1. The Product Tanker Market and Phase-Out Implications by Erik.Ranheim@INTERTANKO.com Manager Research and Projects 4th Annual Combined Chemical & Product Tankers Conference London, 5 December 2007 ‘ Erik.Ranheim@INTERTANKO.com

2. International Association of Independent Tanker Owners Trade association established in Oslo in 1970 Spokesman, information service, meeting place Membership 280 Members 40+ countries 2,800+ tankers 230 million dwt 75% of independent tanker fleet 300 Associate Members INTERTANKO

3. Product tanker market and phase out Product tanker demand Phase-out review Phase-out consequences

4. Market trends

5. Tanker segments Average tankers Advanced tankers/operators Low quality tankers Bad market Alang beachNewbuildings

6. Product tanker trade '000 m tonnes Source: BP Review

7. Product tanker trade '00 m tonnes Source: Fearnleys 2004 5.3% increase 2005 8.9% increase 2006 5.0% increase 2007 4.7% increase 2008 3.8% increase

8. Product import to the US, Japan and Europe mbd Source: IEA/PAJ/EIA Biodiesel More mpg

9. New Refinery distillation capacity projects by region 2007-12 mbd Source: Source: Petroleum Economist/INTERTANKO Firm capacity expansion 9.3 mbd + 2.5 mbd planned

10. New Refinery distillation capacity projects by region 2007-12 mbd Source: Petroleum Economist/INTERTANKO

11. The world is moving away from HFO Oil consumption by product - % share Source: INTERTANKO/BP Review % share mbd

12. Refineries are moving away from HFO ……..company’s early commitment in the mid- 1990s to making cleaner fuels, and by being proactive about finding the technology needed to achieve this.

13. Why switching to distillates? A simple solution : 1. 1. Significant global reduction of emissions SO x, - 60 - 80%, PM, - 80 - 90%, NOx, - 15%, No heavy metals, Less soot 2. 2. A more healthy environment for crew and dockworkers 3. 3. No onboard waste 4. 4. Reduces overall fuel consumption (and CO 2 emission) ) 5. 5. Better and easier control or monitoring of ships Cleaner, Simpler and more Efficient ships

14. Why switching to distillates?..continue: 6. 6. Fewer engine breakdowns and potential pollution accidents 7. 7. Less pollution when spilled 8. 8. Provides opportunity for the development of more efficient engines (with less emissions) 9. 9. Applies to all ships and all current engines 10. 10. No safety problem in connection with switching fuels Cleaner, Simpler and more Efficient ships

15. Why not scrubbers? Still under testing (2 ship limited scale) Large Expensive Difficult (impossible?) to install CO 2 emission (buffering effect) leaves hazardous waste waste disposal – no-one wants it Tonnes of seawater need to be processed/added We are involved in transportation – not waste treatment

16. Phase-out

17. Phase-out history After Exxon Valdez, on 18 August 1990, the US President signed into law the US Oil Pollution Act of 1990 (OPA 90). This was the first regulation to mandate double hull design for tankers with a building contract after 30 June 1990 and with a delivery after 31 December 1992. First IMO phase-out initiated by the US OPA 90 - ratified by the IMO March1992 - enforced as from July 1993. Accelerated IMO phase-out initiated by Europe as a result of the ERIKA accident outside France - ratified by the IMO April 2000 - enforced as from September 2001. Further acceleration of IMO phase-out initiated by Europe as a result of the PRESTIGE accident outside Spain - ratified by the IMO December 2003, enforced as from April 2005 - enforced by Europe as from October 2003. The European Union’s Regulation (1726/2003) on single hull tankers took effect on 21st October 2003. Revised Annex II was implemented 1 January 2007 NOT phase-out. Both ERIKA and PRESTIGE carried Heavy Fuel Oils that can pollute up to ten times more than crude oil. IMO therefore adopted a new regulation – Regulation 13H of Annex I of MARPOL 73/78 – banning the carriage of heavy grade oil as cargo in single hull oil tankers as from 5 April 2005.

18. Tanker recycling by receiver countryNo.

19. Tanker recycling 10,000- 79,999 dwt m dwt

20. Phase-out of small tankers as from 2008 Tankers 600 - 4,999 dwt by hull - 3,429 tankers – 8 m dwtNo.

21. Tankers 600 - 4,999 dwt by type - 3,429 tankersNo.

22. Tanker deliveries, phase-out, demolition 5,000 - 9,999 dwt – 1095 tankers, 385 SHNumber Fragmented, many geographical segments Cabotage trade Phase-out overhang, 118 tankers

23. Tanker deliveries, phase-out, demolition and 10,000 - 24,999 dwtNumber Fleet - 5.2 m dwt, 419 tankers Phase-out – 0.6 m dwt, 187 tankers Orderbook - 3.1 m dwt, 39 tankers Phase-out overhang 70 – removed 2008 – 2001

24. Tanker deliveries, phase-out, demolition and 25,000 - 34,999 dwtNumber Fleet – 18.4 m dwt, 776 tankers Phase-out – 3.7 m dwt, 124 tankers Orderbook - 2.3 m dwt, 123 tankers Phase-out overhang - 3.9 m dwt, 70 – assumed removed 2008 – 2011

25. Tanker deliveries, phase-out, demolition and 35,000 - 52,999 dwtNumber Fleet – 53.0 m dwt, 1,225 tankers Phase-out – 7.0 m dwt, 168 tankers Orderbook – 24.8 m dwt, 533 tankers Phase-out overhang - 0.7 m dwt, 9 – removed 2008 – 2010

26. Tanker deliveries, phase-out, demolition, 53,000 dwt - 79,999 dwtNumber Fleet – 27.3 m dwt, 399 tankers Phase-out – 6.1 m dwt, 95 tankers Orderbook – 8.4 m dwt, 166 tankers Only handful on order 53,000 dwt – 73,000 dwt

27. Tanker deliveries, max. phase -out, demolition and 5,000 - 79,999 dwtNumber Fleet – 111.8 m dwt, 3,914 tankers Phase-out – 22.3 m dwt, 957 tankers Orderbook – 38.7 m dwt, 1,131 tankers

28. Tanker deliveries, min. phase-out, demolition and 5,000 - 79,999 dwt M dwt Fleet – 111.8 m dwt, 3,914 tankers Phase-out – 22.3 m dwt, 957 tankers Orderbook – 38.7 m dwt, 1,131 tankers

29. Position of administrations

30. SH trading beyond 2010? –AustraliaNo –ChinaNo –EU No –Mexico No –Romania No – –Bahamas Yes – –Barbados Yes – –Liberia Yes – –Marshall Isl.Yes – –Panama FlagYes – –JapanYes – –Singapore Yes – –India Yes – –Hong Kong * Yes *20 years Flag/Port States positions Trading until the age of 25 years – –United States N/A

31. Hulls

32. Tankers 5,000 - 79,999 dwt by hull

33. Tankers 5,000 - 79,999 dwt phase-out - orders - fleet m dwt of which overdue 3.7 m dwt

34. Conclusion

35. Structural changes in the product tanker market P hase-out on schedule with no major problems P hase-out minor market impact 2010 situation still unclear