Frontline Ltd is the world's largest oil tanker company, transporting crude oil and petroleum products using VLCC and Suezmax tankers. It aims to provide reliable transportation while maintaining low costs. The company faces competition from other large tanker operators like Mitsui OSK Lines and NYK Group. Regulations around emissions and environmental protection also impact Frontline's operations. Customer demand and oil prices influence the tanker shipping industry.

1. INDUSTRY ANALYSIS OF
FRONTLINE LTD.

2. BACKGROUND OF THE COMPANY
• Frontline Ltd. is the world's largest oil tanker shipping company, based in Hamilton,
Bermuda and controlled by John Frederickson.
• Its primary business is transporting crude oil. As of 2008 the company had one of the
world's largest tanker fleets consisting of VLCC, Suezmax and Suezmax OBO carriers.
• As a result of the acquisitions of vessels and companies since 1996, Frontline Ltd. has
established itself as one of the world leaders in the international seaborne transportation
of crude oil, with one of the world's largest fleets of VLCC and Suezmax tankers.

3. Vision
The Company's vision is to provide the customers with a flexible and
reliable transportation service, and use this flexibility to develop unique
industrial relations that will give material benefits to the customers as well
as to the Company, shareholders and employees

4. Business strategy
• Emphasizing operational safety and quality maintenance for all of its vessels;
• Complying with all current and proposed environmental regulations;
• Outsourcing technical operations and crewing;
• Achieving low operational costs of vessels;
• Achieving high utilization of its vessels;
• Competitive financing arrangements; and
• Develop relationship to main charterers.

5. HISTORY
• Frontline Ltd. ("Frontline") has its origin in Frontline AB, which was founded in 1985, and
which was listed on the Stockholm Stock Exchange from 1989 to 1997.
• In May 1997, a decision was made at the general meeting in Frontline AB to change its
domicile from Sweden to Bermuda and to list its shares on the Oslo Stock Exchange.
• The change of domicile was executed through a share for share exchange offer from the
then newly formed Frontline in Bermuda

6. FINANCIAL RESULTS FROM PAST 3 YEARS
2014 2013 2012
Total operating revenue 559,688 517,190 578,361
Total operating
expense
632,908 641,182 594,212
Net operating (loss)
income
(48,600) (100,434) 18,908
Net other expenses (122,601) (89,160) (89,760)
Net loss before income
taxes and non-
controlling interest
(171,201) (189,594) (70,852)
Net loss attributable to
Frontline Ltd.
(162,938) (188,509) (82,754)

7. Cash cost break even
VLCC USD 26,400 / day
Suezmax USD 19,400/ day

8. AREA OF OPERATION
• Seaborne transportation of crude oil and refined petroleum products using VLCC and
Suezmax tankers.
Very large crude carrier (VLCC)
• VLCC have a size ranging between 180,000 to 320,000 DWT.
• They are capable of passing through the Suez Canal in Egypt, and as a result are used
extensively around the North Sea, Mediterranean and West Africa.
• They are capable of passing through the Suez Canal in Egypt, and as a result are used
extensively around the North Sea, Mediterranean and West Africa.

9. • The cost of a VLCC ranges between $100 million to $120 million depending on its age.
Suezmax Tankers
Suezmax are medium to large-sized ships with a deadweight tonnage (DWT)
between 120,000 to 200,000.
A typical Suezmax vessel would be 275 m (900 ft) in length, 48 m (157 ft) in width, and
16.2 m (53 ft) in draught corresponding to about 150,000 DWT.

10. VL

11. PRODUCT AND SERVICES OFFERED BY THE
COMPANY
• Frontline ltd is engaged in transporting crude oil and refined petroleum products using
VLCC and Suezmax tankers. It operates in spot market and time charter markets.
• Frontline ltd Provides high quality transportation and cargo handling operations with high
level of reliability, accuracy.
• It has services in almost all major shipping channels
• It maintains advanced systems of transport monitoring and constant updating of
shippers

12. Type of vessel Number of vessels at the of year 2014
VLCC 30
Suezmax tanker 16
• VLCCs are specifically designed for the transportation of crude oil and, due to their size, are
primarily used to transport crude oil from the Middle East Gulf to the Far East, Northern Europe,
the Caribbean and the Louisiana
• Suezmax tankers are similarly designed for worldwide trading, but the trade for these vessels is
mainly in the Atlantic Basin, Middle East and Southeast Asia.

