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“TANKER SEMINAR” Madrid 19 May 2010

“TANKER SEMINAR” Madrid 19 May 2010. Peter M Swift, MD INTERTANKO. Tanker Seminar. INTERTANKO Tanker Shipping’s Record Key issues GHG Emission Reductions Piracy Other commercial/operational issues Markets and more Incident data. INTERTANKO Today.

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“TANKER SEMINAR” Madrid 19 May 2010

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  1. “TANKER SEMINAR”Madrid19 May 2010 Peter M Swift, MD INTERTANKO

  2. Tanker Seminar • INTERTANKO • Tanker Shipping’s Record • Key issues • GHG Emission Reductions • Piracy • Other commercial/operational issues • Markets and more • Incident data

  3. INTERTANKO Today 260 + members operating ca. 3,100 ships > 75% of the independent oil tanker fleet and > 85% of the chemical carrier fleet 300 + associate members: in oil and chemical tanker related businesses 15 Committees – 5 Regional Panels Principal Offices – London and Oslo Representative Offices in US, Asia and Brussels Observer Status at IMO, IOPC, OECD and UNCTAD International Association of Independent Tanker Owners

  4. INTERTANKO’s Strategic Objectives To develop and promote best practices in all sectors of the tanker industry, with owners and operators setting the example. To be a positive and proactive influence with key stakeholders, developing policies and positions, harmonising a united industry voice, and engaging with policy and decision makers. To profile and promote the tanker industry, communicating its role, strategic importance and social value. To provide key services to Members, with customised advice, assistance and access to information, and enabling contact and communication between Members and with other stakeholders.

  5. Global dependence on oil tanker transportation World Oil Consumption 3.8 billion ts Transported by sea 2.4 billion ts > 60% transported by sea

  6. Tanker Incidents and accidental pollution Number incidents Based on data from LMIU, ITOPF + others

  7. Accidental oil pollution from tankers 1000 ts spilt 1000 bn tonne miles trade Based on ITOPF/Fearnleys

  8. Oil price and freight rate – real and nominal USD per barrel

  9. Tanker Shipping’s GREEN Credentials • This car, weighing one tonne, uses 1 litre of fuel to move 20 kms • This oil tanker uses 1 litre of fuel to move one tonne of cargo 2,500 kms • more than twice as far as 20 years ago

  10. Investment in New Tonnage- Move to Double Hulls • More than USD 500 billion invested since 2000 with the result that ~95% of tanker fleet* double hulled by end 2010 * over 10,000 dwt

  11. Average age of tanker fleet above 10,000 dwt Average Age - Years Based on LRFairplay

  12. Tanker Industry is accustomed to being under the spotlight Watched by: • Regulators • Politicians • Public Licences to trade rigorously applied by: • Flag states • Classification Societies • Insurers • Charterers Monitored by: • Coastal and Port states

  13. Key Issues for Tanker Owners Today • Establishing and maintaining an international framework of consistent regulations and standards • Delivering best environmental performance • Ensuring availability of good people (and quality ships) • Ensuring the welfare and well-being of ships’ crews • Meeting the challenges of Piracy

  14. Establishing an international framework of consistent regulations and standards Shipowners supporting: • International rather than unilateral legislation • Ratification of IMO (and ILO) Conventions • IMO Member State Audit scheme (Flag & Coastal States) • Harmonisation and uniformity across Port State Control regimes • Development and Application of Common Structural Rules for Tankers • Classification societies’ procedural requirements, unified requirements and unified interpretations • Greater uniformity in chartering practices and standards

  15. Delivering best environmental performance • Air emissions - Green House Gases - Exhaust Gas emissions (Annex VI & its revisions) - VOC emissions • Spill Prevention and Response Planning • Ballast Water management • Biofouling • Antifouling systems • Ship Recycling • Port Reception Facilities (adequacy & affordability) • Waste management (onboard and ashore) • Radiated Noise pollution • Cetacean strikes

  16. Ensuring availability of good people - recruitment, training and retention Both a quantity and quality challenge ! Recruitment initiatives covering: • Raising awareness of the industry: - www.maritimefoundation.com and Careers outreach programme - www.shippingfacts.com - www.careers-at-sea.org and DVD: Careers in International Shipping - www.bimco.org/Corporate%20Area/Seascapes.aspx • Attracting entrants to the Maritime Professions(IMO: “Go to Sea” and other industry campaigns) Human Resources are respected as an asset, not treated as a cost !

