SEOUL INTERNATIONAL MARITIME AND SHIPBUILDING CONFERENCE (SIMS)

4 November 2008

Peter M. Swift

Managing Director, INTERTANKO

Issues and Challenges for Tanker Shipping

Energy and oil demandOil supply

Tanker supply

Industry Performance

Global Financial Crisis

Principal Issues and Challenges for Tanker Shipping

Primary energy consumption by fuel

0

2

4

6

8

10

1219

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

Hydro Nuclear Coal Gas Oil

Billion tonnes oil equivalents

World oil demand

mbd

65

70

75

80

85

90

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Oil demand by area

mbd

Source: BP/IEASource: BP/IEA

0

4

8

12

16

20

24

28

32

36

4019

65

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Es0

9

Europe US

China Japan

ROW*

*includes Former Soviet Union

Oil consumption per capita

Litres per year

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

USA Japan UK Europe Russia China

World’s largest net oil exporters

mbd

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.01999

2000

2001

2002

2003

2004

2005

2006

2007

UK

Nigeria

Canada

Mexico

UAE

Venezuela

Norway

Iran

Kuwait

FSU

Saudi Arabia

                     

                                    

The importance of oil tanker transportation

World Oil Consumption 4.0 billion ts per year

Transported by sea 2.6 billion ts per year

> 60% transported by sea

Issues and Challenges for Tanker Shipping

Tanker supply

Tanker fleet above 10,000 dwt

m dwt

Source: INTERANKO/ClarksonSource: INTERANKO/Clarkson

0

50

100

150

200

250

300

350

400

450

500

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Combos

Above 200,000

120-200,000

80-120,000

60-80,000

10-60,000

The projection 2008-2011 is based on current f leet, orderbook, phase out and conversion assumptions

Projection

Tanker contracting by segment

US$ bn

Source: Clarkson Shipyard MonitorSource: Clarkson Shipyard Monitor

0

10

20

30

40

50

60

70

80

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

Au

g-0

8

Handy

Chem/Spec)

Panamaxes

Aframaxes

Suezmaxes

VLCCs

1993 and earlier sizes except VLCCs were defined differently

Investment in new tankers

• More than USD 550 billion invested since 2000 with the result that >85% of tanker fleet double hulled in 2010

622

5159

67 68 73 76 79 82 85

9478

4941

33 32 27 24 21 18 15

0

20

40

60

80

100

19

91

19

97

En

d 0

2

En

d 0

3

En

d 0

4

En

d 0

5

En

d 0

6

En

d 0

7

En

d 0

8

En

d 0

9

En

d 1

0

SH/DB/DS

DH

% dwt share

Assumes phase out according to regulations (rounded upwards), max 25 y.o./2015 after 2010.

Issues and Challenges for Tanker Shipping

Industry Performance

Tanker incidents and accidental pollution

Number

Source: INTERTANKO/LMIU/various

‘‘000 tonnes pollution000 tonnes pollution

0

210

420

630

840

105078

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

0

120

240

360

480

600

Misc

Grounded

War

Hull & Machinery

Fire/Expl

Coll/Contact

Oil pollution

The figures for 2008 is a projection based on data from 10 months

Tanker incidents 2007 by type

Source: INTERTANKO/LMIU/various

1%

33%

14%

15%

12%

24%

Collision/contact

Grounding

Fire/Explosion

Hull & machinery

Misc/unknown

Hostilties

Collision Grounding

Hull & Machinery 96 of which 50

engine related

Misc.

Fire & Expl.

326 reported tanker incidents 2007

Tanker incidents 2008 by type

Source: INTERTANKO/LMIU/various

Fire / Explosion 7%

Hostilties

Grounding 17%

Collision / contact 29%

Misc / unknown

14%

Collision/contact

Grounding

Fire/Explosion

Hull & machinery

Misc/unknown

Hostilties

235 reported tanker incidents

2008(10 months)

Hull & Machinery (28%), 65 of which

40 engine related

Issues and Challenges for Tanker Shipping

Global Financial Crisis

Global Financial CrisisGlobal Financial Crisis Fleet Development & Seaborne Oil TradeFleet Development & Seaborne Oil Trade

0

50

100

150

200

250

300

350

400

450

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Projected

Actual

Oil tanker fleet

m dwt

Source: INTERTANKO, Fearnleys

0

2,500

5,000

7,500

10,000

12,500

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06P0

8P1

0

Oil products

Crude oil

???

Source: INTERTANKO, Fearnleys

Seaborne oil trade

bn tonne milesbn tonne miles

Global Financial CrisisGlobal Financial Crisis Tanker Fleet RemovalsTanker Fleet Removals

Source: INTERTANKOSource: INTERTANKO

m dwtm dwt

ConversionsConversions 2005 2006 2007 2008 2009

Small 2Small 2 0 0 13 13 23 23Aframax 0Aframax 0 4 4 19 19 14 14Suezmax 0Suezmax 0 6 6 13 13 9 9VLCC 2VLCC 2 9 9 15 15 30 30

0

6

12

18

24

3019

6919

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

Conversions

Scrapping

?

