ASIAN PANEL ASIAN PANEL March 2, 2010 INTERTANKO OVERVIEW REPORT JOSEPH ANGELO DEPUTY MANAGING DIRECTOR.

ASIAN PANELASIAN PANEL March 2, 2010

INTERTANKO INTERTANKO OVERVIEW OVERVIEW

REPORTREPORTJOSEPH ANGELO

DEPUTY MANAGING DIRECTOR

MEMBERSHIP MEMBERSHIP

BUDGETBUDGET

SECRETARIATSECRETARIAT

COUNCIL ISSUESCOUNCIL ISSUES

PIRACYPIRACY

GREENHOUSE GASESGREENHOUSE GASES

EXCOM ISSUESEXCOM ISSUES

US ISSUESUS ISSUES

MEMBERSHIPMEMBERSHIP

• 270+ Members

• 3,100+ Tankers

• 250+ Million DWT• Members in 40+ countries

• MORE THAN 75MORE THAN 75%% OF THE OF THE INDEPENDENT TANKER FLEETINDEPENDENT TANKER FLEET

• 330+ Associate Members

MEMBERSHIPMEMBERSHIP

0

55

110

165

220

275

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

0

500

1,000

1,500

2,000

2,500

3,000

3,500

No. members

m dwt

No. ships

Members/million dwt No. of tankers

BUDGETBUDGET

2008 2009 2010

(BUDGET)Total Operating Income (US$) 8,689,980 8,603,025 7,291,509

Total Operating Expenses (US$) 8,473,822 6,511,325 6,767,825

Operating Result 216,158 2,091,700 523,684

Non-operating Income/expenses -291,883 270,000 -25,000

Result for the Year -75,725 2,361,700 498,684

BUDGETBUDGET

• Reasons for large operating surplus for 2009 year end

- Virtual retention of all members in 2009- Disciplined control of discretionary expenditures (limiting of activities)- Expenditures benefiting from strong US dollar against British pound and Norwegian Kroner

• Membership fees for Members and Associate Members in 2010 to be reduced by 10%.

SECRETARIATSECRETARIAT

• 24 STAFF MEMBERS IN 4 OFFICES

Oslo (12), London (10), Singapore (1)

USA (1) + Brussels, Manila (consultant)

• STAFF INCLUDES

- Managing Director

- Technical Director

- Director, Regulatory Affairs

- Marine and Chemical Director

- General Counsel

COUNCIL ISSUESCOUNCIL ISSUES

NEW LEADERSHIP

ORGANIZATION REVIEW

TANKER MARKET

CRIMINALIZATION OF SEAFARERS

FACILITATION PAYMENTS

PILOTS

NEW LEADERSHIPNEW LEADERSHIPCHAIRMAN – Graham Westgarth

Teekay Shipping (Canada)

VICE CHAIRMEN –

David Koo, Valles Shipping (Hong Kong)

Bengt Hermelin, SAMCO (Singapore)

Robert Johnston, OSG (USA)

FOUR NEW EXECUTIVE COMMITTEE MEMBERS, including

Carlos Juan Madinabeitia, Tradewinds (Venezuela)

ORGANIZATION REVIEWORGANIZATION REVIEW

Operational• Clarify priorities• Narrow scope• Reduce administrative burden• Improve communications• Reduce number of meetings• Subcommittees are of value, but there are too

many

Structural• Executive Committee role vs Council role is

unclear• Structure is heavy• Regional panel role is unclear

ORGANIZATION REVIEWORGANIZATION REVIEW

Council• Discusses and approves the key issues, policies and

priorities of INTERTANKO for the following year• Elects the Executive Committee• Approves the membership fees for the following year• Approves the accounts and auditor’s report

Executive Committee • Implements the strategy and priorities of

INTERTANKO, as directed by the Council, and the direction of the secretariat

• Establish working group to review priorities and scope of activities

ORGANIZATION REVIEWORGANIZATION REVIEW

Regional panels• Panel Chairman a member of the Executive Committee• Panel Chairmen, in conjunction with the regional

membership, to decide the appropriate arrangements and frequency of meetings for maximum effectiveness

Committees• Decide frequency of meetings based upon workload

Secretariat• Develop improved communications through web site

and other available means• Reduce administrative workload

World GDP and oil demand change

Source. IMF/BP/IEA/Fearnleys

-3

-1

1

3

5

7

9

11

19

87

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

20

08

20

09

20

10

GDP growth - IMF

Oil demand growth - IEA

Tonne miles growth - Fearnleys

%

Oil/tanker demand correlates with Economic growthPositive growth projected – but there is still uncertainty

