Business Prospects Prospektus Awal Soechi Lines Versi Inggris FINAL

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7. Competition in Shipping Industry

Indonesian-Flagged Vessels DWT Soechi DWT Soechi „s Market Share Oil tankers 5,805,740 992,015 17 Chemical and oil product tankers 753,640 58,895 8 FSO 178,397 144,197 81 Liquid Gas 617,715 4,199 1 Total 7,355,492 1,199,306 16 Source: Fleetmon, Company data, RHB Shipyard In line with the implementation of cabotage principle, the need for shipyards for new shipbuilding and vessel repair and docking will rapidly increase. Based on Indonesian National Shipping Association’s INSA data, the major cabotage principle implementation in the years 2005 – 2012 has doubled the number of vessels, from 6,000 units to 11,628 units. These additional vessels tend to be large in size, therefore, in terms of tonnage the number tripled from 5.6 million to 16 million gross tons. Whereas the number of domestic shipyards does not increase significantly. The existing shipyards are designed to facilitate small sized vessels. Based on the regulations from international classification agency IACS, all vessels are required to conduct an inspection survey of the ship bottom bottom survey every 2.5 years intermediate survey and every 5 years special survey. Therefore, the constant capacity of domestic shipyard will result in the following impact: 1. For small vessels: long queue of ships waiting for domestic dock space 2. For large vessels: difficulty in obtaining domestic shipyard space, therefore they will look for alternative shipyards overseas. For example, large vessels owned by the Company and Pertamina prefer to carry out docking in China. The sharp increase in demand for docking is clearly reflected in the ability of domestic shipyards to obtain high profit by charging fees that are far higher compared to similar shipyards in China. However, customers are still waiting in line in those shipyards. The Company believes that by the time the Company’s floating dock facility is completed in early 2015, vessels that previously preferred to travel to China will choose to carry out docking in the Company’s shipyard considering the vessel mobilization and demobilization cost to China is very high. In addition to the travel time to China that takes 5-7 days, fuel costs are to be incurred to travel to and back from China. As for the new shipbuilding market, the Government of Indonesia has started implementing similar policies as the United States, i.e., Indonesian-flagged vessels are encouraged to be built by domestic shipyard. For example, Pertamina carried out tender for the new building of tanker with a capacity of 17,500 tons, provided that such vessel is built locally. The Company has seized this opportunity and managed to win the order for 3 17,500 tons vessels from Pertamina, with a total project value of more than USD 70 million. The same applies for government contractors for oil and gas under SKK Migas, which have implemented all tenders for new shipbuilding to require the vessel to be built in domestic shipyards. For example, Total EP Mahakam Block recently issued tender for the new shipbuilding of 5 AHTS vessels, which are required to be built locally. The Company believes that in the future, demands for new ships to be built locally will continue to grow. The Company’s shipyard, which has just recently started operating, has managed to obtain orders for 5 vessels with a total value of USD 92 million. 8. Compliance with Environmental Regulations Based on the State Minister Environmental Regulation No 11. Year 2006 concerning the type of business plan andor activities for which environmental impact assessment reports are mandatory, the Company is not under the category of a company which business plans andor business activities renders it mandatory to prepare environmental impact assessment reports Analisis Mengenai Dampak Lingkungan, ―AMDAL‖ . In addition, based on the Decree of the Governor of Special Capital Region of Jakarta No. 1892002 dated 5 February 2002, the Company is also not categorized as a company which business plans andor business activities renders it mandatory to prepare Environment Management Efforts Upaya Pengelolaan Lingkungan, ―UKL‖ and Environment Monitoring Efforts Upaya Pemantauan Lingkungan Hidup, ―UPL‖ in the Special Capital Region of Jakarta. Accordingly, it is not mandatory for the Company to prepare AMDAL or UKL and UPL documents. 144 139 However, based on Ministry of Transportation Regulation No. KM 4 Th. 2005 dated 20 January 2009 concerning Prevention of Pollution from Ships ―Permen No. KM 4 Th. 2005‖, the Company should be able to demonstrate that the pollution prevention equipment and tools arrangement construction in the vessels owned by the Company have complied with the requirements set forth in Permen No. KM 4 Th. 2005 referred to above; therefore each vessel owned by the Company has to obtain the National Oil Pollution Prevention by Ships Certificate ―Pollution Prevention Certificate‖. In that regard, based on the inspections conducted by the Directorate General of Sea Transport, the pollution prevention equipment and tools arrangement constructions in the vessels owned by the Company have complied with the requirements and have obtained the Pollution Prevention Certificate. Presented below is the list of certificates obtained by the Company: NO DOCUMENT ISSUING AGENCY VESSEL NAME REGISTERED PORT VALID UP TO 1 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SOECHI ANINDYA JAKARTA 20022016 2 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. GOLDEN PEARL XIV JAKARTA 15052015 3 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. ANGELIA XVI BANTEN 22072016 4 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. STEPHANIE XVIII JAKARTA 16042017 5 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. ANDRIANA XX BATAM 29072016 6 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SILVIA XII JAKARTA 15032015 7 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SOECHI CHEMICAL I JAKARTA 08052017 8 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SOECHI CHEMICAL III PALEMBANG 29092016 9 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SOECHI CHEMICAL V BANTEN 26082016 10 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SOECHI CHEMICAL VII JAKARTA 20062016 11 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SOECHI CHEMICAL IX JAKARTA 14102015 12 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SOECHI PRESTASI JAKARTA 09122016 13 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SOECHI PRATIWI JAKARTA 03032015 14 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. SUKSES XI JAKARTA 23122016 15 INTERNATIONAL OIL POLLUTION PREVENTION CERTIFICATE DIRECTORATE GENERAL OF MARINE TRANSPORTATION MT. ALISA XVII JAKARTA 06122016