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A. History and Development of the Company
Scorpio Tankers Inc. was incorporated in the Republic of the Marshall Islands pursuant to the BCA on July 1, 2009. We provide seaborne transportation of crude oil and refined petroleum products worldwide. We began our operations in October 2009 with three vessels. In April 2010, we completed our initial public offering, and our common stock commenced trading on the New York Stock Exchange, or NYSE, under the symbol “STNG.” We have since expanded, and as of March 19, 2026, our fleet consisted of 90 wholly owned tankers (34 LR2, 42 MR and 14 Handymax) with a weighted average age of approximately 10.1 years.
Our principal executive offices are located at 99 Boulevard du Jardin Exotique, Monaco, 98000 and our telephone number at that address is +377-9798-5716. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's Internet site is http://www.sec.gov. The address of the Company's Internet site is http://www.scorpiotankers.com. None of the information contained on these websites is incorporated into or forms a part of this annual report.
Fleet Development
For information regarding our fleet please see “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources-Capital Expenditures-Vessel acquisitions and payments for vessels under construction.”
Recent Developments
Time charter-out
In March 2026, we commenced a time charter-out agreement on an LR2 product tanker, STI Lombard, for five years at a rate of $33,000 per day.
In March 2026, we entered into a time charter-out agreement on an LR2 product tanker, STI Rambla, for eight years at a rate of $30,500 per day. This charter is expected to commence in the first or second quarter of 2026.
Declaration of dividend
On February 11, 2026, our Board of Directors declared a quarterly cash dividend of $0.45 per common share, which is payable on March 20, 2026 to all shareholders of record as of March 6, 2026.
Vessel Sales
In January 2026, we closed on the sale of the 2019 built scrubber-fitted LR2 product tanker, STI Lavender, for $61.2 million.
In February 2026, we closed on the sales of the 2016 built scrubber-fitted LR2 product tankers, STI Goal and STI Gallantry, for $52.3 million per vessel.
In March 2026, we entered into agreements to sell two 2015 built scrubber-fitted MR product tankers, STI Seneca and STI Osceola for $35.0 million per vessel and a 2015 built scrubber-fitted LR2 product tanker, STI Solidarity, for $60.0 million. These sales are expected to close within the first or second quarter of 2026. In March 2026, these three vessels, STI Seneca, STI Osceola and STI Solidarity, were released from collateral on the 2023 $1.0 Billion Credit Facility and we paid the outstanding debt balance of $20.2 million related to these vessels and reduced the amount available under the revolving portion of the facility by $10.8 million.
Debt Activity
In January 2026, STI Kingsway was released from collateral on the 2023 $1.0 Billion Credit Facility, with no outstanding balance and reducing the amount available under the revolving portion of the facility by $13.7 million. We entered into an agreement to sell this vessel for $57.5 million in December 2025 with closing expected in the first quarter of 2026.
In February 2026, we paid the $18.9 million purchase option, representing the aggregate outstanding lease obligation, on the LR2 product tanker, STI Symphony, that was financed under the Ocean Yield Lease Financing arrangement and thus terminated the lease.
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Newbuilding Vessels
In February 2026, we declared options to purchase two scrubber-fitted LR2 newbuilding product tankers that are to be constructed at Dalian Shipbuilding Industry Co., Ltd. in China for $68.5 million per vessel. Deliveries are expected in the third and fourth quarters of 2029.
Conflict in Iran
The recent military conflict in Iran has had a significant direct and indirect impact on the trade of crude oil and refined petroleum products. The conflict has disrupted major trading routes such as the Strait of Hormuz and as a result, the price of oil and petroleum products has risen significantly. We cannot predict what effect the higher price of oil and petroleum products will have on demand, and it is possible that the current conflict in Iran could adversely affect our financial condition, results of operations, cash flows, financial position, and future performance.
B. Business Overview
We provide seaborne transportation of refined petroleum products worldwide. As of March 19, 2026, our fleet consisted of 90 wholly owned product tankers (34 LR2, 42 MR and 14 Handymax) with a weighted average age of approximately 10.1 years, which we refer to collectively as our Operating Fleet.
The following table sets forth certain information regarding our Operating Fleet as of March 19, 2026:
Vessel Name Year Built DWT Ice class Employment Vessel type Scrubber
Owned
1 STI Brixton 2014 38,734 1A SHTP (1) Handymax No
2 STI Comandante 2014 38,734 1A SHTP (1) Handymax No
3 STI Pimlico 2014 38,734 1A SHTP (1) Handymax No
4 STI Hackney 2014 38,734 1A SHTP (1) Handymax No
5 STI Acton 2014 38,734 1A SHTP (1) Handymax No
6 STI Fulham 2014 38,734 1A SHTP (1) Handymax No
7 STI Camden 2014 38,734 1A SHTP (1) Handymax No
8 STI Battersea 2014 38,734 1A Time Charter (4) Handymax No
9 STI Wembley 2014 38,734 1A SHTP (1) Handymax No
10 STI Finchley 2014 38,734 1A SHTP (1) Handymax No
11 STI Clapham 2014 38,734 1A SHTP (1) Handymax No
12 STI Poplar 2014 38,734 1A SHTP (1) Handymax No
13 STI Hammersmith 2015 38,734 1A SHTP (1) Handymax No
14 STI Rotherhithe 2015 38,734 1A SHTP (1) Handymax No
15 STI Duchessa 2014 49,990 — SMRP (2) MR No
16 STI Opera 2014 49,990 — SMRP (2) MR No
17 STI Meraux 2014 49,990 — SMRP (2) MR Yes
18 STI Virtus 2014 49,990 — SMRP (2) MR Yes
19 STI Aqua 2014 49,990 — SMRP (2) MR Yes
20 STI Dama 2014 49,990 — SMRP (2) MR Yes
21 STI Regina 2014 49,990 — SMRP (2) MR Yes
22 STI St. Charles 2014 49,990 — SMRP (2) MR Yes
23 STI Mayfair 2014 49,990 — SMRP (2) MR Yes
24 STI Soho 2014 49,990 — SMRP (2) MR Yes
25 STI Memphis 2014 49,990 — Time Charter (5) MR Yes
26 STI Gramercy 2015 49,990 — SMRP (2) MR Yes
27 STI Bronx 2015 49,990 — SMRP (2) MR Yes
28 STI Pontiac 2015 49,990 — SMRP (2) MR Yes
29 STI Queens 2015 49,990 — SMRP (2) MR Yes
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30 STI Osceola 2015 49,990 — SMRP (2) (14) MR Yes
31 STI Notting Hill 2015 49,687 1B SMRP (2) MR Yes
32 STI Seneca 2015 49,990 — SMRP (2) (14) MR Yes
33 STI Westminster 2015 49,687 1B SMRP (2) MR Yes
34 STI Brooklyn 2015 49,990 — SMRP (2) MR Yes
35 STI Black Hawk 2015 49,990 — SMRP (2) MR Yes
36 STI Galata 2017 49,990 — SMRP (2) MR Yes
37 STI Bosphorus 2017 49,990 — Bareboat Charter (6) MR No
38 STI Leblon 2017 49,990 — SMRP (2) MR Yes
39 STI La Boca 2017 49,990 — SMRP (2) MR Yes
40 STI San Telmo 2017 49,990 1B SMRP (2) MR No
41 STI Donald C Trauscht 2017 49,990 1B SMRP (2) MR No
42 STI Esles II 2018 49,990 1B SMRP (2) MR No
43 STI Jardins 2018 49,990 1B Time Charter (7) MR No
44 STI Magic 2019 50,000 — SMRP (2) MR Yes
45 STI Mystery 2019 50,000 — SMRP (2) MR Yes
46 STI Marvel 2019 50,000 — SMRP (2) MR Yes
47 STI Magnetic 2019 50,000 — Time Charter (8) MR Yes
48 STI Millennia 2019 50,000 — SMRP (2) MR Yes
49 STI Magister 2019 50,000 — SMRP (2) MR Yes
50 STI Mythic 2019 50,000 — SMRP (2) MR Yes
51 STI Marshall 2019 50,000 — SMRP (2) MR Yes
52 STI Modest 2019 50,000 — SMRP (2) MR Yes
53 STI Maverick 2019 50,000 — SMRP (2) MR Yes
54 STI Miracle 2020 50,000 — Time Charter (9) MR Yes
55 STI Mighty 2020 50,000 — SMRP (2) MR Yes
56 STI Maximus 2020 50,000 — SMRP (2) MR Yes
57 STI Elysees 2014 109,999 — SLR2P (3) LR2 Yes
58 STI Madison 2014 109,999 — SLR2P (3) LR2 Yes
59 STI Park 2014 109,999 — SLR2P (3) LR2 Yes
60 STI Orchard 2014 109,999 — Time Charter (10) LR2 Yes
61 STI Sloane 2014 109,999 — SLR2P (3) LR2 Yes
62 STI Broadway 2014 109,999 — SLR2P (3) LR2 Yes
63 STI Condotti 2014 109,999 — SLR2P (3) LR2 Yes
64 STI Rose 2015 109,999 — Time Charter (11) LR2 Yes
65 STI Veneto 2015 109,999 — SLR2P (3) LR2 Yes
66 STI Alexis 2015 109,999 — Time Charter (12) LR2 Yes
67 STI Winnie 2015 109,999 — SLR2P (3) LR2 Yes
68 STI Oxford 2015 109,999 — SLR2P (3) LR2 Yes
69 STI Lauren 2015 109,999 — SLR2P (3) LR2 Yes
70 STI Connaught 2015 109,999 — SLR2P (3) LR2 Yes
71 STI Spiga 2015 109,999 — Time Charter (13) LR2 Yes
72 STI Kingsway 2015 109,999 — SLR2P (3) (14) LR2 Yes
73 STI Solidarity 2015 109,999 — SLR2P (3) (14) LR2 Yes
74 STI Lombard 2015 109,999 — Time Charter (15) LR2 Yes
75 STI Grace 2016 109,999 — Time Charter (16) LR2 Yes
76 STI Jermyn 2016 109,999 — Time Charter (17) LR2 Yes
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77 STI Sanctity 2016 109,999 — SLR2P (3) LR2 Yes
78 STI Solace 2016 109,999 — SLR2P (3) LR2 Yes
79 STI Stability 2016 109,999 — SLR2P (3) LR2 Yes
80 STI Steadfast 2016 109,999 — SLR2P (3) LR2 Yes
81 STI Supreme 2016 109,999 — SLR2P (3) LR2 Yes
82 STI Symphony 2016 109,999 — SLR2P (3) LR2 Yes
83 STI Guard 2016 113,000 — Time Charter (18) LR2 Yes
84 STI Guide 2016 113,000 — Time Charter (19) LR2 Yes
85 STI Selatar 2017 109,999 — SLR2P (3) LR2 Yes
86 STI Rambla 2017 109,999 — SLR2P (3) (20) LR2 Yes
87 STI Gauntlet 2017 113,000 — Time Charter (21) LR2 Yes
88 STI Gladiator 2017 113,000 — Time Charter (19) LR2 Yes
89 STI Gratitude 2017 113,000 — Time Charter (22) LR2 Yes
90 STI Lotus 2019 110,000 — SLR2P (3) LR2 Yes
Total owned or lease financed 6,396,352
Newbuildings currently under construction
Vessel Name Yard DWT Vessel type
91 Hull YZJF2024-001 JNS 49,800 MR (23)
92 Hull YZJF2024-002 JNS 49,800 MR (23)
93 Hull YZJF2024-003 JNS 49,800 MR (23)
94 Hull YZJF2024-004 JNS 49,800 MR (23)
95 Hull P110K-102 DS 115,000 LR2 (24)
96 Hull P110K-103 DS 115,000 LR2 (24)
97 Hull P110K-104 DS 115,000 LR2 (24)
98 Hull P110K-105 DS 115,000 LR2 (24)
99 Hull 5540 HO 300,000 VLCC (25)
100 Hull 5541 HO 300,000 VLCC (25)
Total newbuilding product tankers 1,259,200
Total Fleet 7,655,552
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(1) This vessel operates in the Scorpio Handymax Tanker Pool, or SHTP. SHTP is operated by Scorpio Commercial Management S.A.M. (SCM). SHTP and SCM are related parties to the Company.
