C The Search For Clues The Search For Clues zThe last five years has been full of surprises zIn the last 50 years tanker booms lasted less than a year zWhen will the next one come?

Intertanko Greek Committee

13th March 2002 1

C C

The Search For CluesThe Search For CluesThe last five years The last five years has been full of has been full of surprisessurprisesIn the last 50 In the last 50 years tanker years tanker booms lasted less booms lasted less than a yearthan a yearWhen will the next When will the next one come?one come?

BOOM BUST

020406080

100120140160

Jan '73

Jan '75

Jan '77

Jan '79

Jan '81

Jan '83

Jan '85

Jan '87

Jan '89

Jan '91

Jan '93

Jan '95

Jan '97

Jan '99

Jan '01

W/S VLCC 3 Month Av. Layup

Oilprice

World Economy

Supply

W. Europe10.4 m bpdN. America8.7 m bpd

Japan4.3 m bpd

S. Korea2.5 m bpd

India1.3 m bpd

China0.9 m bpdSingapore1.1 m bpdOther Asia2.1 m bpd

CRUDE IMPORTS

34.2 m bpd

Others2.9 m bpd

PRODUCTSPRODUCTS

Asia3.4 m bpd

OilDemand75.6m

bpd

EnergyDemand

171 m bpd

Trade

Middle East14.3 m bpd6-12,000 m

CRUDE EXPORTS

34.2 m bpd

N. Sea4.3 m bpdL. America4.3 m bpd

Africa5.1 m bpdIndonesia.7 m bpd

FSU1.5 m bpd

Others4 m bpd

Demand

Long Haul

Short HaulShort Haul

VLCCs127.4 m dwt

Suezmax40.9 m dwt

Aframax50.6 m dwtPanamax

15.1 m dwt

Products59.3 m dwt

FLEET

293 m dwt

Orderbook50.3 m dwt

Scrapping14 m dwt

Refinery

Freight market

Shipowner

Own Trade

SpotMarket

Timecharter

Oil CompanyShipyards

Cash

Bank Credit Policy

Consumer

9.7 m bpd9.7 m bpd

Oil Traders

Local Oil Production41.2 m bpd 0

20

40

60

80

100

120

140

160

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

W/S

Gul

f Eur

ope

Supply driven cyclesDemand driven cycles1

2 3

4

5

6 78 9

10

Agenda For TodayAgenda For Today

1)1) Tanker Market TodayTanker Market Today2)2) Economic FundamentalsEconomic Fundamentals3)3) Newbuilding Newbuilding 4)4) SupplySupply--Demand BalanceDemand Balance5)5) Demand TrendsDemand Trends6)6) FSU Oil TradeFSU Oil Trade7)7) DeliveriesDeliveries8)8) ScrappingScrapping9)9) Freight Rate ForecastFreight Rate Forecast10)10) ConclusionsConclusions

These big waves make

me feel nervous


13th March 2002 2

Earnings Earnings March March 20022002

This chart shows average earnings today for the ship type, as a % of the average earnings during the last 7 years

-60% -50% -40% -30% -20% -10% 0%

VLCC 1990sSuezmax

AframaxProducts

CapesizePanamax

Handymax

ChemicalOffshore

LPGContainer

% deviation from 7 year trendFig 7

Tanker Index In The 1990sTanker Index In The 1990s

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Jan '90

Nov '90Sep '91Jul '92

May '93Mar '9

4Jan

'95Nov '9

5Sep '96Jul '97

May '98Mar '9

9Jan

'00Nov '0

0Sep '01

$/day

earni

ngs

Trough 1$9156/dayJune 1992

Fig 14

Trough 2$11,999/day

Nov 1999

Trough 314,800$/dayMar 2002

7 Year Tanker Perspective7 Year Tanker Perspective

$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000$90,000

$100,000

Jan '93

Sep '93May '

94Jan

'95Sep '95

May '96

Jan '97

Sep '97May '

98Jan

'99Sept '99May'0

0Jan

'01 Sept

$/day

earni

ngs

ULCC VLCC (Modern)VLCC (1970s) SuezmaxAframax Products

Note that products took off

much laterThe market peak in 2000 was a massive deviation from the 10 year trend in tanker earnings. Rates still not hit bottom.

