CLARKSON RESEARCH SERVICES LTD

Tanker Market Outlook In its second year of the eruption Martin Stopford, Managing Director, Clarkson Research 1th May 21

Today s Agenda 1) How the Eruption s Going 2) The Tanker Market Model 3) The World Economy 4) Shipbuilding 5) Tanker Demand 6) Oil Tanker Supply 7) Outlook 8) Conclusion Less a disaster, more a dust up

WHEN DO YOU EVACUATE? Although it may seem safe to stay at home and wait out a disaster, doing so could be very dangerous. For example, the rock debris from an exploding volcano can break windows and set buildings on fire. Stay safe. Follow authorities instructions and leave the area. US Navy disaster preparedness office, Naples www.nsa.naples.navy.mil Disaster supply kit

Tanker Market Eruptions 1971-21 Freight cost $/ba arrel 4. 36 3.6 3.2 2.8 2.4 2. 16 1.6 1.2.8.4. 1971 1973 Boom 1974 197s Recession 1977 7 The chart shows annual average transport cost per barrel of oil AG to Rotterdam (excluding port costs) 198 198s Recession 1983 1986 199 1997 Boom Boom 1989 9 1992 1995 1998 2 Boom Operating costs 21 24 Boom 24 28 Boom 27 21*

d a y e a r $ / Tanker Earnings 199-21 $8 Crude Tankers 12 M onth Average Products Tankers 12 Month Average $7 $6 $4 n i n g s$5 $3 $2 $1 $ Chart shows 12 month moving average of tanker earnings (i.e. $23,/day is average for crude tankers Mar 29 to April 21 ) 1 Asia Crisis 2 New record for tanker earnings $71,/day 3 4 J a n - 9 J a n - 9 1 J a n - 9 2 J a n - 9 3 J a n - 9 4 J a n - 9 5 J a n - 9 6 J a n - 9 7 J a n - 9 8 J a n - 9 9 J a n - J a n - 1 J a n - 2 J a n - 3 J a n ' 4 J a n ' 5 J a n ' 6 J a n ' 7 J a n ' 8 J a n ' 9 J a n '1

Tanker Earnings Monthly April 21 $2 VLCC Suezm ax A fram ax Products $18 $16 $14 $12 $1 earning s $8 $6 $4 $2 $ $ /day J an-9 J an-91 J an- 9 2 J an-93 J an- 9 4 J an-95 J an-96 J an-97 J an-98 J an- 9 9 J an- J an- 1 J an-2 J an- 3 J a n ' 4 J a n ' 5 J a n ' 6 J a n ' 7 J a n ' 8 J a n ' 9 J a n '1 Figure 11 Tanker earnings trends 24 to 21

Tanker Prices Bottom Out VLCC Price hit trough of $62.5 MM in Sept 22, but in 28 reached $16 MM New price was down 4% to $97MM but has now edged back up to $99MM 5 year old was down to $8MM but up to $82MM this month Price $ m ill l io n 195 New VLCC 18 165 15 135 12 15 9 75 6 45 3 15 5 Year Old VLCC 2 4 6 8 2 4 6 8 '9 '9 '9 '9 '9 ' ' ' ' ' '1

per da ay $ VLCC Cost & Revenue 199-29 Note: this chart shows month by month the cost of a New VLCC depreciated over 2 years, paying interest at LIBOR (no spread), and OPEX $9,/day 9 3 Year TC 8 7 6 5 4 3 2 1 This is the 3 year time charter rate for a modern ship Interest Depreciation Operating Costs Cost now Say $24,/day Ja an '9 Ja an '91 Ja an '92 Ja an '93 Ja an '94 Ja an '95 Ja an '96 Ja an '97 Ja an '98 Ja an '99 Ja an ' Ja an '1 Ja an '2 Ja an '3 Ja an '4 Ja an '5 Ja an '6 Ja an '7 Ja an '8 Ja an '9 Ja an '1 SHIPPING MAJOR BENEFICIARY OF THE FINANCIAL CRISIS