Tanker deliveries, removal, phase out

m dwt

YearGrowth in tanker fleet since 2000The fleet will continue to grow even if all SH tankers are

phased out(Delays in deliveries must be anticipated)

-35

-25

-15

-5

5

15

25

35

45

55

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Deliveries

Phase out

Conversion

Demolition

Deliveries - deletions = fleet increase

Tanker fleet development(Assumed max phase out, orderbook March 2009, include chemical tankers)

Tanker fleet increase 2003-2012: 70%

m dwt number

290

339

388

437

486

535

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

3,300

3,920

4,540

5,160

5,780

6,400

dwt

number

Seaborne crude oil tradeVolume back to the 1970s level

bn tonne-miles

Source: INTERTANKO, Fearnleys

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

1970s 1980s 1990s EST00s

-38%

+36%

+19%

Oil demand, tonne-mile, tanker fleet indices

Source: IEA, Fearnleys, INTERTANKO

Tanker fleet increase 2002-2010: 46%

95

100

105

110

115

120

125

130

135

140

145

150

155

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

20

10

Oil demand index

Tonne miles crude tanker index

Tanker fleet index

Tankers used for floating storage

Source: EA Gibson

Number

17

61

12

42

Tankers tied up in storage has saved the marketand may be major wild card in 2010

0

20

40

60

80

100

120

140

Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

LR1/Panamax

LR2/Aframax

Suezmax

VLCCs

Source: E.A. Gibson

Chinese oil import

China will be the most important market for tankers

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

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

Products

Crude

Source: BP Review/IEA

mbd

CRIMINALIZATIONCRIMINALIZATION

• Criminalization of seafarers- “Prestige”- Spain- “Hebei Spirit” (South Korea)- “Tosa” case (NYK VLCC – Taiwan)- “Full City” (COSCO Bulk carrier – Southern Norway)

• Industry-wide support for adherence to the IMO-ILO Guidelines on the Fair Treatment of Seafarers in the event of a Maritime Accident

• Council agreed that INTERTANKO- needs a strategy on the issue of criminalisation of seafarers as a base for its future work- develop a position paper for use in discussion with governments and others based on factual examples

FACILITATION PAYMENTSFACILITATION PAYMENTS

• Facilitation Payments are frequently made to Authorities, Pilots, Terminal Officials, Inspectors, and more for “smooth” trade

• However, Shipowners are expected to warrant that no bribes (and in some cases also no facilitation payments) will be paid during the performance of the contract and that owners are obliged to indemnify charterers from all consequences if any such payments are made.

FACILITATION PAYMENTSFACILITATION PAYMENTS• Raise the issue with OCIMF, Round Table partners and

Governments, as applicable

• Members are encouraged to report incidents to INTERTANKO

• INTERTANKO Documentation Committee is developing model clauses, e.g. for Voyage Charters:….. any waiting time caused by the owners refusal to pay a facilitation payment or bribe shall count as laytime or if on demurrage time on demurrage, even if the vessel formally lacks any local certificates, clearances or there are any other  … circumstances or formalities that ordinarily could prevent laytime from starting, if the reason the owners do not have such approval etc. is because owner has refused a facilitation payment or bribe.

PILOTSPILOTS

• Discussion Group meetings with the leadership of the International Maritime Pilots Association (IMPA) and the American Pilots Association (APA)

• Aim is to improve maritime safety and to explore areas for future cooperation with pilot groups

• Issues have included bridge resource management, criminalisation of seafarers, maritime casualties, engine failures and pilot safety when embarking

• Meetings have been very successful in gaining trust

• IMPA/APA President proposed joint signing of Memorandum of Agreements (MOAs) to formalize relationship

• Council has authorized Chairman to sign MOAs

EXCOM ISSUESEXCOM ISSUES

GREENHOUSE GAS EMISSIONSPIRACY

US POLICY ISSUESEU ISSUES

WORKPLAN PRIORITY REVIEWCHINESE MARINE POLLUTION REGS

CONDITIONS OF CLASSMERCURY IN CRUDE OILS

IMO YEAR OF THE SEAFARERFDIP

FDIPFDIP

Freight and Demurrage Information Pool

• Helps members with demurrage and other claims against charterers which are not dealt with on a timely basis

