Marine Transportation of Energy

Marine Transportation System Capacity

Mare ForumHouston Nov. 18-19 2002

Bulk Liquid Ocean Shipping IssuesPeter M. Swift

The world needs tankers

As long as the world uses oilAs long as the world uses oil • World oil consumption 3,590 mptaWorld oil consumption 3,590 mpta

• 60 % t60 % transported by sea = ransported by sea = 2,0152,015 mtpa mtpa

• + 103 + 103 mtpamtpa chemicals chemicals

Freight rates and oil price $/bbl

0

20

30

40

50

60

70

80

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00

Nominal Arabian Light Deflated Arabian Light Nominal freight rates Deflated freight rates

Source: INTERTANKO, IEA

10

Tonnes spilt Tonnes spilt per billion tonne-mile transportedper billion tonne-mile transported

0

10

20

30

40

50

90 91 92 93 94 95 96 97 98 99 00 01

US crude oil production and net crude oil imports1983-2003 (est.)

Source: EIA

23456789

10Ja

n-83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Mbd

US crude oil production

US net crude oil imports

Linear (US net crude oilimports)Linear (US crude oilproduction)

U

Oil consumption in selected Asian countries

0.00

2.00

4.00

6.00

8.00

10.00

80 82 84 86 88 90 92 94 96 98 00 02

Mbd

China India Thailand Korea Taiwan

OPEC and non-OPEC oil production1971-2002

Source: IEA

15

20

25

30

35

40

45

50M

bd

Non-OPECOPEC

Major world crude oil exporters - Mbd

Source: OPEC, PIW, IEA, Norwegian Oil Directorate

Crude oil exports - world's largest exporters

0.5

1.5

2.5

3.5

4.5

5.5

6.5

1994 1995 1996 1997 1998 1999 2000 2001est.

2002proj.

Mbd

SaudiArabiaFSU

Norway

Iran

UAE

Nigeria

Venezuela

UK

Mexico

Kuwait

Crude oil – seaborne trade indicies1973=100

Source: Fearnleys

40

60

80

100

120

Tonne-miles

Tonnes

Miles

Oil products – seaborne trade indicies 1973=100

Source: Fearnleys

80

100

120

140

160

180

200

220

Miles

Tonnes

Tonne-miles

Tanker & combined carrier fleet by year of build

0

2550

75

100

125150

175

200

225

250275

<196

819

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

04+

Num

ber o

f tan

kers

U/VLCCsSuezmaxAframaxPanamax10'-60' dwt

Fordelivery

Tanker & combined carrier fleet by year of build

0

5

10

15

20

25

30

35

40

<196

819

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

04+

Dw

t m

illio

ns

U/VLCCsSuezmaxAframaxPanamax10'-60' dwt

Fordelivery

Tanker fleet double-hull development

Source: INTERTANKO

622

5175 81

9478

4925 19

0

20

40

60

80

100

1991 1997 End 02 End 07 End 10

SH share (%)

DH share (%)

Double hull ships are great

…but like the life rafts of a Boeing 747, it is a device we should do all in our power to

avoid testing.

World fleet and orderbook - million dwt

0 100 200 300

Ferry-HSReefer

DC-generalDC - multi-Ferry-24hs

Ferry-dayRoro-cargo

ContainerRoro-car

BulkerCruiseCombi

Chem. TankProd tanker

LPGCrude

LNG

FleetOn order

22%

21% 24%

World Shipbuilding Capacity (mCGT)

0

5

10

15

20

25

30

1998 2005

OthersPolandChinaEUJapanKorea

Source :KSA

World Shipbuilding Capacity (mCGT)

0

5

10

15

20

25

30

1998 2005

Others

Poland

China

EU

Japan

Korea

Completions

Completions peak year 2001

Bulk Liquid Ocean Shipping Issues

Demand for marine transportation Supply of marine transportation Shipping standards Environmental concerns Security issues

Bulk Liquid Ocean Shipping IssuesDemand for Marine Transportation

Oil dependence & Global economic health

Oil sources – long haul vs. short haul Alternative energy sources Pipelines

Bulk Liquid Ocean Shipping IssuesSupply of Marine Transportation

Fair return on investment

AGEISMArbitrary but flawed age limitations- legislation or charterers- challenge to principle of grandfathering

Bulk Liquid Ocean Shipping IssuesShipping Standards – The Threats

Poor freight rates Weak links in the chain of responsibility Competition between builders and

between classification societies Ineffective self-regulation Inadequate feedback mechanisms

QUALITY STANDARDS -

THE VICIOUS CIRCLE

STANDARDSLOWERED

ACCIDENTS INCREASE

IMPOSITION OF NEW

REGULATIONS

INVESTMENT DISCOURAGED

??

Bulk Liquid Ocean Shipping IssuesEnvironmental Concerns

Society’s ever increasing expectations – effectively zero tolerance

Bunker fuel requirements

Oil movements in extra sensitive areas

Some of the more sensitive areas

Bulk Liquid Ocean Shipping IssuesSecurity Issues

Limburg incident

Security at loading and discharge ports

Critical passages

Critical Oil Movements Security Concerns

Straits of Hormuz 15.5 mbd (14 mbd crude)Malacca Straits 10 -12 mbdRed Sea 3.3 mbdSumed pipeline 2.2 mbdBosporous/Turkish Straits 1.6 up to 2.3 mbdDruzba / ”Friendship” pipeline 1.2 mbdCeyhan pipeline 1.1 mbdSuez canal0.9 mbdPanama canal and pipeline 0.5 mbd

The world needs tankers

- the world expects tankers to be safe !

Thank you

www.intertanko.com