TANKER Seminar 2004

Istanbul

31 May 2004

Peter M. Swift

TANKER SEMINAR 2004

1. INTERTANKO Today2. Tanker industry

– performance and structure3. Issues and challenges4. Managing the issues5. Challenges ahead

INTERTANKO today:

Vision for the tanker shipping industry:

“ A responsible, sustainable and respected industry able

to influence its own destiny.”

- representing responsible oil and chemical representing responsible oil and chemical tanker owners worldwidetanker owners worldwide

- promoting Safer Ships, Cleaner Seas and Free promoting Safer Ships, Cleaner Seas and Free CompetitionCompetition

- strict membership criteria based on quality strict membership criteria based on quality and performanceand performance

The The International Association of Independent Tanker OwnersInternational Association of Independent Tanker Owners

INTERTANKOINTERTANKO

14 Committees - 4 Regional Panels• Safety & Environment• Technical – incldg. Bunkers, IT • Chemicals, Short Sea, Offshore• Legal, Insurance, Documentary• Vetting, WorldScale• Communications and Public Relations• Publications – Industry Guidelines• Services and advicewww.intertanko.com

The The International Association of Independent Tanker OwnersInternational Association of Independent Tanker Owners

INTERTANKOINTERTANKO

• 230 (+/-)230 (+/-) Members Members

2,200 (+/-) tankers2,200 (+/-) tankers165 million dwt165 million dwt Average age: 11.8 yearsAverage age: 11.8 years

• 280 (+/-) 280 (+/-) Associate MembersAssociate Members

• 25 Staff / 8 Consultants25 Staff / 8 Consultants

Oslo

London

Washington

Singapore

TANKER SEMINAR 2004

1. INTERTANKO Today2. Tanker industry

– performance and structure

3. Issues and challenges4. Managing the issues5. Challenges ahead

2003 in review

• Increased tanker demand – with extra emphasis on quality

• Accelerated introduction of new ships

• Proactive industry on standards and environmental measures

• Volatile but profitable markets

• Awakening investor interest

Tanker Performance

US CIF oil price* - USD

0

5

10

15

20

25

30

35

2000 2001 2002 2003 Max 03

Freight Costs

Fob SpotDubai

*Costs of oil transported from the Persian Gulf to LOOP

Accidental oil spills from tankers 1970-2003

0

100

200

300

400

500

600

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02

Tonne miles

0

2,000

4,000

6,000

8,000

10,000

12,000

Trade in Tonne-miles (Source: Fearnleys)

Pollution tonnes Source. ITOPF

Tonnes

Accidental pollution from tankers 1,000 ts

0

50

100

150

200

250

300

350

400

450

90 91 92 93 94 95 96 97 98 99 00 01 02 03 P'04

Largest spills since 1990

1991 ABT Summer 260,000 ts

1991 Kirki 17,700 "

1991 Haven 144000 "

1992 Agean Sea 74,000 ”

1992 Katina P 72,000 ”

1993 Braer 85,000 ”

1994 Seki 19,000 "

1996 Sea Empress 72,000 ”

1997 Nahodka 17,500 "

1999 Erika 20,000 ”

2002 Prestige 77,000 ”

2003 Tasman Spirit 30,000 ”

Oil into the Sea Annual Releases, best estimates

Average 1990-1999, '1000 ts

Natural seeps

Extraction of oil

Tanker accidents

Tanker operation

Other transportation

River and run-offs

Other shipping

Other consumption related

Source: National Academy of Science

47%

21%

11%

8%

3%

3%

Tanker incidents1978-03

0

200

400

600

800

1000

78 80 82 84 86 88 90 92 94 96 98 00 02

Grounded WarMisc Hull&MachineryFire/ExplCollision

Source: LMIS, Informa, press, INTERTANKO

Number

Tanker incidents 2003 - 130

12%

25%

24%25%

14%

Collision

Groundings

Hull&machinery: 2813 engine,6 steer/prop/rudder5 hull5 other

Fire&Expl.

Misc. .

dw t. Tankers involved36 below 10,00038 10-29,999 dw t35 30-99,999 dw t17 > 100,000 dw t

Age tankers involved :24 built 1970s or earlier48 built 1980s43 built 1990s12 built 2000s, 3 unknow n

7 involving pollution of which Tasman Spirit most serious

Fleet by hullpercentage

622

6074

83

9478

4940

2617

49

0

20

40

60

80

100

1991 1997 End 02 End 03 End 05 End 10

SH* share (%)

DH share (%)

End 05, all tankers built 1982 and earlier goneEnd 10, all tankers built 1987 and earlier gonetrading beyond 2010 subject to administrations

Tanker record

• Continuous improvement - both in safety and environmental performance

• But not complacent……………..