Oil price World Economy Energy Demand 229 m bpd Oil Demand 85 m bpd Local Oil Production 47.1 m bpd 29 Trade CRUDE IMPORTS 37.9 m bpd W. Europe 1.1 m bpd N. America 6.6 m bpd Japan 3.5 m bpd S. Korea 2.5 m bpd India 3. m bpd China 3.5 m bpd Singapore 1 1. m bpd Other Asia 2.6 m bpd Others 2.9 m bpd PRODUCTS 16 m bpd Asia 5. m bpd CRUDE EXPORTS 37.9 m bpd Long Haul Middle East 14 m bpd 6-12, m Short Haul N. Sea 2.7 m bpd L. America 3.9 m bpd Africa 6.7 m bpd Indonesia.3 m bpd FSU 51 5.1 m bpd Others 3.6 m bpd Oil Traders Demand Time charter Own Trade Cargo Owners 16 W/S VLCC 3 Month Av. Layup 14 12 1 8 6 4 2 Freight market Supply '73 '75 '77 '79 '81 '83 '85 '87 '8 9 '91 '93 '95 '97 '99 '1 Shipowners FLEET 439 m dwt Orderbook 129 m dwt VLCCs 162 m dwt Suezmax 62 m dwt Aframax 9 m dwt Panamax 28 m dwt Products 99 m dwt Scrapping 9 m dwt Shipyards Bank Credit Policy Deliveries 49 m dwt Cash Refinery Consumer

M. Dwt 6 Supply/Demand Balance 1963-7 Tanker Market Balance 1963-7 % S urplus 6% 5 4 3 2 1 Available tanker fleet Surplus tanker capacity Fleet growing slower than demand due to low investment t Tanker demand growing faster than supply Surplus? 5% 4% 3% 2% 1% % -1% 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27 29 211 213

M. Dwt 6 5 4 3 2 Supply/Demand Balance 1963-9 Tanker Market Balance 1963-9 Available tanker fleet Supply now ahead of demand but floating storage and falling oil transport by the single hull fleet has disguised the surplus so far Tanker demand runs ahead of supply 23-7 % S urplus 6% Fall in demand in 29 5% 4% 3% 2% 1% 1 Surplus tanker capacity % Surplus? -1% 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27 29 211 213

Predicting what is going to happen next in the world economy is very difficult. There are so many obscure consequences These volcanoes are not very easy to model

World GNP & Oil Trade Growth Oil trade % growth 14% 12% 1% 8% 6% 4% 2% % -2% -4% -6% -8% -1% Oil trade forecast Oil Trade (left axis) World GDP (right axis) the forecasts (yellow line) show substantial bounce back Oil trade (left axis) fell 3.7% in 29 World GDP % growth 7% 6% 5% 4% 3% 2% 1% % -1% -2% 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 2 2 2 2 2 2 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 1973 1 st Oil Crisis 1979 2 nd Oil Crisis Figure 8 World GDP cycles 1966 to 21 1991 Financial Crisis 1997 Asia Crisis 21 Dot.com crisis

$/Barrel Brent Crude The Oil Price 135 Oil price $7/bbl in 27 115 This involved an increase in the world oil bill of $1.5-2 trillion EIA forecast June 8 95 75 55 Oil price started to escalate in 24 35 IEA s 3 year planning scenario 23 was $24/bl 15-5 Ja an- Ja an-1 Ja an-2 Ja an-3 Ja an-4 Ja an-5 Ja an-6 Ja an-7 Ja an-8 Ja an-9 Ja an-1 Ja an-11

Index 1992=1 Industrial Production Asian Economies Index 1992=1 14 (excluding Japan) 35 13 12 11 1 Atlantic economies 3 25 2 15 1 5 Feb Feb Feb Feb Feb Feb Feb Feb '3 '4-5 '6 '7 '8 '9 '1

World Energy: Oil Losing market share % total t world energy demandd 5% 45% 4% 35% 3% 25% 2% 15% 1% 5% % COAL Oil Demand Over the last decade oil s share of total energy demand has fallen by 4.2% NUCLEAR BY 215 Oil -2% Coal +3% GAS Gas +% 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27

World Oil Demand & IEA Forecast World oil demand is very cyclical In 28 oil demand was expected to grow, but it fell to 84m bpd in early 29 The forecast is not very exciting Million bpd world oil demand Oil demand falls to 84 mbpd 9 8 7 6 5 4 3 2 1 1Q99 9 1Q 1Q1 1 1Q2 1Q3 World Oil Demand World fortecast Source: IEA Monthly Review of Oil Industry 1Q4 1Q5 1Q6 1Q7 1Q8 1Q9 1Q1

