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, 2004

                                       OR

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

Commission file number            033-79220-03

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

                                     Bahamas
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         (State or other jurisdiction of incorporation or organization)

          Mareva House, 4 George Street, PO Box N-3937, Nassau, Bahamas
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                    (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
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Securities for which there is a reporting obligation pursuant to section 15(d)
of the Act.

                                      None
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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 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.

                                 Yes [X] No [_]

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

                             Item 17 [_] Item 18 [X]
<PAGE>

                     CALPETRO TANKERS (BAHAMAS III) LIMITED
                          INDEX TO REPORT ON FORM 20-F

                                                                            Page

PART I

Item 1.     Identity of Directors, Senior Management and Advisers .......      1

Item 2.     Offer Statistics and Expected Timetable .....................      1

Item 3.     Key Information .............................................      2

Item 4.     Information on the Company ..................................      6

Item 5.     Operating and Financial Review and Prospects ................     17

Item 6.     Directors, Senior Management and Employees ..................     19

Item 7.     Major Shareholders and Related Party Transactions ...........     20

Item 8.     Financial Information .......................................     21

Item 9.     The Offer and Listing .......................................     21

Item 10.    Additional Information ......................................     21

Item 11.    Quantitative and Qualitative Disclosures about Market Risk ..     22

Item 12.    Description of Securities Other than Equity Securities ......     23

PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies .............     24

Item 14.    Material Modifications to the Rights of Security Holders
            and Use of Proceeds .........................................     24

Item 15.    Controls and Procedures .....................................     24

Item 16.    [Reserved]

Item 16A.   Audit Committee Financial Expert ............................     24

Item 16B.   Code of Ethics ..............................................     24

Item 16C.   Principal Accountant Fees and Services ......................     24

Item 16D.   Exemptions from the Listing Rules for Audit Committees ......     25

Item 16E.   Purchases of Equity Securities by the Issuer and
            Affiliated Purchasers

PART III

Item 17.    Financial Statements ........................................     25

Item 18.    Financial Statements ........................................     25

Item 19.    Exhibits ....................................................     26
<PAGE>

                                     PART I

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 III) 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 III) Limited with
the Securities and Exchange Commission.

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

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Financial Data

The selected statement of operations and retained earnings data of the Company
with respect to the fiscal years ended December 31, 2004, 2003 and 2002, and the
selected balance sheet data at December 31, 2004 and 2003, 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, 2001 and 2000 and the selected balance sheet data at December
31, 2002, 2001 and 2000 have been derived from audited financial statements of
the Company not included herein. Certain comparative figures have been
reclassified to conform with the presentation adopted in the current period. 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.

                                               Year ended December 31,
                                        2004     2003     2002     2001     2000
                                      ------   ------   ------   ------   ------
(U.S. Dollars in thousands except per share data)

Statement of operations and retained
earnings data:
Net operating revenues                 1,596    1,808    2,019    2,227    2,435
Net income                                 8       46       78       98      139

Per share data:
Dividends per share                       --       --       --       --       --

Balance sheet data:
Total assets                          19,482   22,056   24,562   27,061   29,476
Current portion of Serial Loans        2,530    2,530    2,530    2,530    2,530
Long-term loans                       15,274   17,804   20,334   22,864   25,394
Stockholder's equity                   1,280    1,274    1,228    1,150    1,052

(1) Includes current portion.

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 VIRGO VOYAGER (formerly William E. Crain) (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 the fact that Chevron has an option to terminate the charter earlier
on three specified dates. We received irrevocable notice of Chevron's intention
to exercise its first termination option effective April 1, 2006.

If the tanker industry, which has been cyclical, is depressed in the future when
our Vessel's Charter is terminated, our earnings and available cash flow may
decrease. Our ability to recharter our Vessel on the 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 in April 2006, we may incur additional
expenses and not be able to recharter our Vessel profitably

On April 21, 2005 we received irrevocable notice from Chevron regarding the
termination of the bareboat charter of the vessel Virgo Voyager on April 1,
2006.

Since Chevron has given notice to 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 to
California Petroleum Transport Corporation under the Serial and Notes discussed
in Item 4. "Information on the Company." We will attempt to arrange a
replacement charter, or may sell the Vessel. 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 Notes.