13. COMPETITORS
1. Mitsui-OSK (MOL)
• MOL is a Japanese transport company headquartered in Toranomon, Minato, and Tokyo,
Japan.
• MOL's fleet includes (VLCCs) of more than 200,000 DWT and Aframax tankers.
• With a large tanker fleet and decades of extensive experience and expertise, MOL is
truly the energy expert when it comes to developing global tanker operations.

14. • The fleet also has various types of vessels that meet specific cargo characteristics
• product tankers that transport refined petroleum products such as gas oils, naphtha,
and gasoline,
• chemical tankers and methanol carriers that transport liquid chemical products.
• Liquefied petroleum gas (LPG) carriers.
• In total the company controls 40 VLCCs, 6 LR2s, 5 Aframaxes, 12 LR1s, 26 MRs and 13
Handy size tankers

15. b) Nyk Group.
• NYK Line, is one of the largest shipping companies in the world. The company has its
headquarters in Chiyoda, Tokyo, Japan.
• Tanker Transport division operates very large crude carriers (VLCCs) and Aframaxes
tankers that transport crude oil.
• The NYK Group’s fleet stands at 33 VLCCs, four Aframaxes, 5 LRs, 24 MRs and 5
chemical carriers.

16. c) National Iranian Transport Company- (NITC)
• The National Iranian Tanker Co. transports Iranian crude to export markets and is also
responsible for the distribution of oil products to Iranian ports and island ports and
islands located in the Persian Gulf.
• NITC fleet stands at 37 VLCCs, nine Suezmaxes , five Aframaxes and three products
tankers.

17. COMPETITIVE ANALYSIS
Analyzing top two competitors of Frontline ltd. i.e. MOL, NYK Group.
1. Mitsui O.S.K Lines, Ltd
• MOL tanker fleet — crude oil tankers (mainly VLCCs), petroleum product tankers,
chemical product tankers, and LPG carriers — and its global leadership in all related
fields.
• As an expert in energy transport, they have developed a comprehensive safe operation
system covering our entire lineup of vessels

18. MOL founded the VLCCs and LR1 product tankers pool Management Company to enable
them to cater more precisely to customer’s requirements and to maintain the high quality
of services.
a) Tanker fleet
Type At the end of march 2014
Crude oil tankers 38
Product tankers 59
Chemical tankers 72
LPG tankers 11

19. b) Corporate profile
• Capital : 65,400,351,028yen
• Number of shareholders : 109,304
• Number of shares Issued : 1,206,286,115
• Major shareholders : Japan Trustee Services Bank, Ltd,
The Master Trust bank of Japan, Ltd,
Mitsui sumitomo insurance Co.Ltd ,
Trust & Custody Services Bank, Ltd,
Juniper, The bank of New York Mellon

20. c) Corporate Principle
1. As a multi-modal transport group, actively seize opportunities that contribute to global
economic growth and development by meeting and responding to its customers' needs
and to this new era.
2. Maximize corporate value by always being creative, continually pursuing higher
operating efficiency and promoting an open and visible management style that is guided
by the highest ethical and social standards
3. To promote and protect environment by maintaining strict, safe operation and
navigation standards

21. d) . Vision
To make the MOL Group an excellent and resilient organization that leads the world
shipping industry.
e) . Values
“CHART" stands for five words that express the company's shared values – "Challenge,"
"Honesty," "Accountability," "Reliability," and" Teamwork."

22. f) . Financial results

23. • Results for Q3 of fiscal year 2014

24. g) . Strengths and weakness
Strengths:
1. Currently having 15.8 million dwt (dead weight tonnage) plus 74000 dwt new building.
2. Tanker section caters to many different needs of the customer. (Crude oil, product, LPG,
Chemical)
3. MOL focuses on enhancement of the fleet's quality as well as seafarer education and
training to establish an optimum safe operation system.