(2) This vessel operates in the Scorpio MR Pool, or SMRP. SMRP is operated by SCM. SMRP and SCM are related parties to the Company.
(3) This vessel operates in the Scorpio LR2 Pool, or SLR2P. SLR2P is operated by SCM. SLR2P and SCM are related parties to the Company.
(4) This vessel commenced a time charter in April 2025 for two years at a rate of $24,000 per day.
(5) This vessel commenced a time charter in June 2022 for three years at an average rate of $21,000 per day. The daily rate is the average rate over the three-year period, which is payable during the first six months at $30,000 per day, the next six months are payable at $20,000 per day, and years two and three are payable at $19,000 per day. In July 2025, this time charter was extended for a period of 75 to 120 days at a rate of $21,500 per day commencing in August 2025. In November 2025, this time charter was further extended for a period of six months at a rate of $27,500 per day.
(6) This vessel commenced a bareboat charter-out arrangement in August 2025 at a bareboat rate of $13,150 per day. The vessel is chartered to a third-party joint venture which re-flagged the vessel to the United States in order for it to participate in the U.S. Government’s Tanker Security Program (TSP). The contract will remain in effect until the vessel reaches 20 years of age, which will occur in 2037, subject to annual renewal within the National Defense Authorization Act (“NDAA”).
(7) This vessel commenced a time charter in October 2024 for three years at a rate of $29,550 per day.
(8) This vessel commenced a time charter in July 2022 for three years at an average rate of $23,000 per day. The daily rate is the average rate over the three-year period, which is payable in years one, two, and three at $30,000 per day, $20,000 per day, and $19,000 per day, respectively. In July 2025, this time charter was extended for a period of 75 to 120 days at a rate of $21,500 per day commencing in August 2025. In November 2025, this time charter was further extended for a period of six months at a rate of $27,500 per day.
(9) This vessel commenced a time charter in August 2022 for three years at an average rate of $21,000 per day. The daily rate is the average rate over the three-year period, which is payable during the first six months at $30,000 per day, the next six months are payable at $20,000 per day, and years two and three are payable at $19,000 per day. In July 2025, this time charter was extended for a period of 75 to 120 days at a rate of $21,500 per day commencing in August 2025. In November 2025, this time charter was further extended for a period of six months at a rate of $27,500 per day.
(10) This vessel commenced a time charter in August 2025 for five years at a rate of $28,350 per day.
(11) This vessel commenced a time charter in February 2026 for five years at a rate of $29,000 per day.
(12) This vessel commenced a time charter in January 2026 for five years at a rate of $29,000 per day.
(13) This vessel commenced a time charter with a related party in November 2025 for one year at a rate of $35,000 per day.
(14) The Company has entered into an agreement to sell this vessel which is expected to close in the first or second quarter of 2026.
(15) This vessel commenced a time charter in March 2026 for five years at a rate of $33,000 per day.
(16) This vessel commenced a time charter in December 2022 for three years at an average rate of $37,500 per day. The daily rate is the average rate over the three-year period, which is payable during the first six months at $47,000 per day, the next 6 months are payable at $28,000 per day, and years two and three are payable at $37,500 per day. In November 2025, this time charter was extended for a period of one year at a rate of $36,000 per day commencing in December 2025.
(17) This vessel commenced a time charter in April 2023 for three years at a rate of $40,000 per day. The charterer has the option to extend the term of this agreement for an additional year at $42,500 per day.
(18) This vessel commenced a time charter in July 2022 for five years at a rate of $28,000 per day.
(19) This vessel commenced a time charter in July 2022 for three years at an average rate of $28,000 per day. In April 2025, the charterers exercised their option to extend the term of this agreement for an additional year at $31,000 per day commencing in July 2025. The charterers have the option to further extend the term of this agreement for an additional year at $33,000 per day.
(20) This vessel entered into a time charter-out agreement for eight years at a rate of $30,500 per day which is expected to commence in the first or second quarter of 2026.
(21) This vessel commenced a time charter in November 2022 for three years at an average rate of $32,750 per day. In November 2025, this time charter was extended for a period of one year at a rate of $36,000 per day.
(22) This vessel commenced a time charter in May 2022 for three years at an average rate of $28,000 per day. In February 2025, the charterers exercised their option to extend the term of this agreement for an additional year at $31,000 per day commencing in May 2025. The charterers have an additional option to further extend the term of this agreement for an additional year at $33,000 per day.
(23) These newbuilding vessels are being constructed at JNS (Jingjiang Nanyang Shipbuilding Co. Ltd.). Two vessels are expected to be delivered in the second and fourth quarters of 2026 and two vessels are expected to be delivered in the first and second quarters of 2027.
(24) These newbuilding vessels are being constructed at DS (Dalian Shipbuilding Industry Co. Ltd.). Two of the vessels are expected to be delivered in the third quarter of 2027, one is expected to be delivered in the third quarter of 2029 and one is expected to be delivered in the fourth quarter of 2029.
(25) These newbuilding vessels are being constructed at HO (Hanwha Ocean Co. Ltd.). The vessels are expected to be delivered in the third and fourth quarters of 2028.
Chartering Strategy
Generally, we employ our vessels through a combination of commercial pools operated by related entities, time charters and spot market exposure. The mix of employment varies over time based on market conditions, relative profitability and our forward view of tanker fundamentals.
Commercial Pools
To increase vessel utilization and thereby revenues, we participate in commercial pools with other shipowners of similar modern, well-maintained vessels. By operating a large number of vessels as an integrated transportation system, commercial pools offer customers greater flexibility and a higher level of service while achieving scheduling efficiencies. Pools employ experienced commercial managers and operators who have close working relationships with customers and brokers, while technical management is performed by each shipowner. Pools negotiate charters with customers primarily in the spot market, but may also arrange time charter agreements. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and contracts of affreightment, or COAs, thus generating higher effective TCE revenues (see Item 5. Operating and Financial Review and Prospects - Important Financial and Operational Terms and
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Concepts for definition and reconciliation of TCE revenue) than otherwise might be obtainable in the spot market. As of March 19, 2026, 72 of the vessels in our Operating Fleet operated in one of the Scorpio Pools.
Time and Bareboat Charters
Time and bareboat charters give us a fixed and stable cash flow for a known period of time and also mitigate in part the seasonality of the spot market business, which is generally weaker in the second and third quarters of the year. As of December 31, 2025, 14 of our vessels (nine LR2s, four MRs and one Handymax) were operating on long-term charter-out agreements and one MR was operating on a long-term bareboat charter-out agreement with terms of one year or greater. In the future, we may opportunistically look to enter more of our vessels into time charter contracts. We may also enter into time charter contracts with profit sharing agreements, which enable us to benefit if the spot market increases.
Spot Market
A spot market voyage charter is generally a contract to carry a specific cargo from a load port to a discharge port for an agreed freight per ton of cargo or a specified total amount. Under spot market voyage charters, we pay voyage expenses such as port, canal and bunker costs. Spot charter rates are volatile and fluctuate on a seasonal and year-to-year basis. Fluctuations derive from imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes. Vessels operating in the spot market generate revenue that is less predictable but may enable us to capture increased profit margins during periods of improvements in tanker rates. We also consider short-term time charters (with initial terms of less than one year) as spot market voyages.
Management of our Fleet
Commercial and Technical Management
Our vessels are commercially managed by SCM and technically managed by SSM pursuant to the terms and conditions set forth under a revised master agreement which, for the year ended December 31, 2023, was effective as from January 1, 2018 (the "2018 Revised Master Agreement"). In 2024, certain terms of the 2018 Revised Master Agreement were amended and restated with an effective date of January 1, 2024 (the "2024 Revised Master Agreement"). The 2024 Revised Master Agreement may be terminated by either party upon 24 months' notice, unless terminated earlier in accordance with the provisions of the 2024 Revised Master Agreement. In the event of the sale of one or more vessels, a notice period of three months and a payment equal to three months of management fees will apply, provided that the termination does not amount to a change in control, including a sale of all or substantially all of our vessels, in which case a payment equal to 24 months of management fees will apply. SCM and SSM are related parties of ours. We expect that additional vessels that we may acquire in the future will also be managed under the 2024 Revised Master Agreement or on substantially similar terms.
SCM’s services include securing employment, in the spot market and on time charters, for our vessels. SCM also manages the Scorpio Pools. Under the 2018 Revised Master Agreement, during the year ended December 31, 2023, when our vessels were operating in one of the Scorpio Pools, SCM, the pool manager, charged fees of $250 per vessel per day with respect to our LR2 vessels, and $325 per vessel per day with respect to each of our Handymax and MR vessels, plus a 1.50% commission on gross revenues per charter fixture. These were the same fees that SCM charged other vessel owners in these pools, including third-party owned vessels. For commercial management of our vessels that were not operating in any of the Scorpio Pools during the year ended December 31, 2023, we paid SCM a fee of $250 per vessel per day for each LR1 and LR2 vessel and $300 per vessel per day for each Handymax and MR vessel, plus 1.25% commission on gross revenues per charter fixture.
Effective January 1, 2024, under the 2024 Revised Master Agreement, the flat fees payable per day charged by SCM were increased by $35 per vessel per day. As such, under this agreement, commercial management fees on vessels that are not operating in any of the Scorpio Pools were increased to $285 per vessel per day for each LR2 vessel and $335 per vessel per day for each Handymax and MR vessel on the effective date of January 1, 2024. For vessels operating in one of the Scorpio Pools, SCM, the pool manager, increased its fees to $285 per vessel per day with respect to our LR2 vessels and $360 per vessel per day with respect to each of our Handymax and MR vessels on the effective date of July 1, 2024. Commissions on gross revenues per charter fixture remain unchanged.
SSM’s services include day-to-day vessel operations, performing general maintenance, monitoring regulatory and classification society compliance, customer vetting procedures, supervising the maintenance and general efficiency of vessels, arranging the hiring of qualified officers and crew, arranging and supervising drydocking and repairs, purchasing supplies, spare parts and new equipment for vessels, appointing supervisors and technical consultants and providing technical support. Under the 2018 Revised Master Agreement and during the year ended December 31, 2023, we paid SSM an annual fee of $175,000 plus additional amounts for certain itemized services per vessel to provide technical management services for each of our owned or bareboat chartered vessels. Effective January 1, 2024, under the 2024 Revised Master Agreement, the annual fees were increased to $187,500 plus additional amounts for certain itemized services per vessel.
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Amended Administrative Services Agreement
We have an Amended Administrative Services Agreement with Scorpio Services Holding Limited ("SSH"), or our Administrator, for the provision of administrative staff and office space, and administrative services, including accounting, legal compliance, financial and information technology services. SSH is a related party to us. We reimburse our Administrator for the reasonable direct or indirect expenses it incurs in providing us with the administrative services described above. The services provided to us by our Administrator may be sub-contracted to other entities within the Scorpio group of companies.
Further, pursuant to our Amended Administrative Services Agreement, our Administrator, on behalf of itself and other entities within the Scorpio group of companies, has agreed that it will not directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt.
Our Amended Administrative Services Agreement may be terminated by us upon two years' notice.
The International Oil Tanker Shipping Industry
All the information and data presented in this section, including the analysis of the oil tanker shipping industry, has been provided by McQuilling Services LLC. The statistical and graphical information contained herein is drawn from McQuilling’s database and other sources. While McQuilling has made reasonable efforts to include accurate and up-to-date information in this report, McQuilling makes no warranties or representations as to the accuracy of any information contained herein or accuracy or reasonableness of conclusions drawn there from.
