Intertanko History Brochure

Seawise Giant/Jahre Viking – biggest tanker ever (564,000 dwt) – jumboised in the 1980s

Andreas Ugland (Chairman 92-94), Tormod Rafgård (MD 70-95),Basil Ph. Papachristidis (Chairman 87-89), Seigo Suzuki (Chairman 89-92)

Rådhusgatan 25

Miles Kulukundis (Chairman 94-96)

Filippo Cameli (1st Vice Chairman), Jørgen Jahre (Chairman 73-76),Jan Hudig (1st Chairman 70-73), Erling Dekke Naess (Chairman 76-79)

Carl Rentz-Petersen (Chairman 82-84)James Rand (Chairman 84-87)

INTERTANKO – 40 Years Leading the way

The Six Day War (Israel/Egypt) and the first Arab oil embargo, the closure of the Suez Canal and the wreckof the Torrey Canyon were dramatic events in 1967 with huge significance for the world and for tankershipping. They brought about a massive size increase in tankers; they changed tanker shippingregulation; they changed some of the tanker operating fundamentals. But they all in different waysemphasised the need for stronger and more effective international cooperation between tanker ownersas well as between tanker industry players; for a body that would provide a forum for the exchange ofviews; for an association that would take active steps towards the promotion and protection of theinterests of independent tanker owners.

Three years later, in 1970, INTERTANKO, the International Association of Independent Tanker Owners,was established in Oslo, as the 35 year-old, London-based International Tanker Owners’ Associationclosed its doors.

Its first Chairman was Jan Hudig. Its first Vice Chairmen were Jørgen Jahre and Filippo Cameli. The rest ofits first Executive Committee were Erling Dekke Naess, John Kulukundis and Maersk Mc-Kinney Møller.

1970-1990INTERTANKO’s first 20 years started with its establishment as a two-man operation in Oslo’s Rådhusgatan25, setting out to provide safe transport, cleaner seas and free competition. It grew incredibly fast, risingto maturity and to the status of a non-governmental organisation (NGO) at the IMO. It steadily built upits membership and gained recognition as the authority and spokesman for the tanker industry.

1990-2010Its second 20 years started with the Exxon Valdez casualty, which became a significant tanker industrywatershed between one era and the next. The tanker industry rethought its priorities as it stepped outfrom a decade and a half of depression into a period of growth and generally increasing – though notsteady – profitability.

These two decades saw a complete and massive rethink of the Association’s priorities too. It became trulyinternational, setting up offices in London, Washington DC, Singapore and Brussels. It has developed intoa very proactive, open, dynamic and responsive association. It is today one of the few NGOs at the IMOwhich is proactively proposing rule changes to improve safety and environmental protection.

INTERTANKO has become a well-respected representative and spokesman for the oil tanker owners. Ithas gained in confidence over the years – enough to see its Council unanimously embrace the ambitiousgoals of zero pollution, zero deaths and zero detentions.

GENESISINTERTANKO came into being in 1970 out of a dramatic series of events in the late

1960s which changed the world of oil tanker transportation for ever.

INTERTANKO – GENESIS


INTERTANKO – THROUGH THE YEARS

1. Tanker seaborne crude oil trade over four decadesbn tonne-miles

1970s 1980s 1990s 2000s

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

Source: INTERTANKO, based on data from Fearnleys

0

Boomand bust

Lay up anddemolition

Growthand

structuralchanges

China, theemergingmarkets

andprofitability

2. Oil consumption & production in the 1970s and 2000s

OthersChinaMiddle EastOther AsiaJapanEurope(inc Eurasia)

US

Oil consumption1970s

Oil consumption2000s

Oil production1970s

Oil production2000s

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

Source: BP

07.2mbd

16.8mbd

24.2mbd

22.7mbd

7.2mbd

10.5mbd

10.9mbd

20.0mbd

12.7mbd

20.0mbd

20.0mbd

5.3mbd

20.0mbd

12.1mbd

6.6mbd

5.4mbd

11.7mbd

17.0mbd

22.3mbd

4.7mbd

3.0mbd

6.1mbd

3. Crude oil seaborne trade 1973

Source: Fearnleys

4. Crude oil seaborne trade 2002

Source: Fearnleys

THROUGH THE YEARSFour decades of INTERTANKO and the oil tanker industry – huge changes in the way theindustry is structured, how it goes about its business, how it thinks, how it performs.