  17. The Maritime Industry Knowledge Centre www.maritimeindustryfoundation.com OBJECTIVES To improve the image of shipping To heighten awareness of international shipping To attract young people both to the seafaring professions and to careers onshore

  18. Ensuring availability of good people - recruitment, training and retention Both a quantity and quality challenge ! Training and retention initiatives covering: • Provision of Cadet berths and training facilities on ALL new ships and maximum utilisation of cadet berths on existing ships • Revision of STCW Convention • Development of Tanker Officer Training Standards (TOTS), covering proficiency and experience, as the industry standard • Establishment of Seafarer Focus Groups to provide feedback of experiences

  19. Ensuring welfare and well-being of ships’ crews Initiatives covering: • Unjustified criminalisation • Support for IMO-ILO guidelines on Fair Treatment of Seafarers (in event of Maritime Accident) • Improved conditions for shore leave and access • Reduction in number of inspections • Less bureaucracy and associated paperwork • Guidelines for safe handling of cargoes and fuels, tank cleaning and entry • Greater clarity in Operating Manuals • Guidelines on implementing ILO Convention on “work and rest hours” • Higher standards of accommodation as industry “norms” (including e.g. access to internet, etc.)

  20. Other current commercial/operational issues • Mercury in crudes • Chinese Marine Pollution Regulations • Sanctions on oil products to Iran • Model clauses – Piracy, Vetting, Virtual arrival • Facilitation payments • “Smart vetting” – multiplicity of inspections • Conditions of Class project • Reaction in the USA to Deepwater Horizon spill

  21. Greenhouse Gas & Low Sulphur Emissions • Key Dates • Outcome of COP15 • IMO (MEPC) Programme • “Virtual Arrival” • Industry study/TEEMP/Other Low Sulphur Fuel Issues

  22. Shipping’s GHG Emissions Selected Key Dates 12/2009 UNFCCC COP15 Meeting, Copenhagen 3/2010 IMO MEPC 60 3-9/2010 Industry Study Group 5-6/2010 UNFCCC, Bonn 5 to 8 /2010 IMO MBM-Expert Group 6-7/2010 IMO MEPC Intersessional 9-10/2010 IMO MEPC 61 10-11/2010 UNFCCC COP16 Meeting, Cancun 7/2011 IMO MEPC 62 12/2011 EU Deadline for IMO/International Agreement

  23. IMO/MEPC Challenge remains ! IMO Principle: “No More Favourable Treatment” Versus Kyoto Protocol principle: “Common But Differentiated Responsibility”

  24. COP15, Copenhagen 2009 What was the outcome ? • NO targets • NO resolution of Kyoto/IMO Treaty conflict • NO direct reference to international shipping in Copenhagen Accord No change yet !

  25. IMO Programme To develop: EEDI for new ships SEEMP & EEOI for all ships and, if possible/needed: Market Based Measure (Instrument) for shipping

  26. Intersessional Working Group To improve the text for mandatory requirements of EEDI and SEEMP in terms of: • coverage of ship types and ship sizes for the EEDI; • establishment of EEDI baseline(s); • frequency of reducing the mandatory value of EEDI (reduction in 3 phases); • reduction rate from the baseline for the phases for the EEDI; To develop various guidelines: • on the method of calculation of EEDI; • for the calculation of baselines for attained EEDI; • to support the regulatory framework for verification of the EEDI