Oil Tanker Demand
The evolution of world trade, seaborne trade, and the world shipping fleet are inexorably intertwined in history. Economic prosperity drives trade, and trade compels economic growth. There has always been a strong correlation between trade and seaborne transport to regional economic growth. Dirty Petroleum Products (DPP) tanker demand is mainly generated by three factors: 1) crude oil demand in the global refining system with incremental changes coming from refinery capacity additions/shutdowns and higher/lower utilization of that capacity; 2) crude storage buildup or release to fulfill global refinery demand; 3) average sailing distance from crude export countries to these refineries or storage centers.
While refineries are the main source of demand for the DPP market, clean products have outlets in numerous applications ranging from industrial to commercial, transportation, heating, and more. This creates a complex market and global trade flow, with Clean Petroleum Product (CPP) cargoes originating from many different locations and exported to dozens more, which all have fluctuating outputs/input volumes and products. Because of this, CPP tanker demand has become a function not only of supply and demand but also of differences in balances for each product in each region. As an example, naphtha is a demand-generating cargo that clearly exhibits these relationships. As petrochemical plant capacity increases in Asia, the growing feedstock (in this case naphtha) deficit calls for additional cargoes that are going to be sourced not by a specific location, but rather from the location that has the most to spare.
In recent years, CPP tanker demand has been increasingly morphed by the sudden changes of trade flows and refining margins. These impacts are due to geopolitical and economic developments on maritime “chokepoints”, including reduced daily transits through the Panama Canal in 2023, Houthi attacks in the Red Sea since 2023, and the change in Russian oil flows since 2022.
Sharp reductions in Russian oil product exports, together with the gradual reopening of Red Sea transits, have reshaped global product tanker trade patterns in 2025. In the East of Suez market, expanded refining capacity in the Middle East and India have supported both eastbound and westbound CPP tanker demand, particularly for Long Range (LR) tanker. However, benchmark naphtha flows from the Middle East to the Far East faced persistent headwinds throughout the past year, driven by increased substitution toward discounted propane products amid a surplus in global balances, as well as a narrowing regional naphtha deficit following the ramp-up of integrated refining and petrochemical complexes in the discharge region. In the Atlantic Basin market, US diesel exports to Europe have received incremental support following the EU’s 18th sanctions package, alongside the continued erosion of European refining capacity. As a result, the benchmark Medium Range 2 (MR2) triangulation in the Atlantic Basin continued reversing, with a growing share of MR2s ballasting back to the US Gulf (USG) after discharging diesel in Europe.
Shifting to the crude side, large production growth, particularly in non-OPEC countries, has provided strong support on crude tanker demand. Since 2025, North and South America have played an increasingly important role in Very Large Crude Carrier (VLCC) tanker demand growth, benefiting from improved logistics after ExxonMobil lifted seasonal VLCC restrictions in Guyana and sticking to a positive outlook with a new VLCC terminal in Argentina expected in 2027. Higher export volumes from Brazil, and the redirection of Venezuelan heavy crude flows to the USG have unlocked significant growth potential in US-produced light crude exports by VLCCs. Similarly, Aframax-sized crude tanker demand has strongly benefited
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from shifting Venezuelan crude flows, supported by growing Venezuela to USG crude movements and USG to Venezuela dirty naphtha diluent flows as a backhaul. Further support emerged since late 2025 from pipeline developments along the North America West Coast. Direct Vancouver to East Asia flows by Aframaxes accounted for roughly 80% of the overall Trans Mountain (TMX) pipeline exports in Q4 2025, as importers substitute heavy Venezuelan crude.
Overall oil tanker demand, however, remains highly volatile amid the ongoing US-Israel conflict with Iran. The situation in the Arabian Gulf continues to evolve rapidly, with significant uncertainty surrounding the duration and severity of potential disruptions to the Strait of Hormuz. While a prolonged closure remains difficult to predict, even the perceived risk of restricted passage has already begun to influence trading patterns, freight volatility, and chartering decisions. Given that a substantial share of global seaborne crude flows through this chokepoint, the market is likely to remain sensitive to regional geopolitical developments, with oil tanker demand adjusting quickly to any shifts in security conditions or export flows from the region.
World Seaborne Tanker Ton Mile Demand
DPP Tankers CPP Tankers DPP & CPP Tankers
Year Ton Mile Demand %YoY Ton Mile Demand %YoY Ton Mile Demand %YoY
2014 2,385 865 3,250
2015 2,457 3 % 896 4 % 3,354 3 %
2016 2,522 3 % 929 4 % 3,450 3 %
2017 2,620 4 % 968 4 % 3,588 4 %
2018 2,578 (2) % 1,003 4 % 3,581 — %
2019 2,524 (2) % 992 (1) % 3,516 (2) %
2020 2,385 (6) % 923 (7) % 3,308 (6) %
2021 2,369 (1) % 982 6 % 3,351 1 %
2022 2,483 5 % 1,015 3 % 3,498 4 %
2023 2,584 4 % 1,017 — % 3,602 3 %
2024 2,551 (1) % 1,000 (2) % 3,551 (1) %
2025 2,544 — % 979 (2) % 3,523 (1) %
*DPP includes crude oil and dirty petroleum products
Source: AIS, McQuilling
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World Oil Products Demand: 2014-2025
(Million bpd)
Source: Kpler
World Oil Supply and Demand
In 2025, the crude oil market navigated a complex landscape shaped by OPEC+ production increases, geopolitical tensions, and macroeconomic concerns. Throughout the year, OPEC+ announced six production hikes, beginning in May and June at 411,000 barrel per day (“b/d”), followed by larger increases of 548,000 b/d in August and 547,000 b/d in September. The group subsequently scaled back the pace of increases to 137,000 b/d in both October and December, resulting in a total OPEC output increase of 2.191 million b/d for 2025. The moderation in the pace of output hikes suggests the group remains committed to maintaining market balance. After pausing production increases in Q1 2026, OPEC+ announced a further production increase of 206,000 b/d starting in April 2026. The move aims to stabilize market volatility stemming from supply concerns during the US-Israel/Iran conflict, although Iranian drone attacks on key oil infrastructure and threats to commercial vessels transiting the Strait of Hormuz could affect production levels from some OPEC+ producers.
On a different front, as the Russia-Ukraine war persists, pressure on Russia’s oil sector continues to intensify. Escalating sanctions, weak oil prices, and repeated Ukrainian drone attacks have created significant operational and commercial challenges for Russian producers. Sanctions imposed by the US, EU, and UK have steadily expanded to encompass hundreds of vessels, alongside measures targeting major oil companies Rosneft and Lukoil in October 2025. As such, oil exports from Russia have declined while prolonged wartime underinvestment in drilling could begin to weigh on total output. At the same time, India - a major buyer of Russian crude - is scaling back imports amid rising tariff pressure from the US and tightening EU sanctions.
On the other side of the Atlantic, heightened US enforcement against Venezuelan oil flows began in December 2025 - marked by multiple US Coast Guard seizures of sanctioned and shadow tankers - evolved to a US military operation on January 3, 2026, which successfully captured Nicolás Maduro, the country’s de facto leader. The displaced 438,000 b/d of Venezuelan heavy crude exports, including cargoes aboard seized tankers, were absorbed almost immediately by US Gulf refineries, well ahead of any new capital investment in Venezuela’s oil infrastructure. With Venezuelan crude production beginning to inch up and a US OFAC issued general license on January 29th, 2026 allowing US companies to participate fully in Venezuelan oil exports, infrastructure repair, and foreign investment, additional oil exports are expected from the country to the US, Europe, India, and potentially China, although oil marketed under US control is reportedly being sold at market rates rather than the deep discounts previously seen.
Outside of OPEC+, some of the fastest-growing sources of crude production are emerging in South America, led by Guyana, Brazil, and Argentina. In 2025, the “One Guyana” floating production storage and offloading unit (FPSO) came online, adding approximately 250,000 b/d of production capacity and pushing Guyana’s total crude output to more than 900,000 b/d for the year. Brazil also continued to expand production, increasing output by about 270,000 b/d in 2025, in line with Petrobras’s publicly stated objective of becoming the world’s fifth-largest oil producer by 2030. Meanwhile, Argentina recorded production growth of roughly 94,000 b/d in 2025 through infrastructure debottlenecking, enabling rising shale output from the Vaca Muerta “to be exported, primarily to the US West Coast.
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Oil Product Exports - Major Selected Regions
('000 bpd)
Source: JODI, McQuilling
From a refining capacity standpoint, the largest increases are likely in India and West Africa as the ramp up of the Dangote refinery continues to have a material market impact, supporting jet and naphtha exports to the East. North American refining has become increasingly export-dependent as US and Canadian road-fuel demand trends broadly flat to lower. The most competitive plants particularly along the US Gulf Coast, have sustained high utilization by supplying refined products to Latin America and, increasingly, Africa, as both regions continue to substitute away from Russian product imports. Feedstock availability will also play a critical role: increased Venezuelan heavy-crude supply would benefit US Gulf Coast refineries configured for heavier grades and could displace lighter Atlantic Basin crudes, including domestic shale oil, into export markets in the east of Suez.
Mexico’s Olmeca/Dos Bocas refinery remains another key variable. Pemex’s 340,000 b/d project has faced repeated delays but reportedly operated at 77% utilization rate in December 2025. The plant is expected to reach full capacity in 2027, alongside ongoing upgrades at existing refineries to increase runs of domestic heavy crude. This has resulted in seasonal diesel exports to the US East Coast, reduced gasoline imports from the US Gulf, and the partial displacement of Mexican Maya crude from the US Gulf refining system.
European refineries, meanwhile, are focusing on structural rationalization and trade rerouting rather than capacity expansion. Policy remains a dominant driver, as the EU’s sanctions framework increasingly targets indirect imports of products derived from Russian crude via third countries. Stricter origin verification requirements are expected to raise compliance costs, potentially widening price differentials for diesel and other middle distillates. The main theme for European refiners in 2025 has been refinery consolidation, increased focus on biofuel conversions, and more complex import economics particularly for diesel, where documentation and traceability are becoming nearly as critical as refining margins.
In the East of Suez, China’s refining landscape has been shaped as much by feedstock access and policy risk as by incremental capacity changes. Independent (“teapot”) refiners, particularly in Shandong, remain heavily reliant on discounted Venezuelan, Iranian and Russian crude, as these barrels can be decisive to economics when margins are thin. This dependence, however, exposes operators to sanctions risk and episodic disruptions in purchasing behavior.
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Current Tanker Fleet
Depending on yard capacity, backlog size, and complexity of the vessel, building an oil tanker will take anywhere from 12 to 36 months from start of construction to delivery. This constraint makes the tanker fleet relatively inelastic in the short-term. The only remedy to the lack of expansion of the fleet is by increasing operating speeds, redeploying vessels out of drydocking, or, in the very extreme case, getting vessels out of layup. On the flip side, if vessels begin to slow steam, start a routine special survey, or are laid up, it would constitute a negative effect on the net tanker fleet. Since the start of the Russia/Ukraine war in March 2022 and the introduction of a price cap for Russian crude and oil products, proliferation of the shadow and sanctioned fleets dramatically increased. It was no longer just Iranian and Venezuelan barrels carried on sanctioned vessels but also Russian oil, trading above the price cap.
The uncoated tanker fleet (after removing ships over 25 years old) currently stands at 2,241 vessels. We do not consider tonnage older than 25 years of age as part of the trading fleet due to their non-viability in the crude and/or refined product transportation requirements. This is due to chartering vetting requirements, insurance, and regulatory limits on older vessels, making them generally very inefficient in the commercial market. Of these ships, we have counted a total of 551 sanctioned or shadow tankers, which represents 24.6% of the total fleet size, a continual growth from last year’s 21.5% that was brought up due to US, EU and UK sanctions in 2025. A majority of the uncoated tankers in the sanctioned fleet are Aframaxes (207 ships), including the Russian fleet and ships not adhering to the Russian price cap. The VLCC fleet stands at 851 ships in total, making it the biggest uncoated tanker fleet among all segments, while the size of uncoated Aframaxes decreased to 641 vessels, given shipping companies’ increased interest in ordering LR2s with the capability to switch between trading crude and refined products from shipping companies.