1970s – Boom and bust � Suez Canal closure in 1967 saw tanker freight rates rocket and

the beginning of a tanker building boom of larger and larger tankers built to trade round the Cape of Good Hope.

� 1973 saw orders for 105m dwt of new tankers, representing 55% of the existing fleet.

� Torrey Canyon wrecked off the UK in 1967 – 120,000 tonnes of crude oil lost. This incident brought about: Civil Liability Convention of 1969 (CLC) and Fund Convention; introduction of Tovalop and Cristal spill compensation funding system as an industry voluntary interim move pending universal ratification of CLC; International Convention for the Prevention of Pollution from Ships of 1973 (which became MARPOL and brought in segregated ballast (SBT)).

� SOLAS Convention of 1974 brought in inert gas systems (IGS) to prevent tank explosions.

� Arab-Israel war 1973 and Arab oil embargo 1973/4 cut oil exports and hiked oil prices. Tanker demand collapsed.

� Oil price increased from $2/bbl in the early 1970s to $30/bbl by the end of the decade after the 1979 oil price shock.

� With the oil and tanker shipping worlds in turmoil, INTERTANKO was a steadying hand as it looked at issues from currency instability to uses for idle tankers, from flag discrimination to clean ballast tanks, from the casualty record to slow steaming.

� Oil majors lost the control of large chunks of the world’s oil – nationalisation of oil production in Latin America, North Africa and the Middle East.

� In the 1970s the Middle East was supplying more than one third of world oil production. Today it is just under one third (see graph2 opposite).

� Main tanker trades were between Middle East and Europe/U.S. which together represented 70% of world oil demand. Today lessthan 50% of world oil production is consumed by U.S. and EU.(See graphs 2, 3 and 4 opposite)

� Suez Canal reopened in 1975, decimating tanker tonne-miles andleaving a large, modern tanker fleet, which increased by 250% during the 1970s, locked into chronic oversupply and flounderingeven before oil production started to decline in 1979.

� Nevertheless despite the poor rewards, the VLCC moved to centre stage and by 1977 roughly 60% of crude oil was carried by VLCCs.

� Amoco Cadiz lost off France in 1978 – 223,000 tonnes of crude oil lost. The incident hastened the amendments to, and the ratification of, MARPOL 73/78 which brought in Crude Oil Washing (COW) and protectively-located ballast (SBT-PL).

� Tankers contributed to 28% of oil pollution at sea (compared to 7-10% in 2000s and still declining) – exceeded only by sump oil (poured down town drains) contributing 29.4%.

� A 1970s-built steam turbine powered VLCC burned 180 tonnes of heavy fuel a day (compared to 65 tonnes of intermediatefuel today).

1970sBOOM AND BUST

The first ever VLCC – Idemitsu Maru – 206,106 dwt, built in 1966



1980s – Lay-up and demolition� Oil prices now up to $32/bbl.

� In 1981, 41 VLCCs went for demolition including 15 oil company vessels. In 1982/3 another 126 VLCCs were scrapped.

� 1982 alone saw an 18% drop in tanker tonne-miles. VLCC rates hit a WS14 low point. A 10 year-old VLCC was worth $3m.

� 71.4m dwt of tankers were laid up in 1982 – 20% of the fleet. By1985 half the VLCC fleet was surplus tonnage – over 130 were laid up. Even oil company tankers were laid up.

� Tonne-mile trade figures declined by 155% from the peak in 1976 to a low in 1985, according to Fearnleys. Overall tonne-miledemand was down by 38% this decade compared to the 70s.

