase-out schedule for Single Hull (SH) oil tankers stretches to 2015 MV Prestige incident has intensified the pressure to accelerate the phase-out and increase surveillance of older SH oil tankers, & place limitations on the carriage of heavy Fuel Oil The EU 1 will most likely be implementing several new measures to address these issues, including a phase-out acceleration scheme that is similar to their original proposal to IMO EU Member states are requested to pressure IMO to adopt similar measures globally 1 – Already recommended by the European Commission and Council

3. 3 Definitions PL/SBT – Protectively located segregated ballast tanks Dirty oil – heavy diesel, fuel and lube oil Oil – clarified, crude, dirty, aromatic (except vegetable), distillates, gas oil, gasoline, jet fuel, naptha, asphalt solutions CAS – Condition Assessment Scheme – a hull structure survey scheme focusing on planning diligence and greater reporting transparency, required by 2005 for Cat 1, by 2010 for Cat 2 1 – Already recommended by the European Commission and Council

4. 4 IMO Oil Tanker Categories Category 1 – non-double hull (pre PL/SBT), 20 K dwt and above carrying crude and dirty oils, OR 30 K dwt and above carrying other oil cargoes Category 2 – non-double hull (PL/SBT), 20 K dwt and above crude and dirty oils, OR 30 K dwt and above carrying other oil cargoes Category 3 – non-double hull, 5 K – 19,999 dwt carrying crude and dirty oils OR 5 K – 29,999 dwt carrying other oil cargoes

5. 5 IMO MARPOL 13G Phase Out CategoryTypeDWTCargoPhase Out 1 Pre PL/SBT Pre-1981 >/= 20K >/= 30K Crude and dirty oil Other oil 2003 - 07 2 PL/SBT Pre 1996 >= 20K >/=30K Crude and dirty oil Other oil 2003 - 15 3Oil tanker 5K<d< 20K 5K<d<30K Crude and dirty oil Other oil 2003 - 15

6. 6 EU Member States are requested to: Reject single hull tankers carrying heavy FO Accelerate implementation & enhance the PSC Directive 1/1/03 Establish plans to designate safe refuge by 1 July 2003 Develop double hull protection for bunker tanks at IMO Adopt measures to control the tanker traffic Ratify EU liability supplementary fund Accelerate phase-out of single hull oil tankers- adopt by 1 Jul 03 Cat. 1 ships - age 23+ yrs starting in 2003 & all by 2005 (pre Marpol) Cat. 2 ships - age 28+ yrs starting in 2003 & all by 2010 ( PL/SBT) Cat. 3 ships - age 28+yrs starting in 2003 & all by 2015 (5K-20/30KDwt) Apply CAS to all tankers at 15 years of age Limit transport of heavy FO in single hulls in EEZ of EU members EU Council 6 Dec 2002 Conclusions Impacting Oil Tankers EEZ = Exclusive Economic Zone

7. 7 Impact of EU Proposed Phase-out Acceleration Will IMO also adopt it? Near term impact on Supply / Demand balance could be significant, and degree varies by size of oil tanker Immediate impact would affect applicable tankers that trade to EU If EU proposal adopted by IMO impact would be worldwide 2 Phase-out scenarios were considered for comparison: Scenario 1: Current IMO Reg. 13g phase out scheme Scenario 2: EU Proposal - assumed to apply to entire fleet [ If adopted by IMO earliest would be 2004, & most likely 2005 ]

8. 8 Impact of EU Proposed Phase-out Acceleration Approach -Side-by-side comparison of Supply / Demand balance for each year to 2015 for current IMO and proposed EU phase-out schemes Demand = Current fleet size (+ or -) forecast annual demand growth Demand growth: estimated crude & product oil seaborne transport based on the US Dept of Energy Oil Demand Forecast to 2020 Large tankers - crude oil only, Smaller tankers - crude & product Supply = Fleet - Removals (both phase-out & scrapping*) + Newbuilding deliveries (current orderbook) Future Deliveries needed = Supply shortfall to meet Demand * scrapping based on historical avg. by age and ship type, and considered after Phase-outs have been accounted for.

9. 9 VLCC Delivery Requirements Regulatory Phase-out Scenario Comparison IMO Reg 13g -282-8-10 -12-14-167-11 -12 Surplus Deliveries 17 -12-34-21-13-12-14-12-13 -20 -17 -22 -134 Phase-outs New Demand Additions Needed Scrapping Scheduled Deliveries Jan 2003 Orderbook Accelerated Phase-out would likely spread if IMO adopts in 2004 or 2005 (-) Shortfall + Surplus Fleet Data Source: INTERTANKO & Clarkson Demand Outlook based on US Dept of Energy Oil demand Forecast EU Proposal Assumed adopted worldwide Size: 200+ KDwt Replacem’t & New Growth Needs Fleet Additions Largest Annual Delivery Over Past 5 yrs: 41 -28-26-34-44-54-66-80-247-258-269-280-292-304 175-29-50-63-75-89-101-114-134-151-173-307 Cumm.