Marine transportation of CPP is carried out through non-IMO “product tankers” and IMO II and IMO III “chemical tankers”, the latter of which can switch between trading refined products and chemicals, depending on market conditions. Due to this “switchover” ability, it is necessary to account for both “product” and “chemical” tankers when assessing supply capable of transporting CPP products. The product and chemical tanker fleet currently stands at 5,043 vessels, including a total of 470 sanctioned or shadow tankers representing 9.3% of the total fleet size; the ratio is much lower compared to the figure for the uncoated tanker fleet.
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The Oil Tanker Fleet (1) - February 2026
Deadweight Tons Number of Capacity
Vessel Type (Dwt) Vessels % of Fleet (m Dwt) % of Fleet
Crude Tankers
VLCC 200,000+ 851 38.0 % 262.1 59.7 %
Suezmax 120,000-199,999 633 28.3 % 99.4 22.6 %
Aframax 80,000-119,999 641 28.6 % 70.7 16.1 %
Panamax 60,000-79,999 65 2.9 % 4.5 1.0 %
Medium Range 2 40,000-59,999 40 1.8 % 1.9 0.4 %
Medium Range 1 27,500-39,999 2 0.1 % 0.1 — %
Handy 10,000-27,499 9 0.4 % 0.2 — %
Total Fleet 2,241 100 % 438.9 100 %
Product Tankers
Long Range 3 (LR3) 120,000-199,999 36 2.7 % 5.5 5.4 %
Long Range 2 (LR2) 80,000-119,999 511 37.7 % 56.8 55.5 %
Long Range 1 (LR1) 60,000-79,999 315 23.2 % 23.2 22.7 %
Medium Range 2 (MR2) 40,000-59,999 269 19.8 % 12.7 12.4 %
Medium Range 1 (MR1) 27,500-39,999 46 3.4 % 1.5 1.5 %
Handy 10,000-27,499 180 13.3 % 2.6 2.6 %
Total Fleet 1,357 100 % 102.3 100 %
Chemical Tankers(2)
Long Range 3 (LR3) 120,000-199,999 — — % — — %
Long Range 2 (LR2) 80,000-119,999 4 0.1 % 0.4 0.3 %
Long Range 1 (LR1) 60,000-79,999 58 1.6 % 4.3 3.3 %
Medium Range 2 (MR2) 40,000-59,999 1,684 45.7 % 82.0 63.1 %
Medium Range 1 (MR1) 27,500-39,999 527 14.3 % 19.1 14.7 %
Handy 10,000-27,499 1,413 38.3 % 24.1 18.6 %
Total Fleet 3,686 100 % 129.9 100 %
Product & Chemical Tankers
Long Range 3 (LR3) 120,000-199,999 36 0.7 % 5.5 2.4 %
Long Range 2 (LR2) 80,000-119,999 515 10.2 % 57.2 24.6 %
Long Range 1 (LR1) 60,000-79,999 373 7.4 % 27.5 11.8 %
Medium Range 2 (MR2) 40,000-59,999 1,953 38.7 % 94.7 40.8 %
Medium Range 1 (MR1) 27,500-39,999 573 11.4 % 20.7 8.9 %
Handy 10,000-27,499 1,593 31.6 % 26.7 11.5 %
Total Fleet 5,043 100 % 232.3 100 %
Crude, Product, and Chemical Tankers
VLCC 200,000+ 851 11.7 % 262.1 39.1 %
Suezmax/LR3 120,000-199,999 669 9.2 % 104.9 15.6 %
Aframax/LR2 80,000-119,999 1,156 15.9 % 127.9 19.1 %
Panamax/LR1 60,000-79,999 438 6.0 % 32.0 4.8 %
Medium Range 2 40,000-59,999 1,993 27.4 % 96.6 14.4 %
Medium Range 1 27,500-39,999 575 7.9 % 20.7 3.1 %
Handy 10,000-27,499 1,602 22.0 % 26.9 4.0 %
Total Fleet 7,284 100 % 671.1 100 %
(1)Vessels over 25 years are excluded in fleet count. Tanker Fleet includes Shuttle Tankers
(2)Chemical Tankers can have IMO II and IMO III capability and the ability to trade CPP cargoes and routes.
Source: McQuilling
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The World Tanker Orderbook (1) - February 2026
Deadweight Tons Orderbook Orderbook % Fleet 2026 2027 2028+
Vessel Type (Dwt) No m Dwt No Dwt No m Dwt No m Dwt No m Dwt
Crude Tankers
VLCC 200,000+ 148 45.5 17.4% 17.3% 40 12.2 61 18.7 47 14.5
Suezmax 120,000-199,999 152 23.8 24.0% 23.9% 56 8.7 59 9.3 37 5.8
Aframax 80,000-119,999 23 2.6 3.6% 3.7% 12 1.3 10 1.1 1 0.1
Panamax 60,000-79,999 2 0.1 3.1% 3.3% — — — — 2 0.1
Medium Range 2 40,000-59,999 13 0.6 32.5% 33.4% 7 0.3 6 0.3 — —
Medium Range 1 27,500-39,999 — — —% —% — — — — — —
Handy 10,000-27,499 — — —% —% — — — — — —
Total Fleet 338 72.6 15% 17% 115 22.5 136 29.4 87 20.5
Product Tankers
Long Range 3 (LR3) 120,000-199,999 — — —% —% — — — — — —
Long Range 2 (LR2) 80,000-119,999 182 20.7 35.6% 36.4% 77 8.8 69 7.8 36 4.1
Long Range 1 (LR1) 60,000-79,999 50 3.6 15.9% 15.7% 20 1.5 14 1.0 16 1.2
Medium Range 2 (MR2) 40,000-59,999 28 1.3 10.4% 10.6% 5 0.2 9 0.4 14 0.7
Medium Range 1 (MR1) 27,500-39,999 7 0.3 15.2% 16.5% 4 0.2 — — 3 0.1
Handy 10,000-27,499 32 0.6 17.8% 24.6% 17 0.3 9 0.2 6 0.2
Total Fleet 299 26.5 22% 26% 123 11.0 101 9.4 75 6.3
Chemical Tankers(2)
Long Range 3 (LR3) 120,000-199,999 — — —% —% — — — — — —
Long Range 2 (LR2) 80,000-119,999 — — —% —% — — — — — —
Long Range 1 (LR1) 60,000-79,999 8 0.6 13.8% 13.9% 6 0.4 2 0.1 — —
Medium Range 2 (MR2) 40,000-59,999 263 12.8 15.6% 15.7% 140 6.9 96 4.6 27 1.3
Medium Range 1 (MR1) 27,500-39,999 34 1.2 6.5% 6.5% 14 0.5 13 0.5 7 0.3
Handy 10,000-27,499 263 5.0 18.6% 20.9% 168 3.2 76 1.5 19 0.4
Total Fleet 568 19.6 15% 15% 328 11.0 187 6.7 53 2.0
Product & Chemical Tankers(2)
Long Range 3 (LR3) 120,000-199,999 — — —% —% — — — — — —
Long Range 2 (LR2) 80,000-119,999 182 20.7 35.3% 36.2% 77 8.8 69 7.8 36 4.1
Long Range 1 (LR1) 60,000-79,999 58 4.2 15.5% 15.4% 26 1.9 16 1.2 16 1.2
Medium Range 2 (MR2) 40,000-59,999 291 14.2 14.9% 15.0% 145 7.1 105 5.1 41 2.0
Medium Range 1 (MR1) 27,500-39,999 41 1.5 7.2% 7.3% 18 0.7 13 0.5 10 0.4
Handy 10,000-27,499 295 5.7 18.5% 21.3% 185 3.5 85 1.7 25 0.5
Total Fleet 867 46.3 17% 20% 451 22.0 288 16.3 128 8.2
Crude, Product, and Product/Chemical Tanker Fleet
VLCC 200,000+ 148 45.5 17.4% 17.3% 40 12.2 61 18.7 47 14.5
Suezmax/LR3 120,000-199,999 152 23.8 22.7% 22.7% 56 8.7 59 9.3 37 5.8
Aframax/LR2 80,000-119,999 205 23.3 17.7% 18.2% 89 10.1 79 9.0 37 4.2
Panamax/LR1 60,000-79,999 60 4.4 13.7% 13.7% 26 1.9 16 1.2 18 1.3
Medium Range 2 40,000-59,999 304 14.8 15.3% 15.3% 152 7.5 111 5.4 41 2.0
Medium Range 1 27,500-39,999 41 1.5 7.1% 7.2% 18 0.7 13 0.5 10 0.4
Handy 10,000-27,499 295 5.7 18.4% 21.1% 185 3.5 85 1.7 25 0.5
Total Fleet 1,205 119.0 17% 18% 566 44.6 424 45.8 215 28.7
(1) Tanker Orderbook includes Shuttle Tankers
(2) Chemical Tankers can have IMO II and IMO III capability and the ability to trade CPP cargoes and routes
Source: McQuilling
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Postponed Net Zero, Leaving Shipowners in Limbo
Decarbonization requirements at both the global and regional levels - through frameworks such as the Energy Efficiency Design Index (EEDI), FuelEU Maritime, and the EU Emissions Trading System (EU ETS) - are becoming progressively more stringent. At the same time, shipowners face increasing challenges in complying with and navigating a growing number of overlapping mandates, each with distinct methodologies for measuring and reducing emissions. Uncertainty across the industry intensified in the fall of 2025 when the International Maritime Organization (IMO) decided to delay its vote on enforcing the Net-Zero Framework by one year. In the absence of a clear regulatory pathway, responsibility has increasingly shifted onto owners to determine fuel choices and propulsion technologies for newbuildings that are economically viable while aligning with the broader push toward lower emissions.
Earlier, in the spring of 2025, the IMO approved, but did not formally adopt new greenhouse gas (GHG) requirements at the Maritime Environmental Protection Committee (MEPC 83). These measures included: (1) approval of a new GHG fuel intensity (GFI) standard combined with a pricing and reward mechanism; (2) adoption of amendments to MARPOL Annex VI and the NOx Technical Code enabling the use of multiple engine operational profiles (MEOP) and engine re-certification; (3) approval of amendments designating the North-East Atlantic as an Emission Control Area (ECA); and (4) completion of the first phase of the review of the Carbon Intensity Indicator (CII), Ship Energy Efficiency Management Plan (SEEMP), and Energy Efficiency Existing Ship Index (EEXI). Under the proposed framework, emissions would be measured using a GFI metric - defined as well-to-wake GHG emissions per unit of energy consumed on board. Compliance surpluses and deficits would be managed through the trading of Remedial Units (RUs), with initial prices set at US $100/mt of CO₂-equivalent for Tier 1 RUs and US $380/mt of CO₂-equivalent for Tier 2 RUs.
Despite this progress, IMO’s Net-Zero Framework has stalled. The US, an IMO signatory, played a major role in the decision to postpone the vote, reportedly exerting significant pressure and even threatening sanctions against countries supporting the framework. At the spring 2025 meeting, most EU member states, along with many Asian countries, voted in favor of the draft text. However, China and India later supported postponing the vote during the fall session- with Russia, the UAE, and Saudi Arabia dissenting. Following the decision, some stakeholders called for a restructuring of the IMO’s decision-making process, while others argued that further reassessment would only prolong regulatory uncertainty.
The most immediate consequence of the one-year delay is a shift in the regulatory timeline: the earliest possible review of the 2023 IMO GHG Strategy is now 2027, with finalization and potential adoption of a revised IMO Strategy unlikely before 2028. Less clear, however, is the broader impact on the industry’s decarbonization trajectory. Market discussions suggest that the US may seek to influence future IMO outcomes toward prioritizing LNG as a transition fuel, reflecting its extensive domestic infrastructure and supply capabilities. In parallel, other IMO regulatory initiatives continue to evolve and will remain critical determinants of investment and operational decisions across the shipping sector.
