Leading the way; making a difference

Sustainability of the Oil

Transportation Industry

China Oil Transportation Safety Conference

NanjingSeptember 2012

Tim WilkinsRegional Manager Asia-Pacific

INTERTANKOInternational Association of Independent Tanker Owners

Leading the way; making a difference

INTERTANKO

INTERTANKO is a non-governmental organization established in 1970 to represent the interests of independent tanker operators at the international, regional, national and local levels

Staff of 21 with offices in London, Oslo, Washington, Singapore and Brussels

NGO status at the International Maritime Organization (IMO) and the International Oil Spill Compensation Fund.  Consultative status at the United Nations Conference on Trade and Development.

Leading the way; making a difference

MISSION Provide Leadership to the Tanker Industry in

serving the World with theSAFE, ENVIRONMENTALLY SOUND and EFFICIENT

seaborne transportation of oil, gasand chemical products

INTERTANKO

Leading the way; making a difference

MEMBERSHIP is open to independent tanker owners and operators of oil and chemical tankers (i.e. non-oil companies and non-state controlled tanker owners) who meet the membership criteria.

ASSOCIATE MEMBERSHIP is available to any entity with an interest in the shipping of oil and chemicals.

INTERTANKO

Leading the way; making a difference

250+ Members3,300+ Tankers

285+ Million DWTMembers in 40+ countries

MORE THAN 75% OF THE INDEPENDENT TANKER FLEET

300+ Associate Members

INTERTANKO

Leading the way; making a difference

Economics• Profit & loss• Cost saving• Terms and conditions• Trade growth

Safety and environment • Oil pollution

• GHG emission• ANNEX VI

• Ballast water

World society• Free market and trade• Economy and welfare• Rules and regulations

• Law and politics

Sustainable

Sustainability - the balancing acts

Free competition/Fair trade

AdministeringNatural resources

Stewardship

Profitability & efficiency versus safety and pollution prevention

Leading the way; making a difference

1. Sustainable Industryi. Tanker demandii. Tanker supply

2. Sustainable Performancei. Safety & Environment

INTERTANKO

Political

Socio-Cultural

EnvironmentalTechnological

Economic

Sustainability of the Oil Transportation Industry

Leading the way; making a difference

1. Sustainable Industryi. Tanker demandii. Tanker supply

Leading the way; making a difference

% growth

World GDP. Oil demand and seaborne trade growth

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

-10

-5

0

5

10

15

GDP

Oil demand

Tonne miles

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mbd

Oil production and seaborne trade growth

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

9

12

15

18

21

24

4,000

5,800

7,600

9,400

11,200

13,000

Middle East Oil Prod mbd

Tonne miles

Asia 50% dependent on MEEurope 18% US 7%

bn tonne-miles

Source: Fearnleys/Platou

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mbd

Source: INTERTANKO/IEA

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

-2.6

-2.2

-1.8

-1.4

-1.0

-0.6

-0.2

0.2

0.6

1.0

1.4

1.8

2.2

2.6

3.0

Rest of world* USA Middle East

China World Biofuels demand

Other Asia: 0.24

L America: 0.17

Africa: 0.16

FSU 0.13

Mexico/Canada -0.22

Europe -0.33

Middle East 0.21

USA -0.01

China 0.36

Others: 0.06

Total 0.77

Main Changes:

Area mbd

World increase in oil demand: China, ME, USA & ROW

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mbd

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

2

4

6

8

10

12

14

USA down 1.0 mbd since 2007 (peak)

Europe* down 1.2 mbd since 2003

OECD Asia** down 0.7 mbd since 2000

China up 2.7 mbd since 2000

* includes intra European import** Japan/Korea

Oil import to selected areas

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mbd

27.3% 16.5% 31,8% 8.5% 7.3% 4.8% 3.8%

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0

20

40

60

80

100

120

Nominal price Arab Light Real price Arab Light

Nominal freight rate AG-West Real freight rate AG-West

Deflated by the Consumer Price Index (USD)CPI* index 1982-84=100

Oil price and freight rate

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Tanker demand

• Arab light oil price• 1990-2004 $20.0 per barrel• 2005-2012 $73.0 per barrel• now $110.0 per barrel

• Energy efficiency measures accelerated• Oil is in the process of losing its almost total domination

as a transportation fuel • The US oil import the lowest since 1998• China’s growth rate curbed• Still – positive growth and• Increased dependency on the Middle East

Leading the way; making a difference

1. Sustainable Industryi. Tanker demandii. Tanker supply

Leading the way; making a difference

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

65707580859095

100105110115120125130135140145150155160165170175

Oil demand index

Tonne miles crude tanker index

Tanker fleet index

VLCC price index

Tanker trends – fleet, VLCC price, oil demand and tonne-mile indices

Leading the way; making a difference

m dwt number19

92

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

275

329

383

437

491

545

3,300

3,920

4,540

5,160

5,780

6,400

dwt Number

Projected Tanker Fleet Development 1992-2013

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Tanker deliveries and removals

m dwt

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-25

-5

15

35 SH phase out

Scrapping/ conversion

Delveries

Balance deliv-eries - deletions

year

Assumed removal of double hull tankers

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Tanker phase out, deliveries, scrapping tankers 10,000 dwt+ balance(surplus) assuming various demand increases

m dwt

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-25

0

25

50

75

Last phase out

Deletions

Delveries

Surplus zero trade growth

Surplus 2.5% trade growth

Surplus 4% trade growth

Surplus 6% trade growth

year

Assumed market balance end 2008

-1.8 % growth in 2009 3.8% growth in 20100.5% growth in 2011

Assumed removal DH tankers

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2. Sustainable Performancei. Safety &

Environment

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Number spills above 700 tonnes

Source: INTERTANKO/ITOPF

Num

ber

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0

10

20

30

Number

Average no per decade

1980s 9.3

1970s 25.2

1990s 7.8

2000s 3.3

Safety and Environment

2010-2011 2.5

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Accidental oil pollution into the seaspills per tonne-miles 1970-2011

Source: INTERTANKO/ITOPF

Tonn

es sp

iltpe

r bn

tonn

e m

iles o

il tr

ansp

orta

tion

1970

1979

1989

1999

2009

0

12

24

36

48

60

Safety and Environment

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Tanker incidents by cause 1978-2012Number incidents

Source: Based on incidents reports from Informa superposed with ITOPF statistics

1978

19

80

1982

19

84

1986

19

88

1990

19

92

1994

19

96

1998

20

00

2002

20

04

2006

20

08

2010

20

12

0

210

420

630

840

1050

0

120

240

360

480

600

Miscellaneous

Fire/Expl

Hull & Machinery

Grounded

Coll/Contact

Oil pollution

Safety and Environment

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Safety and Environment

Environmental performance• Ballast Water Management

• Achieving compliance with discharge standards

• Air Emission Reductions• Global switch to cleaner fuels

• Greenhouse Gas Emission Reductions• SEEMP and EEDI: exceeding CO2 target emissions

• Slow steaming...?

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Historical VLCC hire and bunker costs

1992 2002 20120%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bunker

TC hire (+port costs)

Leading the way; making a difference

1. Sustainable Industryi. Tanker demandii. Tanker supply

2. Sustainable Performancei. Safety & Environment

INTERTANKO

Political

Socio-Cultural

EnvironmentalTechnological

Economic

Sustainability of the Oil Transportation Industry

The industry is sustainable and has demonstrated this, but for how much longer will it remain so?

Leading the way; making a difference

It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done.

The Common Law of Business Balance

John Ruskin (1819-1900)

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