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

The operation of tanker vessels and transportation of crude and petroleum
products is an extremely competitive business. Competition arises primarily from
other tanker owners, including major oil companies as well as independent tanker
companies, some of whom have substantially greater resources than we do.
Competition for the transportation of oil and oil products can be intense and
depends on price, location, size, age, condition and the acceptability of the
tanker and its operators to the charterers. During the term of our existing
Charter with Chevron we are not exposed to the risk associated with this
competition. When Chevron terminates the charter in April 2006 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 our achieving lower revenues from our Suezmax
oil tanker.

Compliance with environmental laws or regulations may adversely affect our
earnings and financial conditions at the end of the existing Charter

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

We may not have adequate insurance in the event existing charters are not
renewed

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 Notes that we will
adequately insure against all risks at the end of the Charter or in the event
the Charter 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 Transport Corporation and ChevronTexaco
Corporation

We are highly dependent on the due performance by Chevron of its obligations
under the Charter and by its guarantor, ChevronTexaco Corporation, of its
obligations under its guarantee. A failure by Chevron or ChevronTexaco
Corporation to perform their obligations could result in our inability to
service the Serial and Term Loans. If the Notes holders had to enforce the
mortgages securing the Notes, 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, which could result in the
loss of our Vessel

We currently 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 Serial and Term Loans 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 holder of the Notes.

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 the Vessel. Requisition for
title occurs when a government takes control of a vessel and becomes her owner.
Also, a government could requisition the 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 the Vessel would
negatively impact our revenues.

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 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
you 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, 2004, we had $17.8 million in total
indebtedness outstanding and stockholder's equity of $1.3 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 Serial and 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

The activity of the Company 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 Serial Loans and Term Loans
will be from this Charter and from any subsequent charters following the
termination of the Charter with Chevron.

The Company

CalPetro Tankers (Bahamas III) Limited was incorporated in the Bahamas on May
13, 1994 together with two other companies: CalPetro Tankers (Bahamas I) Limited
and CalPetro Tankers (Bahamas II). 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 Transport Corporation. California Petroleum Transport
Corporation, 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
Transport Corporation. The Company was allocated $27,640,000 of the Serial Loans
and $12,744,000 of the Term Loans and acquired its Vessel, the VIRGO VOYAGER
(formerly Willian E Crain), as described below. The Company engages in no
business other than the ownership and chartering of its Vessel and activities
resulting from or incidental to such ownership and chartering.

The Company is 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, a Cayman Islands company ("ITC") which was previously a
wholly-owned subsidiary of Hemen Holding Limited, a Cyprus company ("Hemen").
Hemen is the principal shareholder of Frontline Ltd ("Frontline"), a publicly
listed Bermuda company, and is indirectly controlled by Mr. John Fredriksen, the
Chairman and Chief Executive Officer of Frontline. On July 1, 2003, Frontline
entered into an option agreement with Hemen to acquire all shares in ITC. This
option was exercised effective May 27, 2004.

Overview of the Business

The Company's Vessel is a 150,000-deadweight tonne ("dwt") Suezmax oil tanker,
called the VIRGO VOYAGER (formerly William E. Crain), 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. As
Chevron has elected to terminate the charter on April 1, 2006, they are required
to pay the Company a termination payment (the "Termination Payment") on or prior
to the termination date as follows:

     (In millions of $)

     Termination Date         Termination Payment
     April 1, 2006                           5.05

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 the Company
that it expects to use the Vessel worldwide as permitted under the Charter. The
obligations of Chevron under the Initial Charter are guaranteed by ChevronTexaco
Corporation, a major international oil company, pursuant to a guarantee (the
"Chevron Guarantee"). The Initial Charter is an indirect, wholly-owned
subsidiary of ChevronTexaco Corporation.

The Vessel is a single-hull oil carrier of and is presently registered under the
Bahamian 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 and additional crew quarters to facilitate
added manning. The builder of VIRGO VOYAGER (formerly William E. Crain) was
Ishikawajima do Brasil Estaleiros S.A.

The Management

On March 31, 1999, Frontline became the 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 the Company along with technical advisory services. If the Charter
is terminated by Chevron, Frontline, acting on behalf of the Company, 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.

The International Tanker Market

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, the primary charterers of the vessels owned or controlled by
the Company, 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 the Company engages.

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;
    (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    demand for oil and oil products;

     o    global and regional economic conditions;

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

     o    changes in sea borne and other transportation patterns

The factors that influence the supply of tanker capacity include:

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels; and

     o    the number of vessels that are out of service.