  27. MBM – Expert Group Group of MBM schemes which would require all ships to pay a contribution: 1. International Fund for Greenhouse Gas emissions from ships – suggested by Denmark and supported and complemented by some other Administrations such as Cyprus, Marshall Islands and Nigeria. 2. Global Emission Trading System for International Shipping, as proposed by Norway, France and Germany; and a Global Emissions Trading System for GHG Emissions from International Shipping, as proposed by UK. Group of MBM schemes which provide rewards to more energy efficient ships: 3. Leveraged Incentive Scheme based on the International GHG Fund - proposed by Japan. 4. Trading with Efficiency Credits based on Efficiency Standards for All Ships - proposed by the USA. 5. Vessel Efficiency System - proposed by the World Shipping Council.

  28. Virtual Arrival OCIMF /INTERTANKO project Virtual Arrival is all about managing time and managing speed. It’s not about blanket speed reduction to match current market conditions. Virtual arrival is about identifying delays at discharging ports, then managing the vessel’s arrival time at that port/terminal through well managed passage speed, resulting in reduced emissions but not reducing capacity.

  29. Virtual Arrival - Summary • Cooperation between Charterer (Terminal Operator) and Owner • Speed is “optimised” when ship’s estimated arrival is before the terminal is ready • Owners and Charterers agree a speed adjustment • May use an independent 3rd party to calculate / audit adjustment • Owners retain demurrage, while fuel savings and any carbon credits are split between parties Next Steps: • OCIMF-INTERTANKO running joint workshops • Charter Parties being reviewed (INTERTANKO/BIMCO/BP/Chevron) – indemnity and liability issues, including bills of lading • Individual oil majors and owners “trialling” system • Bulk carrier sector examining feasibility

  30. GHG emissions - OTHER TEEMP – Tanker Energy Efficiency Management Plan Industry Study – RT, OCIMF, WSC: Achievable targets ? Cooperation with others – e.g. Carbon War Room ?

  31. Gas fuelled engines Electronic engine control Waste heat recovery Air cavity lubrication Contra-rotating propeller Fuels cells as auxiliary engines Frequency converters Exhaust gas boilers on auxiliary engines Energy efficient light systems Wing generator Wind power – kite Wind power – fixed sails or wings Solar panels Solar panels Trim/draft optimising Weather routing Voyage execution Steam plant operational improvements Speed reduction due to port efficiency Propeller condition Speed reduction due to fleet increase Hull condition Propulsion efficiency devices Cold ironing Engine monitoring Reduced auxiliary power usage Industry Study Group:Possible Abatement Measures

  32. Low Sulphur Fuel Issues • EU Sulphur Directive - 0.1% at berth requirement - Revision timetable - Finnish concerns & Annex VI Revision • CARB requirements – legal challenge • North American ECA Regulation without recognition of the impact on seafarers Greater consideration of the ramifications of new regulations and legislation at IMO and elsewhere/ Somebody has to make it work - or carry the can if it doesn’t !

  33. Meeting the challenges of Piracy Gulf of Aden / Somali Basin Guidance: • Register Company and Ship with MSCHOA • Plan for Transit • Following Best Management Practices (V2) • Report regularly to UKMTO Dubai (or MARLO) A problem in many regions, including South China Sea, Somali Basin and Gulf of Aden, Gulf of Guinea and South America !

  34. Piracy: Development update • Industry involvement via UN Contact Group/SHADE/IMO-MSC • Encouraging continuing Naval support but also a new strategy for Western Indian Ocean • Issues on under active discussion: - push for prosecutions – gathering/providing evidence - impact of US “Ban” on Ransom Payments - increasing calls for the Arming of Ships • Industry developing: Best Management Practices – Version 3 Guidance to companies, masters & crews on: - “Capture to Release” - the care of seafarers & others who have been hijacked • New focus on the Gulf of Guinea / Malacca Straits

  35. Markets and More !Tanker Markets Today ? • Demand down, but recovering ? • Supply up, and still growing ? • Rates down, and ?

