IMO Sulfur Regulations Impact on the Bunker Fuel Supply

1. IMO Sulfur Regulations Impact on the Bunker Fuel Supply October 25-27, 2009 2009 Energy Buyers Conference Miami Beach, Florida © Poten & Partners 2009

2. Global & Regional Marine Fuel Regulations HISTORICAL 2005, May 19 IMO Global cap – 4.5%S 2006, May 19 IMO Baltic Sea ECA – 1.5%S 2006 Aug 11 EU EU passenger ships 1.5%S 2006, Aug 11 EU EU ports - 1.5%S MDO & 0.2%S MGO 2007, Jan 1 CARB California, auxiliary engines - 1.5%S MGO & 0.5%s MDO 2007, Nov 22 IMO North Sea/English Channel ECA - 1.5%S 2009, Jul 1 CARB California, 24 nm off coast - 1.5%S MGO & 0.5%S MDO FUTURE 2010, Jan 1 EU EU waterways & 2 hrs+ ships at berth – 0.1%S 2010, Jan 1 CARB California, auxiliary engines – 0.1%S MGO 2010, Jul 1 IMO Existing ECAs – 1.0%S 2012, Jan 1 IMO Global cap – 3.5%S 2012, Jan 1 CARB California, 24 nm off coast - 0.1%S MGO 2012, Aug 1 IMO U.S. & Canada ECA – 1.0%S (200 nm off coast) 2015, Jan 1 IMO Existing ECAs – 0.1%S 2020/25, Jan 1 IMO Global cap – 0.5%S

3. California Marine Fuel Stance • July 2009 California banned residual bunker fuel burn 24 nm off its coast and imposed burning of 1.5%S MGO & 0.5%S MDO • Market response: Los Angeles MDO/MGO price jump compared to other major bunkering ports • Possibility of oil spill from a ship whose engine fails while switching fuel

4. International Bunker Fuel Sales Overview *Europe excludes Former Soviet Union republics.

5. July 2010 ECA 1.0%S Marine Fuel Switch:Nothing to Panic About • In NW Europe & the Baltic Sea, domestic residual bunker sales account for 9% of total heavy bunker sales • In the U.S. and Canada, domestic residual bunker sales account for 4% of total heavy bunker sales • The existing Europe and the future North America ECAs’ domestic heavy bunker sales are a mere 1% of global heavy bunker sales

6. January 2015 - ECA 0.1%S Marine Fuel Switch • In 5 years, SECAs would reduce bunker fuel sulfur content from current 1.5%S to 0.1%S • 0.1%S bunker fuel cannot be achieved by desulfurizing residual fuel oil; switching to marine gasoil required • Generally refiners look to invest in resid destruction capacity and produce transportation fuels • Judging from 2008 gasoil/diesel net balance in the existing ECA and future North America ECA, MDO/MGO availability would not be an issue • Depending on MDO/MGO cost, vessel exhaust scrubbing technology could be a feasible option for shipowners

7. Global Marine Fuel Cap In January 2012, global marine fuel sulfur content would be capped at 3.5%S. Since average global sulfur content is 2.7%, this sulfur limit is generally symbolic

8. Global Marine Fuel Cap - Continued • In 2020/2025, global marine fuel sulfur would be reduced to 0.5%S from 3.5%S (ECAs would be already limited to burning 0.1%S marine fuel) • Global marine fuel demand (HFO & MDO/MGO), which in 2008 accounted for about 240 million mt, could increase by 10-15% by year 2020/2025 • Global production of gasoil/diesel would not be sufficient to meet the surge in world 0.5%S MDO/MGO demand • To speculate – unless scrubbers become commercially viable, refiners will need price incentives to desulfurize HFO. A combination of both may occur.

9. Talked About Future ECAs • Mexico is considering joining the U.S. and Canada North America ECA initiative • Mexico’s domestic marine fuel burn (HFO and MDO/MGO) is about 1 million mt and projected to grow by 2015. • Mexico is net short diesel/gasoil, so as a prospective ECA member it would turn to MDO/MGO imports to meet demand. • Countries in the Mediterranean region (in Europe, the Middle East and Africa) would likely not agree on an ECA by 2020. • Mediterranean countries’ marine fuel burn (HFO and MDO/MGO) is about 2.5 million mt and projected to decline by 2015 • Mediterranean sea countries are net short diesel/gasoil, so prospective ECA would call for MDO/MGO imports.

10. Near-Term Tanker Shipping Expectations Marine Fuel Regulations 2010-2025 What the Future Holds for the International Shipping Industry • Still bullish on China and India • Lower than ‘expected’ GDP growth assessments do not necessarily denote low growth • Cash injections by certain governments will help support shipping industry in certain markets, particularly in the East • Demand in OECD markets expected to recover slowly through the remainder of 2009 bolstering tanker demand • Economic recovery will be largely dictated by policy • Banking sector regulation • Stimulus and deficit • Taxes • Likelihood of the ‘double-dip’ recession A Focused Analysis and Outlook on the Marine Fuels Market - Overview of Marine Fuel Historical and Future Regulations - Residual Bunker Fuel and Marine Gasoil/Diesel (2007-2008) Demand by Region - ECA 1.0%S Marine Fuel Limit (July 2010) - Impact of Future North America ECA (2012) - ECA 0.1%S Marine Fuel Limit (January 2015) - Global 0.5%S Bunker Limit (2020/2025) - Future Marine Fuel Pricing Implications to be published December 2009

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