Tankers transport crude oil from their points of production to their points of consumption, which are typically oil refineries. The main clients within the industry include oil companies, oil traders, large oil consumers, petroleum product producers, and government agencies. The contracts by which crude oil is transported include spot charters, time charters and "bareboat" charters.

The pricing of crude oil transportation services occurs in a highly competitive global tanker charter market. A broker is usually involved in the deal and acts as an intermediary between the vessels owner and the charterer. The major hubs of shipping are located in New York, London, Oslo, Singapore and Tokyo.

Types of Tankers
The oil tanker fleet in divided into six major categories, based on their carrying capacity. In order to benefit from economies of scale charterers typically charter the largest possible vessel that can be accommodated in their arrival and discharge ports. The six categories of vessels are:

ULCCs and VLCCs are the largest vessels in the world tanker fleet. They carry cargos of 200,000 dwt or greater. They typically transport oil in long-haul trades mainly from the Arabian Gulf to Western Europe and the United States via the Cape of Good Hope and Asia.

Suezmax and Aframax vessels are considered mid-size tankers. Suezmax tankers can carry cargos of 120,000 to 200,000 dwt and typically engage in long to medium haul oil trades from West Africa to the North Sea to the East Coast and Gulf Coast of the U.S. Alternatively, Aframax vessels typically engage in medium to short haul oil trades and can carry cargos of 80,000 to 120,000 dwt. General Maritime's fleet is focused on the Aframax and Suezmax trade.

Panamax and Handysize tankers are the smallest vessels in the world fleet. They typically trade in short haul business and can transport cargos of 80,000 dwt to as little as 10,000 dwt.

Tanker Demand and Supply
Tanker demand is expressed in "ton-miles" and is measured as the product of (a) the amount of oil transported in tankers, multiplied by (b) the distance over which this oil is transported. Tonnage of oil shipped is primarily a function of global oil consumption, which is driven by economic activity as well as the long-term impact of oil prices on the location and related volume of oil production. Tonnage of oil shipped is also influenced by transportation alternatives such as pipelines.

The distance over which oil is transported is the more variable element of the ton-mile demand equation. It is determined by seaborne trading and distribution patterns, which are principally influenced by the locations of production and the optimal economic distribution of the production to destinations for refining and consumption. Seaborne trading patterns are also periodically influenced by geo-political events that divert tankers from normal trading patterns, as well as by inter-regional oil trading activity created by oil supply and demand imbalances.

The United States is the leading importer of crude oil in the world. Since 1995, U.S. demand for crude oil has risen in the aggregate by 6.8%, whereas U.S. crude oil production has decreased by 11.6% during the same period. Driven by the imbalance of supply and demand, U.S. crude oil imports have increased by 25.6% from 1995 to 2003.

Tanker supply increases with the deliveries of newbuildings and decreases with the scrapping of older vessels. Typically newbuildings are delivered 18 to 36 months after they are ordered. Every two and a half years oil tankers undergo a class survey, which with time becomes progressively more expensive. If the number of newbuildings delivered stays below the number of older tankers scrapped, the demand for modern tonnage will increase, as may the rates they command.

Consolidation
The seaborne crude oil transportation business is highly fragmented and is generally provided by two types of operators: independent ship owners and captive fleets of privately and state owned oil companies. Within the industry, independent owners account for approximately 80.4% of the tanker capacity, and the top ten owners account for 26.4% of the world tanker fleet. The continued concern among the oil companies to secure safe modern tonnage by dealing with large trusted owners has greatly influenced the continued consolidation within the industry. Additionally, the drive toward consolidation has provided the larger owners with leverage to better control operating costs by taking advantage of economies of scale. Through consolidation of the mid-size tanker market, General Maritime will be able to create a sector specific focus. It intends to have a versatile fleet of similar ships that will be able to cater to a broad range of charterers.

Focus on Safety
Environmental protection has been a major focus of the tanker industry over the past years. Regulations such as OPA 90 and IMO have caused tanker owners to take extra care in the maintenance of their vessels and plan ahead to the time their vessels will no longer be allowed to trade. Oil disasters such as the Exxon Valdez in 1989 the Erika in 1999 and the Prestige in 2002 have forced charterers to exercise extreme caution in hiring only the most modern and well-maintained vessels to trade within U.S. waters.

With major oil companies seeking modern double hull vessels, the demand has increased for these ships, thus prompting higher charter rates. With a modern fleet of Aframax and Suezmax ships well bellow the industry's average age, General Maritime is well positioned to take advantage of the higher rates being offered by the charterers.