IMO Sulfur Regulations Impact on the Bunker Fuel Supply

1. IMO Sulfur Regulations Impact on the Bunker Fuel Supply October 25-27, 2009 2009 Energy Buyers Conference Miami Beach, Florida © Poten & Partners 2009

2. Global & Regional Marine Fuel Regulations HISTORICAL 2005, May 19 IMO Global cap – 4.5%S 2006, May 19 IMO Baltic Sea ECA – 1.5%S 2006, Aug 11 EU EU passenger ships 1.5%S 2006, Aug 11 EU EU ports - 1.5%S MDO & 0.2%S MGO 2007, Jan 1 CARB California, auxiliary engines - 1.5%S MGO & 0.5%s MDO 2007, Nov 22 IMO North Sea/English Channel ECA - 1.5%S 2009, Jul 1 CARB California, 24 nm off coast - 1.5%S MGO & 0.5%S MDO FUTURE 2010, Jan 1 EU EU waterways & 2 hrs+ ships at berth – 0.1%S 2010, Jan 1 CARB California, auxiliary engines – 0.1%S MGO 2010, Jul 1 IMO Existing ECAs – 1.0%S 2012, Jan 1 IMO Global cap – 3.5%S 2012, Jan 1 CARB California, 24 nm off coast - 0.1%S MGO 2012, Aug 1 IMO U.S. & Canada ECA – 1.0%S (200 nm off coast) 2015, Jan 1 IMO Existing ECAs – 0.1%S 2020/25, Jan 1 IMO Global cap – 0.5%S (subj. to 2018 feasibility study)

3. California Marine Fuel Stance July 2009, California banned residual bunker fuel burn 24 nm off its coast and imposed 1.5%S MGO & 0.5%S MDO fuel limits Market response: Los Angeles MDO/MGO price firmed compared to other major bunkering ports Possibility of oil spill from a ship whose propulsion fails while switching fuel

4. International Bunker Fuel Sales Overview *Europe excludes all the Former Soviet Union republics (which includes Lithuania, Latvia and Estonia)

5. July 2010 ECA 1.0%S Marine Fuel Switch: • The switch to 1.0% would not present too much of a supply challenge, however at what cost, remains to be seen • The Baltic Sea/North Sea ECA is satisfactory managing the current 1.5%S bunker demand

6. Aug 2012 North America 1.0%S Marine Fuel Switch: • Canada & US East Coasts can meet the 1.0%S demand • North America West Coast would require LSFO imports • Gulf Coast could require some level of imports • The Great Lakes could meet the demand with Canadian LSFO production

7. January 2015 - ECA 0.1%S Marine Fuel Switch • 0.1%S bunker fuel cannot be achieved by desulfurizing residual fuel oil; switching to marine gasoil required • NW Europe diesel/gasoil short net position would create an issue for the 0.1%S changeover. Russian gasoil/diesel supplies would meet some of the demand. • Generally refiners look to invest in resid destruction capacity to produce high value transportation fuels • Depending on MDO/MGO cost, vessel exhaust scrubbing technology could be an option for shipowners if commercially viable

8. Global Marine Fuel Cap – 3.5%S In January 2012, global marine fuel sulfur content is to be capped at 3.5%S. Since average global sulfur content is 2.7% according to IMO methods, this sulfur limit drop is generally symbolic

9. Global Marine Fuel Cap – 0.5%S • Global marine HFO, which in 2008 accounted for about 192 million mt, could increase by 10-15% by time frame of 2020/2025 • Global production of gasoil/diesel would not be sufficient to meet the surge in world 0.5%S MDO/MGO demand • To speculate – unless scrubbers become accepted as commercially viable, refiners will need price incentives to desulfurize HFO. A combination of both will probably occur

10. Considered Future ECAs • Mexico is considering joining the U.S. and Canada North America ECA initiative • In 2008, Mexico’s marine HFO sales for domestic burn were about 800 thousand mt and projected to grow through 2015 • Mexico is net short diesel/gasoil, so as a prospective ECA member it would need MDO/MGO imports to meet demand in 2015 • In 2008, Mediterranean sea countries’ marine HFO sales for domestic burn were about 1 million mt and projected to grow through2015 • Mediterranean countries are net short diesel/gasoil • Gasoil/diesel supply from the Black Sea region would alleviate this short position

11. Near-Term Tanker Shipping Expectations Marine Fuel Regulations 2010-2025 What the Future Holds for the International Shipping Industry • Still bullish on China and India • Lower than ‘expected’ GDP growth assessments do not necessarily denote low growth • Cash injections by certain governments will help support shipping industry in certain markets, particularly in the East • Demand in OECD markets expected to recover slowly through the remainder of 2009 bolstering tanker demand • Economic recovery will be largely dictated by policy • Banking sector regulation • Stimulus and deficit • Taxes • Likelihood of the ‘double-dip’ recession A Focused Analysis and Outlook on the Marine Fuels Market - Overview of Marine Fuel Historical and Future Regulations - Residual Bunker Fuel and Marine Gasoil/Diesel (2007-2008) Demand by Region - ECA 1.0%S Marine Fuel Limit (July 2010) - Impact of Future North America ECA (2012) - ECA 0.1%S Marine Fuel Limit (January 2015) - Global 0.5%S Bunker Limit (2020/2025) - Future Marine Fuel Pricing Implications to be published December 2009

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