� Main tanker trades still Middle East/West but eastbound shipments growing and trade diversification accelerating.

� INTERTANKO developed on the world political stage, gaining inter alia a consultative seat at IMCO in 1982. Inthe same year IMCO was reborn as the IMO.

� In 1985 30m dwt of tanker tonnage was sold for demolition.

� Iraq / Iran wars through the early 1980s. 1984 Iraq attacked the aframax Filkon L loaded with Kuwaiti crude oil. The ‘tanker war’ became a key strategic element. Over the four years, INTERTANKO recorded 324 attacks on tankers. In 1987, 144 tankers were attacked and 64 seafarers killed. Twelve 500 pound parachute bombs extensively damaged the world’s largest tanker, the 564,000 dwt Seawise Giant.

� This decade saw INTERTANKO becoming involved in port state control, oil pollution compensation and disputes over open registries; dealing with lay-up, scrapping, and the ‘dangers’ of low building prices with tempting finance packages; taking a fresh look at tanker quality, and also pushing for fair port dues for SBT tankers.

� Fundamental changes in the ownership patterns of oil, of oil refineries and of oil tankers started in the 1970s, accelerated in the 1980s and continued through the 1990s. In the 1970s about 80% of oil production was in the hands of the oil companies. Today that share has fallen to about 25% of oil production and about 15% of oil reserves. In 1988 it was noted that state companies had taken over the lead position in controlling oil production and reserves with companies such as Aramco, KPC, NIOC, PDV, Pemex, Petrobras, Sonatrach holding the reins.

� This period also saw the growth of the independent tanker owner as oil companies and state companies reduced their tanker ownership. INTERTANKO’s prompt reactions to the growing importance of independent ownership helped boost its membership in the 1980s and 1990s.

� Exxon Valdez grounded in Alaska in 1989 – 37,000 tonnes of crude oil lost. This watershed incident changed the tanker world as it brought in OPA 90 and double-hull legislation.

1980sLAY-UP AND DEMOLITION



1990sGROWTH AND STRUCTURAL CHANGES

1990s – Growth and structural changes� Tonne-mile demand increased by 36% in the 90s compared to

the 80s.

� Periods with good freight rates, but strong volatility in the marketdue to incidents such as the 1990-1991 Iraq-Kuwait war, stronglyincreasing Middle East oil production (1992 – highest level in more than a decade), unrest in Nigeria.

� Increasing talk of an ageing tanker fleet saw INTERTANKO rediscussing the definition of substandard ships, and stressing that proper maintenance was a bigger safety factor than age. INTERTANKO was the first shipping association to introduce quality criteria for membership.

� Exxon Valdez, Oil Pollution Act of 1990 (OPA 90) and the IMO’s adoption of the double hull in March 1992 meant that as from mid 1996 all new tankers were double hulled.

� INTERTANKO called OPA 90 ‘a hundred pages of uncertainty’ as Congress removed charterer liability from the Act, and as this Act brought in compensation for damage to natural resources along with contingent valuation methodology.

� INTERTANKO involved itself increasingly in criminal liability issues, unlimited liability, drug and alcohol abuse measures, charterer responsibility for quality, pressing for tougherclass surveys.

� The 1992 Protocols to CLC and Fund Conventions (eif 1996) broadened the scope of these Conventions and raised financial limits of liability.

� INTERTANKO and its Members found themselves looking at the cost to them of the poor image of the tanker industry, and at the same time starting to reach out to the environmental groups.

� OCIMF’s Ship Inspection Reports Programme (Sire) started in 1994. INTERTANKO had suggested the concept and assisted inits development.

� INTERTANKO started to call for support from industry partners to improve the industry’s infrastructureand thereby increase safety, calling it ‘Preventionthrough Partnership.’

� Through the 1990s the idea took root and grew that responsibility for safe and sound shipping is shared between all those elements which are involved in its execution. This gave rise to the concept of the ‘chain of responsibility’, which emphasises joint responsibility as well as the fact that a chain is only as strongas its weakest link.