?

Credit crunch – liquidity; financing; exposures; covenants & more….

• Oil prices ?• Steel prices ?• Newbuild / scrap prices ?• Economic slowdown (or meltdown !) ?• Green agenda slowdown ?• Markets ?• Other ?

Global Financial CrisisGlobal Financial Crisis

Issues and Challenges for Tanker Shipping

Principal Issues and Challenges for Tanker Shipping

Key challenges for the Tanker industry

• Maintaining an international framework of consistent, high standards- global governance for a global industry

• Delivering best environmental performance- meeting society’s expectations

• Ensuring availability of good people (and quality ships)- a quality as well as a quantity issue

Maintaining an international framework of consistent, high standards

Support for:

• IMO and international rather than unilateral local, national or regional legislation

• Ratification of IMO (and ILO) Conventions• IMO Member State Audit scheme plus transparency in

findings• Greater harmonisation and uniformity in procedures

across Port State Control regimes, and better targeting procedures

• Quality Coastal State initiative (to live up to their obligations, - ensuring fair and consistent processes)

• Development of Common Structural Rules for Tankers & Bulkers

• Uniformity in classification societies of requirements, standards and interpretations, survey procedures, etc.

• Greater uniformity in chartering practices and standards

Delivering best environmental performance

• Anti-fouling systems • Ballast Water management • Biofouling• Ship Recycling• Port Reception Facilities (adequacy & affordability) • Waste management (onboard and ashore)

• Marine Noise pollution• Whale strikes • Spill Prevention and Response Planning• VOC emission reductions• Exhaust Gas emissions (Annex VI & its revisions)

• Green House Gas emissions

Ensuring availability of good people - recruitment, training and retention

Initiatives covering:

• Raising awareness of the industry, (www.maritimefoundation.com)

• Attracting entrants to the Maritime Professions (IMO Campaign)

• Provision of Cadet berths and training facilities on ALL new ships

• Maximum utilisation of cadet berths on existing ships• 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

Ensuring availability of good people - welfare and well-being

Initiatives covering: • Unjustified criminalisation, including challenges through

the courts• Support for IMO-ILO guidelines on Fair Treatment of

Seafarers (in event of Maritime Accident)• Improved conditions for shore access when security

constraints active • Reduction in number of inspections• Lessening the technical and operational burden of

equipment, systems and associated paperwork• Guidelines for safe handling of cargoes and fuels, tank

cleaning and entry• Guidelines on implementing ILO Convention on “work

and rest hours” • Higher standards of accommodation as industry “norms”

Hebei Spirit – and the IMO/ILO Fair Treatment Guidelines

Captain Jasprit Chawla & Chief Officer Syam Chetan

of Hong Kong-based tanker Hebei Spirit,

with Roberto Giorgi president of V. Ships

PIRACY – PIRACY – Somali coast / Gulf of AdenSomali coast / Gulf of Aden

Message from International Shipping to the IMO, governments and the UN:

1. Commit sufficient numbers of warships, military aircraft and surveillance assets to the region and coordinate their command and control under the auspices of a United Nations mandate,

2. Enhance the existing UN Security Council resolutions 1816 and 1838 with a further resolution with more explicit text on action required against the criminal gangs and with a timeframe adequate to reaching a final solution,

3. Establish a legal jurisdiction to bring arrested criminals to justice and subsequent punishment. In this regard States are particularly urged to review and amend national legislation to include such due process, noting their obligations under the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation, 1988 (SUA Convention).

Thank you 감사합니다

For more information, please visit:www.intertanko.com

www.poseidonchallenge.comwww.shippingfacts.com

www.maritimefoundation.com

Encouraging Ratification by States Encouraging Ratification by States of International Conventionsof International Conventions

IMO Conventions including:• International Convention on the Control of Harmful Anti-fouling

Systems on Ships (AFS), 2001 (*)• International Convention for the Control and Management of Ships’

Ballast Water and Sediments, 2004 • Annex VI: Prevention of  Air Pollution from Ships, 1996: International

Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto (MARPOL 73/78) (*)

• !996 Protocol to Convention on Limitation of Liability for Maritime Claims (LLMC), 1976

(*)Even though Entered/Entering into Force

Encouraging Ratification by States Encouraging Ratification by States of International Conventionsof International Conventions

Continued:

IMO Conventions including:• International Convention on Civil Liability for Oil Pollution Damage

(CLC), 1969• International Convention on the Establishment of an International Fund

for Compensation for Oil Pollution Damage (FUND), 1971• International Convention on Liability and Compensation for Damage in

Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS), 1996

• International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (*)

ILO Convention(s):• Seafarers' Identity Documents Convention (Revised), (C185), 2003• Maritime Labour Convention, (MLC) 2006

(*) Even though Entered/Entering into Force

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