Future Projection of Demand for New Vessels

155 010 011 012 13 62 33 25 103 30 51 27 19 62 25 35 17 forms 7 10 21 8 No version Value stic Vessel stic Vessel tion port to nesia Unit DWT Unit DWT Unit DWT 1 2,500 92 230,000 31 77,500 61 152,500 2 4,000 7 28,000 2 8,000 5 20,000 3 515 4 2,060 2 1,030 2 1,030 4 519 3 1,557 1 519 2 1,038 5 12,500 5 62,500 2 25,000 3 37,500 6 15,000 23 345,000 5 75,000 18 270,000 7 3,000 151 453,000 6 18,000 145 435,000 8 519 19 9,861 3 1,557 16 8,304 9 350 153 53,550 25 8,750 128 44,800 10 200 22 4,400 5 1,000 17 3,400 11 111 63 6,993 8 888 55 6,105 12 600 4 2,400 1 600 3 1,800 13 185 3 555 1 185 2 370 549 1,199,876 92 218,029 457 981,847 2006 2007 2008 2009 2010 2011 2012 2013 13,6 9,8 15,9 10,4 6,5 46,4 10,9 - -10,5 3,8 0,6 0,5 0,6 1,0 1,1 - 0,0 1,9 5,7 3,6 3,4 1,7 9,8 - 6,9 11,3 14,1 12,2 8,5 9,6 8,2 10,0 The growth of number of vessels in Indonesia is mainly supported by the development of oil and natural gas production activities in Indonesia. The Ministry of Trade estimated that a minimum of 30 CNG Compressed Natural Gas and LNG Liquefied Natural Gas carriers with 40,000 Cum capacity is required at present. However, in reality, Indonesian shipyards are only able to produce this type of vessel within the next three to four years source: www.bisnis.com , 11 August 2013. The demand for gas carrier vessels continues to increase, in line with the increase in gas consumption that is parallel with the energy conversion program from oil to natural gas. The distribution process of natural gas, which has reached approximately 20.1 TCF Trillion Cubic Feet in 2010, is estimated to increase by 13 to 22.8 TCF by the end of 2014. This volume is estimated to require approximately 150 to 2000 CNG and LNG carriers within the next 5 years. The same applies for oil production and exploration activities, the number of oil tankers is projected to grow by 20 during the same period, assuming Pertamina Persero, with the support from oil distributors such as PT AKR Corpindo Tbk, PT Petronal Niaga Indonesia and PT Surya Parna Niaga, will intensify their distribution operation in eastern Indonesia area. Currently, there are 672 vessels supporting the oil and natural gas activities in Indonesia, and only approximately 3 mostly C Class consists of foreign-flagged vessels. Projection of the number of vessels required prepared by SKK Migas for the period 2013-2015 is outlined in the table below. Global Business Guide predicts that the demand for offshore vessels in the next 5 years up to 2018 will be 460 units of new vessels. Projection of Demand for Offshore Vessels Year 2013 – 2018 Exploration, Construction, Production Type of Activity Operational Support Offshore Construction Oil Gas Explorations Drilling 2013 – 2015 3 years 206 63 16 64 2014 – 2018 5 years 280 75 30 75 Source : SKK Migas Global Business Guide Projection, March 2014 Several important points from Pertamina’s vessel procurement program summarized by Global Business Guide in its report as of March 2014 are as follows:  Pertamina operates around 190 units of vessel, 59 units of which are properties of this state-owned oil and gas company. The remainings are vessels chartered from several private companies, including the Company, PT Berlian Laju Tanker Tbk., Samudra Shipping Services and Humpuss business group. Since November 2013 up to April 2014, Pertamina has carried out 39 time charter tenders, only a few were tenders opened for spot charter method.  Pertamina plans to increase the number of vessels by up to 40 units of vessel for the 2013-2016 period, as stated in Pertamina’s Long-term Plan 2012-2016, with a total budget of approximately USD 2.5 billion.  Pertamina intends to own one unit of LNG gas carrier with a capacity of 140,000 m3 before 2018.

5. Maritime Industry Competitive Landscape Shipping Industry

In general, the competition of shipping industry in Indonesia is fully protected by the cabotage principle: 1. Foreign-flagged vessels are prohibited from transporting Indonesia’s domestic cargo, therefore competition is limited to other domestic shipping companies. 2. All Indonesian-flagged vessels shall be owned by Indonesian citizen. Foreign ownership in Indonesian- flagged vessels is limited to a maximum of 49. 3. All Indonesian-flagged vessels shall be manned by Indonesian citizen, therefore operating the vessel will be extremely difficult for foreigners, as they do not have skilled Indonesian crew. In practice, domestic shipping companies will only acquire a vessel and register the said vessel as an Indonesian- flagged vessel if additional tonnage demand for ship transportation exists. In our experience, tenders for extension of existing vessel charter contract are commonly attended by a single participant, i.e., the existing vessel, with no competition. Currently the annual increase in demand for oil and gas transportation in Indonesia is extremely high, therefore, each national shipping company indirectly obtains sufficient individual portion for them to grow. Therefore, 156 competition can be considered relatively inexistent or low. Particularly in large vessels sectors, there is only a very limited number of national shipping companies that are capable of providing large-size vessels. Furthermore, we can project the future competitive landscape of shipping industry in Indonesia by looking at the market of ship transportation in the United States, which has long implemented the cabotage principle since 1920. Competition is practically inexistent in the US, for example the range of charter fee for MR type tanker in the world is between USD 12,000 -13,000 per day, but charter fee in the US is more than USD 50,000 per day.            