� Erika broke up off France in December 1999 – 20,000 tonnes of heavy fuel oil lost. This incident brought in IMO’s amendments to Marpol 73/78 with a tougher single-hull phase-out timetable and brought the EU into the regulatory front line. It also signalled the start of the two-tier tanker market.



2000s – China, the emerging markets, andprofitability� The decade started with the global dot.com crisis and ended with

the global financial crisis.

� 2000 saw INTERTANKO’s landmark legal victory in Washington when five years of fighting through the U.S. courts resulted in INTERTANKO winning its argument that individual U.S. states had no constitutional right to regulatematters of vessel design, construction, maintenance, operation, equipping and manning.

� Tanker trade growth lower than the 90s, but the decade started with relatively tight market balance and a limited shipbuilding capacity, which helped boost earnings.

� For a large part of the 2000s shipping experienced a super boom,with all shipping sectors enjoying unprecedented simultaneous profitability for a time.

� With closer supply/demand balance and increased employment came greater market volatility, with VLCC spot rates swinging from$10,000 to $100,000 a day in six months, then from $15,000 to a peak of close to $250,000 a day in another 6-12 months.

� Prestige broke up off Spain in 2002 – 70,000 tonnes of fuel oil lost. This incident brought in EU phase-out regulation and a further tightening of the international phase-out regime.

� INTERTANKO’s role this decade has become increasingly political, with an emphasis on regulation at the IMO, in Washington and in Brussels, as well as emphasis on the environment, and on the industry’s image.

� With the industry cooperating to produce a compensation regimethat balances the interests of all stakeholders, the limits of liabilityunder the 1992 CLC/Fund regime were raised by 50% in 2000, and in 2003 the Supplementary Fund provided a third tier of compensation up to $1.2bn.

� The tanker trades have become diversified, with getting on for twice as much oil now going Middle East/East as goes Middle East/West. U.S. and EU now consume less than 50% of world oil production (was over 70% in 1970).

� China’s oil consumption increased by 77% over the decade, pushing its oil imports up 250% and becoming one of the main drivers of the tanker market.

� Tankers contributed to less than 10% of global oil pollution at sea(less than 2% in the U.S.) – down from 28% in 1970s.

� As top quality officers and crew become harder to recruit and retain, and as accident statistics point to high human causative factors, INTERTANKO has been focusing on the human element in much of what it does.

� A modern motor powered VLCC consumes about 65 tonnes of intermediate fuel a day. It uses 1 litre of fuel to move 1 tonne of cargo 2,500 km – more than twice as far as the steam turbine powered VLCCs in the 1970s. �

Reducing tanker spills through 80s, 90s and into 00s000 tonnes Average age

1970 1979 1989 20091999

600 16

14

12

10

8

6

4

500

400

300

200

100

Source: INTERTANKO, based on data from ITOPF

0

50,000

99,00082,000

Figures show average size of tanker (dwt)

2000sCHINA, THE EMERGING MARKETS, AND PROFITABILITY



Co

nn

y W

ickb

erg


FORTY YEAR OVERVIEW

FORTY YEAR OVERVIEWOil prices and tanker freight rates, mixed with stock markets and tonne-mile demand, andalso with tanker fleet and productivity, make an interesting juxtaposition of 40-year graphs.

19881989

19871986

19781977

19761975

19741973

19721971

19701979

19801981

19821983

19841985

$ per barrel

100

80

60

40

20

0

Real price Arab Light Real freight rate AG-West

275

250

225

200

175

150

125

100

75

50

25

Fleet Tonne miles Tonnes Average distance Productivity – t-m/dwt

FTSE All Share Price Index 1970-January 2010 and Average VLCC Spot Rate

Oil price and freight rates 1970-2009

Main crude oil tanker indices– fleet, trade and productivity

3500

3000

2500

2000

1500

1000

500

0

FTSE All share price index


FORTY YEAR OVERVIEW

19921990

19911993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009



Source: Thompson Datastream0

10

20

30

40

50

60

70

80

90TT 265,000 dwt mid 70s MT 300,000 dwt 1990s

WS

VLCC Spot rate source: R S Platou Shipbrokers


INTERTANKO MEMBERS

CMM

INTERTANKO MEMBERSSupporting the publishing of this booklet commemoratingthe Association’s 40th anniversary


