UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F

(Mark One)

[_]               REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
                            THE SECURITIES EXCHANGE ACT OF 1934

                                              OR

[X]                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended                         December 31, 2006
                         -------------------------------------------------------

                                       OR

[_]              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                         THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

[_]             SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report
                                                  ------------------------------

Commission file number                              033-79220-02
                      ----------------------------------------------------------

                      CALPETRO TANKERS (BAHAMAS II) LIMITED
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


                                     Bahamas
--------------------------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)


          Mareva House, 4 George Street, PO Box N-3937, Nassau, Bahamas
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to section 12(b) of the Act.

Title of each class                   Name of each exchange on which registered

      None                                          Not applicable
-------------------                   ------------------------------------------

Securities registered or to be registered pursuant to section 12(g) of the Act.

                                      None
--------------------------------------------------------------------------------

Securities for which there is a reporting obligation pursuant to section 15(d)
of the Act.

                                      None
--------------------------------------------------------------------------------

Indicate the number of shares outstanding of each of the registrant's classes of
capital or common stock, as of the close of the period covered by the annual
report.

               Common stock: 100 shares, par value of $1 per share
--------------------------------------------------------------------------------

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

                                                     [_] Yes              [X] No

If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.

                                                     [_] Yes              [X] No

Note - Checking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                     [X] Yes              [_] No

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [_]   Accelerated filer [_]    Non-accelerated filer [X]

Indicate by check mark which financial statement item the registrant has elected
to follow:

                                                     [_] Item 17   [X] Item 18

If this is an annual report, indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

                                                     [_] Yes              [X] No

<PAGE>



                          INDEX TO REPORT ON FORM 20-F

                                                                          Page
PART I
Item 1.   Identity of Directors, Senior Management and Advisers.............. 3
Item 2.   Offer Statistics and Expected Timetable............................ 3
Item 3.   Key Information.................................................... 3
Item 4.   Information on the Company......................................... 7
Item 4A.  Unresolved Staff Comments..........................................21
Item 5.   Operating and Financial Review and Prospects.......................21
Item 6.   Directors, Senior Management and Employees.........................24
Item 7.   Major Shareholders and Related Party Transactions..................25
Item 8.   Financial Information..............................................27
Item 9.   The Offer and Listing..............................................27
Item 10.  Additional Information.............................................27
Item 11.  Quantitative and Qualitative Disclosures about Market Risk.........29
Item 12.  Description of Securities Other than Equity Securities.............30

PART II
Item 13.  Defaults, Dividend Arrearages and Delinquencies....................31
Item 14.  Material Modifications to the Rights of Security
          Holders and Use of Proceeds........................................31
Item 15.  Controls and Procedures............................................31
Item 16.  Reserved...........................................................31
Item 16A. Audit committee financial expert...................................31
Item 16B. Code of Ethics.....................................................31
Item 16C. Principal Accountant Fees and Services.............................31
Item 16D. Exemptions from the Listing Rules for Audit Committees.............32
Item 16E. Purchases of Equity Securities by the Issuer
          and Affiliated Purchasers..........................................32

PART III
Item 17.  Financial Statements...............................................33
Item 18.  Financial Statements...............................................33
Item 19.  Exhibits...........................................................33

<PAGE>

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Matters discussed in this document may constitute forward-looking statements.
The Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements in order to encourage companies to
provide prospective information about their business. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements, which
are other than statements of historical facts.

CalPetro Tankers (Bahamas II) Limited (the "Company") desires to take advantage
of the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and is including this cautionary statement in connection with this safe
harbor legislation. This document and any other written or oral statements made
by us or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance. The words
"believe," "except," "anticipate," "intends," "estimate," "forecast," "project,"
"plan," "potential," "will," "may," "should," "expect" and similar expressions
identify forward-looking statements.

The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in our records and other data available from third
parties. Although we believe that these assumptions were reasonable when made,
because these assumptions are inherently subject to significant uncertainties
and contingencies which are difficult or impossible to predict and are beyond
our control, we cannot assure you that we will achieve or accomplish these
expectations, beliefs or projections.

In addition to these important factors and matters discussed elsewhere herein
and in the documents incorporated by reference herein, important factors that,
in our view, could cause actual results to differ materially from those
discussed in the forward-looking statements include the strength of world
economies and currencies, general market conditions, including fluctuations in
charterhire rates and vessel values, changes in demand in the tanker market, as
a result of changes in OPEC's petroleum production levels and world wide oil
consumption and storage, changes in the company's operating expenses, changes in
governmental rules and regulations or actions taken by regulatory authorities,
potential liability from pending or future litigation, general domestic and
international political conditions, potential disruption of shipping routes due
to accidents or political events, and other important factors described from
time to time in the reports filed by CalPetro Tankers (Bahamas II) Limited with
the Securities and Exchange Commission.

Please note: In this section, "we", "us" and "our" all refer to the Company.

<PAGE>

Item 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

Item 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3.  KEY INFORMATION

Throughout this report, the "Company," "we," "us" and "our" all refer to
Calpetro Tankers (Bahamas II) Limited. We use the term deadweight ton, or dwt,
in describing the size of vessels. Dwt, expressed in metric tons, each of which
is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and
supplies that a vessel can carry. Unless otherwise indicated, all references to
"USD" and "$" in this report are to, and amounts are presented in, U.S. dollars.

A. Selected Financial Data

The selected statement of operations data of the Company with respect to the
fiscal years ended December 31, 2006, 2005, and 2004, and the selected balance
sheet data at December 31, 2006 and 2005, have been derived from the Company's
audited financial statements included herein and should be read in conjunction
with such statements and the notes thereto. The selected statement of operations
and retained earnings data with respect to the years ended December 31, 2003 and
2002 and the selected balance sheet data at December 31, 2004, 2003 and 2002
have been derived from audited financial statements of the Company not included
herein. The following table should also be read in conjunction with Item 5
"Operating and Financial Review and Prospects" and the Company's audited
financial statements and notes thereto included herein. The Company's accounts
are maintained in US dollars.

<TABLE>

                                                                Fiscal Years ended December 31,
                                                   2006         2005          2004          2003          2002
                                                   ----         ----          ----          ----          ----
<S>                                              <C>          <C>           <C>           <C>           <C>
 (in thousands of $, except share data)

 Statement of operations data
 Total operating revenues                         2,547        2,819         3,115         3,532         3,966
 Net (loss) / income                               (37)         (90)          (54)          (56)            57
Per share data:
 Dividends per share                                  -            -             -             -             -
 Balance sheet data:
 Total assets                                    30,775       34,052        37,938        42,770        48,102
 Current portion loans                            3,187        3,187         3,187         5,210         5,210
 Long-term loans                                 25,491       28,678        31,865        35,052        40,262
 Stockholder's equity                             1,441        1,478         1,568         1,622         1,678
 Number of shares                                   100          100           100           100           100
</TABLE>

B. Capitalization and Indebtedness

Not Applicable

C. Reason for the offer and use of proceeds

Not Applicable

D. Risk Factors

The cyclical nature of the tanker industry may lead to volatile changes in
charter rates, which may adversely affect our earnings

Our vessel the Altair Voyager (the "Vessel") is currently operated under a
bareboat charter (the "Charter") to Chevron Transport Corporation ("Chevron").
The Charter has a term expiring on April 1, 2015, subject to Chevron's options
to terminate the charter on April 1, 2008 and 2010. Non-binding notice of the
intention to exercise the options to terminate the Charter must be given at
least seven months in advance.

If the tanker industry, which has been cyclical, is depressed in the future when
our Vessel's Charter expires or is terminated, our earnings and available cash
flow may decrease. Our ability to recharter our Vessel on the expiration or
termination of its current Charter and the charter rates payable under any
renewal or replacement charters will depend upon, among other things, economic
conditions in the tanker market. Fluctuations in charter rates and vessel values
result from changes in the supply and demand for tanker capacity and changes in
the supply and demand for oil and oil products.

Because our Charter may be terminated, we may incur additional expenses and not
be able to recharter our Vessel profitably

Chevron has the sole discretion to exercise its option to terminate the charter
and will not owe any fiduciary or other duty to the holders of the Notes,
defined below, in deciding whether to exercise the termination options, and
Chevron's decision may be contrary to our interests or those of the holders of
the Notes, defined below.

We cannot predict at this time any of the factors that Chevron will consider in
deciding whether to exercise its termination options under the Charter. It is
likely, however, that Chevron would consider a variety of factors, which may
include whether a vessel is surplus or suitable to Chevron's requirements and
whether competitive charterhire rates are available in the open market at that
time.

In the event Chevron does terminate the Charter, it is required under the terms
of the Charter to make a termination payment to us. The amount of the
termination payment is not expected to be sufficient to cover our obligations
under the Term Loans, defined below. If Chevron terminates the Charter, we will
attempt to arrange a replacement charter, or we may sell the Vessel to satisfy
our obligations under the term loans. Replacement charters may include
shorter-term time charters and employing the Vessel on the spot charter market
(which is subject to greater fluctuation than the time charter market). Any
replacement charter may bring us lower charter rates and would likely require us
to incur greater expenses which may reduce the amounts available, if any, to pay
principal and interest on the Term Loans, defined below.

We operate in the highly competitive international tanker market which could
affect our position at the end of our current Charter and if Chevron terminates
its Charter earlier

The operation of tanker vessels and transportation of crude and petroleum
products is an extremely competitive business. During the term of the existing
Charter with the charterers, we are not exposed to the risk associated with this
competition. At the end of the current Charter or in the event that Chevron
terminate the Charter on the last termination date, we will have to compete with
other tanker owners, including major oil companies as well as independent tanker
companies for charters. Due in part to the fragmented tanker market, competitors
with greater resources could enter and operate larger fleets through
acquisitions or consolidations and may be able to offer better prices and
fleets, which could result in us achieving lower revenues from their suezmax oil
tankers which will reduce the amounts available, if any, to pay the principal
and interest on the Term Loans.

Safety, environmental and other governmental and other requirements expose us to
liability, and compliance with current and future regulations could require
significant additional expenditures, which could have a material adverse affect
on our business and financial results.

Our operations are affected by extensive and changing international, national,
state and local laws, regulations, treaties, conventions and standards in force
in international waters, the jurisdictions in which our Vessel operates and the
country in which our vessel is registered, including those governing the
management and disposal of hazardous substances and wastes, the cleanup of oil
spills and other contamination, air emissions, and water discharges and ballast
water management. In addition, vessel classification societies also impose
significant safety and other requirements on our vessel. In complying with
current and future environmental requirements, we may also incur significant
additional costs in meeting new maintenance and inspection requirements, in
developing contingency arrangements for potential spills and in obtaining
insurance coverage. Government regulation of vessels, particularly in the areas
of safety and environmental requirements, can be expected to become stricter in
the future and require us to incur significant capital expenditures on our
vessel to keep it in compliance, or even to scrap or sell the vessel altogether.

Many of these requirements are designed to reduce the risk of oil spills and
other pollution, and our compliance with these requirements can be costly. These
requirements also can affect the resale value or useful lives of our vessel,
require a reduction in cargo-capacity, ship modifications or operational changes
or restrictions, lead to decreased availability of insurance coverage for
environmental matters or result in the denial of access to certain
jurisdictional waters or ports, or detention in, certain ports.

Under local, national and foreign laws, as well as international treaties and
conventions, we could incur material liabilities, including cleanup obligations,
natural resource damages and third-party claims for personal injury or property
damages, in the event that there is a release of petroleum or other hazardous
substances from our vessel or otherwise in connection with our current or
historic operations. We could also incur substantial penalties, fines and other
civil or criminal sanctions, including in certain instances seizure or detention
of our vessel, as a result of violations of or liabilities under environmental
laws, regulations and other requirements.

For example, OPA affects all vessel owners shipping oil to, from or within the
United States. OPA allows for potentially unlimited liability without regard to
fault for owners, operators and bareboat charterers of vessels for oil pollution
in United States waters. Similarly, the International Convention on Civil
Liability for Oil Pollution Damage, 1969, as amended, which has been adopted by
most countries outside of the United States. imposes liability for oil pollution
in international waters. OPA expressly permits individual states to impose their
own liability regimes with regard to hazardous materials and oil pollution
incidents occurring within their boundaries. Coastal states in the United States
have enacted pollution prevention liability and response laws, many providing
for unlimited liability.

Compliance with extensive and changing environmental laws and other regulations
may entail significant expenses including expenses for ship modifications and
changes in operating procedures and therefore affect the operation of the
Vessel. Although Chevron is responsible for all operational matters and bear all
these expenses during the term of the current Charter, these expenses could have
an adverse effect on our business operations at any time after the expiration or
termination of the Charter or in the event Chevron fails to make a necessary
payment.