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.

2004 was a good year for the tanker market as freight rates increased
dramatically compared to 2003, mainly due to limited fleet growth and strong
growth in the demand for oil, and implicitly for oil tankers.

According to IEA, world oil demand grew by 2.65 million barrels per day(mb/d)
compared to 2003 with the total world demand ending up at 82.44 mb/d. The main
driver for this growth was the strong economic growth in China and the USA
resulting in record import levels.

The world supply of oil increased with 3.39 mb/d from 2003 to a total of 83.03
mb/d in 2004. The rapid economic growth in China led to a large growth in
imports of oil into China during the year. In addition, the hurricane Ivan which
hit the US Gulf led to the shut down of oil production in the area which had to
be replaced by additional imports. This resulted in strong demand for VLCC's,
and a very healthy market for most of the year. The continuing unrest in Iraq
kept the output from that country to about 1.9 mb/d. vs. a pre-war level of
about 2.2 mb/d. However, the shortfall in production from Iraq was replaced by
increased production in the rest of the OPEC countries.

The size of the world VLCC fleet increased by 2.5 percent in 2004 from 433
vessels to 441 vessels. A total of 11 VLCC's was scrapped during the year and 30
were delivered. The total order book for VLCC's were at 84 vessels at the end of
the year, of which 43 were ordered during the year. The size of the world
suezmax fleet increased by 5 percent in 2004 from 295 vessels to 310. A total of
11 suezmaxes was scrapped and 26 were delivered. The total order book for
suezmaxes were at 76 at the end of the year, of which 30 were ordered during the
year. The total order books for VLCC and Suezmax respectively, were at 19.09
percent and 24.51 percent of the existing fleet.

The outlook for the tanker market for the remainder of 2005 is positive since it
seems that the continued growth in oil consumption will ensure a positive demand
situation for tankers. The freight forward market for 2005 is now at USD 58,000
per day for VLCC tankers, and USD 38,500 for suezmax tankers.

There is no guarantee that Suezmax rates would be sufficient to meet the debt
service required if the bareboat charters entered into with Chevron are not
extended. 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 Society

Every commercial vessel's hull and machinery is "classed" by a classification
society authorised by its country of registry. The classification society
certifies that the vessel has been built and maintained in accordance with the
rules of such classification society and complies with applicable rules and
regulations of the country of registry of the vessel and the international
conventions to which that country is a member.

Each vessel is inspected by a surveyor of the classification society every year,
every two and a half years and every four to five years. Should any defects be
found, the classification surveyor will issue a "recommendation" for appropriate
repairs which have to be made by the shipowner within the time limit prescribed.

The Vessel will be maintained during the term of the Charter by Chevron in
accordance with good commercial maintenance practice commensurate with other
vessels in Chevron's fleet of similar size and trade, as required by the
Charter. The Charter requires Chevron to return the Vessel on termination of the
Charter "in class" under the rules of the American Bureau of Shipping (or
another classification society previously approved by the Company). In addition,
the Company has the right to inspect the Vessel and to require surveys upon
redelivery, and the Initial Charterer will be responsible for making or
compensating the Company for certain necessary repairs in connection with such
redelivery.

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

Environmental and Other Regulations

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. 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 lives of our tankers. Future, non-compliance could require us to
incur substantial costs or to temporarily suspend operation of our tankers.

We believe 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. 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,
harbour 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 Organisation

In 1992, the International Maritime Organization, or IMO ( the United Nations
agency for maritime safety and the prevention of marine pollution by ships),
adopted MARPOL 73/78 regulations that set forth pollution prevention
requirements applicable to tankers. These regulations, which have been adopted
by more than 150 nations, 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 ("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 13F or have double bottoms and double sides
with dimensions in compliance with 13G1(c) continue to be exempt from the
accelerated phase out.

<TABLE>
Baseline Phase Out Scheme
-------------------------------------------------------------------------------------
<CAPTION>
                                      Year of Delivery
Phase Out Date       Category 1           Category 2                    Category 3
-------------------------------------------------------------------------------------
<S>             <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 has been 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 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 13E; or

o    Wing tanks having a width which does not meet that required by IBC Code -
     Type 2.

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 years of age 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.

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 prohibit
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.

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 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.

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

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, rents, 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 million per tanker that is over 3,000 gross tons (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 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 wilful
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. 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.