Fig 14

Laid Up TonnageLaid Up Tonnage

Things may seem Things may seem bad, but the market is bad, but the market is still tightly balancedstill tightly balancedLaid up tonnage is Laid up tonnage is still low still low –– so from a so from a market viewpoint this market viewpoint this is not the 1980sis not the 1980sOr the early 1990sOr the early 1990s

01020304050607080

1971

1976

1981

1986

1991

1996

2001

M. d

wt l

aid

up

Tankers

Fig 9

Tanker DemolitionTanker Demolition

2

502

1,002

1,502

2,002

2,502

3,002

3,502

4,002

4,502

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

000 d

wt sc

rapp

ed / m

onth

Tanker

Fast Demolition Response

Aframax 2Aframax 2ndnd Hand PriceHand Price

0

5

10

15

20

25

30

35

40

45

Jan

'92

Jan

'93

Jan

'94

Jan

'95

Jan

'96

Jan

'97

Jan

'98

Jan

'99

Jan

'00

Jan

'01

Jan

'02

$ Milli

on 5

Year

Old

0

5

10

15

20

25

30

$ Milli

on 10

Yea

r Old

5 Year Old (Double) 10 Year Old (Single)

Prices only just back to where they were three years ago5 year old

Aframax (left axis)

Prices falling, but not back to 1999 trough


13th March 2002 3

-10

-8

-6

-4

-2

0

2

4

6

8

Jan

'93

Jan

'94

Jan

'95

Jan

'96

Jan

'97

Jan

'98

Jan

'99

Jan'

00

Jan'

01

Jan

'02

Jan

'03

% per annum growth

Pacific Economies

Atlantic Economies

This trough looks

unusually deep

Forecast?Just past the

bottom??

Economy on the slideEconomy on the slide

Fig 10

Oil Price back to 1990s Oil Price back to 1990s AverageAverage

After two years of After two years of high rates, oil price high rates, oil price under $20/bblunder $20/bblTime lag of about 1Time lag of about 1-- 2 2 years between price years between price change and impact on change and impact on consumptionconsumptionShort haul production Short haul production is increasingis increasing

05

10152025303540

Jan '90

Jan '92

Jan '94

Jan '96

Jan '98

Jan-00

Jan '02

$ per Barrel

Oil PriceASIA CRISIS

STRIKES!

Lower interest ratesLower interest ratesLIBOR has fallen to LIBOR has fallen to 1.9%, the lowest level 1.9%, the lowest level since the early 1960s since the early 1960s recessionrecessionThe cost of capital is The cost of capital is one third what it was one third what it was a year agoa year agoUS Treasury model US Treasury model says .6% increase in says .6% increase in GNP for each 1% fall GNP for each 1% fall in interest ratesin interest rates

0%

2%

4%

6%

8%

10%

Jan '90

Jan '92

Jan '94

Jan '96

Jan '98

Jan-00

Jan '02

LIBORFall in LIBOR helped tanker

owners in 1992/3

Shipbuilding Deliveries ForecastShipbuilding Deliveries Forecast

We are now at the We are now at the peak of the peak of the replacement cyclereplacement cycleShipyard capacity is Shipyard capacity is 49 m dwt, but 49 m dwt, but demand likely to drop demand likely to drop to 30 m dwtto 30 m dwtTiming will depend on Timing will depend on how much oil is how much oil is sourced in the Middle sourced in the Middle EastEast

05

101520253035404550

1988

1991

1994

1997

2000

2003

2006

2009

2012

Mill

ion

dwt d

eliv

erie

s

OtherBulkTankers

Forecast Peak

dependson ME

oil

Fig 13

Tanker replacement

over


13th March 2002 4

The Shipbuilding Capacity IssueThe Shipbuilding Capacity Issue

1963

1967

1971

1975

1979

1983

1987

1991

1995

1999

010203040506070

ScrappingDeliveries

Remains of 1970s fleet 70 m dwt tankers & 140 total

Deliveries 47 m dwt in

2001

Timing of old ships scrapping

crucial

Million Dwt

Fig 12

The Deliveries & OrderbookThe Deliveries & Orderbook

0

1

2

3

4

5

6

7

1Q94

1Q95

1Q96

1Q97

1Q98

1Q99

1Q00

1Q01

1Q02

1Q03

1Q04

1Q05

1Q06

Millio

n cgt

of or

ders

Tankers Bulkers Gas Container Other

Tankers

Container

Bulkers

Cruise etc

Tanker Replacement Demand Now Tanker Replacement Demand Now Covered by the OrderbookCovered by the Orderbook

The replacement The replacement demand under the demand under the IMO phase out IMO phase out programme is programme is 62.2 m dwt62.2 m dwtAt end Feb 2002 At end Feb 2002 the tanker the tanker orderbook was orderbook was 62.3 m dwt62.3 m dwt