World Oil Demand & IEA Forecast World oil demand is very cyclical In 28 oil demand was expected to grow, but it fell to 84m bpd in early 29 The forecast is not very exciting Million bpd world oil demand 9 8 7 6 Oil demand falls to 84 mbpd World Oil Demand World fortecast Importer demand f 1Q99 9 1Q 1Q1 1 1Q2 1Q3 1Q4 1Q5 1Q6 1Q7 1Q8 1Q9 1Q1 Source: IEA Monthly Review of Oil Industry

Oil Demand Trends for 21 3. In 25N American oil demand hit a plateau at 25. 25.5 m bpd, before falling to 23 m bpd in 29. EIA 2. says demand has peaked out 15. Europe has settled down at 15 m bpd China and other Asia are 1. growing but are still quite small consumers 5. Millio n barrels per day IEA Forecast April 21 N America Europe Other Asia China. 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 21

Demand for tankers fell by about 2.7% in 29 A 3.7% fall in trade was partly compensated by falling efficiency of the single hull tanker fleet and tankers used for temporary storage But this was the biggest fall in tanker demand since the 198s Now recovering Tanker Demand dwt Million 5 Base Case 45 Tanker demand 4 35 3 25 2 We estimate Tanker demand d fell by roughly 3% in 29 199 9 199 92 199 94 199 96 199 98 2 2 2 2 4 2 6 2 8 21 1 21 12 21 14

The shipping market is in danger of being run over by a large lava flow The lava flow is coming!

World Container Orderbook M dwt o18 m dw t o n rd er 33 3 27 24 21 18 15 12 9 6 3 Following a decade with a very small orderbook, container investors were the first in the market and started building the orderbook in early 23 Orderbook 15% of the fleet in May 1998 The orderbook peaked aty 6.5 m TEU (6% of the fleet) in uary 28 CONTAINERSHIP ORDERBOOK (Mill TEU) 7 6 5 4 3 2 1 m illio n t eu on order -96-97 -98-99 - -1-2 -3-4 -5-6 -7-8 -9 '1

Container & Tanker Orderbook M dwt o18 m dw t o n rd er 33 3 27 24 21 18 15 12 9 6 3 Tanker Orderbook peaks at 48% of the fleet in September 28 Containers (right axis) Tankers (left axis) Tanker investors started to invest seriously in uary 26 and the orderbook TANKER ORDERBOOK 7 6 5 4 3 2 1 m illio n t eu on order -96-97 -98-99 - -1-2 -3-4 -5-6 -7-8 -9 '1

M dwt m dwt on order 33 3 27 24 21 18 15 12 9 6 3 World Orderbook Containers (right axis) Tankers (left axis) Bulkers (left axis) Note how container investors started t building the orderbook in 23, three years ahead of bulk investors Bulk carrier orderbook takes off in 27, peaking at 73% of the fleet in October 28 7 6 5 4 3 2 1 - - - - - - - - - - - - - - on orde er mil llion teu -96-97 -98-99 - -1-2 -3-4 -5-6 -7-8 -9 '1

Shipbuilding Bubble: Delivery Profile GT Del iveries M illion 2 18 16 14 12 1 8 6 4 2 The blue bars show projected output in March 29 and the yellow line shows the latest projection An investment bubble is trade in high volumes at prices that are considerably at variance with intrinsic values Restructuring of capacity 1976-86 33% slippage In 21? 25% slippage In 29 196 197 198 199 2 21 12/5/21 27 25% Slippage In 211?

VLCC New Prices Down 33% $/million VLCC $14 newbuilding price $12 $1 $8 $6 $4 $2 $ 1971 1974 1977 198 198s Recession 1983 1986 1989 1992 1995 1998 Year End 21 24 27 21

Single Hulls to be phased out by 21

Non-Double Hull Fleet By Size & YOB Million Dwt (year en nd) 5 45 4 35 3 25 2 15 1 5 Double Hull April 21 Single hull April 21 Double Hull Single Hull The Single hull fleet was 45 million dwt at the end of April 21. Scrapping below expectation SINGLE HULL TANKER FLEET Tanker fleet 441 m dwt April 21 197 71 197 73 197 75 197 77 197 79 198 81 198 83 198 85 198 87 198 89 199 91 199 93 199 95 199 97 199 99 2 1 2 3 2 5 2 7 2 9

