Erik.Ranheim@intertanko.comManager Research and Projects

Russian oil Export in Baltic Sea transits

Stockholm 3 November 2005

Russian/CIS oil

Setting the Scene

I cannot forecast you the action of Russia. It is a riddle wrapped in a mystery inside an enigma; but perhaps there is a key? The key is Russian national interests.

Sir Winston Churchill, 1939

Setting the SceneScene 2004

Russian oil prevented a 3rd oil crisesSafety record of tankers from FSU highEurope completely dependent on Russian oil

Change of Scene?

Scene 2005 Russian oil export slowing – tension in the oil marketSafety record continue to be excellent - no new major tanker casualties Increasing oil export from special projects (Primorks (soon peaking?), Sakhalin, Northern areas) and pipelines?Overinvestment in ice-classed tonnage?

Oil Export

World increase in oil demand supplied by FSU and the rest

mbd

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Others

FSU

51% 28% 97% 79% 178% 53% 25% 30% 28%

World largest crude oil exporters - mbd

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

P0

5

Saudi Ar.

FSU

Norway

Iran

UAE

Nigeria

Venezuela

UK

Mexico

Kuwait

FSU crude oil and products export - mbd

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 P05

Black Sea** Baltic Sea**

Druzhba Pipeline

**seaborne

Others

European crude oil importmbd

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

1H05

Europe

America

Middle East

Africa

FSU

Others

Sources of European oil import 1H05 – 12.9 mbd

Source: IEA

(The US 0.32 mbd from FSU 1H05)

4.4 mbdMiddle East

20%

FSU34%

Africa18%

Europe22% America

2%

Others4%

Oil export from FSU 1H05

Source: IEA

OECD Europe

East Europe, others

China

N AmericaOECD Pacfic

Market effect (pipeline effect) of one mbd transported various trades

324

338

328

46

314 billion tonne miles

0 50 100 150 200 250 300 350

Ceyhan-US

Novorossisk- US

Ras Tanura-Yokohama

Nakhodka-Yokohama

Ras Tanura-China

bn tonne miles

Safety Performance

Tanker incidents World wide and FSU related

Collisions, grounding, Hull & Machinery, Fire & Explosions, others

0

200

400

600

800

1000

1200

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004 P05

Baltic/Black Sea/E Med

Total

Baltic/Black Sea/E Med

0

6

12

18

24

30

36

1978

1981

1984

1987

1990

1993

1996

1999

2002 P05

0

1

2

3

4

5

6

Incidents

Oil export

Tanker incidents and pollution Baltic, Black Sea, Bosporus, East Med

0

5

10

15

20

25

30

35

40

197819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

05

0

2,500

5,000

7,500

10,000

12,500

15,000

17,500

20,000N SeaBaltic EastBosp/DardBlack SeaMed E/AegeanPollution

No. inc. Ts. pol106,000

Tanker trade by hull -1Q00-2Q05tankers above 50,000 dwt

Baltic Sea Black Seam

dwt

m dwt

Source: Fearnleys/INTERTANKO

0

5

10

15

20

25

30

35

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

SH

DB/DS

DD

DH: 42% to 99%

0

5

10

15

20

25

30

35

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

SH

DB/DS

DH

DH: 22% to 85%

Tanker trade by hull -1Q00-2Q05tankers above 50,000 dwt

Baltic Sea Black Sea% %

Source: Fearnleys

0%

20%

40%

60%

80%

100%

1Q00

4Q00

3Q01

2Q02

1Q03

4Q03

3Q04

2Q05

SH

DB/DS

DD

DH: 42% to 99%Source:Fearnleys

'

0%

20%

40%

60%

80%

100%

1Q00

4Q00

3Q01

2Q02

1Q03

4Q03

3Q04

2Q05

SH

DB/DS

DH

DH: 22% to 85%Source:Fearnleys

Tanker trade by hull -1Q04-2Q05tankers above 50,000 dwt

number m dwt

Source: Fearnleys/INTERTANKO

-

50

100

150

200

250

300

350

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0 SH DS/DS DH m ts

Baltic transits18,000-50,000 dwt-2004-2Q05

Dirty cargoes

Source: Riverlake/INTERTANKO

Year Transits 65%

Transits 12 ms 100%

m cargo ts 65%

m cargo ts 12 ms 100%

2004 7.2 ms 160 405 4,875 12,330

2005 10.6 ms 86 165 2,545 4,893

Year Transits Transits 12 ms 100%

m cargo ts 65%

m cargo ts 12 ms 100%

2003 142 340 4,242 9,914

2004 299 460 8,676 13,348

2005 255 415 6,330 11,685

Clean cargoes

Baltic transits18,000-50,000 dwt-2004-2Q05

Source: Riverlake/INTERTANKO

Clean cargoes

UK Continent 343 52%

Continent 115 17%

W Africa 55 8%

Mediterranean 34 5%

UK Med 25 4%

UK W Africa 5 1%

Others 87 13%

Total 666 100%

Tanker trade by hull -1Q00-2Q05tankers above 50,000 dwt from Murmansk area

m tonnes

Source: Fearnleys

0

0.7

1.4

2.1

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

DH SS

13 1914 17 12 11

Tanker trade by hull -1Q00-2Q05Aframax tanker – spot fixtures from Murmansk area

Source: Riverlake

Movements 2004 53

Movements 2005 39

Movements total 92

Russian ships: 48 (52%)

Average cargo size 99,377 tonnes

Average tanker size 109,078dwt

Average age 2004 2.6 years in 2004

Average age 2005 4.1 years

All double hull tankers

+ a limited number of small tankers carrying products (some 20/year)

Oversupply of ice-class?

Ice ClassNumber of Aframaxes available and needed for

Primorsk trade (including 1A/1B/1C tankers)Number

Source: Riverlake, Geneva

2003/04 addition 17 handysize tankers available1C tankers may have problems in January/February

0

10

20

30

40

50

60

2003/2004 2004/2005 2005/2006 2006/2007

1C

1B

1A

Demand

Conclusion

Conclusion

Slower expansion in FSU oil export, but

Most Russian oil goes to Europe

Pipelines will in medium to long term take market shares

Safety record very good, trade served by modern tonnage

Many projects – uncertainty with regard to technical, geological, commercial as well as political factors