0 10 20 30

VLCC

Suezmax

Aframax

Panamax

Handy 40-60k

Handy 28-40k

Million Dwt demand/orderbook

Orderbook

ReplacementDemand

VLCC Building CapacityVLCC Building CapacityThe VLCC building The VLCC building capacity is currently capacity is currently about 50 ships a yearabout 50 ships a yearThere is no There is no replacement demand replacement demand before 2005 and the before 2005 and the demand to meet trade demand to meet trade growth is 40growth is 40-- 60 ships60 ships 9

955

44

33

11

0 2 4 6 8 10

HyundaiDaewooHitachi

IHISamsung

MitsubishiMitsui

KawasakiHalla

Samo

VLCC pa capacity

So the shipyards look like So the shipyards look like having a problem…having a problem…

Tankers, 26%

Bulkers, 22%

Gas , 7%

Container, 23%

Other , 22%

Share of deliveries 1994 to 2001 (including orderbook)

Aframax Tanker PriceAframax Tanker Price

0

10

20

30

40

50

60

Jan '

79

Jan '

81

Jan '

83

Jan '

85

Jan '

87

Jan '

89

Jan '

91

Jan '

93

Jan '

95

Jan '

97

Jan '

99

Jan '

01

Jan '

03

$ millio

n new

build

ing pr

ice

Competition pushes "Normal" price down

Trough 1986 - all shipbuilders lost

money

Asia Crisis & Won devaluation cause dip

in prices

?


13th March 2002 5

170190210230250270290310330

1988 1990 1992 1994 1996 1998 2000 2002

Million DWT

FleetCrude Tanker DemandCrude Forecast

Balance of Supply & Demand

Tanker demand grew by 59 m dwt between 1990-99 but the fleet grew by 23 m dwt lessThe balance is tight, so future deliveries and scrapping matter

The balance is precarious

Crude Tanker Demand Crude Tanker Demand ForecastForecast

The tanker fleet added The tanker fleet added 52 m dwt in the 1990s.52 m dwt in the 1990s.Growth came from:Growth came from:--

USA 17 m dwtUSA 17 m dwtEurope 5.4 m DwtEurope 5.4 m DwtJapan 6 m dwtJapan 6 m dwtOther 25.6 m dwtOther 25.6 m dwt

The forecast adds 46 m The forecast adds 46 m dwt by 2007, 7 m dwt a dwt by 2007, 7 m dwt a yearyear 230

250

270

290

310

330

350

1992

1994

1996

1998

2000

2002

2004

2006

Tanker DemandLow ScenarioHigh scenario

Million dwt crude demand

17 m dwt extra from USAand 30 m dwt from others

Does not look much, but

slowdown will cause a problem

Big growth in 2000

High

Low

Fig 15

World Oil Demand To GrowWorld Oil Demand To GrowCorrelation between oil Correlation between oil demand and sea tradedemand and sea tradeOil trade (crude & Oil trade (crude & products) grew by 1.04 m products) grew by 1.04 m bpd pa in 1990sbpd pa in 1990sDemand stagnant in 2001, Demand stagnant in 2001, down from .7 m bpd in down from .7 m bpd in 2000!2000!Oil demand expected to Oil demand expected to grow by about .5 m bpd in grow by about .5 m bpd in 2002 & .7 m bpd in 20032002 & .7 m bpd in 2003

Million barrels per day increase

0

0.5

1

1.5

2

2.5

1990

1992

1994

1996

1998

2000

2002

IEA forecastIncrease in oil demandIncrease in sea trade

US Oil ImportsUS Oil Imports

44.5

55.5

66.5

77.5

88.5

9

Jan-

91

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Millio

n Ba

rrels/

Day

20

25

30

35

40

45

50

Millio

n Dw

t Tan

ker D

eman

d

Dwt Tanker DemandUS Crude Imports

Since Jan 1997 US imports have added 20 m dwt of tanker demand, due mainly to the switch from Short

to long haul oil


13th March 2002 6

US Products Import Boom OverUS Products Import Boom Over

In 1990s products In 1990s products imports averaged imports averaged 1.5 m bpd1.5 m bpdIn January 2001 In January 2001 they hit 2.77 m bpdthey hit 2.77 m bpd230,000 bpd came 230,000 bpd came from Middle East, from Middle East, 150,000 bpd from 150,000 bpd from EuropeEuropeNow back down to Now back down to 1.6 m bpd1.6 m bpd