Single Hull Tankers by M Dwt Single Hull Tankers in M Dwt As of 1 st April 21 there are 2.m dwt of single hull VLCCs, 2.6m dwt Suez, 2.7m dwt Afra, 1.4m dwt Panamax and 6.3m dwt Handys left in the fleet. 2 18 16 14 12 1 8 6 4 2-96 -97-98 -99 - VLCC Aframax Handy -1-2 -3-4 -5 Source: Clarkson Research Services, April 21 Suezmax Panamax -6-7 -8-9 -1

6 5 4 3 2 1 Single Hull Spot Fixtures Single Hull Spot Fixtures, total number In each year VLCC SUEZ AFRA 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 Source: Clarkson Research Services, April 21 The graph shows the total number of spot fixtures recorded in each year for the crude carrying sectors for single hull vessels. As of 22 nd April 21, only 56 VLCC single hull spot fixtures have been recorded in 21 year to date, 11 Suezmax and 22 Aframax.

Single Hull Trading Patterns No of VLCC Spot Fixtures in 24 1 AG- Japan 113 2 AG- Singapore 14 3AG- Korea 1 4 AG- South China 84 5 AG- West Coast India 75 6 AG- Taiwan 66 7 AG- Thailand 61 8AG- US Gulf 32 9WAF- US Gulf 19 1 AG- South America 18 Others 672 Total 841 No of VLCC Spot Fixtures in 29 1 AG- Thailand 69 2AG- Korea 47 3 AG- West Coast India 41 4AG- Taiwan 37 5 AG- South China 23 6 WAF- West Coast India 15 7 WAF- East Coast India 9 8 AG- Singapore 7 9 AG- East Coast India 7 1 AG- Red Sea 6 Others 21 Total 282 No of VLCC Single Spot Fixtures, 21 ytd 1 AG-Thailand 16 4 AG- West Coast India 11 2AG- Taiwan 1 3AG- Korea 7 5 AG- South China 3 6 AG- East Coast India 2 7AG-AG 1 8 AG-Singapore 1 9 WAF- West Coast India 1 1 Japan- Taiwan 1 Others 3 Total 56 AG- East trades remained active for VLCCs through 21, as did discharges in India from West Africa. The Atlantic has effectively remained closed to spot trading single hulls since 25. Saudi Arabia are not expected to accept single hulls from 211 onwards.

Single Hull Phase-Out in 21 1 Single Hull Phase-Out in 21 by Month 1 Single Hull SCRAPPING in 21 by Month 8 VLCC Aframax Suezmax Panamax 8 VLCC Aframax Suezmax Panamax 6 Handy 6 Handy 4 4 2 2 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Source: Clarkson Research Services, uary 21 Dec Feb Mar Apr May Jun Jul Aug Sep Oct Nov Source: Clarkson Research Services, April 21 Dec

Tanker Orders, Delivs & Demo Million dwt VLOC Conv 9 FPSO Conversion Orderbook 8 Deliveries 7 Deliveries Forecast Demolition forecast 6 27 Orders Orders Demolition 5 4 3 2 1-1 Strict phase out profile based on Reg 13G and 25 m dwt con- 21 orderbook of 52 m dwt cut back to 46 m dwt 211 orderbook of 48 m dwt cut back to 44 mdwt 19 988 19 989 19 99 19 991 19 992 19 993 19 994 19 995 19 996 19 997 19 998 19 999 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 11 2 12 2 13 2 14 2 15 Figure 13: Tanker orders, deliveries, scrapping and future deliveries

Tanker Fleet Scenario Since the boom started in 23 there has been a great surge in the tanker fleet After growing g by less than 5 million dwt between 199 and 23, in the last seven years it has increased by 15 million dwt There is still another 139 million dwt on the orderbook so the fleet is likely to grow to 55 m dwt by end 214 dwt Million 6 55 Tanker Fleet Forecast 5 Tanker Fleet 45 4 35 3 25 2 199 9 199 92 199 94 199 96 199 98 2 2 2 2 4 2 6 2 8 21 1 21 12 21 14

We must start out with the premise that forecasting is not a respectable human activity and not worthwhile beyond the shortest t of periods Peter Drucker the one management thinker every educated person should read