We may not have adequate insurance in the event the existing charter is
terminated

There are a number of risks associated with the operation of ocean-going
vessels, including mechanical failure, collision, property loss, cargo loss or
damage and business interruption due to political circumstances in foreign
countries, hostilities and labour strikes. In addition, the operation of any
vessel is subject to the inherent possibility of marine disaster, including oil
spills and other environmental mishaps, and the liabilities arising from owning
and operating vessels in international trade. Under the Charter, Chevron bears
all risks associated with the operation of our Vessel including the total loss
of the Vessel. However, we cannot assure holders of the Term Loans, defined
below, that we will adequately insure against all risks or in the event the
Charter expires or is terminated. We may not be able to obtain adequate
insurance coverage at reasonable rates for our Vessel in the future and the
insurers may not pay particular claims.

We are highly dependent on Chevron and Chevron Corporation

We are highly dependent on the due performance by Chevron of its obligations
under the Charter and by its guarantor, Chevron Corporation, of its obligations
under its guarantee. A failure by Chevron or Chevron Corporation to perform
their obligations could result in our inability to service the Term Loans. If
the Notes holders had to enforce the mortgages securing the Notes, defined
below, they may not be able to recover the principal and interest owed to them.

We may not be able to pay down our debt in the future

Currently, we must dedicate a large portion of our cash flow from operations to
satisfy our debt service obligations. Our ability to pay interest on, and other
amounts due in respect of, our Term Loan will depend on our future operating
performance, prevailing economic conditions and financial, business and other
factors, many of which are beyond our control. There can be no assurance that
our cash flow and capital resources will be sufficient for payment of our
indebtedness in the future. If we are unable to service our indebtedness or
obtain additional financing, as needed, this could have a material adverse
effect on the holders of the Term Loans, defined below.

Governments could requisition our Vessel during a period of war or emergency,
resulting in a loss of earnings

A government could requisition for title or seize our Vessel. Requisition for
title occurs when a government takes control of a vessel and becomes her owner.
Also, a government could requisition our Vessel for hire. Requisition for hire
occurs when a government takes control of a vessel and effectively becomes her
charterer at dictated charter rates. Generally, requisitions occur during a
period of war or emergency. Government requisition of our Vessel would
negatively impact our revenues and therefore impact our ability to service our
debt.

The Notes may not be as liquid as other securities with established trading
markets, which may affect the value of the Notes and your ability to trade them

The Notes, defined below, are not listed on any national securities exchange or
traded on the NASDAQ National Market and have no established trading market.
Consequently, the Notes could trade at prices that may be higher or lower than
their principal amount or purchase price, depending on many factors, including
prevailing interest rates, the market for similar notes and warrants, and our
financial performance. The placement agents for the Notes currently make a
market for the Notes, but are not obligated to do so and may discontinue their
market making activity at any time. In addition, their market making activity is
subject to the limits imposed by the Securities Act and the Exchange Act. We
cannot assure that an active trading market will exist for the Notes or that any
market for the Notes will be liquid.

Substantial leverage and debt service could affect our ability to grow and
service our debt obligations

We are highly leveraged. As of December 31, 2006, we had $28.7 million in total
indebtedness outstanding and stockholders' equity of $1.4 million. The degree to
which we are leveraged could have important consequences for the holders of the
Notes, including:

     o    our ability to obtain additional financing for working capital,
          capital expenditures, acquisitions or general corporate purposes may
          be limited;

     o    we must dedicate a substantial portion of our cash flow from
          operations to the payment of interest on our Term Loans and any future
          indebtedness, which reduces the funds available to us for other
          purposes;

     o    we may have trouble withstanding competitive pressures and responding
          to changing business conditions;

     o    we may be more vulnerable than others in the event of a downturn in
          general economic conditions or in our business; and

     o    we may be more highly leveraged than other tanker owners with which we
          compete, which may put us at a competitive disadvantage.

We have a limited business purpose which limits our flexibility

Our activity is limited to engaging in the acquisition, disposition, ownership,
and chartering of a Suezmax oil tanker. During the terms of our Charter with
Chevron, we expect that the only source of operating revenue from which we may
pay principal and interest on the Term Loans will be from this Charter.

Item 4.  INFORMATION ON THE COMPANY

A  History and Development of the Company

CalPetro Tankers (Bahamas II) Limited was incorporated in the Bahamas on May 13,
1994 together with two other companies: CalPetro Tankers (Bahamas I) Limited and
CalPetro Tankers (Bahamas III) Limited. In addition, CalPetro Tankers (IOM)
Limited was incorporated in the Isle of Man. Together these companies are
referred to as the "Owners". Each of the Owners was organized as a special
purpose company for the purpose of acquiring one of four oil tankers (each a
"Vessel", together the "Vessels") from Chevron. We are wholly-owned by
California Tankers Investments Limited, a company organized under the laws of
the Bahamas, which is in turn a wholly-owned subsidiary of CalPetro Holdings
Limited, an Isle of Man company. CalPetro Holdings Limited is a wholly-owned
subsidiary of Independent Tankers Corporation ("ITC"), a Cayman Islands company
which is a wholly-owned subsidiary of Frontline Ltd. ("Frontline"), a publicly
listed Bermuda company.

California Petroleum Transport Corporation ("California Petroleum"), a Delaware
corporation, acting as agent on behalf of the Owners, issued as full recourse
obligations $167,500,000 Serial First Preferred Mortgage Notes and $117,900,000
8.52% First Preferred Mortgage Notes due 2015 (together the "Notes"). The
proceeds from the sale of the Notes were applied by way of long-term loans,
being Serial Loans in respect of the Serial First Preferred Mortgage Notes and
Term Loans in respect of the First Preferred Mortgage Notes due 2015, to the
Owners to fund the acquisition of the Vessels from Chevron. We were allocated
$46,620,000 of the Serial Loans and $35,052,000 of the Term Loans and acquired
our Vessel, the Altair Voyager, as described below. We engage in no business
other than the ownership and chartering of our Vessel and activities resulting
from or incidental to such ownership and chartering.

Our principal executive offices are located at Mareva House, 4 George Street, PO
Box N-3937, Nassau, Bahamas.

B  Business Overview

Our Vessel is a 130,000 dwt Suezmax oil tanker, called the Altair Voyager, which
was acquired from Chevron. Suezmax tankers are medium-sized vessels ranging from
approximately 120,000 to 200,000 dwt, and of maximum length, breadth and draft
capable of passing fully loaded through the Suez Canal.

The Vessel has been chartered back to Chevron. The Charter has a term expiring
on April 1, 2015, subject to Chevron's right to terminate the Initial Charter on
certain specified dates. The option to terminate has already lapsed for two of
these dates. Chevron can elect to terminat the Charter on any of the two
remaining termination dates, which occur on April 1, 2008 and April 1, 2010. For
future optional termination date a non-binding notice of the intention to
exercise the option to terminate the Charter must be given at least twelve
months in advance, with irrevocable notice to be given seven months prior to the
termination date. Chevron is required to pay us a termination payment (the
"Termination Payment") on or prior to the termination date as follows.

         (in millions of $)
         Optional termination date          Termination payment

         April 1, 2008                               10.03
         April 1, 2010                                8.94

As at June 18, 2007, no termination notice had been received from Chevron for
the Charter.

Chevron is principally engaged in the marine transportation of oil and refined
petroleum products. Chevron's primary transportation routes are from the Middle
East, Indonesia, Mexico, West Africa and the North Sea to ports in the United
States, Europe, the United Kingdom and Asia. Chevron has advised us that it
expects to use the Vessel worldwide as permitted under the Charter. The
obligations of Chevron under the Charter are guaranteed by Chevron Corporation,
a major international oil company, pursuant to a guarantee (the "Chevron
Guarantee"). Chevron is an indirect, wholly-owned subsidiary of Chevron
Corporation.

The Vessel is a double-hull oil carrier and is presently registered under the
Bahamas flag. The Vessel was constructed under the supervision of Chevron and
designed to Chevron's specifications to enhance safety and reduce operating and
maintenance costs, including such features as high performance rudders, extra
steel (minimal use of high tensile steels), additional fire safety equipment,
redundant power generation equipment, extra coating and electrolytic corrosion
monitoring and protection systems, additional crew quarters to facilitate added
manning and a double-hull design patented by one of Chevron Corporation's
subsidiaries. The builder of Altair Voyager was Ishikawajima Harima Heavy
Industries Co., Ltd.

Management

On March 31, 1999, Frontline became our Manager and Technical Advisor to the
Company, pursuant to an assignment of a Management Agreement. Under the
Management Agreement, Frontline provides administrative, management and advisory
services to us along with technical advisory services. If the Charter is
terminated by Chevron, Frontline, acting on our behalf, will provide all
technical management services and will attempt to find an acceptable replacement
charter for the Vessel. If an acceptable replacement charter is commercially
unavailable, the Manager will solicit bids for the sale or recharter of the
Vessel. The Manager's ability to obtain an acceptable replacement charter, to
sell the Vessel or recharter the Vessel will depend on market rates for new and
used vessels, both of which will depend on the supply of and demand for tanker
capacity for oil transportation, and the advantages or disadvantages of the
Vessel compared with other vessels available at the time.

Industry Conditions

The market for international seaborne crude oil transportation services is
highly fragmented and competitive. Seaborne crude oil transportation services
generally are provided by two main types of operators: major oil company captive
fleets (both private and state-owned) and independent shipowner fleets. In
addition, several owners and operators pool their vessels together on an ongoing
basis, and such pools are available to customers to the same extent as
independently owned and operated fleets. Many major oil companies and other oil
trading 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 in direct competition with independent owners and operators in the
tanker charter market. 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 we engage.

The oil transportation industry has historically been subject to regulation by
national authorities and through international conventions. Over recent years,
however, an environmental protection regime has evolved which could have a
significant impact on the operations of participants in the industry in the form
of increasingly more stringent inspection requirements, closer monitoring of
pollution-related events, and generally higher costs and potential liabilities
for the owners and operators of tankers.

In order to benefit from economies of scale, tanker charterers will typically
charter the largest possible vessel to transport oil or products, consistent
with port and canal dimensional restrictions and optimal cargo lot sizes. The
oil tanker fleet is generally divided into the following five major types of
vessels, based on vessel carrying capacity:

     (i)  ULCC-size range of approximately 320,000 to 450,000 dwt;

     (ii) VLCC-size range of approximately 200,000 to 320,000 dwt;

     (iii) Suezmax-size range of approximately 120,000 to 200,000 dwt;

     (iv) Aframax-size range of approximately 60,000 to 120,000 dwt; and

     (v)  small tankers of less than approximately 60,000 dwt.

ULCCs and VLCCs typically transport crude oil in long-haul trades, such as from
the Arabian Gulf to Rotterdam via the Cape of Good Hope. Suezmax tankers also
engage in long-haul crude oil trades as well as in medium-haul crude oil trades,
such as from West Africa to the East Coast of the United States. Aframax-size
vessels generally engage in both medium-and short-haul trades of less than 1,500
miles and carry crude oil or petroleum products. Smaller tankers mostly
transport petroleum products in short-haul to medium-haul trades.

The shipping industry is highly cyclical, experiencing volatility in
profitability, vessel values and charter rates. In particular, freight and
charterhire rates are strongly influenced by the supply and demand for shipping
capacity.

The factors affecting the supply and demand for tanker vessels are outside of
our control, and the nature, timing and degree of changes in industry conditions
are unpredictable. The factors that influence demand for tanker capacity
include:

     o    changes in global crude oil production;

     o    demand for oil and production of crude oil and refined petroleum
          products;

     o    changes in oil production and refining capacity;

     o    global and regional economic and political conditions;

     o    the distance oil and oil products are to be moved by sea;

     o    environmental and other regulatory developments; and

     o    changes in seaborne and other transportation patterns, including
          changes in the distances over which cargo is transported due to
          geographic changes in where commodities are produced, oil is refined
          and cargoes are used.

The factors that influence the supply of tanker capacity include:

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels;

     o    potential conversion of tankers for other purposes;

     o    port or canal congestion;

     o    the number of vessels that are out of service; and

     o    national or international regulations that may effectively cause
          reductions in the carrying capacity of vessels or early obsolescence
          of tonnage.

Tanker values have generally experienced high volatility. The fair market value
of oil tankers, including the Vessel, can be expected to fluctuate, depending
upon general economic and market conditions affecting the tanker industry and
competition from other shipping companies, types and sizes of vessels, and other
modes of transportation. In addition, as vessels grow older, they may be
expected to decline in value. These factors will affect the value of the vessel
at the termination or expiration of the current Charter.

There is no guarantee that Suezmax rates would be sufficient to meet the debt
service required if the bareboat charter entered into with Chevron is
terminated. Spot market rates are volatile and generally linked to global
economic development and especially demand for oil but also to political events
affecting oil producing countries.