11.21.41.61.8

22.22.42.62.8

3

Jan-91Jan

-92Jan

-93Jan

-94Jan

-95Jan

-96Jan

-97Jan

-98Jan

-99Jan

-00Jan

-01Jan

-020510152025303540U S Imports

Products rates

Dip during the 1999 recession

000 bpd 000 $/day

Asian ImportersAsian Importers

Imports of “other Asia” Imports of “other Asia” have increased from 3.4 m have increased from 3.4 m bpd in 1990 to 8 m bpd in bpd in 1990 to 8 m bpd in 20002000Korea and “others” are the Korea and “others” are the biggest, but note China biggest, but note China coming up fast coming up fast India took a big jump when India took a big jump when the Reliance refinery came the Reliance refinery came on streamon streamAnother 2.5 m bpd by Another 2.5 m bpd by 2007?2007? 0.0

1.02.03.04.05.06.07.08.09.0

1991

1993

1995

1997

1999

2001

Korea IndiaSingapore ChinaOther Asia

Million Barrels Per day

Asia crisisdents trade

Spot Crude Oil ShipmentsSpot Crude Oil ShipmentsOil shipments Oil shipments took a big dip took a big dip in 2001in 2001

0

200

400

600

800

1,000

1,200

1,400

1995

1996

1997

1998

1999

2000

2001

Mill

. ton

s pa

ULCC VLCCSuezmax AframaxPanamax

VLCC Spot Shipments SlumpVLCC Spot Shipments Slump

20

22

24

26

28

30

32

34

36

38

40

Dec-95

Dec-96

Dec-97

Dec-98

Dec-99

Dec-00

Dec-01

Mill

ions

Mill

ion

tons

oil/

mo

nt

VLCC

This is a 20% drop in monthly cargo

VLCC, Suez & Aframax Spot VLCC, Suez & Aframax Spot LiftingsLiftings

15

20

25

30

35

40

Dec-95

Dec-96

Dec-97

Dec-98

Dec-99

Dec-00

Dec-01

Mill

ions

Mill

ion

tons

oil/

mon

th

VLCC ULCC SuezmaxAframax Panamax

Russian & Caspian Oil Russian & Caspian Oil In terms of oil In terms of oil reserves and reserves and production, Russia is production, Russia is still one of the worlds still one of the worlds leading countriesleading countriesThis year it will be This year it will be second only to Saudi second only to Saudi Arabia as an exporterArabia as an exporter


13th March 2002 7

Primorsk

47.9 m tons

71.7 m tons

Russian Oil TradeRussian Oil TradeOil Fields

Russian Oil ExportsBy sea

131.9 m mt

12.3 mtNovorossisk

Cas

pian

Black Sea

FSU Oil Revenue & ExportsFSU Oil Revenue & Exports

Oil is a major issue Oil is a major issue for Russia and the for Russia and the tanker markettanker marketRussian and Russian and Caspian oil Caspian oil resources play a resources play a major part in future major part in future of tanker demandof tanker demandGraph includes Graph includes productsproducts

Russian Oil Revenue

05

1015202530354045

199019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

01

$ bi

llion

0123456

Mill

ion

bpd

expo

rts

Oil revenue

Exports

Fig 6

The Caspian The Caspian

0

500

1000

1500

2000

2500

3000

1999 2000 2005 2015

000

bpd

UzbekistanTurkmenistanKazakhstanAzerbaijan

Caspian oil exports Caspian oil exports were .84 m bpd in were .84 m bpd in 20002000Forecasts show 1.5 m Forecasts show 1.5 m bpd by 2005 (1.2bpd by 2005 (1.2-- 2.1 2.1 range) & 2.6 m bpd range) & 2.6 m bpd by 2015by 2015

Primorsk

Caspian

E. Med

Iran

Pakistan

Many Pipeline ProjectsMany Pipeline Projects Novorossysk

Cehan

Kharg Island

1 m bpd

1 m bpd

.56 m bpd Tengiz


13th March 2002 8

The BakuThe Baku--Ceyhan PipelineCeyhan Pipeline

25 Year Tanker Perspective25 Year Tanker Perspective

0

5

10

15

20

25

30

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

$000

/day

Afra

max

ear

ning

s

05101520253035404550

Deliv

erie

s - m

. dwt

DemolitionDeliveriesOrderbookAframax 1 Year TC

Fig 16

Heavy deliveries

2001/2

The Tanker OrderbookThe Tanker OrderbookThe tanker The tanker orderbook is 63.7 m orderbook is 63.7 m dwtdwtThe chart opposite The chart opposite shows deliveries in shows deliveries in cgt by quartercgt by quarterThe delivery profile The delivery profile peaks in the 1peaks in the 1stst