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Oil Tanker Freight Market
Crude Tanker - Spot (TCE) Rates: 2013-2026*
(US$/Day)
Year Caribs Med West Africa AG
USG or USAC Med UKC Far East
Panamax Aframax Suezmax VLCC
2013 10,795 7,345 12,196 14,443
2014 21,171 19,010 22,594 25,673
2015 26,816 33,094 39,382 66,716
2016 15,046 17,495 22,754 38,076
2017 9,643 11,082 11,117 19,468
2018 10,200 12,791 9,788 19,777
2019 19,143 19,013 26,756 40,246
2020 19,131 13,161 22,901 48,837
2021 10,792 7,231 1,523 (2,092)
2022 47,201 41,743 32,351 16,888
2023 53,518 52,517 44,374 38,609
2024 36,832 43,784 34,207 29,261
2025 24,876 48,779 44,887 55,974
Jan-26 62,120 96,425 81,833 82,951
Feb-26 82,307 110,893 75,649 154,629
*Up to February 2026
Source: McQuilling, Note - TCE's are based on Non-Eco, Non-Scrubber vessels
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Product Tanker - Spot (TCE) Rates: 2013-2026*
(US$/Day)
Year UKC USG AG AG
USG UKC Japan Japan
MR2 MR2 LR1 LR2
2013 8,296 4,402 7,576 10,878
2014 7,699 3,174 10,523 14,835
2015 16,543 12,067 23,685 29,014
2016 8,620 4,957 12,290 15,475
2017 6,832 3,054 8,118 9,385
2018 5,397 1,923 7,982 9,472
2019 8,875 3,834 14,131 20,230
2020 12,914 8,095 19,441 30,014
2021 4,402 (1,924) 6,218 6,347
2022 24,322 15,215 31,203 35,386
2023 22,558 13,099 27,192 34,761
2024 15,189 18,429 30,938 39,065
2025 11,580 16,380 23,085 28,503
Jan-26 9,979 24,306 37,557 49,693
Feb-26 13,554 39,032 32,999 42,283
*Up to February 2026
Source: McQuilling, Note - TCE's are based on Non-Eco, Non-Scrubber vessels
The oil tanker market has been historically driven by the largest vessels – VLCCs, with over 60% of global crude and dirty tanker demand being generated by this sector and VLCC earnings being used as the indicator of the overall tanker market -and many shipping stocks- performance. The pattern, however, has been drastically disrupted since 2022 when EU’s ban on Russian oil imports and the “Price Cap” structure provided outsized support on Suezmax and Aframax demand by expanding the average sailing distance from exports from the Europe to the East of Suez markets, such as India, China, and countries in Southeast Asia.
Much like commodity markets, where equilibrium prices are determined by the interaction of supply and demand, the crude tanker market has been undergoing a prolonged “rebalancing process” over the past four years. Between 2022 and 2025, a total of 273 Aframax-sized tankers have been ordered; over the same period, only 180 VLCCs were ordered (88% of which were contracted after 2024) as discounted Russian crude absorbed by Asian refiners displaced Middle Eastern barrels (amid OPEC+ production cuts) and Atlantic Basin crude that previously supplied Europe, both of which are traditionally VLCC-dominated markets.
Shifts in tanker demand have also contributed to narrowing the earnings gap between VLCCs and mid-sized tankers. Charterers have increasingly favored VLCCs on a $/bbl freight basis for short-haul intra-Atlantic Basin trades, including exports from the US Gulf, Guyana (following ExxonMobil’s removal of the seasonal VLCC restriction between September and January), Brazil, and West Africa to Europe. This trend intensified in 2025, driven by: 1) OPEC+ easing production cuts, which supported demand on core VLCC routes; 2) tighter sanctions on Russian crude exports and Ukraine’s drone attacks on refineries, which pressured mid-sized tanker demand; and 3) continued, albeit slower, employment of uncoated VLCCs for India- and Middle East-origin refined product flows into Africa and Europe. As a result, VLCCs regained their position as the top-earning crude tanker segment, with average earnings in 2025 30% higher than those of dirty Aframaxes - reversing the prior three-year trend during which Aframaxes outperformed VLCCs by 34%.
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Through LR2 switchovers, product tanker fundamentals remain closely linked to the cyclical dynamics of the crude tanker market. A strong statistical relationship exists between VLCC earnings and product tanker returns. Historically, LR2s and MR2s have traded at approximately 55% and 40%, respectively, of VLCC earnings during firm market conditions, with an average 77% probability that these markets move in the same year-on-year direction. Overall, heavy cuts in Russian oil product exports, alongside the gradual reopening of Red Sea transits, and the overhang of newbuilding deliveries are three major factors reshaping the product tanker market.
Efforts to mitigate elevated freight costs remained another key driver of product tanker dynamics in 2025. These include: (1) the use of Bahamas storage facilities as a workaround to US Jones Act requirements for moving US Gulf refined products to the US Atlantic and West Coasts; (2) increased chartering of MR2s where feasible, given the substantial 241 newbuilding tankers scheduled for delivery from Asian shipyards over 2026–2027; and (3) the continued “dirtying-up” of LR2s as crude tanker earnings materially outperform product tanker returns.
Oil Tanker Orderbook
The oil tanker orderbook numbers 1205 vessels at the end of 2025, including 338 uncoated tankers and 867 coated & chemical tankers. The significant orderbook for chemical tankers continues to pose challenges for CPP owners if the tonnage swings over, adding further supply-side pressure. A notable 29% of the orderbook comprises IMO-Certified MR2s over 40,000 DWT.
The LR2 orderbook stands at 36% of the trading fleet. This is a significant number, but if we take into account shipowners’ decisions to adjust orders from Aframaxes to LR2s, it makes sense as two fleets theoretically merge into one. Chemical MR2s and LR1s are next in line with 16% of the current fleet on order, a robust growth expected for a relatively young CPP Fleet.
Fleet Profile
Looking closely at the CPP fleet age profile, we see that LR2 tankers continue to be the youngest fleet with 51% of the total at below 10 years of age, followed by Chemical MR2s at 41%. The oldest CPP fleet is the product MR2 and MR1 with only 3% and 10% of fleet below 10 years of age, due mainly to owners switching to Chemical MR orders, as mentioned earlier, for more flexibility of trade. Even though clean vessels that were sanctioned or joined the shadow fleet in the past two years are not as numerous when compared to dirty tankers, we have captured a jump in the number of MR2s entering the unconventional fleet, currently standing at 12.1% of the total. This trend started since the US tightened sanctions, in February 2023, on Russian products including naphtha sold above US $45/bbl and diesel/gasoline sold above US $100/bbl.
Contracting
Tanker ordering activity has continued to recover from the historic lows recorded in 2022, although the pace to date remains measured relative to the peak newbuilding cycle of 2005–2009. This indicates that, despite improving market confidence, owners have generally maintained a disciplined approach to capacity additions, balancing forward earnings visibility against ongoing regulatory and technological uncertainty. Delays surrounding the USTR Section 301 framework and the IMO Net Zero vote have contributed to a more cautious ordering environment.
Throughout 2025, we have captured 166 uncoated vessels ordered, including 79 VLCCs, 79 Suezmaxes, and only 8 uncoated Aframaxes. This is a significant jump from last year’s 127 total DPP orders. Even though this represents a 31% increase since last year, orders are still below the historic average and far from the highs of 2006 during which over 300 vessels were ordered.
Total CPP & Chemical orders in 2025 numbered 152 vessels, a large decrease from the 341 ordered in 2024. After continued growth in newbuilding orders since 2022, this marks the first downturn, particularly for MR2-sized tanker orders which declined from 202 in 2024 to only 79 in 2025.
Shipbuilding capacity in China has been gaining momentum for several years, with 2023 marking an inflection point as the majority of tanker orders were placed at Chinese yards. This momentum has since continued, and even the USTR initiative proposing significant port fees on Chinese-built and Chinese-owned tonnage only briefly interrupted ordering activity. In parallel, the US administration has sought to revive domestic shipbuilding through deeper cooperation with South Korean yards, while Japanese shipbuilders have continued to lose market share and now firmly occupy third place globally. Finally, Southeast Asian yards - including Hyundai joint ventures in Vietnam and the Philippines - are steadily gaining traction in clean tanker construction, particularly in the LR2 and MR2 segments.
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Oil Tankers: Newbuilding Prices: 2002-2026*
(In millions of U.S. Dollars)
MR2 LR1 LR2 Aframax Suezmax VLCC
50,000 75,000 110,000 110,000 160,000 300,000
Year End DWT DWT DWT DWT DWT DWT
2002 26.8 30.6 36.5 34.5 43.5 63.3
2003 31.5 36.3 43.1 41.1 51.1 75.1
2004 39.8 49.2 60.6 58.6 70.3 108.5
2005 45.0 52.0 65.0 63.0 80.5 120.0
2006 45.0 55.0 68.0 66.0 82.0 145.0
2007 43.0 63.0 71.0 69.0 88.0 141.0
2008 43.0 54.0 68.0 66.0 78.0 128.0
2009 33.0 42.0 52.0 50.0 64.0 101.5
2010 35.7 43.5 57.6 55.6 66.3 102.5
2011 34.0 40.0 53.7 51.7 61.5 95.0
2012 32.0 36.0 44.0 42.0 54.0 87.0
2013 34.0 36.0 47.0 45.0 58.0 91.0
2014 35.9 47.5 54.5 51.0 64.0 98.0
2015 35.4 45.0 55.0 51.8 65.0 95.0
2016 32.4 38.5 45.0 42.0 57.3 85.0
2017 35.0 38.5 45.3 43.3 56.0 83.0
2018 37.8 43.8 51.3 47.8 62.8 92.3
2019 38.0 44.8 52.0 49.5 63.5 95.5
2020 34.0 36.0 47.0 45.5 55.0 87.0
2021 38.0 44.0 56.8 53.5 65.5 98.0
2022 46.0 54.0 69.5 66.0 80.5 116.5
2023 49.0 58.0 71.0 69.0 86.0 121.0
2024 52.0 65.0 78.0 75.0 91.0 132.8
2025 50.0 61.5 75.8 73.3 87.5 129.5
Jan-26 51.0 63.0 75.5 73.0 90.0 130.3
Feb-26 51.0 62.8 75.0 73.0 88.0 130.0
Long-Term Average 40.0 47.6 57.9 56.2 69.9 106.1
*Up to February 2026
Source: McQuilling
Second-hand Prices
Supply is one of the most critical determinants of freight levels, and an accelerated pace of exits could potentially support freight rates. Owners of disadvantaged tonnage may be more inclined to sell older vessels for demolition, particularly in the context of reduced floating storage opportunities and higher steel scrap prices. Since 2020, however, a new trend has emerged in which disadvantaged tonnage changes hands in an opaque second-hand market rather than being scrapped, resulting in increased competition for “conventional” ships, albeit at reduced efficiency. This trend has largely tempered in 2025 due to intensified sanctions on shadow tankers and increased scrutiny of KYC during asset transactions, coupled with lower product tanker earnings relative to firm asset prices.
Secondhand activity for LR2s recovered from 20 transactions in 2024 to 38 in 2025, though still below the 44 vessels that changed hands in 2023. Likewise, LR1 secondhand transactions remained limited, with only 19 vessels changing hands in 2025 compared with 70 vessels in 2023. Trading volume for MR2s in the secondhand market was particularly low due to declining shadow MR2 demand for Russian oil exports. In 2025, there were only 130 transactions, continuing the year-on-year decline from 258 transactions in 2023 and 144 transactions in 2024.