25. 4. The MOL Group owns ship management companies specializing in tankers. MOL
consolidates the tanker operation know-how accumulated at these companies to improve
customer services and ensure safe and efficient operation
5. MOL's in-house training centers provide seafarers with extensive education and training
programs backed by the MOL Group's rich experience in tanker operations including cargo
loading and discharging

26. Weakness:
1. Shipping has derived demand, if in case oil and LNG industries goes into crisis the
company will find it difficult to perform its normal operations smoothly

27. 2. NYK Group
a) Tanker Fleet
Crude oil tankers 35
Product tankers 26
Chemical tankers 5
LPG carriers 10
Ammonia carrier 1

28. b) Corporate profile
Capital : JPY 144,319,833,730
Number of shares issued : 1,700,550,988 shares
Number of shareholders : 137,550
Major shareholders : The Master Trust Bank of Japan, Ltd.
Japan Trustee services Bank
Tokyo Marine & Nichido Fire insurance Co. Ltd
Mizuho Bank, Ltd.
Number of employees : 1590

29. c) Mission Statement
“Through safe and dependable transport, we contribute to betterment of societies throughout the world as
a comprehensive global-logistics enterprise offering ocean, land, and air transportation.”
d) Values
• Integrity
• Innovation- Continually think of new ideas for improvement
• Intensity- Carry through with and accomplish your tasks. Never give up.
Overcome challenges. Remain Motivated.

30. d) Financial performance

31. e) Strength and Weakness
Strengths:
1. The company is having 12.6 million dwt( dead weight tonnage)
2. The Tanker section caters to many different needs of the customers.(crude oil, refined petroleum
products ,LNG, chemical products, Ammonia)
3. Management has include Fleet expansion and investment as part of medium term management
plan.

32. Weakness:
1. Most of the vessels is very old compared to its competitors. Age of the ship plays a
crucial role on the freight rate and demand
2. Core area of operation is container shipping. Therefore it lack expertise in tanker
shipping when compared to competitors.

33. ENVIRONMENT OF THE COMPANY
1. Analysis of Macro environment
a) Tanker trade
• Developments in the world economy have shaped the tanker trade.
• defining factors included the high oil price levels, demographics, geopolitical
uncertainties, technology and energy efficiency gains, and also changes in supply and
demand with traditional consumer markets such as the United States emerging as large
suppliers and potentially large exporters of crude oil.

34. Crude oil
Global crude oil shipments fell by 1.7 per cent in 2013 with total volumes averaging
1.8 billion tons. Factors at play included the supply and demand dynamics resulting from
geopolitical disruptions, growing domestic production in the traditionally largest consumer
market, as well as the overall weak global economic conditions and constrained demand.

35. Refined products
• Total global refinery capacity increased by 1.4 per cent in 2013 at more or less the same rate
as the previous year, with volumes reaching 94.9 million bpd.
• Capacity is projected to expand driven by expansion projects in Asia, in particular China and
India.
• Refineries are increasingly being closed down in Europe as environmental constraints in the
OECD region continue to grow and as competition from refineries in Asia grows.
• In 2013, oil product shipments increased by 4.7 per cent, compensating to some extent for
the drop in crude oil shipments.

36. Natural gas and liquefied gases
• Global natural gas production grew by 1.1 per cent in 2013.
• Growth in global LNG trade nearly came to a standstill (0.3 per cent) in 2013, while
increased imports into developing America, China and the Republic of Korea were
partially offset by lower imports in France, Spain and the United Kingdom of Great
Britain and Northern Ireland.
• Qatar remained the largest LNG exporter with a 32.4 per cent share of global LNG
exports.