10. 10 Suezmax Delivery Requirements Regulatory Phase-out Scenario Comparison -49-7 -8-11-13-68-8-9 -10 Surplus Deliveries 17 7 -21-16-9 -11 -13 -12-9-11-13 -14-50 IMO Reg 13g Phase-outs New Demand Additions Needed Scrapping Scheduled Deliveries Jan 2003 Orderbook (-) Shortfall + Surplus Size: 120-200 KDwt Fleet Data Source: INTERTANKO & Clarkson Demand Outlook based on US Dept of Energy Oil demand Forecast EU Proposal Assumed adopted worldwide Accelerated Phase- out would likely spread if IMO adopts in 2004 or 2005 Largest Annual Delivery Over Past 5 yrs: 28 -45-2-9-17-28-41-109-117-126-135-145-15517243-13-22-33-46-58-67-77-90-104-154 Cumm.

11. 11 Aframax Delivery Requirements Regulatory Phase-out Scenario Comparison -22 -5 -12-13-20 -146-12 -13-14-15 Surplus Deliveries 49 11-22-61-42-20 -16-29-34-28-25-61 IMO Reg 13g Phase-outs New Demand Additions Needed Scrapping Scheduled Deliveries Jan 2003 Orderbook Size: 80 -120 KDwt (-) Shortfall + Surplus Fleet Data Source: INTERTANKO & Clarkson Demand Outlook based on US Dept of Energy Oil demand Forecast EU Proposal Assumed adopted worldwide Accelerated Phase-out would likely spread if IMO adopts in 2004 or 2005 Largest Annual Delivery Over Past 5 yrs: 70 -22-27-32-44-57-77-97-243-255-267-280-294-309496038-23-65-85-105-121-150-184-212-237-298 Cumm.

12. 12 -17 7-3-8-9-24-21-54-6 -7 Panamax Delivery Requirements Regulatory Phase-out Scenario Comparison Surplus Deliveries 920-12-31-30-24-21 -14-11 -14 IMO Reg 13g Phase-outs New Demand Additions Needed Scrapping Scheduled Deliveries Jan 2003 Orderbook Size: 60 -80 KDwt (-) Shortfall + Surplus Fleet Data Source: INTERTANKO & Clarkson Demand Outlook based on US Dept of Energy Oil demand Forecast EU Proposal Assumed adopted worldwide Accelerated Phase- out would likely spread if IMO adopts in 2004 or 2005 Largest Annual Delivery Over Past 5 yrs: 32 -17-10-13-21-30-54-75-129-135-141-147-154-16192917-14-44-68-89-110-124-135-146-157-171 Cumm.

13. 13 Products Delivery Requirements Regulatory Phase-out Scenario Comparison -193 -10-9-24-30-81-60-162-27 -25-30-39 Surplus Deliveries -4-14-82-87-75-81-60-49-43 -44-49-67 Size: 20 -60 KDwt IMO Reg 13g Phase-outs New Demand Additions Needed Scheduled Deliveries Jan 2003 Orderbook (-) Large Shortfall Small Shortfall Fleet Data Source: INTERTANKO & Clarkson Demand Outlook based on US Dept of Energy Oil demand Forecast EU Proposal Assumed adopted worldwide Accelerated Phase- out would likely spread if IMO adopts in 2004 or 2005 Largest Annual Delivery Over Past 5 yrs: 95 -193-203-212-236-266-347-407-569-596-623-648-678-717-4-18-100-187-262-343-403-452-495-538-582-631-698 Cumm.

14. 14 Impact Summary Prestige incident has prompted the EU to act to accelerate the current IMO phase-out schedule for single hull oil tankers Accelerating both the age schedule and complete fleet removal dates While there is time to meet the anticipated replace- ment challenge for 2010 and beyond, there will likely be a near term supply shortfall, particularly for smaller oil tankers if: If IMO adopts the EU accelerated phase-out schedule If positive future fleet growth is needed to meet oil transportation requirements

15. 15 Other Issues – Comments? Additional “Incidents” US Environmental Issues (design impact) Jones Act Alternate Energy Sources World Tensions/Maritime Security

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