Inspection by Classification Societies

The classification society certifies that the vessel is "in-class," signifying
that the vessel has been built and maintained in accordance with the rules of
the classification society and complies with applicable rules and regulations of
the vessel's country of registry and the international conventions of which that
country is a member. In addition, where surveys are required by international
conventions and corresponding laws and ordinances of a flag state, the
classification society will undertake them on application or by official order,
acting on behalf of the authorities concerned.

The classification society also undertakes on request other surveys and checks
that are required by regulations and requirements of the flag state. These
surveys are subject to agreements made in each individual case and/or to the
regulations of the country concerned.

For maintenance of the class, regular and extraordinary surveys of hull,
machinery, including the electrical plant, and any special equipment classed are
required to be performed as follows:

     o    Annual Surveys. For seagoing ships, annual surveys are conducted for
          the hull and the machinery, including the electrical plant and where
          applicable for special equipment classed, at intervals of 12 months
          from the date of commencement of the class period indicated in the
          certificate.

     o    Intermediate Surveys. Extended annual surveys are referred to as
          intermediate surveys and typically are conducted two and one-half
          years after commissioning and each class renewal. Intermediate surveys
          may be carried out on the occasion of the second or third annual
          survey.

     o    Class Renewal Surveys. Class renewal surveys, also known as special
          surveys, are carried out for the ship's hull, machinery, including the
          electrical plant and for any special equipment classed, at the
          intervals indicated by the character of classification for the hull.
          At the special survey the vessel is thoroughly examined, including
          audio-gauging to determine the thickness of the steel structures.
          Should the thickness be found to be less than class requirements, the
          classification society would prescribe steel renewals. The
          classification society may grant a one year grace period for
          completion of the special survey. Substantial amounts of money may
          have to be spent for steel renewals to pass a special survey if the
          vessel experiences excessive wear and tear. In lieu of the special
          survey every four or five years, depending on whether a grace period
          was granted, a ship owner has the option of arranging with the
          classification society for the vessel's hull or machinery to be on a
          continuous survey cycle, in which every part of the vessel would be
          surveyed within a five year cycle. At an owner's application, the
          surveys required for class renewal may be split according to an agreed
          schedule to extend over the entire period of class. This process is
          referred to as continuous class renewal.

Insurance

The operation of any ocean-going vessel carries an inherent risk of catastrophic
marine disasters, environmental mishaps, cargo and property losses or damage and
business interruptions caused by adverse weather and ocean conditions,
mechanical failures, human error, political action in various countries, war,
terrorism, piracy, labour strikes and other circumstances or events. Pursuant to
the Charter, the Vessel may be operated through out the world in any lawful
trade for which the Vessel is suitable, including carrying oil and its products.
In the past, political conflicts in many regions, particularly in the Arabian
Gulf, have included attacks on tankers, mining of waterways and other efforts to
disrupt shipping in the area. Vessels trading in such regions have also been
subject to acts of terrorism and piracy. In addition, the carriage of petroleum
products is subject to the risk of spillage and leakage. Any such event may
result in increased costs or the loss of revenues or assets, including our
Vessel.

Under the Charter, Chevron is entitled to self-insure against marine and war
risks relating to the Vessel and against protections and indemnity risks
relating to the Vessel during the term of the Charter and, accordingly,
purchasers of the Notes cannot rely on the existence of third-party insurance.
There can be no assurance that all risks will be adequately insured against,
that any particular loss will be covered or that we will be able to procure
adequate insurance coverage at commercially reasonable rates in the future. In
particular, stricter environmental regulations may result in increased costs
for, or the lack of availability or, insurance against the risks of
environmental damage or pollution.

Chevron will, pursuant to the Charter, indemnify us from damages arising from a
failure to maintain any financial responsibility requirements whether relating
to oil or other pollution damage. Chevron will also indemnify us to the extent
losses, damages or expenses are incurred by us relating to oil or other
pollution damage as a result of the operation of the Vessel by Chevron.

Environmental Regulations and Other Regulations

Government regulations and laws significantly affects the ownership and
operation of our Vessel. The various types of governmental regulation that
affect our Vessel include international conventions and national, state and
local laws and regulations of the jurisdictions where our Vessel operates or is
registered significantly affect the ownership and operation. We believe we are
currently in substantial compliance with applicable environmental and regulatory
laws regarding the ownership and operation of our tanker. However, because
existing laws may change or new laws may be implemented, we cannot predict the
ultimate cost of complying with all applicable requirements or the impact they
will have on the resale value or useful life of our tanker. Future,
non-compliance could require us to incur substantial costs or to temporarily
suspend operation of our tanker.

We believe that the heightened environmental and quality concerns of insurance
underwriters, regulators and charterers are leading to greater inspection and
safety requirements on all vessels and creating an increasing demand for modern
vessels that are able to conform to the stricter environmental standards. We
maintain high operating standards for our Vessel that emphasize operational
safety, quality maintenance, continuous training of our crews and officers and
compliance with United States and international and other national regulations.

Our Vessel is subject to both scheduled and unscheduled inspections by a variety
of governmental and private entities, each of which may have unique
requirements. These entities include the local port authorities such as the U.S.
Coast Guard, harbor master or equivalent, classification societies, flag state
administration or country of registry, and charterers, particularly terminal
operators and major oil companies which conduct frequent vessel inspections.
Each of these entities may have unique requirements that we must comply with.

International Maritime Organization

The International Maritime Organization, or the IMO (the United Nations agency
for maritime safety and the prevention of marine pollution by ships), has
adopted the International Convention for the Prevention of Marine Pollution from
Ships, 1973, as modified by the Protocol of 1978 relating thereto, which has
been updated through various amendments, or the "MARPOL Convention". The MARPOL
Convention relates to environmental standards including oil leakage or spilling,
garbage management, as well as the handling and disposal of noxious liquids,
harmful substances in packaged forms, sewage and air emissions. In March 1992,
the IMO adopted regulations that set forth pollution prevention requirements
applicable to tankers, which became effective in July 1993. These regulations,
which have been adopted by more than 150 nations, including many of the
jurisdiction in which our Vessel operates, provide, in part, that:

     o    tankers between 25 and 30 years old must be of double-hull
          construction or of a mid-deck design with double-sided construction,
          unless:

          (1)  they have wing tanks or double-bottom spaces not used for the
               carriage of oil which cover at least 30% of the length of the
               cargo tank section of the hull or bottom; or

          (2)  they are capable of hydrostatically balanced loading (loading
               cargo into a tanker in such a way that, in the event of a breach
               of the hull, water flows into the tanker, displacing oil upwards
               instead of into the sea);

     o    tankers 30 years old or older must be of double-hull construction or
          mid-deck design with double-sided construction; and

     o    all tankers are subject to enhanced inspections.

Also, under IMO regulations, a tanker must be of double-hull construction or a
mid-deck design with double-sided construction, or be of another approved design
ensuring the same level of protection against oil pollution, if the tanker:

     o    is the subject of a contract for a major conversion or original
          construction on or after July 6, 1993;

     o    commences a major conversion or has its keel laid on or after January
          6, 1994; or

     o    completes a major conversion or is a newbuilding delivered on or after
          July 6, 1996.

These regulations were amended in 2001 and provided a timetable for the phase
out of single hull tankers. This timetable was amended again in December 2003 in
response to European Union, or EU, proposals, further accelerating the final
phase-out dates for single hull tankers.

The baseline phase-out dates apply to tankers according to their certified
arrangement (protectively located segregated ballast tanks or PL/SBT) and the
type of oil carried as cargo. These regulations identify 3 categories of single
hull tankers, including double side and double bottom tankers:

a)   Category 1 (Pre- PL/SBT) oil tankers-any tanker of 20,000 dwt or above
     carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo
     or of 30,000 dwt or above carrying other types of oil.

b)   Category 2 (PL/SBT) oil tankers-any tanker of 20,000 dwt or above carrying
     crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo or of
     30,000 dwt or above carrying other types of oil.

c)   Category 3 oil tankers-any tanker of between 5,000 dwt and 20,000 dwt
     carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo
     or less than 30,000 dwt carrying other types of oil.

The table below provides the specific phase out dates according to each category
of oil tanker. Oil tankers that meet MARPOL Regulation 13F or have double
bottoms and double sides with dimensions in compliance with MARPOL Regulation
13G1(c) continue to be exempt from the accelerated phase out.

Baseline Phase Out Scheme
<TABLE>

                                                                 Year of Delivery
 Phase Out Date                         Category 1                  Category 2               Category 3
 --------------                         ----------                  ----------               ----------
<S>                                     <C>                         <C>                      <C>
April 5, 2005                     before April 5, 1982                            before April 5, 1977
    + 2005                         after April 5, 1982               After April 5, 1977 but before January 1, 1978
    + 2006                                                                          1978* and 1979*
    + 2007                                                                          1980* and 1981*
    + 2008                                                                               1982*
    + 2009                                                                               1983*
    + 2010                                                                           1984* or later

                                  + by Anniversary of Delivery Date In Year
                                                * subject to CAS
</TABLE>

For Category 2 and 3 tankers, a successful completion of the Condition
Assessment Scheme (CAS) is required by 15 years of age or by the first
intermediate or renewal survey due after April 5, 2005, which ever occurs later.

The new phase-out regime became effective on April 5, 2005. For Category 1
tankers (pre-MARPOL tankers without segregated ballast tanks, generally built
before 1982), the final phase-out date was brought forward to 2005 from 2007.
For Category 2 tankers (MARPOL tankers, generally built after 1982) the final
phase out date has brought forward to 2010 from 2015.

To soften the significant impact that would occur if the approximately 700
tankers (approximately 67.0 million tons dwt) were to be phased out globally in
2010 as per above, two exceptions to the baseline phase out dates were adopted
which allow Category 2 and 3 oil tankers that have passed the CAS to operate
beyond the 2010 cut-off date as summarized below:

Exception One - a flag state may permit oil tankers to operate to 25 years of
age provided that, not later than July 1, 2001, the entire cargo tank length is
protected with one of the following arrangements which cannot be used for the
carriage of oil:

     o    Double bottoms having a height at centerline which does not meet that
          required by the MARPOL Regulation 13E; or

     o    Wing tanks having a width which does not meet that required by the
          International Bulk Chemical Code for type 2 cargo tank location.

Exception Two - a flag state may permit oil tankers, that do not have double
bottoms nor double sides, to operate to the age of 25 or the anniversary date of
the tanker's delivery in 2015, whichever occurs earlier.

Although the flag States are permitted to grant extensions in both of the above
cases provided CAS is satisfactorily completed and IMO has been so informed of
the extension, coast States have the right to deny oil tankers that have been
granted such extensions into their ports and offshore terminals.

Oil tankers granted life extension under Exception One may be denied entry after
2015 if they are 25 years of age and older. Oil tankers with neither double
bottoms nor double sides which have been granted an extension under Exception
Two may be denied entry after the relevant phase out date.

In December 2003, the IMO adopted MARPOL Regulation 13H on the prevention of oil
pollution from oil tankers when carrying heavy grade oil, or HGO. The new
regulation bans the carriage of HGO in single hull oil tankers of 5,000 dwt and
above after April 5, 2005, and in single hull oil tankers of 600 dwt and above
but less than 5,000 dwt, no later than the anniversary of their delivery in
2008.

Under MARPOL Regulation 13H, HGO means any of the following:

     o    crude oils having a density at 15(0)C higher than 900 kg/m3;

     o    fuel oils having either a density at 15(0)C higher than 900 kg/ m3 or
          a kinematic viscosity at 50(0)C higher than 180 mm2/s;

     o    bitumen, tar and their emulsions.

Under MARPOL Regulation 13H, the flag state may allow continued operation of oil
tankers of 5,000 dwt and above, carrying crude oil with a density at 15(0)C
higher than 900 kg/m3 but lower than 945 kg/m3, that conform to certain
technical specifications and, in the opinion of the such state, the ship is fit
to continue such operation, having regard to the size, age, operational area and
structural conditions of the ship and provided that the continued operation
shall not go beyond the date on which the ship reaches 25 years after the date
of its delivery. The flag state may also allow continued operation of a single
hull oil tanker of 600 dwt and above but less than 5,000 dwt, carrying HGO as
cargo, if, in the opinion of the such state, the ship is fit to continue such
operation, having regard to the size, age, operational area and structural
conditions of the ship, provided that the operation shall not go beyond the date
on which the ship reaches 25 years after the date of its delivery.

The IMO has also negotiated international conventions that impose liability for
oil pollution in international waters and a signatory's territorial waters. In
September 1997, the IMO adopted Annex VI to the International Convention for the
Prevention of Pollution from Ships to address air pollution from ships. Annex VI
was ratified in May 2004, and became effective in May 2005. Annex VI sets limits
on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibits
deliberate emissions of ozone depleting substances, such as halons,
chlorofluorocarbons, emissions of volatile compounds from cargo tanks and
prohibition of 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.
Compliance with these regulations could require the installation of expensive
emission control systems and could have an adverse financial impact on the
operation of our Vessel. Additional or new conventions, laws and regulations may
be adopted that could adversely affect our ability to manage our Vessel.