37. b) Environmental and Other Regulations
• Government regulations and laws significantly affect the ownership and operation of
vessels. Shipping companies are subject to international conventions, national, state
and local laws and regulations in force in the countries in which vessels may operate or
are registered and compliance with such laws, regulations and other requirements may
entail significant expense.
• Vessels are subject to both scheduled and unscheduled inspections by a variety of
government

38. • Failure to maintain permits, licenses, certificates could require to incur substantial costs
or temporarily suspend operation of one or more of vessels.
• Increasing environmental concerns have created a demand for vessels that conform to
stricter environmental standards
• future serious marine incident that results in significant oil could result in additional
legislation or regulation that could negatively affect profitability.

39. Reduction of greenhouse gas emissions from international shipping and energy
efficiency
• Issues related to the reduction of GHG emissions from international shipping continued
to remain an important area of focus of the work of the IMO Marine Environment
Protection Committee (MEPC).
• Continuous improvements to ships’ design and size, as well as operational measures
including better speed management during the course of a ship’s voyage are being
adopted.

40. • the consumption of fuel, and consequently emissions of CO2, the primary GHG emitted
through its burning, and the largest contributor of GHG emissions from human activities,
remains a strong incentive for shipping.
Energy efficiency for ships
• During its sixty-sixth session, the MEPC continued its work on further developing
guidelines to support the implementation of the mandatory regulations on energy
efficiency for ships, set out in chapter 4 of MARPOL annex VI

41. Air pollution from ships
• IMO is working on regulations to reduce emissions of other toxic substances from
burning fuel oil, particularly SOx and NOx.

42. 2. Analysis of Micro environment
a) Customers
• OPEC made the deepest cut to its forecast for oil-supply growth from countries outside
the group in at least six years, saying a price rout means U.S. drillers will produce less
than previously anticipated.
• Non-OPEC nations will pump about 400,000 barrels a day less than previously
estimated

43. • During the year ended December 31, 2014, one customer represented 14% of consolidated
operating revenues and one customer represented 10% of consolidated operating revenues.
b) Competitors
• The market for international seaborne crude oil transportation services is highly fragmented
and competitive
• Seaborne crude oil transportation services are generally provided by two main types of
operators: major oil company captive fleets (both private and state-owned) and independent
ship-owner fleets.

44. • Many major oil companies also operate their own vessels and use such vessels not only
to transport their own crude oil but also to transport crude oil for third-party charterers.
• Competition for charters is intense and is based upon price, location, size, age,
condition and acceptability of the vessel and its manager
• Competition is also affected by the availability of other size vessels to compete in the
trades in which the Company engages

45. c) Seasonality
• Historically, oil trade and, therefore, charter rates increased in the winter months and
eased in the summer months as demand for oil in the Northern Hemisphere rose in
colder weather and fell in warmer weather.
• Consumption is spread more evenly. This is most apparent from the higher seasonal
demand during the summer months due to energy requirements for air conditioning and
motor vehicles.

46. THE FOUR P’S OF MARKETING
1. Product
• Service offered frontline ltd is transportation of Crude oil, refined petroleum products
• Frontline ltd is having VLCCs, Suezmax tanker, Long range tankers and product tanker.

47. 2. Promotion
• Shipping industry is a very unique industry in terms of promotion of service. Ship-owner
and Cargo owner never interact directly. Charterers and Ship brokers act as
intermediaries.
• Ship-owner contact ship broker for employment of the vessel. He also specify the freight
rate to broker. Cargo owner is represented by charterer. Charterer and broker will do the
negotiation and finally the vessel will be employed.

48. 3. Price
• World scale is a unified system of establishing payment of freight rate for
a given oil tanker’s cargo.
• The freight rate is not fixed and it depends on lot of factors, it includes
both Micro economic and Macro economic factors.

49. The main charges are,
1. Basic ocean freight:
2. The mandatory surcharges:
3. Value added services

51. 4. Place
Shipping has no international boundaries.
Customers of Frontline ltd is located in
Middle East, Europe, north Asia, south
and south East Asia,
Frontlines total trade distribution Region
wise

52. CUSTOMERS OF THE COMPANY
• Repeat business is the backbone of selling. It helps to provide revenue and certainty for
the business. Organizations are dependent upon their customers.
• The main customers of Frontline are:-
Gazprom, Eni, PETRONAS, Kuwait Petroleum Corporation, Valero, Royal Dutch Shell.

