US Jones Act Shipbuilding Market 23 rd JECKU

US Jones Act Shipbuilding Market 23 rd JECKU EPM USA Delegation Peter Brown General Dynamics – NASSCO

Jones Act Key events since the last JECKU US Shipyards continue win contracts to build new vessels of all types Ø Orders have been placed for Tankers, Barges of all sizes, Offshore Supply Vessels and Containerships The revival of Jones Act shipbuilding is directly attributed to the boom in US oil and natural gas production and new emissions regulations New orders have been placed for full dual fuel LNG powered and LNG ready vessels Ø March 2014: NASSCO started construction on the world’s first LNG powered Containership 2

Jones Act What is Currently Driving Demand for New Jones Act Vessels US Oil and Gas Production Emissions US Crude Oil Production (1960 -2040) 3

Jones Act Tankers Tanker Market Overview and Status l Recent demand for new tankers and large barges driven solely by the boom in domestic oil and gas production Ø l Daily domestic production has exceed imports since October of 2013 due to unprecedented levels of shale oil production Ø US imports of crude and refined products continues to decrease Current Jones Act tank vessel fleet Ø Product Tankers Ø Crude Tankers – Alaska (ANS) Ø l Net Imports of US Petroleum and other Liquids (1990 -2040) Articulated Tug Barge (ATB) units Current tanker and large barge fleet is fully employed – no spot market Source: U. S. EIA Energy Outlook 2014 Current Fleet Tankers Barges Number 31, plus 11 ANS 42 Total Barrel Capacity 10, 102, 000 8, 370, 000 Average Barrel Capacity 326, 000 199, 000 Source: Navigistics Consulting’s Wilson Gillette Report © April 2014 used with permission 4

Jones Act Tankers Current Product Tanker Fleet Deployment l Jones Act Tankers are deployed in the following trades Ø Movement of clean petroleum products across U. S. Gulf to the South Atlantic § Ø MSC 7% Chemical 6% Primarily gasoline to Florida Intra West Coast clean petroleum products § West Coast 33% Clean products from San Francisco and Puget Sound to Southern California § Ø Dirty and refinery feedstock between refineries Crude Oil Transportation (Lower 48) - NEW § Crude Oil 25% Movement of Eagle Ford shale oil from Corpus Christi, Texas to Gulf Coast refineries and to East Coast (Philadelphia / New York) § Shuttle Tanker service in the Gulf of Mexico Ø Chemical and Specialty products, primarily along the U. S Gulf and East Coasts Ø Military Sealift Command charters of Jones Act tankers The Number of Product Tankers Moving Crude Oil is Now on Par with Clean US Gulf Movement Source: Navigistics Consulting’s Wilson Gillette Report © April 2014 used with permission 5

Jones Act Tankers Tanker/ATB Fleet Profile and Charter Rates 12 Jones Act (Tanker/ATBs 140, 000 bbls+) Fleet Profile (Excl. Alaska) Number of Ships 10 $ 120, 000 Jones Act Timecharter Rates $ 100, 000 8 Majority at $60$70 k $ 80, 000 6 $ 60, 000 4 $ 40, 000 2 $ 20, 000 Retirement of Older Vessels Represents the Possibility for Future New Builds (Tankers and ATBs) 4 -1 Ja n 2 3 -1 100 K Barge Ja n -1 1 -1 0 230 K ATB Ja n 9 -1 Ja n -0 MR Ja n 8 $Ja n Year Built -0 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 0 Jones Act charter rates are expected to remain firm for the foreseeable future Source: MJLF & Associates 6

Jones Act Tankers Tanker and ATB Construction (vessels greater than 140 k barrels) * Owner Shipyard Contract Delivery American Petroleum Tankers General Dynamics NASSCO Five MR LNG Ready Product Tankers (330 k barrel capacity) 2015 - 2017 Crowley Maritime Aker Philadelphia Four MR LNG Ready Product Tankers (330 k barrel capacity) 2015 - 2016 SEACOR (Seabulk Tankers) General Dynamics NASSCO Three MRLNG Ready Product Tankers (330 k barrel capacity) 2016 - 2017 Philly Tankers Aker Philadelphia Two MR LNG Ready Product Tankers (330 k barrel capacity), plus 2 options 2016 - 2017 Bouchard Transport VT Halter Two 250 k barrel Articulated Tug Barge (ATB) unit 2015 Moran Towing Bay Shipbuilding Two 150 k barrel ATBs 2015 - 2016 Kirby Corporation Gunderson Two 185 k barrel ATBs, plus 2 options 2016 SEACOR Don. Jon One 185 k barrel ATB 2016 The Above New Tankers and ATBs will Provide Over Six Million Additional Barrels of Capacity to the Jones Act 7 *Sea. River Aframax new building program for ANS trade not included above

Jones Act Tankers US Crude Oil Production US Shale Oil Production is currently at 3. 6 M bpd expected to grow to over 5. 2 M bpd by 2020 l Breakeven oil price of North American Shale is ~$65/bbl Ø WTI at $95. 66/bbl (Aug 14, 2014) Breakeven Price Range l Source: US Energy Information Agency Total 2020 Liquid Production, million boe/d Sources: Morgan Stanley and US EIA 8

Jones Act Tankers US Crude Oil Exports Gross Crude Exports and Share of US Crude Production Estimates of US Crude Oil Exports are Forecasted to be Modest Even Under a Full Export Scenario March 2014 Reuters/Ipsos Poll: The US Oil Production Boom Sources: US EIA (historical, data), ICF International and En. Sys Energy (projections) 9