OLYMPIC SHIPPING AND MANAGEMENT S.A.ONASSIS GROUP

INTERTANKO MEMBERS


INTERTANKO ASSOCIATE MEMBERS

Bulk Shipping & Trading (Pvt) Ltd

Karachi – Pakistan

Tel: +(92-21) 32851406-7Fax: +(92-21) 32851400Email: [email protected]

INTERTANKO ASSOCIATE MEMBERSSupporting the publishing of this booklet commemoratingthe Association’s 40th anniversary


INTERTANKO ASSOCIATE MEMBERS


YEARS OF CHANGE

Tanker safetyThere have been tremendous improvements in tanker safety overthe last four decades.

For the first time since 1970 when ITOPF started to record oil spills,there was a year with no major oil spill (major = above 700 tonnes)in 2009.

Nor was this a one-off. Already accidental oil spills from tankers hadhit a record low in 2008.

This forms part of a trend whereby oil pollution from tankers was85% lower in the 2000s than it was in the 1980s, while over thesame period the volume of oil transported by tankers increased byover 50%.

Accidental spills over the whole 40 year period reduced in the2000s to just 6% of what they were in the 1970s.

Tanker productivity – capacity utilisationThe productivity of the fleet measured in tonne-miles per dwt wasthe lowest in 2009 since 1989 when the tanker industry wasemerging from the depressed 1980s.

Taking 1970 as the starting point at 100 on the productivity index,the high point was in 1973/4 at 114 and the low point was 1983 at35. 2009 in comparison stands at 57.5.

More time spent in port, many tankers used for storage, andreduced speed all took a great deal of capacity out of the marketin 2009.

The general belief is that storage will continue to tighten the tankermarket in 2010, albeit in reduced volumes, at least until interestrates begin to rise.

YEARS OF CHANGEThe last 40 years have brought about changes in how tanker business is done in terms ofsafety as well as in terms of tanker usage.

Accidental oil spills from tankers and tanker tradem ts spilled m ts transported

1970s 1980s 1990s 2000s

5

4

3

2

1

Source: INTERTANKO, based on data from ITOPF

0

1000 ts spilled

-63% -3%

-82%

m ts transported Main crude oil tanker indices – fleet and productivity

275

250

225

200

175

150

125

100

75

50

25


Fleet Productivity – t-m/dwt

19901975

19701980

19851995

20002005

2009


Tanker employment The way that tankers are employed has changed out of allrecognition since the 1970s.

� Then, more than one third (36%) of tanker tonnage was oil company- or state-owned; today it is less than one seventh (14%).

� Then, more than half (52%) of tankers were employed under period contracts; today it is just over one quarter (27%).

� Then, only just over one tenth (12%) of tankers were trading on the spot market; today it is getting on for two thirds (59%). �

YEARS OF CHANGE

Tanker employment 1974-2010%

1974 1980 19901984 1994 2000 2002 2010

100

90

80

60

70

50

40

30

20

10

Source: Based on data from Gibsons and others

0

Spot Independent contracts Oil/state owned

Capt Panagiotis Tsakos bidding farewell to one of the Tsakos Group newbuildings in Korea in April 2009.

Capt Panagiotis founded Tsakos Shipping & Trading in 1970, the same year as INTERTANKO was established. 40 years on he is still actively involved in

the family shipping operation which is now headed up by his son Nikos, who is an INTERTANKO Executive Committee Member.