53. SWOT ANALYSIS
Strengths
1. Global economy increased by 2.1%
2. Asian subcontinent is growing in past years.
3. Growth in sub Saharan continent increased in 2014
4. Focus on horizontal trade and focus only on specific segment of industry
5. A large portion of Frontline's vessels trade in the spot market. Spot market rates are typically
higher than time charter rates to compensate for the lack of confirmed continual employment

54. 6. Increasing global environmental concerns have created a demand in the petroleum
products/crude oil seaborne transportation industry for vessels that are able to conform
to the stringent environmental standards currently being imposed throughout the world.
7. Frontline has a strategy of extensive outsourcing. Ship management, crewing and
accounting services are provided by a number of independent and competing ship
management companies

55. Weakness
1. Most of the vessels owned by the Frontline ltd is old. Age of the vessel plays a crucial
role in its employment.
2. Oil companies are cutting down production as a result of declining oil price. Main
business of Frontline Ltd is transportation of crude oil. Shipping has derived demand,
if in case oil industries goes into crisis the company will find it difficult to perform its
normal operations smoothly.

56. Opportunities
1. LNG
• LNG becomes more attractive because of increased restrictions on carbon emission.
Demand for natural gas is increasing exponentially worldwide which resulted in increased
demand LNG ships and their service. Frontline ltd could make use of this opportunity by
adding LNG carriers into its fleet
• Global Natural Gas production increased in USA in 2014. New fields are coming in Asia
pacific, Caspian region, Western Africa and Asia. Increased demand in Asia especially India
and China. New LNG projects are also coming up in Australia, Indonesia, Malaysia,
Singapore and Russia

57. 2. Dry Bulk
• Dry bulk trade is projected to grow at a rate of 4-5%. Frontline ltd can enter into dry bulk
market by adding bulk carriers into its fleet. There is an increased production and
demand of iron ore especially in china.
• The coal trade also increased by 4.8% in 2014. Asia’s demand for coal is fast growing,
china’s demand alone increased by 75% in past decade.

58. Threats
1 . G e o p o l i t i c a l d i s r u p t i o n s i n A s i a n a n d A f r i c a n s u b - c o n t i n e n t .
2 . G r o wi n g d o m e s t i c p r o d u c t i o n .
3 . We a k G l o b a l e c o n o m i c c o n d i t i o n s a n d c o n s t r a i n e d d e m a n d s .
4 . R e f i n e r y c l o s u r e i n E u r o p e b e c a u s e o f e n v i r o n m e n t a l p o l l u t i o n
( O E C D ) .
5 . M a j o r c o m p e t i t o r s o f F r o n t l i n e l t d a r e i n c r e a s i n g t h e i r f l e e t s i z e ,
wh i c h wi l l r e s u l t i n r e d u c e d m a r k e t s h a r e f o r t h e c o m p a n y.

59. SEGMENTATION
FRONTLINE
LTD.
CRUDE OIL
TANKER
VLCC SUEZMAX
PRODUCT
TANKER
SUEZMAX

60. STRATEGIES OF THE COMPANY
Frontline has a strategy of extensive outsourcing
• Frontline's vessels are managed by independent ship management companies.
• Independent ship managers provide crewing for Frontline's vessels. Currently, most
vessels are crewed with full Russian crews, while others have full Indian or full Filipino
crews, or combinations of these nationalities.

61. • A large portion of Frontline's vessels trade in the spot market. Spot market rates are
typically higher than time charter rates to compensate for the lack of confirmed continual
employment.
• Frontline seeks to maximize earnings in employing vessels in the spot market or under
time charters or under contracts of affreightment ("COA").
• Increasing global environmental concerns have created a demand in the petroleum
products/crude oil seaborne transportation industry for vessels that are able to conform
to the stringent environmental standards currently being imposed throughout the world