Chevron insures the Vessel with pollution liability insurance in the maximum
commercially available amount of $1.0 billion per incident per occurance. 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. We are responsible for ensuring our vessels
comply with any additional regulations.

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.

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
European Union 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 will also be restricted from entering or
leaving European Union ports or offshore terminals and anchoring in areas under
European Union jurisdiction. The European Union 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 European 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 European Union 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 European Union nations. It is impossible to predict what
legislation or additional regulations, if any, may be promulgated by the
European Union or any other country or authority.

International Conventions on Civil Liability for Oil Pollution Damage

Although the United States is not a party thereto, many countries have ratified
and follow the liability scheme adopted by the IMO and set out in the
International Convention on Civil Liability for Oil Pollution Damage, 1969, as
amended, or the CLC, and the Convention for the Establishment of an
International Fund for Oil Pollution of 1971, as amended. Under these
conventions, a vessel's registered owner is strictly liable for pollution damage
caused on the territorial waters of a contracting state by discharge of
persistent oil, subject to certain complete defenses. Many of the countries that
have ratified the CLC have increased the liability limits through a 1992
Protocol to the CLC. The liability limits in the countries that have ratified
this Protocol are currently approximately $4.0 million plus approximately $566.0
per gross registered tonne above 5,000 gross tonnes with an approximate maximum
of $80.5 million per vessel, with the exact amount tied to a unit of account
which varies according to a basket of currencies. The right to limit liability
is forfeited under the CLC where the spill is caused by the owner's actual fault
or privity and, under the 1992 Protocol, where the spill is caused by the
owner's intentional or reckless conduct. Vessels trading to contracting states
must provide evidence of insurance covering the limited liability of the owner.
In jurisdictions where the CLC has not been adopted, various legislative schemes
or common law govern, and liability is imposed either on the basis of fault or
in a manner similar to the CLC.

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 ("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 ("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 ("ISPS"). 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 has a double hull and complies with the various security measures
addressed by the MTSA, SOLAS and the ISPS Code.

Organisational Structure

As described above, and also in Item 7. Major Shareholders, and Related Party
Transactions, the Company is 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 the Company as
described in more detail in Item 4.

Property, Plants and Equipment

Other than the Vessel described above, the Company does not have any property.

Item 5. Operating and Financial Review and Prospects

Operating results

Year ended December 31, 2004 compared with the year ended December 31, 2003

Total Revenues

Finance lease interest income for the year ended December 31, 2004 amounted to
$1,596,000, compared with $1,808,000 for the year ended December 31, 2003.
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 leases.

Expenses

Interest payable on the Term and Serial Loans amounted to $1,514,000 for the
year ended December 31, 2004. The amortization of discount on loans for the
period amounted to $31,000. The Company amortises the discount over the life of
the Term and Serial Loans. The corresponding figures for the period to December
31, 2003 were $1,715,000 and $31,000, respectively. Interest payable has fallen
in line with expectations, with interest payable falling in line with the loan
outstanding in the year.

Year ended December 31, 2003 compared with the year ended December 31, 2002

Total Revenues

Finance lease interest income for the year ended December 31, 2003 amounted to
$1,808,000, compared with $2,019,000 for the year ended December 31, 2002.
Interest income fell in line with the value of the finance lease.

Expenses

Interest payable on the Term and Serial Loans amounted to $1,715,000 for the
year ended December 31, 2003. The amortization of discount on loans for the
period amounted to $31,000. The Company amortises the discount over the life of
the Term and Serial Loans. The corresponding figures for the period to December
31, 2002 were $1,901,000 and $31,000, respectively. Interest payable has fallen
in line with expectations, with interest payable falling in line with the loan
outstanding in the year.

Liquidity and Capital Resources

As set forth above, revenues from the Initial Charter are sufficient to pay the
Company's obligations under the Term and Serial Loans. Following the termination
of Initial Charter by Chevron, the Manager, acting on behalf of the Company,
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.

Off-balance Sheet Arrangements

The company has no off-balance sheet arrangements that have, or are reasonably
likely to have, a material current effect or that are reasonably likely to have
a material future effect on our financial condition, revenues or expenses,
liquidity, capital expenditure or capital reserves.