  36. Markets and more • Demand : World oil trade • Supply : Ships on Order & Fleet development • Tanker market • Shipbuilding capacity

  37. World Oil Demand vs. GDP 6 5 4 3 2 % change (year on year) 1 IMF GDP Oil Demand 0 -1 -2 -3 -4 1991 1992 1993 1994 1995 1997 1998 1999 2001 2003 2004 1990 1996 2000 2002 2005 2010 1989 2009 1981 1983 1984 1985 1986 1987 2006 2007 2008 1982 1988 Source: Clarksons (September 2009)

  38. Orderbook Development (All ship types) Orderbook – All ships (>999GT) Source: Clarksons, April 2010

  39. Orderbook by ship type(as % existing fleet) Source: Clarksons (September 2009)

  40. Tanker Contracting 1996-2010 90 80 Handy 70 MR 60 50 Panamax million deadweight 40 Aframax 30 Suezmax 20 10 VLCC 0 2007 2008 2009 2001 2002 2003 2004 2005 2006 2010 1996 1997 1998 1999 2000 Source: Clarksons, April 2010

  41. Fleet Growth 2000-2009 2009 2010 2011 20 15 10 % change y-o-y 5 0 -5 VLCC Smax Amax Pmax MR Handy *Includes slippage, cancellation and removal ideas Source: Clarksons, April 2010

  42. Tanker Fleet Development 550 500 450 10-24 tanker 400 handy 350 MR 300 deadweight (million) Panamax 250 Aframax Suezmax 200 VLCC 150 100 50 0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2012 1982 1970 1972 1974 1976 1978 1980 2004 2006 2008 2010 Source: Clarksons (September 2009)

  43. Newbuilding Tanker Prices VLCC Suezmax Aframax Panamax MR Product 180 150 120 $ million 90 60 30 0 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-10 Jan-76 Jan-78 Jan-80 Jan-82 Jan-84 Jan-06 Jan-08 Source: Clarksons, April 2010

  44. Tanker Age Profile 500 400 Handy MR 300 no of vessels Panamax 200 Aframax Suezmax 100 VLCC 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2013 2014 1980 1981 1982 1983 1984 1985 1986 1987 1988 2008 2009 2010 2011 2012 1970-1974 1975-1979 Source: Clarksons, April 2010

  45. Tanker Fleet Comparisons non-double hull On Order Built since 2000 80 70 75 73 69 69 68 60 58 50 40 percentage of exisiting fleet 38 30 33 29 20 21 19 20 10 13 12 6 5 9 6 0 VLCC Suezmax Aframax Panamax MR Handy Source: Clarksons, April 2010

  46. Where next for Single Hull Tankers ? Current trading status 100% 90% Storage% 80% 70% Inactive% 60% 50% % of single hull fleet Domestic 40% Trading% 30% 20% Normal Trading% 10% 0% VLCC Suezmax Aframax Panamax MR Handy Total Fleet Source: Clarksons, April 2010 (datasource: Clarksons/LLI)

  47. Where next for Single Hull Tankers ? • Trading beyond 2010 ? • Flag/Port State positions re MARPOL 13G trading up to the age of 25 years Australia No China No EU No Mexico No Romania No S Korea No* Philippines No* UAE No* (*No official note sent to IMO yet) Bahamas Yes Barbados Yes Liberia Yes Marshall Isl. Yes Panama Flag Yes Japan Yes Singapore Yes India Yes Hong Kong Yes** (** Max. 20 years old) United States N/A (OPA90)

  48. Tanker sales for demolitionand VLCC freight rate 30 100,000 VLCCs sales for demolition <200,000 dwt sales for demolition** VLCC freight rate*** 24 80,000 18 60,000 12 40,000 6 20,000 0 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09* USD / day m dwt • * Until week ending 4 September • ** Sales for demolition until 4 September • *** Clarkson Freight rate AG-Japan week ending 4 September Source: INTERTANKO

  49. Average tanker freight rates (based on Baltic Exchange rates) USD/day Source: Baltic Exchange/INTERTANKO

  50. or Market Forecast !

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