The operation of our Vessel is also affected by the requirements set forth in
the IMO's Management Code for the Safe Operation of Ships and Pollution
Prevention, or the ISM Code. The ISM Code requires ship owners and bareboat
charterers to maintain an extensive "Safety Management System" that includes the
adoption of a safety and environmental protection policy setting forth
instructions and procedures for safe operation and describing procedures for
emergencies. The failure of a ship owner or a 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. We rely on the safety management
system that has been developed by Chevron.

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 ISM Code requirements for a safety management
system. No vessel can obtain a certificate unless its manager has been awarded a
Document of Compliance, issued by each flag state, under the ISM Code. Our
vessel and its operator have received ISM certification. Chevron is required to
renew these documents of compliance and safety management certificates
periodically.

Non-compliance with the ISM Code and other IMO regulations may subject the
vessel owner or a bareboat charterer to increased liability, may lead to
decreases in available insurance coverage for affected vessels and may result in
a tanker's denial of access to, or detention in, some ports. Both the United
States Coast Guard and EU authorities have indicated that vessels not in
compliance with the ISM Code will be prohibited from trading in U.S. and EU
ports, as the case may be.

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 the operation of oil tankers.

United States Oil Pollution Act of 1990 and Comprehensive Environmental
Response, Compensation and Liability Act of 1980

The United States regulates the tanker industry with an extensive regulatory and
liability regime for environmental protection and cleanup of oil spills,
consisting primarily of the United States Oil Pollution Act of 1990, or OPA, and
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, or CERCLA. OPA affects all owners and operators whose vessels trade with
the United States or its territories or possessions, or whose vessels operate in
the waters of the United States., which include the United States territorial
sea and the 200 nautical mile exclusive economic zone around the United States.
CERCLA applies to the discharge of hazardous substances (other than oil) whether
on land or at sea. Both OPA and CERCLA impact our operations.

Under OPA, vessel owners, operators and bareboat charterers are "responsible
parties" who 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 oil spills from their vessels. These other damages are defined broadly to
include:

     o    natural resources damages and related assessment costs;

     o    real and personal property damages;

     o    net loss of taxes, rents, royalties, fees and other lost revenues;

     o    net cost of public services necessitated by a spill response such as
          protection from fire, safety or health hazards; and

     o    loss of subsistence use of natural resources.

OPA limits the liability of responsible parties to the greater of $1,200 per
gross ton or $10.0 million per tanker that is over 3,000 gross tons (subject to
possible adjustment for inflation). Under a recently proposed legislation, OPA
liability limits will be increased, when such legislation is enacted, to the
greater of $1,900 per gross ton or $16.0 million per tanker that is over 3,000
gross tons per discharge (subject to possible adjustment for inflation). The act
specifically permits individual states to impose their own liability regimes
with regard to oil pollution incidents occurring within their boundaries, and
some states have enacted legislation providing for unlimited liability for
discharge of pollutants within their waters. In some cases, states that have
enacted this type of legislation have not yet issued implementing regulations
defining tanker owners' responsibilities under these laws.

CERCLA, which applies to owners and operators of tankers, contains a similar
liability regime and provides for cleanup and removal of hazardous substances
and for natural resource damages. Liability under CERCLA is limited to the
greater of $300 per gross ton or $5.0 million. These limits of liability do not
apply, however, where the incident is caused by violation of applicable United
States federal safety, construction or operating regulations, or by the
responsible party's gross negligence or willful misconduct. These limits do not
apply if the responsible party fails or refuses to report the incident or to
co-operate and assist in connection with the substance removal activities. OPA
and CERCLA each preserve the right to recover damages under existing law,
including maritime tort law.

OPA also requires owners and operators of vessels to establish and maintain with
the United States Coast Guard evidence of financial responsibility sufficient to
meet the limit of their potential strict liability under the act. The United
States Coast Guard has enacted regulations requiring evidence of financial
responsibility in the amount of $1,500 per gross ton for tankers, coupling the
OPA limitation on liability of $1,200 per gross ton with the CERCLA liability
limit of $300 per gross ton. We expect that if the recently proposed legislation
increasing liability limitations under OPA is enacted, the United States Coast
Guard will accordingly increase the amounts of the financial responsibility.
Under these regulations, an owner or operator of more than one tanker is
required to obtain a certificate of financial responsibility for the entire
fleet in an amount equal only to the financial responsibility requirement of the
tanker having the greatest maximum strict liability under OPA and CERCLA.

Operators, such as Chevron in the case of our Vessel, are required to insure
their vessels with pollution liability insurance in the maximum commercially
available amount of $1.0 billion any one incident or occurrence. A catastrophic
spill could exceed the insurance coverage available, in which event there could
be a material adverse effect on our business.

Under OPA, oil tankers without double hulls will not be permitted to come to
United States ports or trade in the United States waters by 2015.

OPA also amended the Federal Water Pollution Control Act to require owners or
operators of tankers operating in the waters of the United States to file vessel
response plans with the United States Coast Guard, and their tankers are
required to operate in compliance with their United States Coast Guard approved
plans. These response plans must, among other things:

     o    address a "worst case" scenario and identify and ensure, through
          contract or other approved means, the availability of necessary
          private response resources to respond to a "worst case discharge";

     o    describe crew training and drills; and

     o    identify a qualified individual with full authority to implement
          removal actions.

In addition, the United States Coast Guard has announced it intends to propose
similar regulations requiring certain vessels to prepare response plans for the
release of hazardous substances.

OPA does not prevent individual states from imposing their own liability regimes
with respect to oil pollution incidents occurring within their boundaries. In
fact, most 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. These laws may be more stringent than United States federal
law.

Other U.S. Environmental Requirements

The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of
1977 and 1990, or the CAA, requires the U.S. Environmental Protection Agency, or
EPA, to promulgate standards applicable to emissions of volatile organic
compounds and other air contaminants. Our Vessel is subject to vapor control and
recovery requirements for certain cargoes when loading, unloading, ballasting,
cleaning and conducting other operations in regulated port areas. CAA also
requires states to draft State Implementation Plans, or SIPs, designed to attain
national health-based air quality standards in primarily major metropolitan
and/or industrial areas. Several SIPs regulate emissions resulting from vessel
loading and unloading operations by requiring the installation of vapor control
equipment. Although a risk exists that new regulations could require significant
capital expenditures and otherwise increase our costs, we believe, based on the
regulations that have been proposed to date, that no material capital
expenditures beyond those currently contemplated and no material increase in
costs are likely to be required.

The Clean Water Act (the "CWA") prohibits the discharge of oil or hazardous
substances into navigable waters 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. State laws for the
control of water pollution also provide varying civil, criminal and
administrative penalties in the case of a discharge of petroleum or hazardous
materials into state waters. The CWA complements the remedies available under
the more recent OPA and CERCLA, discussed above. Under current regulations of
the EPA, vessels are not required to obtain CWA permits for the discharge of
ballast water in U.S. ports. However, as a result of a recent U.S. federal court
decision, vessel owners and operators may be required to obtain CWA permits for
the discharge of ballast water, or they will face penalties for failing to do
so. Although the EPA is likely to appeal this decision, we do not know how this
matter is likely to be resolved and we cannot assure you that any costs
associated with compliance with the CWA's permitting requirements will not be
material to our results of operations.

The National Invasive Species Act, or NISA, was enacted in 1996 in response to
growing reports of harmful organisms being released into U.S. ports through
ballast water taken on by ships in foreign ports. NISA established a ballast
water management program for ships entering U.S. waters. Under NISA, mid-ocean
ballast water exchange is voluntary, except for ships heading to the Great
Lakes, Hudson Bay, or vessels engaged in the foreign export of Alaskan North
Slope crude oil. However, NISA's exporting and record-keeping requirements are
mandatory for vessels bound for any port in the United States. Although ballast
water exchange is the primary means of compliance with the act's guidelines,
compliance can also be achieved through the retention of ballast water onboard
the ship, or the use of environmentally sound alternative ballast water
management methods approved by the U.S. Coast Guard. If the mid-ocean ballast
exchange is made mandatory throughout the United States, or if water treatment
requirements or options are instituted, the costs of compliance could increase
for ocean carriers.

Our operations occasionally generate and require the transportation, treatment
and disposal of both hazardous and non-hazardous wastes that are subject to the
requirements of the U.S. Resource Conservation and Recovery Act or comparable
state, local or foreign requirements. In addition, from time to time we arrange
for the disposal of hazardous waste or hazardous substances at offsite disposal
facilities. If such materials are improperly disposed of by third parties, we
might still be liable for clean up costs under applicable laws.
Our Vessel currently carry cargoes to U.S. waters regularly and we believe that
it is suitable to meet OPA and other U.S. environmental requirements and that it
would also qualify for trade if chartered to serve U.S. ports.

European Union Tanker Restrictions

In July 2003, the European Union adopted legislation, which was amended in
October 2003, that prohibits all single hull tankers from entering into its
ports or offshore terminals by 2010 or earlier, depending on their age. The EU
has also already banned all single hull tankers carrying heavy grades of oil
from entering or leaving its ports or offshore terminals or anchoring in areas
under its jurisdiction. Commencing in 2005, certain single hull tankers above 15
years of age have also been restricted from entering or leaving EU ports or
offshore terminals and anchoring in areas under EU jurisdiction. The EU is also
considering legislation that would: (1) ban manifestly sub-standard vessels
(defined as those more than 15 years old that have been detained by port
authorities at least twice in a six month period) from EU waters and create an
obligation of port states to inspect vessels posing a high risk to maritime
safety or the marine environment; and (2) provide the EU with greater authority
and control over classification societies, including the ability to seek to
suspend or revoke the authority of negligent societies. The sinking of the m.t.
Prestige and resulting oil spill in November 2002 has led to the adoption of
other environmental regulations by certain EU nations. It is impossible to
predict what legislation or additional regulations, if any, may be promulgated
by the EU or any other country or authority.

International Conventions on Civil Liability for Oil Pollution Damage

Although the United States is not a party to these Conventions, many countries
ratified and followed the liability system adopted by the IMO and originally set
out in the International Convention on Civil Liability for Oil Pollution Damage
of 1969 and the Convention for the Establishment of an International Fund for
Oil Pollution of 1971. This international oil pollution regime was modified in
1992 by two Protocols. The amended Conventions are known as the 1992 Civil
Liability Convention and the 1992 Fund Convention. The 1992 Conventions entered
into force on May 30, 1996. Due to a number of denunciations of the 1971
Convention this Convention ceased to be in force on May 24, 2004. A large number
of States have also denounced the 1969 Civil Liability Convention and as more
States do so its importance is increasingly diminishing. Under the 1992 Civil
Liability Convention, a vessel's registered owner is strictly liable for oil
pollution damage caused in the territory, territorial seas or exclusive economic
zone of a contracting state by discharge of persistent oil from a tanker,
subject to certain complete defences. The 1992 Fund established by the 1992 Fund
Convention pays compensation to those suffering oil pollution damage in a State
party to the 1992 Fund Convention who did not obtain full compensation under the
1992 Civil Liability Convention. This would normally apply where the shipowner
has a defence under the 1992 Civil Liability Convention or the damage exceeds
the shipowner's liability under that Convention. Under an amendment that became
effective on November 1, 2003, liability limits under the 1992 Civil Liability
Convention were increased by over 50%. For vessels of 5,000 to 140,000 gross
tons (a unit of measurement for the total enclosed spaces within a vessel)
liability will be limited to SDR 4,510,000 (approximately $6.7 million) plus SDR
631 (approximately $932) for each additional gross ton over 5,000. For vessels
of over 140,000 gross tons, liability will be limited to SDR 89,770,000
(approximately $132.7 million). Also with effect from the same date the maximum
amount payable by the 1992 Fund increased from SDR 135 million (approximately
$199.5 million) to SDR 203million (approximately $300.0 million). The right to
limit liability is forfeited under the 1992 Civil Liability Convention if it is
proved that the pollution damage resulted from the shipowner's personal act or
omission, committed with the intent to cause such damage, or recklessly and with
knowledge that such damage would probably result. Vessels trading to States that
are parties to the 1992 Civil Liability Convention must provide evidence of
insurance covering the liability of the owner. On March 2005 a third tier of
compensation was established by means of a Supplementary Fund. This Fund
provides additional compensation to that available under the 1992 Fund
Convention for pollution damage in States that are members of the Supplementary
Fund. The amount available is SDR 750 million (approximately $1.1 billion)
including the costs payable under the 1992 Civil Liability Convention and the
1992 Fund Convention, SDR 203 million (approximately $300.0 million). In
jurisdictions where the 1992 Civil Liability Convention has not been adopted,
various legislative schemes govern or common law applies, and liability is
imposed either on the basis of fault or in a manner similar to the 1992
Convention. We believe that our P&I insurance covers liabilities either under
the international oil pollution schemes or under local regimes like for example
the US Oil Pollution Act 1990.