Tabular disclosure of contractual obligations

As at December 31, 2004, the Company had the following contractual obligations
and commitments:

                                               Payments due by period
                                        Less                       More
                                      than 1      1-3      3-5   than 5
(in $'000)                              year    years    years    years    Total

Serial Loans (7.60 to 7.62%)           2,530    2,530       --       --    5,060
Term Loans (8.52%)                        --    1,416    2,832    8,496   12,744
--------------------------------------------------------------------------------
Total contractual obligations          2,530    3,946    2,832    8,496   17,804
--------------------------------------------------------------------------------

Critical Accounting Policies

The Company's principal accounting policies are described in Note 2 to the
financial statements, which is included in Item 18 of this Form 20-F. The most
critical accounting policies include:

     o    Accounting for financing leases as lessor

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.

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 Serial and 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 the company will continue to remain profitable and cash flows
will be adequate to service the debt load. Clearly there will always be some
uncertainty within the business because of the nature of the tanker business but
over the past life of the company the charter rates have been at a level such
that the company has made profits. The structure of debt and charterhire
agreements, including provision for early termination, provides the company with
a clear future.

Recently Issued Accounting Standards

There were no recently issued accounting standards that would have an impact on
the Company's results.

Item 6. Directors, Senior Management and Employees

Directors and Executive Officers of CalPetro Tankers (Bahamas III) Limited

                                   Age      Position
                                   ---      --------

Tor Olav Troim                      42      Director and President
Kate Blankenship                    40      Director and Secretary

Tor Olav Troim has been a Director of CalPetro Tankers (Bahamas III) Limited
since 1998. He has been Vice-President and a director of Frontline since
November 3, 1997. He previously served as Deputy Chairman of Frontline from July
4, 1997. Mr. Troim also serves as a director of Ship Finance International
Limited, a subsidiary of Frontline and since May 2000, has been a director and
Vice-Chairman of Knightsbridge Tankers Limited ("Knightsbridge"). He is a
director of Aktiv Inkasso ASA and Northern Oil ASA, both Oslo Stock Exchange
listed companies and Golden Ocean Group Limited, a Bermuda company listed on the
Oslo Stock Exchange. Mr. Troim has served as a director of Golar LNG Limited
since May 2001. From January 1992, Mr. Troim served as Managing Director and a
member of the Board of Directors of DNO AS, a Norwegian oil company

Kate Blankenship: Mrs. Blankenship has been a director of CalPetro Tankers
(Bahamas III) Limited since 1998. She has been employed by Frontline since 1994
and is currently the Chief Accounting Officer and Secretary and a Director. Mrs.
Blankenship is a member of the Institute of Chartered Accountants in England and
Wales. Mrs. Blankenship has been Chief Financial Officer of Knightsbridge
Tankers Ltd, a Bermuda company listed on the NASDAQ National Market, since April
2000 and Secretary of Knightsbridge since December 2000. Mrs. Blankenship is
Director and Secretary of Ship Finance International Limited since October 15,
2003. Mrs. Blankenship has served as a director of Golar LNG Limited, a Bermuda
company listed on the NASDAQ National Market and Oslo Stock Exchange, since
July, 2003.

Compensation

During the year ended December 31, 2004, the Company paid no compensation to its
directors and officers.

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.

The Company has neither an audit nor a remuneration committee.

Employees

The Company does not have employees involved in the management of the Vessel.
Frontline manages the Company as described in Item 7. "Related Party
Transactions."

Share Ownership

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

Item 7. Major Shareholders and Related Party Transactions

Major Shareholders

The Company is 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 the Company as
described in more detail in Item 4. All the issued and outstanding shares of
capital stock of the Company are beneficially owned by ITC and have been pledged
to the Chase Manhattan Trust Company of California (the "Collateral Trustee") as
part of the collateral for the Notes. ITC has full voting control over the
Company subject to the rights of the Collateral Trustee.

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

Related Party Transactions

As discussed in Item 4, Frontline, the ultimate parent, manages the Company.
Pursuant to a management agreement, Frontline is the Manager and the 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 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 4% 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 4%. 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 4%
increase on each subsequent anniversary of the closing of the issue of the
Notes.

In 2004, a total of $36,654 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

We are not a party to any material pending legal proceedings. In the future, we
may be subject to legal proceedings and claims in the ordinary course of
business. Those claims, even if lacking merit, could result in the expenditure
by us of significant financial and managerial resources.

Item 9. The Offer and Listing

Not applicable.

Item 10. Additional Information

Memorandum and Articles of Association

The Company is No. 23063B 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 authorisation 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.

Material Contracts

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

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.