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Tanker asset values, particularly for secondhand VLCCs, have surged since the beginning of 2026. Ownership restructuring within the conventional fleet appears to be the primary catalyst. In just the first two months of 2026, we counted 72 secondhand VLCC transactions, exceeding the total of 62 transactions recorded in all of 2025. This highly concentrated buying activity has triggered a rapid repricing of secondhand assets, with 5- and 10-year-old VLCC value assessments increasing by US $4.5 million and US $17 million, respectively, within a single month—marking the largest one-month increase in second-hand VLCC prices over the past 25 years.
Oil Tanker Second-hand Prices for 5-year-old vessels: 2002-2026*
(In millions of U.S. Dollars)
MR2 LR1 LR2 Aframax Suezmax VLCC
50,000 75,000 110,000 110,000 160,000 300,000
Year End DWT DWT DWT DWT DWT DWT
2002 20.0 20.0 29.5 27.5 38.0 54.0
2003 26.0 27.9 37.5 35.5 46.8 69.0
2004 39.0 42.0 59.5 57.5 75.0 108.0
2005 47.0 48.0 65.0 63.0 75.0 115.0
2006 48.5 56.0 68.5 66.5 82.0 115.0
2007 53.0 58.0 69.0 67.0 96.0 130.0
2008 41.0 50.0 64.0 62.0 78.0 124.0
2009 22.5 31.5 41.0 39.0 56.0 72.0
2010 23.2 35.8 41.2 39.2 59.3 81.8
2011 26.0 28.0 32.0 30.0 42.5 56.0
2012 21.0 24.0 28.0 26.0 41.0 58.0
2013 27.0 25.0 29.5 27.5 38.0 55.0
2014 23.3 29.7 42.3 37.5 51.0 71.8
2015 27.3 35.0 48.5 45.0 60.1 77.5
2016 21.0 27.5 36.3 28.5 41.3 60.5
2017 24.8 27.5 34.5 30.8 40.5 61.0
2018 27.4 29.3 34.8 33.5 43.5 62.5
2019 30.0 32.1 39.3 37.5 47.5 69.5
2020 25.0 26.0 36.0 33.5 43.5 67.0
2021 29.2 31.2 42.0 39.2 47.8 72.3
2022 40.5 42.0 55.3 53.0 61.5 93.0
2023 44.0 48.0 66.5 63.5 72.8 95.0
2024 47.3 54.8 75.3 71.8 84.5 115.3
2025 42.0 51.3 70.7 70.5 79.5 120.0
Jan-26 42.0 51.1 70.5 65.9 79.0 120.5
Feb-26 42.8 52.8 72.8 67.5 82.3 125.0
Long-Term Average 32.8 37.9 48.0 45.8 59.3 84.7
*Up to February 2026
Source: McQuilling
Sustainability Initiatives and Focus on ESG
We aim to uphold and advance a set of principles and practices regarding Environmental, Social and Governance matters and have developed, adopted, and implemented ESG initiatives within our operations and business culture. In adopting these initiatives, our primary goals are to reduce the environmental impact of our operations, create a safe and healthy work environment, both at sea and onshore, and engage in responsible corporate governance practices. Our Board of Directors, which includes five independent members, oversees our ESG strategy, evaluates and adopts ESG initiatives including those relating to sustainability and climate change, assesses ESG risks and opportunities, and promotes responsible ESG practices within our Company. In May 2025, we published our fifth comprehensive sustainability report. The report disclosed our ESG performance for 2024 and was prepared in accordance with the Sustainability Accounting Standards Board ("SASB") Marine Transportation standard and the Global Reporting Initiative ("GRI").
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The sustainability report is available on our website at www.scorpiotankers.com. The information included on or accessible through our website is not incorporated by reference into this annual report.
ESG initiatives we have undertaken include, among others:
•Signing the Call to Action for Shipping Decarbonization, pledging to offer net zero emission shipping services by 2030, measure carbon intensity and assess climate alignment of our vessels on an annual basis, develop and improve digital and other management tools to measure greenhouse gas emissions from the full supply chain to compare activities and optimize operations.
•Our continuing membership in:
◦The International Seafarers’ Welfare and Assistance Network (ISWAN)
◦The Trident Alliance (Sulphur Enforcement)
◦Marine Anti-Corruption Network (MACN)
•Aligning our internal policies with certain UN Sustainable Development Goals relating to work and economic growth, climate action, and life below water.
•Supporting the principles of the Sea Cargo Charter.
•Creating a direct reporting line from our environmental compliance audit and training team (SECAT) to our Board of Directors.
•Signing the Neptune Declaration on Seafarer Wellbeing and Crew Change.
•Committing to responsible ship recycling in accordance with the Hong Kong Convention and conducted in compliance with the IMO Convention for the Safe and Environmentally Sound Recycling of Ships.
•Joining the IMPA Maritime Environmental Footprint ("IMEF") Initiative to enhance Scope 3 emissions reporting through an industry-wide activity-based approach, supporting greater transparency and decarbonization efforts.
•Equipping all vessels with appropriate ballast water treatment systems.
•Reporting our climate-related environmental performance to the Carbon Disclosure Project, achieving a B rating in our most recent submission, reflecting continued improvement in our ESG transparency and disclosure practices.
•Participating in the Blue Whales Blue Skies program, achieving Sapphire level recognition with a 91% fleet participation rate.
Environmental and Other Regulations in the Shipping Industry
Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.
A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States Coast Guard (“USCG”), harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of our vessels.
Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations frequently change and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability.
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International Maritime Organization
The IMO, the United Nations agency for maritime safety and the prevention of pollution by vessels, adopted MARPOL, the SOLAS Convention, and the International Convention on Load Lines of 1966 (the “LL Convention”). MARPOL establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms. MARPOL is applicable to drybulk, tanker and LNG carriers, among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to noxious liquid substances carried in bulk and harmful substances carried in packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997; new emissions standards, titled IMO-2020, took effect on January 1, 2020.
In 2012, the IMO’s Marine Environmental Protection Committee (the "MEPC") adopted a resolution amending the International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk (the "IBC Code"). The provisions of the IBC Code are mandatory under MARPOL and the SOLAS Convention. These amendments, which entered into force in June 2014 and took effect on January 1, 2021, pertain to revised international certificates of fitness for the carriage of dangerous chemicals in bulk and identifying new products that fall under the IBC Code. All our vessels to which this applies have been issued the revised certificates accordingly.
Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits “deliberate emissions” of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks, and the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, as explained below. Emissions of “volatile organic compounds” from certain vessels, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls ("PCBs")) are also prohibited. We believe that all our vessels are currently compliant in all material respects with these regulations.
The MEPC adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting substances, which entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. On October 27, 2016, MEPC 70 agreed to implement a global 0.5% m/m sulfur oxide emissions limit (reduced from 3.50%) starting from January 1, 2020. This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels, or certain exhaust gas cleaning systems. Ships are now required to obtain bunker delivery notes and International Air Pollution Prevention ("IAPP") Certificates from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to prohibit the carriage of bunkers above 0.5% sulfur on ships were adopted and took effect March 1, 2020, with the exception of vessels fitted with exhaust gas cleaning equipment (“scrubbers”) which can carry fuel of higher sulfur content. These regulations subject ocean-going vessels to stringent emissions controls and may cause us to incur substantial costs.
Sulfur content standards are even stricter within certain emission control areas ("ECAs"). As of January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 0.1% m/m. Currently, the IMO has designated seven ECAs, including specified portions of the Baltic Sea area, Mediterranean Sea area, North Sea area, North American area, Canadian Artic Area, Norwegian Sea Area and United States Caribbean area. Ocean-going vessels in these areas will be subject to stringent emission controls and may cause us to incur additional costs. Other areas in China and South Korea are subject to local regulations that impose stricter emission controls. The Canadian Arctic and the Norwegian Sea officially became Emission Control Areas (ECAs) on 1 March 2026 under MARPOL Annex VI. In the two new areas, ships must meet stricter emission limits on nitrogen oxides (NOx), sulphur oxides (SOx) and particulate matter (PM). . MEPC 83 also approved the North East Atlantic Ocean as an ECA and is expected to take effect in 2028. If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency ("EPA") or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.
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The amended Annex VI also established new tiers of stringent nitrogen oxide emissions standards for marine diesel engines, depending on their date of installation. Tier III Nitrogen Oxide (NOx) standards were designed for the control of NOx produced by vessels and apply to ships that operate in the North American and U.S. Caribbean Sea ECAs with marine diesel engines installed and constructed on or after January 1, 2016. At MEPC 70 and MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on or after January 1, 2021. The Canadian-Arctic ECA for NOx will also be effective starting from March 1, 2026 for ships built on or after January 1, 2025. For the Norwegian Sea ECA, the NOx Tier III engine certification requirement will apply to ships (i) with building contracts placed on or after March 1, 2026, (ii) in the absence of a building contract, constructed on or after September 1, 2026, or (iii) delivered on or after March 1, 2030. For the North-East Atlantic ECA, the requirement is expected to apply to ships (i) contracted on or after January 1, 2027, (ii) in the absence of a building contract, constructed on or after July 1, 2027, or (iii) delivered on or after January 1, 2031. The EPA promulgated equivalent (and in some senses stricter) emissions standards in 2010. Tier III requirements could apply to additional areas designated for Tier III NOx in the future. In April 2025, MEPC 83 also adopted amendments (expected to enter into force late 2026 and early 2027) to the NOx Technical Code 2008, which allows ships to optimize fuel consumption based on their operational profile, thus improving energy efficiency, while ensuring compliance with NOx emission requirements. As a result of these designations or similar future designations, we may be required to incur additional operating or other costs.
At MEPC 70, Regulation 22A of MARPOL Annex VI became effective as of March 1, 2018 and requires ships above 5,000 gross tonnage to collect and report annual data on fuel oil consumption to an IMO database, with the first year of data collection having commenced on January 1, 2019. The IMO used such data as part of its initial roadmap (through 2023) for developing its strategy to reduce greenhouse gas emissions from ships, as discussed further below. MEPC 83 approved draft amendments to make the IMO’s data collection system more accessible to the public through an anonymized database.
As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All ships are now required to develop and implement Ship Energy Efficiency Management Plans, ("SEEMP"), and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as defined by the Energy Efficiency Design Index ("EEDI"). MEPC 75 adopted amendments to MARPOL Annex VI which brought forward the effective date of the EEDI’s “phase 3” requirements from January 1, 2025 to April 1, 2022 for several ship types, including gas carriers, general cargo ships, and LNG carriers.
Additionally, in 2022, MEPC amended Annex VI to impose new regulations to reduce greenhouse gas emissions from ships. These amendments introduce requirements to assess and measure the energy efficiency of all ships and set the required attainment values, with the goal of reducing the carbon intensity of international shipping. The requirements include: (1) a technical requirement to reduce carbon intensity based on a new Energy Efficiency Existing Ship Index (“EEXI”), and (2) operational carbon intensity reduction requirements, based on a new operational carbon intensity indicator (“CII”). The attained EEXI is required to be calculated for ships of 400 gross tonnage and above, in accordance with different values set for ship types and categories. With respect to the CII, the draft amendments would require ships of 5,000 gross tonnage to document and verify their actual annual operational CII achieved against a determined required annual operational CII. All ships above 400 gross tonnage must also have an approved SEEMP on board. For ships above 5,000 gross tonnage, the SEEMP needs to include certain mandatory content. That same year, MEPC amended MARPOL Annex I to prohibit the use and carriage for use as fuel of heavy fuel oil (“HFO”) by ships in Arctic waters on and after July 1, 2024. In late 2022, MEPC 79 adopted amendments to MARPOL Annex VI, Appendix IX to include the attained and required CII values, the CII rating and attained EEXI for existing ships in the required information to be submitted to the IMO Ship Fuel Oil Consumption Database. MEPC 79 also revised the EEDI calculation guidelines to include a CO2 conversion factor for ethane, a reference to the updated ITCC guidelines, and a clarification that in case of a ship with multiple load line certificates, the maximum certified summer draft should be used when determining the deadweight. These amendments entered into force on May 1, 2024. In July 2023, MEPC 80 approved the plan for reviewing CII regulations and guidelines, and in April 2025, MEPC 83 adopted amendments to 2021 Guidelines on operational carbon intensity reduction factors, which outline methods for determining CII reduction factors from 2023 and now includes newly defined factors from 2027 to 2030. MEPC 83 also approved a work plan on the development of a regulatory framework for the use of onboard carbon capture and storage systems, which will capture carbon produced by a ship before it is emitted into the air.