The unit of account in the 1992 Conventions is the Special Drawing Right (SDR)
as defined by the International Monetary Fund. In this document the SDR has been
converted into US dollars at the rate of exchange applicable on May 2, 2006 of
SDR 1 = USD 1.477760.

Vessel Security Regulations

Since the terrorist attacks of September 11, 2001, there have been a variety of
initiatives intended to enhance vessel security. On November 25, 2002, the
Maritime Transportation Security Act of 2002, or MTSA came into effect. To
implement certain portions of the MTSA, in July 2003, the United States Coast
Guard issued regulations requiring the implementation of certain security
requirements aboard vessels operating in waters subject to the jurisdiction of
the United States. Similarly, in December 2002, amendments to the International
Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the
convention dealing specifically with maritime security. The new chapter came
into effect in July 2004 and imposes various detailed security obligations on
vessels and port authorities, most of which are contained in the newly created
International Ship and Port Facilities Security Code, or ISPS Code. Among the
various requirements are:

     o    on-board installation of automatic information systems, or AIS, to
          enhance vessel-to-vessel and vessel-to-shore communications;

     o    on-board installation of ship security alert systems;

     o    the development of vessel security plans; and

     o    compliance with flag state security certification requirements.

The United States Coast Guard 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 International Ship Security
Certificate that attests to the vessel's compliance with SOLAS security
requirements and the ISPS Code.

Our Vessel complies with the various security measures addressed by the MTSA,
SOLAS and the ISPS Code.

C  Organizational Structure

As described above, and also in Item 7. Major Shareholders and Related Party
Transactions, we are a wholly owned subsidiary of California Tankers Investments
Limited, a company organised under the laws of the Bahamas, which is a
wholly-owned subsidiary of ITC. Frontline ultimately controls the Company as
described in more detail in Item 4.

D  Property, Plant and Equipment

Other than the Vessel described above, we do not have any property.

Item 4A.  UNRESOLVED STAFF COMMENTS

None

Item 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

The following discussion should be read in conjunction with Item 3 "Selected
Financial Data" and the Company's audited Financial Statements and Notes thereto
included herein.

Our strategy has been to acquire a Vessel and charter this to Chevron under a
bareboat charters which is expected to provide:

a)   charterhire payments we expect will be sufficient to pay, so long as the
     Charter is in effect:

     i.   the obligations under the loans for acquiring the Vessel,

     ii.  management fees and technical advisor's fees,

     iii. recurring fees and taxes, and

     iv.  any other costs and expenses incidental to the ownership and
          chartering of the Vessel;

b)   termination payments sufficient to make sinking fund and interest payments
     on the TermLoans, to the extent allocable to the Vessel for which the
     related Charter has been terminated, for at least two years following any
     such termination, during which time the Vessel may be sold or rechartered;
     and

c)   that the Vessel will be maintained in accordance with the good commercial
     maintenance practices required by the Charter and to arrange for vessel
     management and remarketing services to be available in case the Charter is
     terminated by Chevron, or the Vessel is for any other reason returned to
     our possession and use.

As of June 18, 2007, notice had not been received from Chevron regarding the
termination of the Charter.

Trend Information

It is expected that as the Vessel ages, the charter income will be reduced. In
line with this effect, the interest payable on the Term Loans financing the ship
will also be reduced as the principal is repaid. Thus, there is a consistent
reduction in income, expenses and net assets employed by the Company. However we
expect that cash flows will be adequate to service the debt load, although there
will always be uncertainty related to this because of the nature of the tanker
business. However, over the past few years, the charter rates have been at a
level such that we have been able to service our debt. The structure of debt and
charterhire agreements, including provision for early termination, provides us
with a clear future.

Market Overview

The tanker market proved its strength in 2006 and it was the demand side which
had the greatest influence on the rates. The year started at average daily time
charter equivalent ("TCE") rates of approximately $70,000 thereafter following
the traditional seasonal pattern by softening to TCEs of about $25,000 by
mid-April. From this point markets firmed against most market predictions up to
TCEs of about $75,000 at the end of August. The fear of another active hurricane
season in the US Gulf combined with geopolitical uncertainty and increased risk
of supply disruptions gave strong incentives to build oil stocks throughout the
summer. On-land storage capacity was in some regions filled to the brim, driven
by an extraordinary strong contango, with a wide use of tankers for storage
purposes as the consequence.

Gradually the oil market picked up on the very strong stockbuilding which
triggered a sharp drop in crude prices, from $76 per barrel in early August to
$56 in early October. This subsequently made markets weaken and TCEs of $30,000
were reached mid-December. At the very end of the year markets firmed providing
one steep spike to TCEs of approximately $90,000 for a short period. Depending
on the source of information, the average TCE for the year was $50,000 for a
double hulled Suezmax with a single hull earned about 60 percent of this.

For OPEC it was of great importance to prevent an uncontrolled price dive so it
decided in October to cut production with by 1.2 million barrels per day from
November. It was reported by the International Energy Agency ("IEA") an average
OPEC Oil production, including Iraq but not Angola, of approximately 29.7
million barrels per day during 2006, a 0.02 million barrels per day decrease
from 2005. Even if OPEC crude production was unchanged from 2005 to 2006 there
was a noticeable shift from Nigeria and Venezuela to the Middle East.

IEA further estimate an average world oil demand at 84.5 million barrels per day
in 2006, a 1.0 percent increase from 2005. For 2007 a 1.8 percent or 1.55
million barrels per day growth is forecasted in world oil demand with North
America, China and the Middle East as the main drivers.

The total Suezmax fleet increased by 7.5 percent in 2006 from 322 to 346 vessels
according to industry sources. The same source stipulates that a total of 25 new
vessels were delivered to owners during 2006 while 77 new orders were made. The
majority of these are set to be delivered in 2009. The total order book amounted
to 123 vessels at the end of the year which represented approximately 35 percent
of the existing fleet.

The tanker market looks healthy also for 2007 and it was possible to sell
freight futures at the end of 2006 for the calendar year 2007 at a level that
equated to TCEs for the Suezmax segment at approximately $40,000.

Operating results

Year ended December 31, 2006 compared with the year ended December 31, 2005

Total Revenues

(in thousands of $)                           2006        2005       % Change
Finance lease interest income                2,547       2,819          (10)%

Interest income has fallen in line with expectations. As the value of the
finance lease falls on an annual basis, so does the interest received on the
finance lease.


Expenses

(in thousands of $)                           2006          2005     % Change
Interest expense                             2,511         2,783        (10)%
Amortization of loan discount                   26            75        (65)%

Interest expense has fallen in line with expectations, with interest expense
falling in line with the principal loan outstanding each year. The Company
amortizes the discount over the life of the Term Loans. Amortization of loan
discount has fallen as the serial loan discount was fully amortized in 2005.

Year ended December 31, 2005 compared with the year ended December 31, 2004

Total Revenues

(in thousands of $)                           2005          2004     % Change
Finance lease interest income                2,819         3,115        (10%)


Refer to explanation for 2006.

Expenses

(in thousands of $)                           2005          2004     % Change
Interest expense                             2,783         3,076        (10%)
Amortization of loan discount                   75            75            -

Refer to explanation for 2006 for interest expense. The loan discount remained
the same between 2005 and 2004 as both the Serial and Term Loans were being
amortized.

Liquidity and Capital Resources

As set forth above, revenues from the Charter are currently sufficient to pay
our obligations under the Term Loans. Chevron may elect to terminate the Charter
on the remaining specified termination dates, April 1, 2008 or April 1, 2010. If
the Charter is terminated by Chevron, the Manager, acting on our behalf, will
attempt to find an acceptable replacement charter for the Vessel. If an
acceptable replacement charter is commercially unavailable, the Manager will
solicit bids for the sale or recharter of our Vessel. The Manager's ability to
obtain an acceptable replacement charter, to sell the Vessel or recharter the
Vessel will depend on market rates for new and used vessels, both of which will
depend on the supply of and demand for tanker capacity for oil transportation,
and the advantages or disadvantages of the Vessel compared with other vessels
available at the time.

Off-balance Sheet Arrangements

None

Tabular disclosure of contractual obligations

As at December 31, 2006, we had the following contractual obligations and
commitments:

<TABLE>

                                                                             Payments due by period

(in thousands of $)                  Less than 1 year        1-3 years        3-5 years        More than 5 years           Total
-------------------                  ----------------        ---------        ---------        -----------------           -----
<S>                                             <C>             <C>              <C>                   <C>                <C>
Term Loans (8.52%)                              3,187           6,374            6,374                 12,743             28,678

Total contractual obligations                   3,187           6,374            6,374                 12,743             28,678
</TABLE>


Critical Accounting Policies

Our principal accounting policies are described in Note 2 to the financial
statements, which are included in Item 18 of this Annual Report. The most
critical accounting policies include:

     o    Finance lease and revenue recognition

As the lease has been classified as a finance lease, the minimum lease payments
(net of amounts representing estimated executory costs including profit thereon)
plus the unguaranteed residual value are recorded as the gross investment in the
lease. The difference between the gross investment in the lease and the sum of
the present values of the two components of the gross investment is recorded as
unearned income which is amortized to income over the lease term as finance
lease interest income to produce a constant periodic rate of return on the net
investment in the lease.

Recently Issued Accounting Standards

In September 2006, the United States Securities and Exchange Commission ("SEC")
issued SAB No. 108 Considering the Effects of Prior Year Misstatements When
Quantifying Misstatements in Current Year Financial Statements, which provides
interpretative guidance on how registrants should quantify financial statement
misstatements. Under SAB 108 registrants are required to consider both a
"rollover" method, which focuses primarily on the income statement impact of
misstatements, and the "iron curtain" method, which focuses primarily on the
balance sheet impact of misstatements. The effects of prior year uncorrected
errors include the potential accumulation of improper amounts that may result in
material misstatement on the balance sheet or the reversal of prior period
errors in the current period that result in a material misstatement of the
current period income statement amounts. Adjustments to current or prior period
financial statements would be required in the event that after application of
various approaches for assessing materiality of a misstatement in a current
period financial statements and consideration of all relevant quantitative and
qualitative factors, a misstatement is determined to be material. We adopted the
provisions of SAB 108 as of December 31, 2006 and this did not have a material
effect on the Company's results of operations or financial position.

Item 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Executive Officers of CalPetro Tankers (Bahamas II) Limited

Name                                        Age      Position

Tor Olav Troim                              44       Director and President
Kate Blankenship                            42       Director and Secretary

Tor Olav Troim has been a Director of CalPetro Tankers (Bahamas II) Limited
since October 31, 2001. Mr. Troim graduated as M.Sc Naval Architect from the
University of Trondheim, Norway in 1985. His careers include Portfolio Manager
Equity in Storebrand ASA (1987- 1990), and Chief Executive Officer for the
Norwegian Oil Company DNO AS (1992-1995). Since 1995 Mr. Troim has been a
Director of SeaTankers Management in Cyprus. In this capacity he has acted as
Chief Executive Officer for the public companies Frontline and Golar LNG Limited
(NASDAQ). Mr. Troim was also the Chief Executive Officer of Seadrill Ltd. until
the recent takeover and intergration of Smedvig ASA. Mr. Troim is currently Vice
Chairman of these three companies and in addition is a director and Chairman of
Ship Finance International Limited (NYSE) and a member of the Boards in the
public companies Golden Ocean Group Limited (OSE), Aktiv Kapital ASA (OSE) and
PanFish ASA (OSE).

Kate Blankenship has been a Director of CalPetro Tankers (Bahamas II) Limited
since October 31, 2001. Mrs. Blankenship has been a director of the Manager
since March 2000. Mrs. Blankenship served as the Chief Accounting Officer and
Secretary of Frontline between 1994 and October 2005. Mrs. Blankenship also
serves as Chief Financial Officer of Knightsbridge Tankers Limited and director
of Golar LNG Limited, Ship Finance International Limited, Seadrill Limited and
Golden Ocean Group Limited. She is a member of the Institute of Chartered
Accountants in England and Wales.

B.  Compensation

During the year ended December 31, 2006, we paid no compensation to our
directors and officers.

C.  Board Practices

The directors have no fixed date of expiry of their term of office. The details
of their service are shown above. The directors have no entitlement to any
benefits on termination of their office.

We have neither an audit nor a remuneration committee.

D.  Employees

We do not have any employees involved in the management of the Vessel.

Frontline is our Manager as described below in Item 7 - Related Party
Transactions.

E.  Share Ownership

The directors have no interest in the share capital of the Company, nor do they
have any arrangements for involvement in our capital.