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.

Documents on Display

The Company is 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. These
materials, including this annual report and the accompanying exhibits may be
inspected and copied at the public reference facilities maintained by the
Commission at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may
obtain information on the operation of the public reference room by calling 1
(800) SEC-0330, and you may obtain copies at prescribed rates from the Public
Reference Section of the Commission at its principal office in Washington, D.C.
20549. 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 office of the Manager at Par-la-Ville
Place 4th Floor, 14 Par-la-Ville Road, Hamilton, Bermuda.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Quantitative information about market risk

Quantitative information about market risk instruments at December 31, 2004 is
as follows:

i) Serial Loans:

The principal balances of the Serial Loans bear interest at rates ranging from
7.60% to 7.62% and mature over a remaining two-year period from April 1, 2005.
The loans are reported net of the related discounts, which are amortized over
the term of the loans. The outstanding serial loans have the following
characteristics:

Maturity date                                      Interest rate   Principal due
                                                                       ($ 000's)

April 1, 2005                                              7.60%           2,530
April 1, 2006                                              7.62%           2,530
--------------------------------------------------------------------------------
                                                             --            5,060
================================================================================

ii) Term Loans:

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

                                             Charter       Charter       Charter
    Scheduled              Charter not    terminated    terminated    terminated
 payment date               terminated          2006          2008          2010
                                 $'000         $'000         $'000         $'000

April 1, 2007                    1,416           570         1,416         1,416
April 1, 2008                    1,416           620         1,416         1,416
April 1, 2009                    1,416           670           490         1,416
April 1, 2010                    1,416           730           530         1,416
April 1, 2011                    1,416           790           570           270
April 1, 2012                    1,416           850           620           290
April 1, 2013                    1,416           930           670           310
April 1, 2014                    1,416         1,010           730           340
April 1, 2015                    1,416         6,574         6,302         5,870
--------------------------------------------------------------------------------
                                12,744        12,744        12,744        12,744
================================================================================

Qualitative information about market risk

The Company was organised solely for the purpose of the acquisition of one
Vessel and subsequently entered into a long-term agreement between the Company
and Chevron.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

                                     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.

As of the balance sheet date, the Company carried out an evaluation, under the
supervision and with the participation of the Company's manager Frontline Ltd,
including the Company's President and Principal Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the President and Principal Financial Officer concluded that the Company's
disclosure controls and procedures are effective in alerting them timely to
material information relating to the Company required to be included in the
Company's periodic SEC filings.

(b)  Changes in internal controls

There have been no significant changes in our internal controls or in other
factors that could have significantly affected those controls subsequent to the
date of our most recent evaluation of internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

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. The Company's
obligations toward its bondholders are set out in detail in covenants contained
in the Indenture for their Notes. 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. The Company's
obligations toward its bondholders are set out in detail in covenants contained
in the Indenture for their Notes. 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

     a) Audit Fees

     Our principal accountant for 2004 was Grant Thornton and Ernst & Young for
     2003. The following table sets forth the aggregate fees billed for
     professional services rendered and services provided by the principal
     accountant in connection with statutory and regulatory filings or
     engagements for the two most recent fiscal years.

     Fiscal year ended December 31, 2004    $18,000
     Fiscal year ended December 31, 2003    $3,375

     b) Audit Related Fees

     For the fiscal years ended December 31, 2004 and 2003 there have been no
     assurance and related services rendered by Grant Thornton in 2004 or Ernst
     & Young in 2003 related to the performance of the audit or review of the
     Company's financial statements.

     c) Tax Fees

     For the fiscal years ended December 31, 2004 and 2003 there have been no
     tax related services rendered by Grant Thornton in 2004 or Ernst & Young in
     2003 related to tax compliance (i.e., preparation of original and amended
     tax returns), tax advice (i.e., assistance with tax audits and appeals),
     and tax planning.

     d) All Other Fees

     For the fiscal years ended December 31, 2004 and 2003 there have been no
     aggregate fees billed for professional services rendered by Grant Thornton
     in 2004 or Ernst & Young in 2003 for services other than Audit Fees, as 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

                                    PART III

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

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

                                                                            Page

     Report of Independent Registered Public Accounting Firm                 F-1

     Report of Independent Registered Public Accounting Firm                 F-2

     Statements of Operations and Retained Earnings for the Years Ended      F-3
     December 31, 2004, 2003 and 2002