• In a world of “near zero tolerance” for any tanker accident

Tanker Industry & Market Fundamentals

Growth in leading operators – Preference of charterers ?

Frontline 15.1 m dwt 62 tankersTeekay 9.7 m dwt 88 ” (13 on order)Mitsui OSK 9.7 m dwt 62 ” (15 " )World-Wide 7.3 m dwt 28 ” ( 2 " )Kristen 5.5 m dwt 25 ” ( 3 " )Genmar 5.1 m dwt 42 ”Tsakos Group 4.9 m dwt 40 ” (15 " )Dynacom 4.8 m dwt 30 ” (11 " )AP Møller 3.8 m dwt 31 ” (18 " )Thenamaris 3.1 m dwt 31 ” ( 8 " )OMI 2.6 m dwt 33 DS-Schiffahrt 2.3 m dwt 24 ”Stelmar 2.1 m dwt 36 ” ( 5 " )BP 1.7 m dwt 24 ” (24 " )Brostrøm 1.4 m dwt 49 ” (18 " )

Major oil company fleets

0

10

20

30

40

50

60

1974 1978 1984 1990 1995 1997 1999 2002 2004 2005

Chevron/ Texaco

ExxonMobil

BPAmoco

Shell

Exxon

BP

Chevron

Texaco

Mobil

Amoco

dwt

Tanker supply

Accelerated phase-outFurther sales for demolitionIncreased contracting of new tonnageNew entrants (e.g. Chinese interests)Active shipbuilding programme may dampen tanker fleet expansionUSD 100 billion invested in oil tankers since 1995

Tanker phase out - m dwt

0

10

20

30

40

50

60

70

MARPOL*

EU

OPA90

Phase out year

Sales for decommissioning

0

5

10

15

20

25

30

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

Others/NN

Bangladesh

Pakistan

India

Taiwan

Korea

China

4.7 months

m dwt

Tanker deliveries - numbernumber

0

50

100

150

200

250

300

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

10-60,000 Panamax Aframax Suezmax VLCC

Tanker deliveries, demolition, phase out m dwt

-20

-15

-10

-5

0

5

10

15

20

25

30

35

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

MARPOL* 43.7

Demolition

Deliveries 79.2

Net change

EU phase-out 86.2 m dwt*subject to administrations

Tanker demand

OPEC increasing oil productionFSU increasing oil production USA increasing imports / rebuilding strategic stocksCHINA flat domestic oil production, increased imports

Crude oil price - Brent blend spot development 1999-2004

15.0017.5020.0022.5025.0027.5030.0032.5035.0037.50

02-J u

l

02-O

ct

02-J a

n02

-Apr02

-J ul

02-O

ct

02-J a

n02

-Apr02

-J ul

02-O

ct

02-J a

n02

-Apr02

-J ul

02-O

ct

02-J a

n02

-Apr02

-J ul

02-O

ct

02-J a

n02

-Apr

$/bb

l

Billion tonne-miles created by the transportation of one mbd

609

556

324

316

314

293

234

106

50

0 100 200 300 400 500 600

Ras Tanura-LOOP

Ras Tanura-Rotterdam

Ceyhan-LOOP

Ras Tanura-Rotterdam

Ras Tanura-China

Bonny-LOOP

Mongstad-LOOP

Puerto La Cruz-Houston

Mexico-Houston

bn tonne miles

via Cape

via Cape

via Suez

Seaborne oil trade

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002 P05

Mill

ion

tonn

es

Oil productsCrude oil

Source: Fearnleys

TANKER SEMINAR 2004

1. INTERTANKO Today2. Tanker industry

– performance and structure3. Issues and challenges4. Managing the issues5. Challenges ahead

Tanker Issues & Challenges

International versus Regional legislation

Maritime Regulatory Structures Liability and criminalisation Environmental concerns Security

Regional versus international developments

• Security – MTSA vs. ISPS• Liability – EU Penal Sanctions vs.

International Conventions• Safety & Environment – EU (Post Erika &

Prestige) vs. IMO/Marpol & SOLAS• Sulphur Levels – EU, USA vs. IMO

EU + US Agendas !

Maritime Regulatory Structures

Are they working ?• IMO• Flag administrations• Classification Societies• Port State Control

Others: P and I, commercial vetting

LIABILITY and CRIMINALISATION

Increasing liabilities of shipowners & others

Extended criminalisation

Penal Sanctions

led by politicians or by the public ?

Environmental Challenges

Anti-Foulings (Convention – consistent standards)

VOC Recovery (in port and at sea)

Sulphur Levels (in Fuel) / Air emissions

Ship Recycling (Voluntary vs. Regulatory)

Water Ballast Management (Practical solutions)

Security Challenges

• Visas (US and elsewhere)• Seafarer identity cards• ISPS deadline• Non-compliant ports• Security costs• Other………………………

• Links to Piracy and Armed Robbery ?