quarter of 2003quarter of 2003 0.0

0.5

1.0

1.5

2.0

2.5

1Q94

1Q97

1Q00

1Q03

1Q06

Mill

ion

cgt /

quar

te

Peak in 1st qtr 2002

Tanker Deliveries & O/BTanker Deliveries & O/B

The number of The number of tankers delivered tankers delivered will almost double in will almost double in 20022002Volume will pick up Volume will pick up further in 2003further in 2003This is a This is a challenging targetchallenging target

1371371191196565HandyHandy288288235235124124TOTALTOTAL

9943432626

3838

222244PanamaxPanamax66661414AframaxAframax29291515SuezmaxSuezmax

34342626VLCCVLCC

2001 2002 2003

Tanker Orderbook % FleetTanker Orderbook % Fleet

0%

5%

10%

15%

20%

25%

30%

Jan '92

Jan '93

Jan '94

Jan '95

Jan '96

Jan '97

Jan '98

Jan '99

Jan '00

Jan'01

Jan'02

VLCC Suezmax AframaxPanamax Handy Line 6

Freight market takes off

Market sentiment hits rock bottom


13th March 2002 9

Tanker Fleet & DemolitionTanker Fleet & Demolition

The tanker fleet grew The tanker fleet grew by 37 m dwt in the by 37 m dwt in the 1990s1990sIt peaked at 296.7 m It peaked at 296.7 m dwt in October 2001dwt in October 2001Today it is down to Today it is down to 288.1288.1This is real dynamic This is real dynamic adjustment!adjustment!

250255260265270275280285290295300

Feb-94

Feb-95

Feb-96

Feb-97

Feb-98

Feb-99

Feb-00

Feb-01

Feb-02

Mill

ion

dwt

0.0

0.5

1.0

1.5

2.0

2.5

3.0Fleet Scrap

Tanker FleetsTanker FleetsAframax & Suez Fleet

30

35

40

45

50

55

Jan-94

Jan-96

Jan-98

Jan-00

Jan-02

Mill

ion

dwt

AframaxSuezmax

VLCC Fleet

115117119121123125127129131

01/01/

91

01/01/

93

01/01/

95

01/01/

97

01/01/

99

01/01/

01

Milli

on d

wt

Fast reaction

VLCC scrapping kicked in just as VLCC scrapping kicked in just as chartering took offchartering took off

120

122

124

126

128

130

132

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Mill

ion

dwt V

LCC

flee

4.04.55.05.56.06.57.07.58.08.59.09.510.0

Mill

ion

bpd

of o

il fix

ed in

VLC

C

VLCC FixturesVLCC Fleet

Note how VLCC fixtures back down to 1996 levels14 VLCCs scrapped in the

first two months of 2002

Part 9 The ForecastPart 9 The ForecastThat’s a lot of That’s a lot of informationinformationWhat does it all meanWhat does it all meanThe forecast for The forecast for average tanker average tanker earnings isearnings is

Down 40% this year Down 40% this year (compared with 2001)(compared with 2001)Up 20% next yearUp 20% next yearUp 45% in 2004 (if you Up 45% in 2004 (if you play your cards right)play your cards right)

Should I order?

Tanker ForecastTanker ForecastQuarterly earnings forecast

-5,0005,000

15,00025,00035,00045,00055,00065,00075,00085,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

$000 p

er day

earni

ngs

PoductAframaxSuezmaxVLCCAframax ForecastSuezmax ForecastVLCC Forecast

Fig 17


13th March 2002 10

10. Conclusion….10. Conclusion….

Weak fundamentals, but no sign of Weak fundamentals, but no sign of structural threatstructural threatRecord deliveries of 25 m dwt & Record deliveries of 25 m dwt & looming shipyard capacity problem looming shipyard capacity problem -- cheap tankers?cheap tankers?Tankers balance still tight, but Tankers balance still tight, but heavy orderbook and weak heavy orderbook and weak demand outlook. demand outlook. Supply responding pretty fast, so Supply responding pretty fast, so expect improvement next yearexpect improvement next year

Documents

C The Search For Clues The Search For Clues zThe last five years has been full of surprises zIn the last 50 years tanker booms lasted less than a year zWhen will the next one come?