     Balance Sheets as of December 31, 2004 and 2003                         F-4

     Statements of Cash Flows for the Years Ended                            F-5
     December 31, 2004, 2003 and 2002

     Notes to the Financial Statements                                       F-6

Item 19. Exhibits

1.1* Certificate of Incorporation and Memorandum of Association of CalPetro
Tankers (Bahamas III) 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 III) 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 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 Principal Financial Officer pursuant to Rule 13a-14(a)
       and Rule 15d-14(a) of the Securities Exchange Act, as amended

13     Certification pursuant to 18 USC 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 III) Limited

We have audited the accompanying balance sheets of Calpetro Tankers (Bahamas
III) Limited (the "Company") as of December 31, 2004 and the related statements
of operations and retained earnings and cash flows for the year then ended.
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 audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. An audit
includes 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, and
evaluating the overall financial statement presentation. We believe that our
audit provides 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 III)
Limited at December 31, 2004 and the results of its operations and cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America.


/s/ Grant Thornton LLP


New York, New York
February 16, 2005
<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors
Calpetro Tankers (Bahamas III) Limited

We have audited the accompanying balance sheet of Calpetro Tankers (Bahamas III)
Limited as of December 31, 2003, and the related statements of operations and
retained earnings, and cash flows for each of the two years in the period ended
December 31, 2003. 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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's 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, and
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 III)
Limited at December 31, 2003, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 2003, in
conformity with US generally accepted accounting principles.


Ernst & Young
Chartered Accountants

Douglas, Isle of Man
June 8, 2004
<PAGE>

CalPetro Tankers (Bahamas III) Limited
Statements of Operations and Retained Earnings
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands of US$)

                                                     2004       2003       2002

Revenues
     Finance lease interest income                  1,596      1,808      2,019
-------------------------------------------------------------------------------
     Total operating revenues                       1,596      1,808      2,019
-------------------------------------------------------------------------------
Expenses
     General and administrative expenses              (72)       (77)       (58)
     Amortization of loan discount                    (31)       (31)       (31)
     Interest expense                              (1,514)    (1,715)    (1,901)
-------------------------------------------------------------------------------
     Total operating expenses                      (1,617)    (1,823)    (1,990)
-------------------------------------------------------------------------------
Net operating income                                  (21)       (15)        29
     Interest income                                   29         61         49
-------------------------------------------------------------------------------
Net income                                              8         46         78
===============================================================================

Retained earnings at the start of the year          1,274      1,228      1,150
-------------------------------------------------------------------------------
Retained earnings at the end of the year            1,282      1,274      1,228
===============================================================================

See accompanying Notes to the Financial Statements
<PAGE>

CalPetro Tankers (Bahamas III) Limited
Balance Sheets as of December 31, 2004 and 2003
(in thousands of US$)

                                                          Note     2004     2003

Assets
     Current assets:
     Cash and cash equivalents                                    1,735    1,715
     Current portion of net investment in finance
     lease                                                   4    2,557    2,535
     Interest receivable                                            367      419
     Other current assets                                            10       17
--------------------------------------------------------------------------------
     Total current assets                                         4,669    4,686
     Net investment in finance lease, less current
     portion                                                 4   14,732   17,258
     Loan discount, net of amortization                      5       81      112
--------------------------------------------------------------------------------
     Total assets                                                19,482   22,056
================================================================================

Liabilities and stockholder's equity
     Current liabilities:
     Accrued interest                                               368      420
     Current portion of serial loans                         6    2,530    2,530
     Other current liabilities                                       28       28
--------------------------------------------------------------------------------
     Total current liabilities                                    2,926    2,978
     Long-term loans                                         6   15,274   17,804
--------------------------------------------------------------------------------
     Total liabilities                                           18,200   20,782
--------------------------------------------------------------------------------
     Stockholder's equity:
     Unclassified stock: 100 shares of $1 par value          7                --
     Retained earnings                                            1,282    1,274
--------------------------------------------------------------------------------
     Total stockholder's equity                                   1,282    1,274
--------------------------------------------------------------------------------
     Total liabilities and stockholder's equity                  19,482   22,056
================================================================================

See accompanying Notes to the Financial Statements
<PAGE>

CalPetro Tankers (Bahamas III) Limited
Statements of Cash Flows
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands of US$)