Jones Act Dry Cargo Market Overview l Dry Cargo market consists of three non-contiguous trade lanes Ø Ø Hawaii – Three operators Vessels range from Containerships to Ocean-going Barges Ø l Dutch Harbor Average Age of Dry Cargo vessels is 31 years (excludes barges) Kodiak Horizon Lines TOTE Maritime Tacoma China Alaska – Two operators Ø l Puerto Rico – Four primary operators Alaska Market Anchorage Honolulu Guam Hawaii / Guam Market Horizon Lines Matson Navigation Pasha Hawaii Elizabeth Oakland Long Beach Jacksonville Houston Tampa San Juan Puerto Rico Market Crowley Maritime Horizon Lines TOTE Maritime Trailer Bridge Current and future emission regulations are driving owners new building and vessel conversion decisions Ø Three main regulations are or will be in place to address SOx, NOx and C 02 emissions § Sulfur Oxide (SOx) – all vessels (new and existing) must meet the 0. 1% sulfur emissions limit beginning in 2015 – steam propulsion vessels exempt until 2020 § Nitrogen Oxide (NOx) – all new vessels built after January 2016 must meet Tier III levels § CO 2 – Multiple cut-off dates in place impacting new vessels acceptable CO 2 discharge levels 10

Jones Act Dry Cargo Market Orders Placed This Past Year l Nov 2013: Matson orders two 3600 TEU LNG Ready Containerships Ø Ø Scheduled Delivery: 3 Q 2018 and 4 Q 2018 Ø l Shipyard: Aker Philadelphia Trade lane: Hawaii replacing aging steam powered vessels Nov 2013: Crowley orders two LNG powered Con. Ro vessels Ø Shipyard: VT Halter Ø Scheduled Delivery: 2 Q 2017 and 4 Q 2017 Ø Trade lane: Puerto Rico – replaces five Crowley 700’ barges 11

Jones Act Dry Cargo Market TOTE Dual Fuel LNG Containership Construction at NASSCO TOTE-1 (Hull 495) Contract Award: Dec 2012 SOC: Mar 2014 Launch: Apr 2015 Delivery: 4 Q 2015 TOTE-2 (Hull 496) SOC: Apr 2014 Launch: Aug 2015 Delivery: 1 Q 2016 Type C LNG Tanks TOTE 1 Under Construction ME-GI Main Engine 12

Jones Act LNG Cargo Market Possible Future Vessels l LNG Bunkering Vessels (2 K m 3 – 5 K m 3) Ø Ø l Barges Self-Propelled LNG Carriers-Small (15 k m 3 – 70 K m 3) Ø Ø l Articulated Tug Barges (ATB) Ocean-going vessels LNG Carriers-Large (100 k+ m 3) Ø Likely only if US LNG export laws are modified to require US built vessels 13

Jones Act LNG Cargo Market North American LNG Bunkering Infrastructure Forecast Vancouver, Canada Duluth, MN Seattle &Tacoma, WA Sarnia, Canada New York, NY Mississippi river Fourchon, LA Jacksonville, FL Source: DNV-GL 14

Jones Act LNG Cargo Market Hawaii & Puerto Rico – Non Contiguous LNG Market ● Hawaii & Puerto Rico are generating electric power using oil and desire to convert to natural gas ● Hawaii has no present facilities for import of LNG. A pilot program has begun using 40’ ISO containerized LNG tanks Several Parties have Expressed a Desire to Provide LNG to Hawaii via Small/Mid-Size LNG Carriers ● Puerto Rico has an LNG terminal and regasification facility at Guayanilla Bay serving a 461 megawatt cogeneration plant ● Puerto Rico Electric Power Authority (PREPA) is planning the Aguirre Offshore floating LNG import terminal / regas plant (Excelerate Energy) 15

U. S. LNG Export Projects Company Quantity (Bcf/d) DOE FERC Under Construction Cheniere Sabine Pass T 1 – T 4 Freeport LNG Lake Charles Cameron LNG Corpus Christi Sabine Pass Under Construction Source: Office of Oil and Gas Global Security and Supply, Office of Fossil Energy, U. S. Department of Energy; U. S. Federal Energy Regulatory Commission; Company releases Filed FERC Application Proposed Projects Lake Charles 2. 0 FTA + Non. FTA 1. 0 FTA * Non. FTA v NO 1. 7 FTA * Non. FTA Approved NO Jordan Cove FTA + Non. FTA Cameron LNG Dominion Cove Point 1. 8 Dominion Cove Point Oregon LNG 2. 2 1. 2/0. 8 FTA * Non. FTA v NO Oregon LNG 1. 25 FTA v NO Cheniere Corpus Christi 2. 1 FTA v NO Cheniere Sabine Pass T 5 – T 6 1. 3 T 5 Filed Updated 8 -6 -2014 Fully permitted Approved YES NO NO NO Application filing = v 16 16

Jones Act Summary l Orders last year and this year for new tankers and large barges driven solely by the boom in domestic oil and gas production Ø Ø Currently only two US yards building large ocean-going tankers (Aker and NASSCO) Ø l Jones Act tanker fleet is young – average 9 years Between 2015 and 2017, over 6 M additional barrels of capacity will be added to the Jones Act tanker and large barge market Seven new Dry Cargo vessels are currently on-order or under construction at three separate US shipyards Ø Ø l The world’s first LNG powered containership new building program at NASSCO is on-track with vessel delivery to occur the 4 th quarter of 2015 Opportunities exist for new dry cargo orders as a large number of vessels are long overdue for replacement given their age and upcoming emissions regulations Future LNG market segments range from small bunkering barges to largescale LNG carriers for exports (pending regulation changes) 17