TANKER SEMINAR 2004

1. INTERTANKO Today2. Tanker industry

– performance and structure3. Issues and challenges4. Managing the issues5. Challenges ahead

Responsible parties working together......Responsible parties working together......

SHIPOWNER

SHIPYARDS

INSURERS

BANKS &INVESTORS

CARGO OWNER

CHARTERER

PORTS & TERMINALS

CLASSSOCIETIES

FLAG STATES

PARTNERSHIP:Working closely with regulators and legislators

Convention Ratification:• AFS Convention (2001)• Annex VI (Air Emissions) (1997)• HNS Convention (1996)• OPRC-HNS Protocol (2000)• Bunkers Convention (2001)

Places of Refuge

Reception Facilities

Port and infrastructure security

The same commitment from politicians and regulators ?

Annex VI – Success at last !

CONVENTION :MARPOL Annex VI: Prevention of Air Pollution from Ships (Sept. 1997)

RATIFIED BY :Bahamas, Bangladesh, Barbados, Denmark, Germany, Greece, Liberia, Marshall Islands, Norway, Panama, Singapore, Spain, Sweden, Vanuatuand now by Samoa

Places of RefugePlaces of RefugeA Solution Waiting to be ImplementedA Solution Waiting to be Implemented

Erika II Package – December 2000Erika II Package – December 2000

Requires Each Member State to Draw up Requires Each Member State to Draw up Emergency Plans for Hosting Ships in Emergency Plans for Hosting Ships in Distress in Places of RefugeDistress in Places of Refuge

PSC – an industry perspectiveSummary:

PSC is actively supported by industry More needs to be done to ensure harmonised standards Greater sharing of inspection records would be beneficial It is an imperative that the integrity of PSC is maintained Better targeting would result from additional analysis of PSC

records Important lessons can be learned by analysing PSC

performance Used as membership criteria by associations Used in assessments by charterers, insurers and others Support for EQUASIS

PSC Operational Issues – the shipowners’ perspective

Need to ensure:

Harmonised standards and training of inspectors

Better / more rational targeting

Consistency in grounds for detention, naming of charterer, appeals procedure, etc.

Development of rewards / incentives

Operational Issues in relation to PSC – the shipowners’ perspective

Ideas to ensure integrity of system:

Regular and open dialogue between responsible owners and PSC officials

Development of ”best practices” within PSC regimes, e.g. With leadership from Paris MoU

Appropriate mechansims for confidential feedback Reports back to IMO of PSC performance

PSC Operational Issues – the shipowners’ perspective

Need to ensure integrity of system:

”Overly enthusiastic” inspectors ”Selective” targeting ”Soft option or easy” targeting ”Malpractice”

- self interest or third party interest

BUT Not all owners are ”guilt free”

The

ROUND TABLE

of

international shipping associations

Examples of Round Table cooperation:

• Improved dialogue with IACS

• Tripartite meetings of owners, builders and class

• Flag State guidelines

• Industry guidelines on Recycling

• The “image” of shipping

Industry Leadership - Flag State Guidelines

Full Ahead with Partners ?Full Ahead with Partners ?

• Feedback mechanisms weak

• Openness and transparency doubted

SHIPOWNER

SHIPYARDS

INSURERS

TRAFFICMANAGEMENT

CARGO OWNER

CHARTERER

PORTS & TERMINALS

CLASSSOCIETIES

FLAG STATES

Examples of where we could do better:

• Tanker Structure Cooperative Forum• Industry guidelines and standards• IACS development of Requirements and

Procedures• Port and Terminal Reviews• Incident reporting and analysis, and casualty

investigations

Initiatives via Information Sharing

Impediments to information sharing:

• commercial competitiveness• legal liability• professional jealousy• lack of incentives

Information Sharing

TANKER SEMINAR 2004

1. INTERTANKO Today2. Tanker industry

– performance and structure3. Issues and challenges4. Managing the issues5. Challenges ahead

Challenges ahead

Zero tolerance – shipping “image”- managing environmental expectations

Establishing goal-based standards Implementing common rulesHuman element in design and operationMachinery reliabilityLiability – as means of punishmentFeedback mechanisms – accidents and

EWS

What are we responsible for ?

In addition to making money

Thank you

www.intertanko.com

2004 : DATES FOR THE DIARY

October 5-6 St Petersburg Mare Forum: “Russian Energy shipments”

October 27-28 AmsterdamExecutive Committee & Council

October 29 AmsterdamMare Forum: “ShipFinance 2004”(Free registration for Members)

Thank you

www.intertanko.com