• On average, takes only 30 days from reporting a claim to the FDIP before payment is received

• Last year the FDIP assisted in the settlement of claims totalling over USD 5 million

• Annual fee is USD 1440 for entire fleet no matter how many claims are chased

• For further information contact Michele White ([email protected])

US ISSUESUS ISSUES

• Massachusetts lawsuit

• EPA Vessel General Permit

• California Air Resources Board (CARB) air emission

• Emission Control Area

• Sanctions

MASS LAWSUITMASS LAWSUIT

INTERTANKO CONCERNS

• District Court 2006 decision upholds Coast Guard authority over vessel operations in US waters

• Reinforces unanimous US Supreme Court decision in 2000 when INTERTANKO took the state of Washington to court

MASS LAWSUITMASS LAWSUIT

DEVELOPMENTS

• In July the District Court Magistrate Judge issued his recommendation to the District Court to grant the U.S. Government's motion for a permanent injunction enjoining the State of Massachusetts from enforcing the tug escort and vessel manning provisions of the states oil spill prevention regulations.

• The State of Massachusetts has objected to this recommendation

• We await the District Court’s decision

MASS LAWSUITMASS LAWSUIT

NEW DEVELOPMENT• New Mass law imposes triple the fines if an oil spill

occurs and tank vessel did not provide the state with advance notice, have a tug escort and have a state pilot on board (USD750K per day)

• State trying to indirectly regulate tank vessel operations in Buzzard's Bay, which is contrary to the Supreme Court decision in state of Washington

• USCG sent a letter expressing deep concern about the new law, but extremely unlikely they will take the lead in taking Massachusetts to court political reasons.

• If successful, will very likely be used by other states, including Washington, as a vehicle to get around the state pre-emption

EPA VGPEPA VGP

INTERTANKO CONCERNS

• Federal Court orders EPA to develop regulations for all ship discharges under NPDES permit system of Clean Water Act

• Judge acknowledges that US Coast Guard has authority under certain laws, but believes that Congress also gave authority to EPA under Clean Water Act

• Ruling has two federal agencies responsible for same subject matter

EPA VGPEPA VGPDEVELOPMENTS• VGP requirements have been effective since

February 2009.

• Environmental groups have sued EPA stating that the VGP discharge requirements, in particular those relating to ballast water, are not stringent enough.

• Lake Carriers Association, American Waterways Operators and World Shipping Council have sued EPA requesting the court to vacate the VGP

• Consideration extended until Feb 2010

• Expected outcome is that court will maintain in place the existing VGP, while remanding the VGP back to EPA for reconsideration.

CARB AIR EMISSIONSCARB AIR EMISSIONS

INTERTANKO CONCERNS

• CARB implements unilateral requirements that are not consistent with IMO standards

• Fuel switching to low sulphur fuels could have safety implications

CARB AIR EMISSIONSCARB AIR EMISSIONS

DEVELOPMENTS• June 2009 US District Court denies PMSA motion to

dismiss CARB air emission regulations for ocean-going vessels

• Court also ruled that California has the authority to apply the regulations 24 miles from their coast because they only applied to ships entering Californian ports

• PMSA to take matter to US Appellate Court

• In August San Francisco Harbor Safety Committee meeting discusses engine failures in San Francisco Bay as a result of fuel switching to comply with this CARB regulation. CARB representative at the meeting made it very clear that suspending the CARB regulation is not an option.

NORTH AMERICAN ECANORTH AMERICAN ECA

200 nm200 nm

200 nm200 nm

Will Mexico join ?

NORTH AMERICAN ECANORTH AMERICAN ECA

• Proposal submitted by Canada and USA to IMO MEPC 59 meeting July 2009

• Approved for circulation for adoption

• Expected to be adopted at MEPC 60 (March 2010)

• Expected to enter into force Aug 2012

• When in force:– Sulphur content 1.0% or less– Sulphur content 0.1% or less after 1 Jan 2015

SANCTIONS SANCTIONS

• Iranian sanctions

- Both houses of US Congress have passed bills

- Pertain to someone who provides ships to deliver refined petroleum products to Iran

- INTERTANKO developing charter party clause

• Ban on paying ransom to pirates

- US considering amendment to UN resolution 1844 which would ban payment of ransom to Somalia pirates

- Also considering possible Executive Order

- If either enacted, could impact ships calling in US or companies operating such ships

THANKTHANKYOU!!YOU!!

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