Item 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

We are a wholly owned subsidiary of California Tankers Investments Limited, a
company organized under the laws of the Bahamas, which is a wholly-owned
subsidiary of ITC. Frontline ultimately controls us as described in more detail
in Item 4. All the issued and outstanding shares of our capital stock have been
pledged by us to California Petroleum Transport Corporation ("CPTC) pursuant to
the stock pledge agreement between us and CPTC and are being held by the Bank of
New York, formerly the Chase Manhattan Trust Company of California and JP Morgan
Chase (the "Collateral Trustee") as part of the collateral for the Notes. ITC
has full voting control over us subject to the rights of the Collateral Trustee.

Significant changes in ownership have been disclosed in Item 4 and there are no
known arrangements that may lead to a change in control of the company.

Related Party Transactions

As discussed in Item 4, Frontline, the ultimate parent, is our Manager. Under
the Management Agreement, Frontline is entitled to a Management Fee and a
Technical Advisor's Fee.

Under the terms of the management agreement, the Management Fee consists of a
fee of $13,625 initially per annum for each Vessel, along with a fee of $3,000
covering all four Vessels, payable semi-annually in arrears for the period until
the third anniversary of the closing of the Notes issue then increasing by four
percent on each subsequent anniversary of the closing of the issue of the Notes.

The Technical Advisor's Fee was initially $10,000 per annum for each Vessel,
payable semi-annually in arrears, during the initial first three year period as
described above. On each subsequent anniversary of the closing of the issue of
the Notes, the fee will increase by four percent. In addition, the Technical
Advisor is entitled to be reimbursed for the fees, costs and expenses of
conducting periodic inspections of the Vessels.

Pursuant to a Designated Representative Agreement, CalPetro Holdings Limited
(the "Designated Representative") was appointed to represent California
Petroleum as its Designated Representative to act on its behalf with respect to
certain administrative matters such as the filing of periodic reports and
financial statements with the Securities and Exchange Commission. The fee
payable to the Designated Representative (the "Designated Representative Fee")
during the initial three year period described above was $15,000 per annum with
a four percent increase on each subsequent anniversary of the closing of the
issue of the Notes.

In 2006, a total of $39,260 was paid under the Management and Designated
Representative Agreements.

Item 8.  FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

See Item 18 below.

Legal Proceedings

To the best of the Company's knowledge, there are no legal or arbitration
proceedings existing or pending which have had or may have significant effects
on the Company's financial position or profitability and no such proceedings are
pending or known to be contemplated by governmental authorities.

Item 9.  THE OFFER AND LISTING

The company does not have any shares outstanding other than those owned by
California Tankers Investments Limited, which are not traded on any exchange.

Item 10.  ADDITIONAL INFORMATION

A.       Share Capital

Not Applicable

B.       Memorandum and Articles of Association

The Company is No. 23064B in the Bahamian register.

Directors may be interested in Company transactions but such interest should be
disclosed to the other directors or Company members prior to agreement by the
board or Company meeting as appropriate. The director concerned may not vote on
the transaction. The directors may borrow on behalf of the Company as they think
fit. There are no stated age limits for directors and directors need not be
stockholders. They do not retire by rotation.

All shares issued are unclassified, there is no authorization in force to issue
other classes of share. Consequently all shares have equal entitlement to voting
rights, dividends, profit shares and other rights and duties. Should any
dividend be declared and not claimed the directors may, after a period of three
years, resolve that such dividends are forfeit for the benefit of the Company.
There are no provisions for changes to the rights of stockholders contained in
the articles, except that by resolution of the directors the authorised capital
may be increased and that the Company may divide or combine shares within the
same class.

Company meetings may be convened by the directors or held on request of members
holding 50% of the voting shares. Annual meetings are held according to Bahamian
law. Members, their properly appointed proxies and corporate members'
representatives are entitled to attend.

There are no limits to ownership of Company securities or to the exercise of
voting rights. Disclosure of ownership is governed by Bahamian law and any laws
operative in the jurisdictions pertaining to the owners of the securities. The
directors of the Company may, without giving a reason, decline to register a
transfer of shares.

C.       Material Contracts

The Company has no material contracts apart from those pertaining to its normal
business.

D.       Exchange Controls

The Company was registered under the International Business Companies Act, 1989
of the Commonwealth of the Bahamas (the "IBC Act") in May 1994. As a result of
such registration the Company is exempt from the provisions of the Exchange
Control Regulations Act of the Bahamas. Interests in the Registered Securities
may be freely transferred among non-residents of The Bahamas under Bahamian Law.

There are no restrictions upon the payment of foreign (non-Bahamian) currency
dividends, interest or other payments in respect of the Registered Securities.

The Company is not permitted to deal in the currency of the Bahamas except in an
external Bahamian dollar account which can be funded only with foreign currency
funds or funds the Company has permission to convert.

None of the Company's Articles of Association, Memorandum of Association or any
other document, nor any Bahamian law nor, to the knowledge of the Company, any
foreign law, imposes limitations on the right of non-residents or foreign owners
to hold the Company's shares of common stock.

E.       Taxation

No Bahamian income or withholding taxes are imposed on the payment by the
Company of any principal or interest to any holder of Notes who is either an
individual citizen or resident of the United States or an entity formed under
the laws of the United States. There is no income tax treaty currently in effect
between the United States and Bahamas.

F.       Dividends and Paying Agents

Not Applicable

G.       Statement by Experts

Not Applicable

H.       Documents on Display

We are subject to the informational requirements of the Securities Exchange Act
of 1934, as amended. In accordance with these requirements, we file reports and
other information with the Securities and Exchange Commission ("SEC"). These
materials, including this annual report and the accompanying exhibits, may be
inspected and copied at the public reference facilities maintained by the SEC at
100 F Street, N.E., Washington, DC. 20549. You may obtain information on the
operation of the public reference room by calling 1 (800) SEC-0330. The SEC
maintains a website (http://www.sec.gov.) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. In addition, documents referred to in this annual
report may be inspected at the our principal executive offices at Mareva House,
4 George Street, PO Box N-3937, Nassau, Bahamas or at the offices of our manager
at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda HM 08.

I.       Subsidiary Information

Not Applicable

Item 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative information about market risk

Quantitative information about market risk instruments at December 31, 2006 is
as follows:

The Term Loans bear interest at a rate of 8.52% per annum. Interest is payable
on April 1 and October 1 of each year. Principal is repayable on the Term Loans
in accordance with a remaining ten-year sinking fund schedule.

The table below provides the revised scheduled sinking fund redemption amounts
and final principal payment of the Allocated Principal Amount of the Term Loans
following termination of the related Initial Charter on last termination date.

<TABLE>
 Scheduled payment date      Charter not terminated           Charter terminated 2008            Charter terminated 2010
 ----------------------      ----------------------           -----------------------            -----------------------
<S>                                           <C>                               <C>                                <C>
                                              $'000                             $'000                              $'000
 April 1, 2007                                3,187                             3,187                              3,187
 April 1, 2008                                3,187                             3,187                              3,187
 April 1, 2009                                3,187                             1,690                              3,187
 April 1, 2010                                3,187                             1,830                              3,187
 April 1, 2011                                3,187                             1,990                              1,510
 April 1, 2012                                3,187                             2,160                              1,630
 April 1, 2013                                3,187                             2,340                              1,770
 April 1, 2014                                3,187                             2,540                              1,930
 April 1, 2015                                3,182                             9,754                              9,090

                                             28,678                            28,678                             28,678
</TABLE>


As at June 18, 2007, no termination notice had been received from Chevron for
the Charter.

Qualitative information about market risk

We were organised solely for the purpose of the acquisition of one Vessel and
subsequently entered into a long-term agreement with Chevron.

Item 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable


<PAGE>


                                     PART II

Item 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None

Item 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS

None

Item 15.  CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Management assessed the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Rule 13a-15(e) of the
Securities Exchange Act of 1934, as of the end of the period covered by this
annual report as of December 31, 2006. Based upon that evaluation, the Principal
Executive Officer and Principal Financial Officer concluded that the Company's
disclosure controls and procedures are effective as of the evaluation date.

(b) Changes in internal controls

There were no changes in our internal controls over financial reporting that
occurred during the period covered by this annual report that have materially
effected or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

Item 16.  RESERVED

Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Company's equity is neither listed nor publicly traded. The equity is held
by one beneficial holder, California Tankers Investments Limited. Accordingly
the Company's Board of Directors has determined that the role played by an audit
committee would have no applicability to the Company.

Item 16B. CODE OF ETHICS

The Company's equity is neither listed nor publicly traded. The equity is held
by one beneficial holder, California Tankers Investments Limited. Accordingly
the Company's Board of Directors has determined that the role played by a code
of ethics would have no applicability to the Company.

Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our principal accountant for 2006 and 2005 was Grant Thornton. The following
table sets forth for the two most recent fiscal years the fees paid or accrued
for audit and services provided by Grant Thornton.

(in thousands of $)                                2006                  2005

Audit fees (a)                                       20                    19
Audit related fees (b)                                -                     -
Tax fees (c)                                          -                     -
All other fees (d)                                    -                     -

Total                                                20                    19

a)       Audit Fees

Audit fees represent professional services rendered for the audit of the
Company's annual financial statements and services provided by the principal
accountant in connection with statutory and regulatory filings or engagements.

b)       Audit Related Fees

Audit-related fees consist of assurance and related services rendered by the
principal accountant related to the performance of the audit or review of the
Company's financial statements which have not been reported under Audit Fees
above.

c)       Tax Fees

Tax fees represent fees for professional services rendered by the principal
accountant for tax compliance, tax advice and tax planning.

d)       All Other Fees

All other fees include services other than audit fees, audit-related fees and
tax fees set forth above.

The Company's Board of Directors has assigned responsibility for the engagement
of the auditors to the Company's manager.

Item 16D. EXEMPTIONS FROM THE LISTING RULES FOR AUDIT COMMITTEES

Not Applicable

Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
          PURCHASERS

Not Applicable


<PAGE>

                                    PART III

Item 17.    FINANCIAL STATEMENTS

Not Applicable

Item 18.    FINANCIAL STATEMENTS

The following financial statements and notes, together with the report of Grant
Thornton Independent Registered Public Accounting Firm are filed as part of this
annual report.

                                                                          Page

Report of Independent Registered Public Accounting Firm                   F-1

Statements of Operations and Retained Earnings for the Years Ended        F-2
December 31, 2006, 2005 and 2004

Balance Sheets as of December 31, 2006 and 2005 (as restated)             F-3

Statements of Cash Flows for the Years Ended December 31,                 F-4
2006, 2005 (as restated) and 2004 (as restated)

Notes to the Financial Statements                                         F-5

Item 19.  EXHIBITS

1.1*     Certificate of Incorporation and Memorandum of Association of CalPetro
         Tankers (Bahamas II) Limited, incorporated by reference to Exhibit 3.3
         in the Registration Statement of CalPetro Tankers (Bahamas I) Limited,
         CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
         Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
         Forms S-3, S-1 and F-1, Registration No. 33-79220.

1.2*     Articles of Association of CalPetro Tankers (Bahamas II) Limited,
         incorporated by reference to Exhibit 3.4 in the Registration Statement
         of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II)
         Limited, CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers
         (IOM) Limited filed November 9, 1994 on Forms S-3, S-1 and F-1,
         Registration No. 33-79220.

2.1*     Form of Term Indenture between California Petroleum Transport
         Corporation and Chemical Trust Company of California, as Indenture
         Trustee, incorporated by reference to Exhibit 4.1 in the Registration
         Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers
         (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and
         CalPetro Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1
         and F-1, Registration No. 33-79220.

2.2*     Form of Term Mortgage Notes, incorporated by reference to Exhibit 4.2
         in the Registration Statement of CalPetro Tankers (Bahamas I) Limited,
         CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
         Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
         Forms S-3, S-1 and F-1, Registration No. 33-79220.

2.3*     Form of Bahamian Statutory Ship Mortgage and Deed of Covenants by
         [CalPetro Tankers (Bahamas I) Limited], [CalPetro Tankers (Bahamas II)
         Limited] to California Petroleum Transport Corporation (including the
         form of assignment of such Mortgage to Chemical Trust Company of
         California, as Collateral Trustee, by California Petroleum Transport
         Corporation), incorporated by reference to Exhibit 4.4 in the
         Registration Statement of CalPetro Tankers (Bahamas I) Limited,
         CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
         Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
         Forms S-3, S-1 and F-1, Registration No. 33-79220.

2.4*     Form of Assignment of Initial Charter Guarantee by [CalPetro Tankers
         (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro
         Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] to
         California Petroleum Transport Corporation (including the form of
         Collateral Assignment of such Initial Charter Guarantee to Chemical
         Trust Company of California, as Collateral Trustee, by California
         Petroleum Transport Corporation), incorporated by reference to Exhibit
         4.7 in the Registration Statement of CalPetro Tankers (Bahamas I)
         Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers
         (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited filed
         November 9, 1994 on Forms S-3, S-1 and F-1, Registration No. 33-79220.