Tanker Supply/Demand Balance 1963-9 6 5 4 3 M. Dwt Surplus tanker capacity (right axis) Available tanker fleet Supply now ahead of demand but floating storage and falling oil transport by the single hull fleet has disguised the surplus so far % Surplus Fall in demand in 29 6% 5% 4% 3% 2% 2 1 Tanker demand runs ahead of supply 23-7 Tanker demand falls by 35% in the 198s recession 1% % -1% 196 63 196 65 196 67 196 69 197 71 197 73 197 75 197 77 197 79 198 81 198 83 198 85 198 87 198 89 199 91 199 93 199 95 199 97 199 99 2 1 2 3 2 5 2 7 2 9 21 11 Figure 1: Supply demand balance for tankers (estimate only) 1963-21

Tanker Supply/Demand Balance 1963-213 6 MDwt % Surplus 6% 5 4 Surplus tanker capacity (right axis) Fleet growing faster than demand due to deliveries 5% 4% 3 2 1 Available tanker fleet (mid year) Tanker demand growing g less than fleet 3% 2% 1% % -1% 19 963 19 965 19 967 19 969 19 971 19 973 19 975 19 977 19 979 19 981 19 983 19 985 19 987 19 989 19 991 19 993 19 995 19 997 19 999 2 1 2 3 2 5 2 7 2 9 2 11 2 13 Figure 3: Supply demand balance for tankers (estimate only) 1963-213

Wild Cards We didn t use the right assumptions China coal supply Congestion in Bosphorus Nigerian tribal war Nuclear problems Hurricanes Contango/storage at sea These have a bigger impact in a tight market!

Three Oil Transport Cost Scenarios Afram max Tanker Earnings $/day 24 1 (Aframax tanker earnings based on $39,/day portfolio of routes.) super cycle with rather high 9 blood pressure 8 7 6 5 4 3 2 1 1979-81 "Rates boomed" 1982-6 "Worst ever" $8,7/day Super-Slump 1989 Far Better! 1992 A year owners would rather forget 1991 $16,/ day 1999 What a miserable six months 1997 A significant upturn $15,6/day 2 $5,/day Wow Dr ress reh earsal $37,226/day Super-Boom Scenario 3 197 76 197 77 197 78 197 79 198 8 198 81 198 82 198 83 198 84 198 85 198 86 198 87 198 88 198 89 199 9 199 91 199 92 199 93 199 94 199 95 199 96 199 97 199 98 199 99 2 2 1 2 2 2 3 2 4 2 5 2 6 2 7 2 8 2 9 21 1 21 21 2 21 34 21 21 6 21 78 21 21 9 Updated 22 Mar 9 Source: Clarkson Research Services Ltd

What An International Group Thinks Probability of occurring % 2% 4% 6% I showed the three scenarios to an international group drawn Scenario 1 from banks, shippers and 25% (Low) shipping companies mostly middle management I asked them to give the Scenario 2 probability of each scenario occurring (Mid) The results are shown opposite they were optimistic Scenario 3 (High) 34% 41%

LNG Deliveries Almost All Delivered! Millio on M3 Delivere ed 1 Under 4k 6-1k 9 8 7 6 5 4 3 2 1 1-14k Over 14k Column 5 Orderbook 199 96 199 98 2 2 2 2 4 2 6 2 8 21 21 2

Gas Trade Not Delivering Yet 28 LNG Trade 24 26 22 24 LNG Fleet 2 22 2 18 18 16 16 14 14 12 12 1 1 8 8 6 6 4 4 2 2 Million tonnes LNG 1984 1986 1988 199 1992 1994 1996 1998 2 22 24 26 28 (e) LNG Fle et M dwt

1. Tanker markets have always been cyclical and in the last two years we had a volcanic eruption. 2. The tanker shortage of the 2s has turned into a surplus in the 21s 3. Sentiment is moving towards Scenario 3, but Scenario 1 or 2 have significant probabilities 4. The possible surplus is large and European shipping is navigating g through difficult and unknown seas. 5. I am optimistic we have the seafaring skills to do this, but I don t underestimate the scale of the challenge for Europe in the coming decade. 12/5/21 46

Disclaimer The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the Company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided. Provision of this data does not obviate the need to make further appropriate enquiries and inspections. Forecasts are frequently wrong and the information on which they are based is not always accurate, so they are not a reliable basis for business decisions. Always consult as many sources as possible and check the validity of each to the extent the decision justifies. The information is for the use of the recipient only and is not to be used in any document for the purposes of raising finance without the written permission of Clarkson Research Services Limited, England, No 1944749. Registered Office at St. Magnus House, 3 Lower Thames Street, London, EC3R 6HE.