INTERTANKO has become something of a bridge builder within theindustry, helping into existence a significant number of cooperativeindustry relationships:

� the Round Table of international shipping associations (BIMCO, ICS-ISF, INTERCARGO and INTERTANKO);

� the Tripartite discussions between ship owners, shipbuildersand class;

� a healthy, active and productive oil company/tanker owner relationship between OCIMF (also established in 1970) and INTERTANKO on a number of fronts;

� good cooperation between the ITF (International Transport Workers Federation) and INTERTANKO, and between IMPA (International Maritime Pilots Association) and INTERTANKO, has resulted in MoUs between the parties;

� there is an active and successful formal partnership agreement with the U.S. Coast Guard;

� relationships with the International Association of Classification Societies (IACS), the International Group of P&I Clubs (IG) andthe Worldscale Association have never been closer and are extremely constructive;

� links with the Paris MoU, while informal, nevertheless involve a closeness and trust that benefits both parties.

The shipping industry is best represented when it is united anddelivering a unified message. Its effectiveness comes from beingproactive, from working with partners to build coalitions, fromengaging globally, and from being prepared to lead – and not justtake a lead, but to lead by example and actually walk the talk. Bydoing that it really can make a difference.

INTERTANKO will continue to pursue the continuous improvementand human awareness principles of Poseidon Challenge and the‘zero goals’ embraced unanimously by its Council in a landmarkdecision to try to raise the quality bar even further – zero deaths,zero pollution, zero detentions.

The Association’s Strategic Objectives are:

� to develop and promote best practices,

� to be a positive and proactive influence,

� to profile and promote the tanker industry,

� to provide key services to Members.

These will form the basis of the Association’s work in the futureas it pursues its Mission...‘to provide leadership to the tanker industry in serving theworld with safe, environmentally sound and efficientseaborne transportation of oil, gas and chemical products’

and its Vision for the tanker industry...‘as a responsible, sustainable, respected tanker industry,committed to continuous improvement and constructivelyinfluencing its future.’

INTERTANKO is up front in the tanker sector as well as in theshipping industry as a whole, leading the way with clear vision andobjectives, and making a real difference in the daily business of ourMembers and of the industry as a whole. But it is the ability toforge relationships and work together with others to the benefit ofour Members and of the industry, that lays the real foundations forthe future. Together as an association of tanker owners, andtogether as an industry, we will be stronger, more respected, andmore clearly heard. �

THE WAY FORWARDThe value of an international shipping association is in its engagement in the differentfacets of operation and regulation around the world, giving its members a strong voice.This requires the cooperation of, and the development of, coalitions among like-mindedpartners in order to strengthen the industry’s influence.

THE WAY FORWARD

Lars Carlsson (Chairman 01-04)

Gange-Rolvs gate 5

Stephen Van Dyck (Chairman 04-07)Westye Hoegh (Chairman 99-01)

Richard du Moulin (Chairman 96-99)Nicholas Fistes (Chairman 07-09), Peter Swift (MD 2001 to date),Graham Westgarth (Chairman 2009 to date)

Dagfinn Lunde (MD 95-01)

Sir Yue-Kong Pao (Chairman 79-82) with Margaret Thatcher

Desig

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eclub

b.co

.ukINTERTANKO London

St Clare House30-33 MinoriesLondon EC3N 1DDUnited KingdomTel: +44 20 7977 7010Fax: +44 20 7977 [email protected]

INTERTANKO OsloNedre Vollgate 4 5th floorPO Box 761 Sentrum N-0106 Oslo Norway Tel: +47 22 12 26 40Fax: +47 22 12 26 [email protected]

INTERTANKO Asia 5 Temasek Boulevard,#12-07 Suntec City Tower 5 Singapore 038985Tel: +65 6333 4007Fax: +65 6333 [email protected]

INTERTANKO North America801 North Quincy Street – Suite 200Arlington, VA 22203USATel: +1 703 373 2269Fax: +1 703 841 [email protected]

INTERTANKO Brussels Rue du Congrès 37-41B-1000 BrusselsBelgium Tel: +32 2 609 54 40Fax: +32 2 609 54 [email protected]

www.intertanko.com

Intertanko History Brochure

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