2.5*     Form of Assignment of Earnings and Insurances from [CalPetro Tankers
         (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro
         Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] to
         California Petroleum Transport Corporation, incorporated by reference
         to Exhibit 4.8 in the Registration Statement of CalPetro Tankers
         (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro
         Tankers (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited filed
         November 9, 1994 on Forms S-3, S-1 and F-1, Registration No. 33-79220.

2.6*     Form of Assignment of Initial Charter from [CalPetro Tankers (Bahamas
         I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers
         (IOM) Limited[ [CalPetro Tankers (Bahamas III) Limited] to California
         Petroleum Transport Corporation (including the form of Collateral
         Assignment of such Initial Charter to Chemical Trust Company of
         California, as Collateral Trustee, by California Petroleum Transport
         Corporation), incorporated by reference to Exhibit 4.9 in the
         Registration Statement of CalPetro Tankers (Bahamas I) Limited,
         CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
         Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
         Forms S-3, S-1 and F-1, Registration No. 33-79220.

2.7*     Form of Management Agreement between P.D. Gram & Co., A.S., and
         [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II)
         Limited] [CalPetro Tankers (IOM) Limited] [CalPetro Tankers (Bahamas
         III) Limited], incorporated by reference to Exhibit 4.10 in the
         Registration Statement of CalPetro Tankers (Bahamas I) Limited,
         CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
         Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
         Forms S-3, S-1 and F-1, Registration No. 33-79220.

2.8*     Form of Assignment of Management Agreement from [CalPetro Tankers
         (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro
         Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited],
         incorporated by reference to Exhibit 4.11 in the Registration Statement
         of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II)
         Limited, CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers
         (IOM) Limited filed November 9, 1994 on Forms S-3, S-1 and F-1,
         Registration No. 33-79220.

2.9*     Form of Serial Loan Agreement between California Petroleum Transport
         Corporation and [CalPetro Tankers (Bahamas I) Limited] [CalPetro
         Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited]
         [CalPetro Tankers (Bahamas III) Limited], incorporated by reference to
         Exhibit 4.12 in the Registration Statement of CalPetro Tankers (Bahamas
         I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers
         (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited filed
         November 9, 1994 on Forms S-3, S-1 and F-1, Registration No. 33-79220.

2.10*    Form of Term Loan Agreement between California Petroleum Transport
         Corporation and [CalPetro Tankers (Bahamas I) Limited] [CalPetro
         Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited]
         [CalPetro Tankers (Bahamas III) Limited], incorporated by reference to
         Exhibit 4.13 in the Registration Statement of CalPetro Tankers (Bahamas
         I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers
         (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited filed
         November 9, 1994 on Forms S-3, S-1 and F-1, Registration No. 33-79220.

2.11*    Form of Collateral Agreement between California Petroleum Transport
         Corporation [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers
         (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited] [CalPetro
         Tankers (Bahamas III) Limited], the Indenture Trustee under the Serial
         Indenture, the Indenture Trustee under the Term Indenture and Chemical
         Trust Company of California, as Collateral Trustee, incorporated by
         reference to Exhibit 4.14 in the Registration Statement of CalPetro
         Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited,
         CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers (IOM)
         Limited filed November 9, 1994 on Forms S-3, S-1 and F-1, Registration
         No. 33-79220.

2.12*    Form of Issue of One Debenture from [CalPetro Tankers (Bahamas I)
         Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers
         (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] to California
         Petroleum Transport Corporation, incorporated by reference to Exhibit
         4.15 in the Registration Statement of CalPetro Tankers (Bahamas I)
         Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers
         (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited filed
         November 9, 1994 on Forms S-3, S-1 and F-1, Registration No. 33-79220.

4.1*     Form of Initial Charter Guarantee by Chevron Corporation, incorporated
         by reference to Exhibit 10.1 in the Registration Statement of CalPetro
         Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited,
         CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers (IOM)
         Limited filed November 9, 1994 on Forms S-3, S-1 and F-1, Registration
         No. 33-79220.

4.2*     Form of Bareboat Initial Charter between [CalPetro Tankers (Bahamas I)
         Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers
         (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] and Chevron
         Transport Corporation, incorporated by reference to Exhibit 10.2 in the
         Registration Statement of CalPetro Tankers (Bahamas I) Limited,
         CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
         Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
         Forms S-3, S-1 and F-1, Registration No. 33-79220.

4.3*     Form of Vessel Purchase Agreement between [CalPetro Tankers (Bahamas I)
         Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers
         (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] and Chevron
         Transport Corporation (including the form of Assignment of such Vessel
         Purchase Agreement to California Petroleum Transport), incorporated by
         reference to Exhibit 10.3 in the Registration Statement of CalPetro
         Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited,
         CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers (IOM)
         Limited filed November 9, 1994 on Forms S-3, S-1 and F-1, Registration
         No. 33-79220.

10.1*    Powers of Attorney for directors and certain officers of CalPetro
         Tankers (Bahamas II) Limited, incorporated by reference to Exhibit 24.1
         in the Registration Statement of CalPetro Tankers (Bahamas I) Limited,
         CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
         Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
         Forms S-3, S-1 and F-1, Registration No. 33-79220.

12.1     Certification of the Principal Executive Officer pursuant to Rule
         13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
         amended.

12.2     Certification of the Principal Financial Officer pursuant to Rule
         13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
         amended.

13.1     Certification of the Principal  Executive  Officer  pursuant to
         18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of
         the Sarbanes-Oxley Act of 2002.

13.2     Certification of the Principal  Financial  Officer  pursuant to
         18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of
         the Sarbanes-Oxley Act of 2002.

* Incorporated by reference to the filing indicated.


<PAGE>


Report of Independent Registered Public Accounting Firm
To the Board of Directors
Calpetro Tankers (Bahamas II) Limited

We have audited the accompanying balance sheets of Calpetro Tankers (Bahamas II)
Limited (the "Company") as of December 31, 2006 and 2005 and the related
statements of operations and retained earnings, and cash flows for each of the
three years in the period ended December 31, 2006. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Calpetro Tankers (Bahamas II)
Limited as of December 31, 2006 and 2005 and the results of its operations and
cash flows for each of the three years in the period ended December 31, 2006, in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 2 the Company has restated its balance sheet as of December
31, 2005 and its statements of cash flows for the years ended December 31, 2005
and 2004.


/s/  Grant Thornton LLP

New York, New York
June 22, 2007

<PAGE>

CalPetro Tankers (Bahamas II) Limited
Statements of Operations and Retained Earnings
For the years ended December 31, 2006, 2005 and 2004
(in thousands of $)

                                                     2006       2005       2004
                                                    -----      -----      -----

Operating revenues
   Finance lease interest income                    2,547      2,819      3,115
--------------------------------------------------------------------------------
   Total operating revenues                         2,547      2,819      3,115
--------------------------------------------------------------------------------
Operating expenses
   General and administrative expenses               (110)       (97)       (72)
--------------------------------------------------------------------------------
   Total operating expenses                          (110)       (97)       (72)
--------------------------------------------------------------------------------
Net operating income                                2,437      2,722      3,043
--------------------------------------------------------------------------------
Other operating income/(expenses)
   Interest income                                     63         46         54
   Interest expense                                (2,511)    (2,783)    (3,076)
   Amortization of deferred charges                   (26)       (75)       (75)
--------------------------------------------------------------------------------
   Net other expenses                              (2,474)    (2,812)    (3,097)
--------------------------------------------------------------------------------
Net loss                                              (37)       (90)       (54)
--------------------------------------------------------------------------------
Retained earnings at the start of the year          1,478      1,568      1,622
--------------------------------------------------------------------------------
Retained earnings at the end of the year            1,441      1,478      1,568
--------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements
<PAGE>

CalPetro Tankers (Bahamas II) Limited
Balance Sheets as of December 31, 2006 and 2005
(in thousands of $)

                                                             2006      2005
                                                            -----     -----
                                                                   (As restated)
ASSETS
   Current assets:
   Restricted cash                                          2,061     2,033
   Current portion of net investment in finance lease       3,289     3,287
   Interest receivable                                        584       653
   Other current assets                                         8         6
--------------------------------------------------------------------------------
   Total current assets                                     5,942     5,979
   Net investment in finance lease, less current portion   24,658    27,872
   Deferred charges                                           175       201
--------------------------------------------------------------------------------
   Total assets                                            30,775    34,052
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
   Current liabilities:
   Accrued interest                                           611       679
   Current portion of term loans                            3,187     3,187
   Other current liabilities                                   45        30
--------------------------------------------------------------------------------
   Total current liabilities                                3,843     3,896
   Long-term loans                                         25,491    28,678
--------------------------------------------------------------------------------
   Total liabilities                                       29,334    32,574
--------------------------------------------------------------------------------
   Commitments and contingencies

   Stockholder's equity:
   Unclassified stock: 100 shares of $1 par value              --        --
   Retained earnings                                        1,441     1,478
--------------------------------------------------------------------------------
   Total stockholder's equity                               1,441     1,478
--------------------------------------------------------------------------------
   Total liabilities and stockholder's equity              30,775    34,052
--------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements
<PAGE>

CalPetro Tankers (Bahamas II) Limited
Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004
(in thousands of $)

                                                   2006        2005        2004
                                                  -----       -----       -----
                                                                (As         (As
                                                          restated)    restated)

Net loss                                           (37)         (90)        (54)
Adjustments to reconcile net loss to net
cash provided by operating activities:
   Amortization of discount on loans                26           75          75
   Changes in assets and liabilities:
   Interest receivable                              69           69          89
   Other current assets                             (2)          14          13
   Accrued interest payable                        (68)         (68)       (108)
   Other current liabilities                        15           (1)         --
--------------------------------------------------------------------------------
Net cash provided by operating activities            3           (1)         15
--------------------------------------------------------------------------------
Investing activities:
Finance lease payments received                  3,212        3,211       4,215
(Placement) maturity of restricted cash            (28)         (23)        980
--------------------------------------------------------------------------------
Net cash provided by investing activities        3,184        3,188       5,195
--------------------------------------------------------------------------------
Financing activities:
Repayments of debt                              (3,187)      (3,187)     (5,210)
--------------------------------------------------------------------------------
Net cash used in financing activities           (3,187)      (3,187)     (5,210)
--------------------------------------------------------------------------------
Net increase in cash and cash equivalents           --           --          --
Cash and cash equivalents at start of the year      --           --          --
--------------------------------------------------------------------------------
Cash and cash equivalents at end of the year        --           --          --
================================================================================
Supplemental disclosure of cash
flow information:

Interest paid                                    2,579        2,851       3,184
================================================================================

The accompanying notes are an integral part of these financial statements
<PAGE>


CalPetro Tankers (Bahamas II) Limited
Notes to the Financial Statements

1.  Description of Business

The Company was incorporated in the Bahamas on May 13, 1994 with two other
entities: CalPetro Tankers (Bahamas I) Limited and CalPetro Tankers (Bahamas
III) Limited. In addition, CalPetro Tankers (IOM) Limited was incorporated in
the Isle of Man. These entities (the "Owners") were organized as special purpose
companies for the purpose of acquiring one of four oil tankers (each a "Vessel",
together the "Vessels") from Chevron Transport Corporation ("Chevron") which
were concurrently chartered on long-term charter agreements back to Chevron.
California Petroleum Transport Corporation, acting as agent on behalf of the
Owners, issued as full recourse obligations Term Mortgage Notes and Serial
Mortgage Notes (the Serial and Term Notes), and subsequently loaned the proceeds
to the Owners in the form of Term Mortgage Loans and Serial Mortgage Loans (the
"Term Loans" and "Serial Loans" respectively) to fund the acquisition of the
Vessels from Chevron. The final tranche of the principal balances of the Serial
Loans payable by the Company to California Petroleum Transport Corporation
matured on April 1, 2004.

The Owners only source of funds with respect to the Term Loans is payments from
Chevron, including Termination Payments. The Owners do not have any other source
of funds for payment of the Term Loans.

The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP).

2.  Principal Accounting Policies

A summary of the Company's accounting policies is set out below.

(a)  Financing lease and revenue recognition

     The long-term charter agreement between the Company and Chevron transfers
     to Chevron all the risks and rewards associated with ownership, other than
     legal title, and contains a bargain purchase option. As such, it is
     classified as a direct financing lease in accordance with Statement of
     Financial Accounting Standards No. 13.

     Accordingly, the minimum payments under the charter agreement are recorded
     as the gross investment in the finance lease. The difference between the
     gross investment in the finance lease and the cost of the Vessel is
     recorded as unearned income which is amortized to income over the life of
     the charter agreement to produce a constant periodic rate of return on the
     net investment in the finance lease.

(b)  Interest payable recognition

     Interest payable on the Serial and Term Loans is accrued on a daily basis.

(c)  Discount on loans

     Discount on issue of the long-term debt is being amortized to maturity of
     the debt on a straight line basis.

