1. Intertanko Energy and Tanker Market Review March 2005

2. 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

3. 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

4. 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

5. 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

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

7. 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

8. Tanker Market Summary 10 YEAR AVG 12 MONTH AVG % CHANGE
VLCC (AG-USG) $34, $68, %
SUEZMAX (WAF-USG) $30, $57, %
AFRAMAX (CAR-USG) $21, $34, %
PANAMAX (CAR-USAC) $19, $29, %
Vessel spot market earnings the past 12 months have been considerably higher than long-term historical averages

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

10. 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

11. 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

12. 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

13. 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

14. 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.

15. 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

16. 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:
– 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

17. 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

18. New York ● London ● Perth
Poten & Partners
                         
                         
New York ● London ● Perth
Athens ● Houston