Any vessels that will not meet these new requirements will need to adopt energy-saving/emission reducing technology, through retrofits, to reach compliant levels. This creates a vast array of implications for the tanker industry going forward. Recycling of older ships could accelerate as the investments to comply with regulations are not feasible. One of the most efficient ways of reducing emissions is reducing power, this would in turn limit vessel speed and with that supply.
We may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.
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Safety Management System Requirements
The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills. The Convention of Limitation of Liability for Maritime Claims ("LLMC") sets limitations of liability for a loss of life or personal injury claim or a property claim against ship owners. We believe that our vessels are in substantial compliance with the SOLAS Convention and LLMC standards.
Under Chapter IX of the SOLAS Convention, or the ISM Code, our operations are also subject to environmental standards and requirements. The ISM Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and for responding to emergencies. We rely upon the safety management system that we and our technical management team have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.
The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have obtained applicable documents of compliance for our offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance and safety management certificates are renewed as required.
Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150 meters in length must have adequate strength, integrity and stability to minimize risk of loss or pollution. Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1, 2016 set for application to new oil tankers and bulk carriers. The SOLAS Convention regulation II-1/3-10 on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which the building contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the functional requirements of the International Goal-based Ship Construction Standards for Bulk Carriers and Oil Tankers ("GBS Standards").
Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and require those vessels be in compliance with the International Maritime Dangerous Goods Code ("IMDG Code"). Effective January 1, 2018, the IMDG Code includes (1) provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency, (2) marking, packing and classification requirements for dangerous goods, and (3) mandatory training requirements. Amendments which took effect on January 1, 2020 also reflect the latest material from the UN Recommendations on the Transport of Dangerous Goods, including (1) provisions regarding IMO type 9 tank, (2) abbreviations for segregation groups, and (3) special provisions for carriage of lithium batteries and of vehicles powered by flammable liquid or gas. Additional amendments, which came into force on June 1, 2022, include (1) addition of a definition of dosage rate, (2) additions to the list of high consequence dangerous goods, (3) new provisions for medical/clinical waste, (4) addition of various ISO standards for gas cylinders, (5) a new handling code, and (6) changes to stowage and segregation provisions. The newest edition of the IMDG Code took effect on January 1, 2024, although the changes are largely incremental.
The IMO has also adopted the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers ("STCW"). As of February 2017, all seafarers are required to meet the STCW standards and be in possession of a valid STCW certificate. Flag states that have ratified the SOLAS Convention and STCW generally employ the classification societies, which have incorporated the SOLAS Convention and STCW requirements into their class rules, to undertake surveys to confirm compliance.
The IMO's Maritime Safety Committee and MEPC, respectively, each adopted relevant parts of the International Code for Ships Operating in Polar Water (the “Polar Code”). The Polar Code, which entered into force on January 1, 2017, covers design, construction, equipment, operational, training, search and rescue as well as environmental protection matters relevant to ships operating in the waters surrounding the two poles. It also includes mandatory measures regarding safety and pollution prevention as well as recommendatory provisions. The Polar Code applies to new ships constructed after January 1, 2017, and after January 1, 2018, ships constructed before January 1, 2017 are required to meet the relevant requirements by the earlier of their first intermediate or renewal survey.
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Furthermore, cybersecurity guidance and regulations have been developed in an attempt to combat cybersecurity threats. For new ships and offshore installations contracted for construction on or after January 1, 2024, the International Association of Classification Societies (“IACS”) now requires vessel owners, yard and suppliers to build cybersecurity barriers into their systems and vessels, requiring compliance across the full spectrum of critical on-board control and navigation systems. On July 16, 2025, the U.S. Coast Guard’s final rule, Cybersecurity in the Maritime Transportation System, went into effect. Under this rule, all regulated entities are required to develop Cybersecurity and Cyber Incident Response Plans, designate a Cybersecurity Officer to implement plans, and to report certain cyber incidents to the National Response Center. This might cause companies to create additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of these regulations is hard to predict at this time Additional procedures for monitoring cybersecurity have been established and are in place in the vessel's safety management system.
In June 2022, SOLAS also set out new amendments that took effect on January 1, 2024, which include new requirements for: (1) the design for safe mooring operations, (2) the Global Maritime Distress and Safety System, (3) watertight integrity, (4) watertight doors on cargo ships, (5) fault-isolation of fire detection systems, (6) life-saving appliances, and (7) safety of ships using LNG as fuel. These new requirements may impact the cost of our operations.
Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatories to such conventions. For example, the IMO adopted the International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the “BWM Convention”) in 2004. The BWM Convention entered into force on September 8, 2017. The BWM Convention requires ships to manage their ballast water to remove, render harmless, or avoid the uptake or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. The BWM Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements to be replaced in time with mandatory concentration limits, commonly referred to as "D2" Standards, and require all ships to carry a ballast water record book and an international ballast water management certificate.
The MEPC maintains guidelines for approval of ballast water management systems (G8). Ships over 400 gross tons generally must comply with a “D-1 standard,” requiring the exchange of ballast water only in open seas and away from coastal waters. The “D-2 standard” specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending on the IOPP renewal dates. The standards have been in force since 2019, and for most ships, compliance with the D-2 standard involved installing on-board systems to treat ballast water and eliminate unwanted organisms. Ballast water management systems, which include systems that make use of chemicals, biocides, organisms or biological mechanisms, or which alter the chemical or physical characteristics of the ballast water, must be approved in accordance with IMO Guidelines (Regulation D-3). Since September 8, 2024, all ships have been required to meet the D-2 standard. Additionally, in November 2020, MEPC 75 adopted amendments to the BWM Convention which would require a commissioning test of the ballast water management system for the initial survey or when performing an additional survey for retrofits. This analysis will not apply to ships that already have an installed BWM system certified under the BWM Convention. These amendments have entered into force on June 1, 2022. In December 2022, MEPC 79 agreed that it should be permitted to use ballast tanks for temporary storage of treated sewage and grey water. MEPC 79 also established that ships are expected to return to D-2 compliance after experiencing challenging uptake water and bypassing a BWM system should only be used as a last resort.
In addition to the BWM Convention, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The U.S., for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements.
The IMO adopted the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocols in 1976, 1984, and 1992, and amended in 2000 ("CLC"). Under the CLC and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel’s registered owner may be strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol changed certain limits on liability expressed using the International Monetary Fund currency unit, the Special Drawing Rights. The limits on liability have since been amended so that the compensation limits on liability were raised. The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner’s actual fault and under the 1992 Protocol where the spill is caused by the shipowner’s intentional or reckless act or omission where the shipowner knew pollution damage would probably result. The CLC requires ships over 2,000 tons covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an owner’s liability for a single incident. We have protection and indemnity insurance for environmental incidents. Protection and indemnity clubs in the International Group issue the required Bunkers Convention “Blue Cards” to enable signatory states to issue certificates. All of our vessels are in possession of a CLC State issued certificate attesting that the required insurance coverage is in force.
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The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the "Bunker Convention") to impose strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in a ship’s bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an incident. In jurisdictions, such as the United States where the CLC or the Bunker Convention has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or on a strict-liability basis.
Anti-Fouling Requirements
In 2001, the IMO adopted the International Convention on the Control of Harmful Anti-fouling Systems on Ships, or the "Anti-fouling Convention." The Anti-fouling Convention, which entered into force on September 17, 2008, prohibits the use of organotin compound coatings to prevent the attachment of mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international voyages will also be required to undergo an initial survey before the vessel is put into service or before an International Anti-fouling System Certificate, or the "IAFS Certificate", is issued for the first time; and subsequent surveys when the anti-fouling systems are altered or replaced. Vessels of 24 meters in length or more but less than 400 gross tons engaged in international voyages will have to carry a Declaration on Anti-fouling Systems signed by the owner or authorized agent.
In November 2020, MEPC 75 approved draft amendments to the Anti-fouling Convention to prohibit anti-fouling systems containing cybutryne, which would apply to ships from January 1, 2023, or, for ships already bearing such an anti-fouling system, at the next scheduled renewal of the system after that date, but no later than 60 months following the last application to the ship of such a system. In addition, the IAFS Certificate has been updated to address compliance options for anti-fouling systems to address cybutryne. Ships which are affected by this ban on cybutryne must receive an updated IAFS Certificate no later than two years after the entry into force of these amendments. Ships which are not affected (i.e. with anti-fouling systems which do not contain cybutryne) must receive an updated IAFS Certificate at the next Anti-fouling application to the vessel. These amendments were formally adopted at MEPC 76 in June 2021 and entered into force on January 1, 2023.
We have obtained Anti-fouling System Certificates for all of our vessels that are subject to the Anti-fouling Convention.
Compliance Enforcement
Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The USCG and European Union authorities prohibit vessels not in compliance with the ISM Code by applicable deadlines from trading in U.S. and European Union ports, respectively. As of the date of this report, each of our vessels is ISM Code certified. However, there can be no assurance that such certificates will be maintained in the future. The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
United States Regulations
The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990 (“OPA”) established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all “owners and operators” whose vessels trade or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S.’s territorial sea and its 200 nautical mile exclusive economic zone around the U.S. The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), which applies to the discharge of hazardous substances other than oil, except in limited circumstances, whether on land or at sea. OPA and CERCLA both define “owner and operator” in the case of a vessel as any person owning, operating or chartering by demise, the vessel. Both OPA and CERCLA impact our operations.
Under OPA, vessel owners and operators are “responsible parties” and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel). OPA defines these other damages broadly to include:
(i) injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
(ii) injury to, or economic losses resulting from, the destruction of real and personal property;
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(iii) loss of subsistence use of natural resources that are injured, destroyed or lost;
(iv) net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
(v) lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
(vi) net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. On December 23, 2022, the USCG issued a final rule to adjust the limitation of liability under the OPA. Effective March 23, 2023, the new adjusted limits of OPA liability for a tank vessel, other than a single-hull tank vessel, over 3,000 gross tons liability to the greater of $2,500 per gross ton or $21,521,300 (previous limit was $2,300 per gross ton or $19,943,400). These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party's gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident as required by law where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.
CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damages for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing the same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law. OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We comply and plan to comply going forward with the USCG’s financial responsibility regulations by providing applicable certificates of financial responsibility.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA. Some states have enacted legislation providing for unlimited liability for oil spills, and many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. Moreover, some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters, although in some cases, states which have enacted this type of legislation have not yet issued implementing regulations defining vessel owners’ responsibilities under these laws. These laws may be more stringent than U.S. federal law. The Company intends to comply with all applicable state regulations in the ports where the Company’s vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. In case of ‘overspill’ claim though which would fall back on the collective membership and on total limitation of the liability of group membership that amount may go up to approximately US$8.2 billion. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and results of operations.
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Other United States Environmental Initiatives
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) (“CAA”) requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. The CAA also requires states to draft State Implementation Plans ("SIPs"), designed to attain national health-based air quality standards in each state. Although state-specific, SIPs may include regulations concerning emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. Our vessels operating in such regulated port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these existing requirements.
The U.S. Clean Water Act (“CWA”) prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA.