(d)  Taxation

     No Bahamian income or withholding taxes are imposed on the payment by the
     Company of any principal or interest to any holder of Notes who is either
     an individual citizen or resident of the United States or an entity formed
     under the laws of the United States. There is no income tax treaty
     currently in effect between the United States and Bahamas.

(e)  Reporting currency

     The reporting currency is United States dollars. The functional currency is
     United States dollars.

(f)  Use of estimates

     The preparation of financial statements in accordance with accounting
     principles generally accepted in the United States of America requires the
     Company to make estimates and assumptions in determining the reported
     amounts of assets and liabilities and disclosures of contingent assets and
     liabilities on the dates of the financial statements and the reported
     amounts of revenues and expenses during the reporting periods. Actual
     results could differ from these estimates.

Recently issued Accounting Standards

In September 2006, the United States Securities and Exchange Commission ("SEC")
issued SAB No. 108 "Considering the Effects of Prior Year Misstatements When
Quantifying Misstatements in Current Year Financial Statements", which provides
interpretative guidance on how registrants should quantify financial statement
misstatements. Under SAB 108 registrants are required to consider both a
"rollover" method, which focuses primarily on the income statement impact of
misstatements, and the "iron curtain" method, which focuses primarily on the
balance sheet impact of misstatements. The effects of prior year uncorrected
errors include the potential accumulation of improper amounts that may result in
material misstatement on the balance sheet or the reversal of prior period
errors in the current period that result in a material misstatement of the
current period income statement amounts. Adjustments to current or prior period
financial statements would be required in the event that after application of
various approaches for assessing materiality of a misstatement in a current
period financial statements and consideration of all relevant quantitative and
qualitative factors, a misstatement is determined to be material. The Company
adopted the provisions of SAB 108 as of December 31, 2006. The adoption of SAB
108 did not have a material effect on the Company's results of operations or
financial position.

Restatement of balance sheet and statement of cash flow

The balance sheet for the year ended December 31, 2005 and the statement of cash
flows for the years ended December 31, 2005 and 2004 have been restated. The
Company had incorrectly classified Restricted Cash as Cash and Cash Equivalents,
therefore a restatement was required to correct the classification.

The effect of this restatement on the balance sheet is such that the Cash and
Cash Equivalents line item is now classified as Restricted Cash.

The following condensed statements of cash flows for the years ended December
31, 2005 and 2004 set forth the effects of these restatements:

                                               Year ended December 31, 2005
                                           -------------------------------------
                                                   As
                                           previously
                                             reported  Adjustments  As restated
                                             --------  -----------  -----------

(in thousands of $)
Net cash provided by operating activities          (1)          --           (1)
Net cash provided by investing activities       3,211          (23)       3,188
Net cash used in financing activities          (3,187)          --       (3,187)
Net increase in cash and cash equivalents          23          (23)          --
Cash and cash equivalents at start of the year  2,010       (2,010)          --
Cash and cash equivalents at end of the year    2,033       (2,033)          --

                                               Year ended December 31, 2004
                                           -------------------------------------
                                                   As
                                           previously
                                             reported  Adjustments  As restated
                                             --------  -----------  -----------
(in thousands of $)

Net cash provided by operating activities          15           --           15
Net cash provided by investing activities       4,215          980        5,195
Net cash used in financing activities          (5,210)          --       (5,210)
Net increase in cash and cash equivalents        (980)         980           --
Cash and cash equivalents at start of the year  2,990       (2,990)          --
Cash and cash equivalents at end of the year    2,010       (2,010)          --

3.  Restricted Cash

The restricted cash accounts were established and are maintained by Bank of New
York (formerly the Chase Manhattan Trust Company of California and JPMorgan
Chase) as the Collateral Trustee who maintains the accounts as collateral agent
for the equal and ratable benefit of the holders of the Term Notes. Charterhire
payments are deposited into a revenue account and these funds can only be used
to fund the principal and interest due on the Term Notes and any operating costs
in relation to operating the Owners.

4.  Finance Lease

The Company has chartered its Vessel on a long term bareboat charter (the
"Charter") to Chevron Transport Corporation (the "Chevron") which has a term
expiring on April 1, 2015 subject to Chevron's right to terminate the Initial
Charter on certain specified dates. Chevron did not elect to terminate the
Charter on the first two specified dates April 1, 2004 and April 1, 2006. The
last two specified dates are April 1, 2008 and April 1, 2010. For these
remaining optional termination dates a non-binding notice of the intention to
exercise the option to terminate the Charter must be given at least twelve
months in advance, with irrevocable notice to be given seven months prior to the
termination date. Chevron is required to pay the Company termination payments
(the "Termination Payment") of $10.03 million and $8.94 million respectively, on
or prior to the remaining termination.

Chevron has the option to purchase the vessel for $1 on April 1, 2015 provided
the Initial Charter is still in place. As at June 18, 2007, no termination
notice had been received from Chevron for the Charter in relation to the April
1, 2008 termination date.

The following schedule lists the components of the net investment in finance
lease:

(in thousands of $)                                        2006            2005
Total minimum lease payments to be received              38,600          44,428
Less: Unearned income                                   (10,653)        (13,269)
--------------------------------------------------------------------------------

Net investment in finance lease                          27,947          31,159
================================================================================

Lease payments under the charter agreement for each of the five succeeding years
are as follows: $5,556,000 in 2007, $5,284,000 in 2008, $5,013,000 in 2009,
$4,742,000 in 2010 and $4,470,000 in 2011.

5.  Deferred Charges

Deferred charges represent the capitalization of debt issue costs. These costs
are amortized over the term of the Loans on a straight line basis. The deferred
charges are comprised of the following amounts:

(in thousands of $)                                     2006               2005
Debt arrangement fees                                  1,006              1,006
Accumulated amortization                                (831)              (805)
--------------------------------------------------------------------------------

                                                         175                201
================================================================================

6.  Debt

(in thousands of $)                                    2006                2005
8.52% Term Loans due 2015                            28,678              31,865
Less: current portion                                (3,187)             (3,187)
--------------------------------------------------------------------------------

                                                     25,491              28,678
================================================================================

The outstanding debt as of December 31, 2006 is repayable as follows:

(in thousands of $)
Year ending December 31,
2007                                                                       3,187
2008                                                                       3,187
2009                                                                       3,187
2010                                                                       3,187
2011                                                                       3,187
2012 and later                                                            12,743
--------------------------------------------------------------------------------

Total debt                                                                28,678
================================================================================

The Term Loans bear interest at a rate of 8.52% per annum. Interest is payable
semi-annually on April 1 and October 1 each year. Principal is repayable on the
Term Loans in accordance with a remaining nine year sinking fund schedule.

If an Initial Charter is terminated, the scheduled mandatory sinking fund
payments on the Term Loans will be revised so that the allocated principal
amount of the Term Loans for the related Vessel will be redeemed on the
remaining sinking fund redemption dates on a schedule that approximates level
debt service with an additional principal payment on the maturity date of $7
million.

The table below provides the revised scheduled sinking fund redemption amounts
and final principal payment of the Allocated Principal Amount of the Term Loans
following termination of the related Initial Charter on each of the optional
termination dates. The Company did not receive any notification from the Initial
Charter of their intention to terminate the Charter on April 1, 2004, nor on
April 1, 2006; therefore the Charter remains in place with the remaining
Optional Termination Dates being April 1, 2008 and April 1, 2010.

Scheduled payment date      Charter not   Charter terminated  Charter terminated
                             terminated                 2008                2010
(in thousands of $)               $'000                $'000               $'000
----------------------      -----------   ------------------  ------------------

                                   $'000               $'000               $'000
April 1, 2007                      3,187               3,187               3,187
April 1, 2008                      3,187               3,187               3,187
April 1, 2009                      3,187               1,690               3,187
April 1, 2010                      3,187               1,830               3,187
April 1, 2011                      3,187               1,990               1,510
April 1, 2012                      3,187               2,160               1,630
April 1, 2013                      3,187               2,340               1,770
April 1, 2014                      3,187               2,540               1,930
April 1, 2015                      3,182               9,754               9,090
--------------------------------------------------------------------------------

                                  28,678              28,678              28,678
================================================================================

The Term Loans are collateralized by first preference mortgage on the Vessel to
California Petroleum Transport Corporation. The earnings and insurance relating
to the Vessel have been collaterally assigned pursuant to an Assignment of
Earnings and Insurance to California Petroleum Transport Corporation, which in
turn has assigned such Assignment of Earnings and Insurance to the Collateral
Trustee. The Initial Charter and Chevron Guarantee relating to the Vessel have
been collaterally assigned pursuant to the Assignment of Initial Charter and
Assignment of Initial Charter Guarantee to California Petroleum Transport
Corporation, which in turn has assigned such Assignment to the Collateral
Trustee. The Capital Stock of the Company has been pledged to California
Petroleum Transport Corporation pursuant to the Stock Pledge Agreement.

7.   Share Capital

(in $)                                                       2006           2005
Authorized share capital:
   1,000 shares of $1 each                                  1,000          1,000
================================================================================

Issued and outstanding share capital:
   100 shares of $1 each                                      100            100
================================================================================

8.   Financial Instruments

Fair values
The carrying value and estimated fair value of the Company's financial
instruments at December 31, 2006 and 2005 are as follows:

                                                  2006                      2005
                                      2006    Carrying          2005    Carrying
                                Fair value       value    Fair value       value
                                ----------    --------    ----------    --------

(in thousands of $)

Restricted cash                      2,061       2,061         2,033       2,033
8.52% Mortgage Loans due 2015       30,578      28,678        35,689      31,865

The methods and assumptions used in estimating the fair values of financial
instruments are as follows:

The carrying value of restricted cash, which is highly liquid, is a reasonable
estimate of fair value.

The estimated fair value for fixed rate debt is based on the quoted market price
of these or similar debt when available.

Concentrations of risk

The Company's only source of funds for the repayment of the principal and
interest on the Term Loans are from charterhire payments from Chevron,
investment income and the proceeds, if any, from the sale of any of the Vessels.
Accordingly, the Company's ability to service its obligations on the Term Loans
is wholly dependent upon the financial condition, results of operations and cash
flows from Chevron.

9.   Related Party Transactions

Pursuant to a management agreement, Frontline is the Company's Manager and
Technical Advisor. Under the management agreement, Frontline is entitled to a
Management Fee and a Technical Advisor's Fee.

Under the terms of the management agreement, the Management Fee consists of a
fee of $13,625 initially per annum for the Vessel, along with a fee of $3,000
covering all four Vessels in the California Petroleum Group, payable
semi-annually in arrears for the period until the third anniversary of the
closing of the Notes issue then increasing by four percent on each subsequent
anniversary of the closing of the issue of the Notes.

The technical Advisor's Fee was initially $10,000 per annum for the Vessel,
payable semi-annually in arrears, during the initial first three year period as
described above. On each subsequent anniversary of the closing of the issue of
the Notes, the fee will increase by four percent. In addition, the Technical
Advisor is entitled to be reimbursed for the fees, costs and expenses of
conducting periodic inspections of the Vessel.

Pursuant to a Designated Representative Agreement, CalPetro Holdings Limited
(the "Designated Representative") was appointed to represent California
Petroleum as its Designated Representative to act on its behalf with respect to
certain administrative matters such as the filing of periodic reports and
financial statements with the Securities and Exchange Commission. The fee
payable to the Designated Representative (the "Designated Representative Fee")
during the initial three year period described above was $15,000 per annum with
a four percent increase on each subsequent anniversary of the closing of the
issue of the Notes.

Management fee expenses and management fee payable as of December 31, 2006,
2005, and 2004 are as follows:

(in thousands of $)                    2006          2005         2004
Management fee expenses                  40            38           37
Management fee payable                   10            10            9

10.  Commitments and Contingencies

The Term Loans are collateralized by a first preference mortgage on the Vessel
to California Petroleum Transport Corporation. The earnings and insurance
relating to the Vessel have been collaterally assigned pursuant to an Assignment
of Earnings and Insurance to California Petroleum Transport Corporation, which
in turn has assigned such Assignment of Earnings and Insurance to the Collateral
Trustee. The Initial Charter and Chevron Guarantee relating to the Vessel have
been collaterally assigned pursuant to the Assignment of Initial Charter and
Assignment of Initial Charter Guarantee to California Petroleum Transport
Corporation, which in turn has assigned such Assignment to the Collateral
Trustee. The Capital Stock of the Company has been pledged to California
Petroleum Transport Corporation pursuant to the Stock Pledge Agreement.

As at December 31, 2006, Chevron holds an option to purchase the Vessel for $1
on April 1, 2015 provided the Initial Charter is still in place.


<PAGE>

                                   SIGNATURES

Subject to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                      CalPetro Tankers (Bahamas II) Limited





                               /s/ Kate Blankenship
                      -------------------------------------

                                Kate Blankenship
                             Director and Secretary



Date:  June 26, 2007