Business development

NORDEN operates its product tanker tonnage through the Norient Product Pool. During the year, it was clear how valuable the pool is. Through a strong market position, the pool realised economies of scale and extended its capacity to a total active fleet of 48 Handysize and MR product tankers at the end of the year with an additional 33 vessels on order for future delivery. Through good customer relations and skilful management, the Norient Product Pool continuously manages to maintain a high fleet capacity utilisation rate.

 

In 2007, the Norient Product Pool decided to extend its activities to include the LR1 segment. The purpose is to be able to offer customers a wider product range. In the coming years, exports of refined oil products from Asia and the Middle East to North America and Europe are expected to grow. These exports are expected to be transported mainly on large product tankers such as LR1, while regional and inter-regional transports are still expected to be carried in the smaller Handysize and MR product tankers. It is thus important for the Norient Product Pool to be able to offer customers transport in LR1 product tankers and thus improve the overall market position of the pool. So far, NORDEN has chartered one LR1 product tanker, which will be delivered in early 2008, while the Company’s pool partner has four LR1 product tankers for delivery in 2008. During 2008, the Norient Product Pool will take delivery of a total of five LR1 tankers, all of which are designated ice class 1A.

 

Based on the Company’s expectation that the product market will provide the best relationship between risk and return going forward, NORDEN completed its strategy of reducing the capital Ship days 28 Management's review 2007 tied up in owned tonnage in the Aframax crude oil segment and will thus in future act solely as an operator in this segment.

 

The strategy change in the Aframax segment meant that 2 crude oil tankers were sold in 2007. In addition, the Company entered into agreements to sell one Handysize and 2 MR product tankers, of which one will be delivered in 2008. Despite the sale of the five vessels, the Tanker Department extended its overall capacity in the short as well as the long term. Accordingly, the Company’s active fleet and order book grew by 15% and 17%, respectively, mainly as a result of more active long-term Handysize charters and more owned MR newbuilding contracts. NORDEN’s gross fleet comprised a total of 44 vessels at 31 December 2007.

 

NORDEN is constantly expanding its core fleet of product tankers, thus ensuring growing long-term loading capacity. This continuously increases the Company’s basic business volume, resulting in economies of scale and a competitive cost structure. The tanker fleet’s average costs for the gross capacity from 2010 onwards is below USD 14,000 per day. With just over 8,000 known ship days for 2008 at the beginning of the year, the Tanker Department has doubled its known capacity since 2004.

 

The coverage of capacity is slightly below previous years’ levels and slightly below the level the Company would like. Despite the focus on coverage, the price attainable for future coverage of capacity has not been deemed sufficiently attractive, and NORDEN has therefore been reluctant to cover capacity. Coverage opportunities remain considerably fewer in the tanker market than in the dry cargo market, but through the Norient Product Pool, NORDEN has nonetheless attained a considerable market position in product tankers without being fully exposed to the market.