The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/or otherwise restrict our vessels from entering U.S. waters. The EPA will regulate these ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters pursuant to the Vessel Incidental Discharge Act (“VIDA”), which was signed into law on December 4, 2018 and replaces the 2013 Vessel General Permit (“VGP”) program and current Coast Guard ballast water management regulations adopted under the U.S. National Invasive Species Act. VIDA establishes a new framework for the regulation of vessel incidental discharges under the CWA, requires the EPA to develop performance standards for those discharges within two years of enactment, and requires the U.S. Coast Guard to develop implementation, compliance, and enforcement regulations within two years of EPA’s promulgation of standards. In October 2024, the EPA finalized its rule on Vessel Incidental Discharge Standards of Performance, which means that the U.S. Coast Guard must now develop corresponding regulations regarding ballast water within two years of that date. Under VIDA, all provisions of the 2013 VGP and USCG regulations regarding ballast water treatment remain in force and effect until the EPA and U.S. Coast Guard regulations are finalized. Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the requirements of the VGP, including submission of a Notice of Intent (“NOI”) or retention of a PARI form and submission of annual reports. We have submitted NOIs for our vessels where required. Compliance with the EPA, U.S. Coast Guard and state regulations could require the installation of ballast water treatment equipment on our vessels or the implementation of other port facility disposal procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters.
European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 (amending EU Directive 2009/16/EC) governs the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions annually, which may cause us to incur additional expenses.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age, and flag as well as the number of times the ship has been detained. The European Union also adopted and extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive 1999/32/EC) introduced requirements parallel to those in Annex VI relating to the sulfur content of marine fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in the Baltic, the North Sea and the English Channel (the so called "SOx-Emission Control Area"). As of January 2020, EU member states must also ensure that ships in all EU waters, except the SOx-Emission Control Area, use fuels with a 0.5% maximum sulfur content.
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On September 15, 2020, the European Parliament voted to include greenhouse gas emissions from the maritime sector in the European Union’s carbon market, the EU Emissions Trading System (“EU ETS”) as part of its “Fit-for-55” legislation to reduce net greenhouse gas emissions by at least 55% by 2030. This will require shipowners to buy permits to cover these emissions. On December 18, 2022, the Environmental Council and European Parliament agreed on a gradual introduction of obligations for shipping companies to surrender allowances equivalent to a portion of their carbon emissions: 40% for verified emissions from 2024, 70% for 2025 and 100% for 2026. Most large vessels will be included in the scope of the EU ETS from the start. Big offshore vessels of 5,000 gross tonnage and above will be included in the 'MRV' on the monitoring, reporting and verification of CO2 emissions from maritime transport regulation from 2025 and in the EU ETS from 2027. General cargo vessels and off-shore vessels between 400-5,000 gross tonnage will be included in the MRV regulation from 2025 and their inclusion in EU ETS will be reviewed in 2026. Furthermore, starting from January 1, 2026, the EU ETS regulations will expand to include emissions of two additional greenhouse gases: nitrous oxide and methane.
From January 1, 2025, EU adopted the FuelEU Maritime regulation, a proposal included in the "Fit-for-55" legislation. FuelEU Maritime sets requirements on the annual average GHG intensity of energy used by ships trading within the EU or European Economic Area (EEA). This intensity is measured as GHG emissions per energy unit (gCO2e/MJ) and, in turn, GHG emissions are calculated in a well-to-wake perspective. The calculation takes into account emissions related to the extraction, cultivation, production and transportation of fuel, in addition to emissions from energy used on board the ship. The baseline for the calculation is the average well-to-wake GHG intensity of the fleet in 2020: 91.16 gCO2e/MJ. This will start at a 2% reduction in 2025, increasing to 6% in 2030, and accelerating from 2035 to reach an 80% reduction by 2050.
Compliance with the EU ETS and FuelEU Maritime regulations will result in additional compliance and administration costs to properly incorporate the provisions of the Directive into our business routines. Additional EU regulations which are part of the EU’s "Fit-for-55," could also affect our financial position in terms of compliance and administration costs when they take effect.
International Labour Organization
The International Labour Organization (the "ILO") is a specialized agency of the UN that has adopted the Maritime Labour Convention 2006, ("MLC 2006"). A Maritime Labour Certificate and a Declaration of Maritime Labor Compliance is required to ensure compliance with the MLC 2006 for all ships that are 500 gross tonnage or over and are either engaged in international voyages or flying the flag of a Member and operating from a port, or between ports, in another country. We believe that all our vessels are in substantial compliance with and are certified to meet MLC 2006.
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions. International negotiations are continuing with respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the Copenhagen Accord, which includes a non-binding commitment to reduce greenhouse gas emissions. The 2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016 and does not directly limit greenhouse gas emissions from ships. The U.S. is not a party to the Paris Agreement.
At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a comprehensive IMO strategy on reduction of greenhouse gas emissions from ships was approved. In accordance with this roadmap, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identifies “levels of ambition” to reduce greenhouse gas (“GHG”) emissions and notes that technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the ambitions. At MEPC 77, the Member States agreed to initiate the revision of the Initial IMO Strategy on Reduction of GHG emissions from ships, recognizing the need to strengthen the “levels of ambition.” In July 2023, MEPC 80 adopted the 2023 IMO Strategy on Reduction of GHG Emissions from Ships, (the “2023 IMO Strategy”) which builds upon the initial strategy’s levels of ambition. The revised levels of ambition include (1) further decreasing the carbon intensity from ships through improvement of energy efficiency; (2) reducing carbon intensity of international shipping; (3) increasing adoption of zero or near-zero emissions technologies, fuels, and energy sources; and (4) achieving net zero GHG emissions from international shipping. Furthermore, the following indicative checkpoints were adopted in order to reach net zero GHG emissions from international shipping: (1) reduce the total annual GHG emissions from international shipping by at least 20%, striving for 30%, by 2030, compared to 2008 levels; and (2) reduce the total annual GHG emissions from international shipping by at least 70%, striving for 80%, by 2040, compared to 2008 levels. As part of the 2023 IMO Strategy, MPEC also created the IMO Net-zero Framework, which will combine mandatory emissions limits and GHG pricing across the industry. The IMO Net-zero Framework was approved at MEPC 83 (Spring 2025) for potential adoption in Spring 2026 and will eventually be included in Annex VI. The approval includes a global fuel standard based on Greenhouse Gas Fuel Intensity (GFI) and a global GHG pricing mechanism. Formal adoption was
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adjourned in October 2025 and is now expected in October 2026, with entry into force anticipated by early 2028. Under these draft regulations, ships will be required to reduce their annual greenhouse gas fuel intensity (“GFI”) calculated using the well-to-wake approach and ships emitting above GFI thresholds will have to acquire remedial units to balance its deficit emissions, while those using zero or near-zero GHG technologies will be eligible for financial rewards. Furthermore, MEPC 83 approved a work plan to develop a regulatory framework for OCCS systems to capture carbon before emission. Compliance with these regulations and other changes in laws, regulations and obligations relating to climate change affects the propulsion options in subsequent vessel designs and could increase our costs related to acquiring new vessels, operating and maintaining our existing vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions or administer and manage a greenhouse gas emissions program.
The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states from 20% of 1990 levels by 2020. The EU also committed to reduce its emissions by 20% under the Kyoto Protocol’s second period from 2013 to 2020. As of January 2018, large ships over 5,000 gross tonnage calling at EU ports are required to collect and publish data on carbon dioxide emissions and other information. Under the European Climate Law, the EU committed to reduce its net greenhouse gas emissions by at least 55% by 2030 through its “Fit-for-55” legislation package. As part of this initiative, the European Union's carbon market, EU ETS, has been extended to cover CO2 emissions from all large ships entering EU ports starting January 2024.
In the United States, the EPA issued a finding that greenhouse gases endanger the public health and safety, adopted regulations to limit greenhouse gas emissions from certain mobile sources, and proposed regulations to limit greenhouse gas emissions from large stationary sources. However, in March 2017, the Trump administration issued an executive order to review and possibly eliminate the EPA’s plan to cut greenhouse gas emissions, and on August 13, 2020, the EPA released rules rolling back standards to control methane and volatile organic compound emissions from new oil and gas facilities. In early 2021, the Biden administration directed the EPA to publish a proposed rule suspending, revising, or rescinding certain of these rules, which was finalized in December 2023. In February 2026, the EPA finalized a rule to overturn the Endangerment Finding, aiming to remove the regulatory basis for limiting GHG emissions.
Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement, that restricts emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at this time. Even in the absence of climate control legislation, our business may be indirectly affected to the extent that climate change may result in sea level changes or certain weather events.
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended to enhance vessel security such as the U.S. Maritime Transportation Security Act of 2002 (“MTSA”). To implement certain portions of the MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.
Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port authorities and mandates compliance with the ISPS Code. The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate (“ISSC”) from a recognized security organization approved by the vessel’s flag state. Ships operating without a valid certificate may be detained, expelled from, or refused entry at port until they obtain an ISSC.
The USCG regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a valid ISSC that attests to the vessel’s compliance with the SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant financial impact on us. We intend to comply with the various security measures addressed by MTSA, the SOLAS Convention and the ISPS Code.
The cost of vessel security measures has also been affected by the escalation in the frequency of acts of piracy against ships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area. Substantial loss of revenue and other costs may be incurred as a result of detention of a vessel or additional security measures, and the risk of uninsured losses could significantly affect our business. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP5 industry standard.
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Inspection by Classification Societies
The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS Convention. Most insurance underwriters make it a condition for insurance coverage and lending that a vessel be certified “in class” by a classification society which is a member of the International Association of Classification Societies (the "IACS"). The IACS has adopted harmonized Common Structural Rules (the "Rules"), which apply to oil tankers and bulk carriers contracted for construction on or after July 1, 2015. The Rules attempt to create a level of consistency between IACS Societies. All of our vessels are certified as being “in class” by all the applicable Classification Societies (e.g., American Bureau of Shipping, Lloyd's Register of Shipping).
A vessel must undergo annual surveys, intermediate surveys, drydockings and special surveys. In lieu of a special survey, a vessel’s machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be drydocked every 30 to 60 months for inspection of the underwater parts of the vessel (depending on the age of the vessel). If any vessel does not maintain its class and/or fails any annual survey, intermediate survey, drydocking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.
Risk of Loss and Liability Insurance
General
The operation of any cargo vessel involves a range of risks such including mechanical failure, physical damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, piracy incidents, hostilities and labor strikes. Additionally, there is always an inherent possibility of marine disaster, such as oil spills and other environmental mishaps incidents, which bring significant liabilities associated with owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon shipowners, operators and bareboat charterers of any vessel trading in the exclusive economic zone of the United States for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and operators trading in the United States market. While we carry comprehensive insurance coverage as customary in the shipping industry, it is important to note that not all risks can be insured and specific claims may be rejected. Furthermore, obtaining adequate insurance coverage at reasonable rates can sometimes be challenging.
Hull and Machinery Insurance
We procure hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance, war risk insurance, which may also cover war loss of hire, and freight, demurrage and defense insurance cover for our fleet. We generally do not maintain insurance against marine loss of hire (except for certain charters, for which if and when, we consider it appropriate), which covers the loss of use of a vessel due to damage repairs of covered risks and in excess of a certain period.
Protection and Indemnity Insurance
Protection and indemnity (P&I) insurance, provided by mutual P&I associations, covers our third-party liabilities in connection with our shipping activities. This includes injury or death of crew, passengers, and other third parties, as well as damage to cargo, property damage, pollution, environmental damage, and wreck removal. Our current P&I insurance coverage for pollution stands at $1 billion per vessel per incident. The 12 P&I associations that form the International Group insure approximately 90% of the world's commercial tonnage and have a pooling agreement to reinsure liabilities. This pooling mechanism covers claims from $10 million up to around $3.35 billion, with potential 'overspill' claims extending the collective liability up to approximately $8.2 billion. As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on our claim records, as well as, the claim records of all other members of the individual association and members of the shipping pool of P&I Associations comprising the International Group.
C. Organizational Structure
Please see Exhibit 8.1 to this annual report for a list of our current significant subsidiaries.
D. Property, Plants and Equipment
Our only material physical assets consist of our vessels which are owned through our separate, wholly-owned subsidiaries. For a description of our fleet, see “Item 4. Information on the Company—B. Business Overview.”
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