What’s Good and What’s Bad for Tanker Operators? Tanker Operator Conference Hamburg April 2016

Martin L Shaw MBA C Eng C Mar Eng FI Mar EST AFNI Managing Director Marine Operations and Assurance Management Solutions Ltd © Marine Operations and Assurance Management Solutions Ltd

Outline • • • • • •

The good news The bad news…new regulations The world The oil industry The customer The ship operators challenges – The system – Is there another system?

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Tanker industry

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Good News?

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Fleet Growth

Source Intertanko © Marine Operations and Assurance Management Solutions Ltd

Good News and Bad News? IGS COW Steering Gear SBT etc.

SECA’s

New Vessels Double Hull

ISM Code

Tightening of SOLAS MARPOL STCW

Erika/ Prestige

ISPS

TMSA1

Ballast water Ship Efficiency GHG MLC Etc

TMSA2 Piracy

Development of Port State and Vetting Building Boom Low Freight Rates © Marine Operations and Assurance Management Solutions Ltd

The world

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World growth, oil growth

• Growth Forecasts reduced • Brexit • Main oil growth is in transportation-electric cars

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The oil Industry

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IEA Supply/Demand Balance

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Oil Price from IEA

• Recent OPEC Deal? • Subsequent increases • Iran locking in higher production after sanctions • Will the OPEC deal turn the clock back?

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If you’ve got it pump it!

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Don’t forget the future of the planet!!

And what about energy security!!! © Marine Operations and Assurance Management Solutions Ltd

The customer

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• • • • • • •

Downstream

Markets

Midstream

Markets

Upstream

Markets

Markets

Oil industry dimensions

Oil super major? .. XOM, Shell, BP Oil major + Chevron, Total, Statoil, Conoco Phillips E&P’s ….. Premier, Talisman etc Refiners …... Inios, Valero etc Traders…...Glencore, Trafigura etc Integrated / sector specific IOC or NOC?!!! © Marine Operations and Assurance Management Solutions Ltd

Oil major earnings

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Oil producers Oil Majors? 2015 Top Producers 0

2

4

6

8

10

12

14

Saudi Aramco Gazprom NIOC Exxon Mobil

Rosneft Petrochina BP Shell Petromex Kuwait Chevron Abu Dhabi Total Petrobras

Qatar Lukoil Sonatrach Iraq PDVSA Conoco Phillips Statoil ISIS

Data source Forbes © Marine Operations and Assurance Management Solutions Ltd

Remember the 70’s Oil Major share of tanker tonnage 1970

Spot 12% Oil Major Owned 36%

Oil Major Owned Oil Major T/C Oil Major T/C 52%

Spot

Data Source Martin Stopford Maritime Economics

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Tanker Owners Top 30 Tanker Owners Top 30 2015 0 Teekay MOL NITC Euronav Bahri AET China VLCC Frontline SCF Maran NYK COSCO Dynacom Ocean Tankers China Shipping OSG Maersk SK Minerva Navios Oman BW Gener8 Thenamaris DHT Tsakos Formosa SCI TORM BP Shipping

2

4

6

8

10

12

14

16

18 +2

-1

-1 = +2 +2 +5 -4

+1 +3 -5 -1 -3

MDWT in service

-1

MDW building

= -2 = -2 +9 -1 = ++ -5 -2 -5 -3

-1 -1

-4

Source Tanker Operator Magazine © Marine Operations and Assurance Management Solutions Ltd

Biggest Charterers 2015 Dirty Fixtures 0

100

200

Number of Fixtures ( Data source Potens) 300 400 500 600

700

800

900

Unipec Shell Vitol BP Chevron Litasco (Lukoil) Exxon Mobil CSSA (Total) ST Shipping Indian Oil Corporation Repsol Clearslake CNR Socar Trafigura Petrochina Petrobras Reliance Bahri PTT (Thailand)

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What the charterer wants? • Safe • Reliable – On time-no stock outs or field shutdowns – No breakdowns – No contamination

• Efficient – Good rate – Load and discharge full stem – Good communications © Marine Operations and Assurance Management Solutions Ltd

The ship operators challenges

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Tanker Regulatory System Other Industry Organisations (10+)

IMO •SOLAS •MARPOL •STCW •ISM

IMO Member States (170+)

Requirements •SOLAS •MARPOL

ICS Codes Guides

Requirements •SOLAS •MARPOL •ISM TMSA

•National Laws •Port Regulations •Terminal Regulations

TMSA

Public Domain Info

Rankings, blacklisting

RO/Class

•Surveys •Certificates •Audits

SIRE Inspection from initiating company

Vetting Org

Owner Response

Operation

SIRE Vetting Clause

Feedback •Plans •Sea trial data •Certificates

Tanker

Tankers (10,000+)

Company Vetting Status Feedback

Trader

Other Traders 100+

SIRE Inspection

•Arrival Documents •Cargo Documents

Port s (1000+)

Port

Requirements SIRE VIQ

Maintain

SIRE Ship Inspector Port State inspection Detention/Sanction

Rankings, blacklisting

Feedback Inspection Detention/Sanction

SIRE Reports Other Charterer /Terminal Vetting Organisations 50-100

Tanker Companies (1,000+) Design and Build

Shipbuilder Design & Build

OCIMF Members 100+

Request for Inspection

Requirements •Contract •Specification •Modifications

OCIMF Codes Guides

SIRE Inspection Report

Requirements •Class Rules •Surveys

Casualty Data

OCIMF

Recognised Organisations (RO’s)/Class (30+) RO/Class

Insurance Industry

ICS

Flag state IACS

SOLAS,MARPOL,STCW,ISM

Targeting Data

Port State

MOU

Other Other Port Inspection Detention/Sanction Port State States MOU’s (100+) (10+) Terminal Feedback

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Fantasy Industry The dream

The requirements

• Transparent markets

• No flags of convenience

• Balanced market providing fair • Transparent ownership and taxation return for owners and economic • Ship-owners committed to common transportation for charterers standards • Single uniform standard across • No competition between flag states, the globe class societies. • Consistent compliance and enforcement

• Clean up and liability costs totally covered by international funds • No need for port state and vetting• No overreaction by media and politicians. • No traders.

• No state support for shipyards • And you need to believe in….. © Marine Operations and Assurance Management Solutions Ltd

Conclusions • Healthy tanker rates? • Incident rates and pollutions are low but the consequence of getting it wrong is even higher than it was • Demand is uncertain with world growth, price, demand, energy security and climate change • There are many customers – National oil companies are increasingly the main player – IOC’s • Super majors, majors • Traders • E&P’s

• The balance has changed over 50 years but instead of big oil major fleets there are now big NOC fleets • The industry is complex but what’s the alternative? © Marine Operations and Assurance Management Solutions Ltd