Ultra-Deepwater Production and Need for Shuttle Tankers in the Gulf of Mexico

1. Ultra-Deepwater Production and Need forShuttle Tankers in the Gulf of Mexico Presentation by Jim McCaul at the 6th Annual Deepwater Technologies & Development Conference September 11, 2001 International Maritime Associates, Inc. — Washington, DC, USA — Tel: 202-333-8501 Fax: 202-333-8504 — E-mail: imaassoc@msn.com — Website: www.imastudies.com

2. Ultra-Deepwater Gulf of Mexico Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

3. Ultra-Deepwater Leases in the Gulf of Mexico Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

4. Ultra-Deepwater Sites Producing or Being Developed in the Gulf of Mexico Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

5. Priority Development Sites inUltra-Deepwater Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

6. Deepwater Oil and Gas Pipelinesin the Gulf of Mexico

7. Pipeline Unfriendly Area in theGulf of Mexico Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

8. Potential Infrastructure Connections forUltra-Deepwater Fields Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

9. Distance from Infrastructure and Seabed Characteristics of Ultra-Deepwater Development Sites(excludes five host sites) Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

10. Segmentation of Development Sites by Distance toInfrastructure and Seabed Conditions Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

11. Layout of the 108,000 dwt Shuttle TankerNordic Savonita Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

12. Characteristics of Four RecentlyDelivered Shuttle Tankers Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

13. Capex for Recent Shuttle Tankers Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

14. Jones Act Restrictions • U.S. law requires that ships used in domestic trade be built in the U.S., crewed by U.S. citizens and owned by U.S. citizens • The floating production unit is a point on the U.S. OCS and transportation from that point to another point in the U.S. is domestic trade • As a result, shuttle tankers built for use in the Gulf of Mexico will be at least twice the international price

15. U.S. Shipbuilders Capable of Building Shuttle Tankers Primary Contenders • Avondale — could be tied up with Navy amphibious ships and Alaskan tankers • NASSCO — but busy with Alaskan tankers, several ro/ro ships and a possible order for a new class of 12 Navy ships • Kvaerner Philadelphia — new yard, good facilities but inexperienced • Alabama Shipyard — tied to Samsung and Conoco for shuttle tankers • Bender/Tampa — long shot Could, But Not Interested • Ingalls — Navy shipbuilding the core business • Newport News — ditto

16. Refinery Restrictions • Most refineries on the Gulf Coast are limited to receiving ships with maximum draft of 40 feet • Given this constraint, a shuttle tanker with 550,000 to 700,000 barrels can be employed in the trade • A larger tanker could be used if LOOP were the discharge point — but designing a ship for LOOP would limit the flexibility of using the ship

17. Characteristics of the Four FieldsSelected for Shuttle Tanker vs. Pipeline Cost Comparison Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

18. Transport Options from the Four Fieldsto the Citgo Refinery in Lake Charles • Option 1 — Direct shuttle tanker transport • Option 2 — Shuttle tanker via LOOP • Option 3 — Delivery by pipeline via existing infrastructure

19. Option 1 — Direct Shuttle Tanker Transport to the Citgo Refinery in Lake Charles Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

20. Option 2 — Shuttle Tanker Via LOOP to the Citgo Refinery in Lake Charles Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

21. Option 3 — Delivery by Pipeline Via Existing Infrastructure to the Citgo Refinery Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

22. Comparative Transport Cost fromAtwater Valley 113 to Lake Charles Via Pipeline and Shuttle Tanker ($ in net present value cost per barrel) Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

23. Breakeven Distance to InfrastructureDepends On • Seabed terrain — rough or smooth • Discounts that can be negotiated on connecting pipeline tariffs • Shuttle tanker capex • Cost of capital

24. Breakeven Distance from Infrastructure Assuming(1) a 60% Discount on Connecting Pipeline Tariff and (2) Shuttle Tanker Capex of $105 Million Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

25. Breakeven Distance from Infrastructure Assuming(1) a 60% Discount on Connecting Pipeline Tariff and (2) Shuttle Tanker Capex of $125 Million Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001

26. Comparison of Shuttle Tanker Financing Options Source: IMA, Shuttle Tankers Required in the Gulf of Mexico Through 2010, Spring 2001