                                                       2004      2003      2002

Cash flows from operating activities:
   Net income                                             8        46        78
   Adjustments to reconcile net income to net cash
   provided by operating activities:
     Amortization of discount on loans                   31        31        31
     Changes in assets and liabilities:
     Decrease in interest receivable                     53        53        53
     Increase / (decrease) in other current
     assets                                               6        28       (23)
       Decrease in accrued interest                     (52)      (43)      (48)
       Increase in other current liabilities             --        21         1
-------------------------------------------------------------------------------
   Net cash provided by operating activities             46       136        92
-------------------------------------------------------------------------------

Cash flows from investing activities:
   Finance lease payments received                    2,504     2,483     2,464
-------------------------------------------------------------------------------
   Net cash provided by investing activities          2,504     2,483     2,464
-------------------------------------------------------------------------------

Cash flows from financing activities:
   Repayments of Serial Loans                        (2,530)   (2,530)   (2,530)
-------------------------------------------------------------------------------
   Net cash used in financing activities             (2,530)   (2,530)   (2,530)
-------------------------------------------------------------------------------
Net increase in cash and cash equivalents                20        89        26
Cash and cash equivalents at start of the year        1,715     1,626     1,600
-------------------------------------------------------------------------------
Cash and cash equivalents at end of the year          1,735     1,715     1,626
===============================================================================

Supplemental disclosure of cash flow information:

Interest paid                                         1,567     1,758     1,949
===============================================================================

See accompanying Notes to the Financial Statements.
<PAGE>

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

1.   General and Basis of Preparation

The Company, was incorporated in the Bahamas on May 13, 1994 with two other
entities: CalPetro Tankers (Bahamas I) Limited and CalPetro Tankers (Bahamas II)
Limited. In addition CalPetro Tankers (IOM) Limited, was incorporated in the
Isle of Man. Each of these entities (the "Owners") has been organized as a
special purpose company for the purpose of acquiring one of four oil tankers
(each a "Vessel", together the "Vessels") from Chevron Transport Corporation
(the "Chevron") and for which long-term charter agreements have been signed with
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 Loans), and subsequently loaned the proceeds
to the Owners to fund the acquisition of the Vessels from Chevron.

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

The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). Certain
comparative figures have been reclassified to conform with the presentation
adopted in the current period.

2.   Principal Accounting Policies

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

     (a)  Finance leases and revenue recognition

          The long-term charter agreement between the Company and Chevron
          subsequently transfers all the risks and rewards associated with
          ownership, other than legal title and contains bargain purchase
          options and as such 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 which comprises the Serial and
          Term Loans is being amortized over the respective periods to maturity
          of the debt.

     (d)  Income taxes

          The company is not liable to pay income taxes in the Bahamas.

     (e)  Cash equivalents

          The Company considers all highly liquid investments with a maturity
          date of three months or less when purchased to be cash equivalents.

     (f)  Reporting currency

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

     (g)  Use of estimates

          The preparation of financial statements in accordance with accounting
          principles generally accepted in the United States 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

     (h)  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.

3.   Finance Lease

The Company has chartered its Vessel on a long term bareboat charter (the
"Initial Charter") to Chevron Transport Corporation (the "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. Chevron can elect to terminate the
Charter on any of three termination dates occurring at two-year intervals
beginning in April 1, 2006. Non-binding notice of Chevron's intention to
exercise the first option to terminate must be given at least 12 months prior to
the termination date and irrevocable notice must be given at least nine months
prior to the first optional termination date. For subsequent optional
termination dates, notice of Chevron's intention to terminate must be given
seven months prior to the termination date. Chevron is required to pay the
Company a termination payment (the "Termination Payment") on or prior to the
termination date as follows:

     (In millions of $)

     Optional                      Termination
     Termination Date              Payment
     April 1, 2006                        5.05
     April 1, 2008                        4.57
     April 1, 2010                        4.08

Chevron has the option to purchase the vessel for $1 on April 1, 2015 subject to
the Charter still being in place.

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

                                                              2004         2003
                                                             $'000        $'000

Total minimum lease payments to be received*                24,819       28,972
Less: Unearned income                                       (7,530)      (9,179)
-------------------------------------------------------------------------------
Net investment in finance lease                             17,289       19,793
===============================================================================

*    Lease payments under the charter agreement for each of the five succeeding
     years are as follows: $3,962,000 in 2005, $3,226,000 in 2006, $2,525,000 in
     2007, $2,404,000 in 2008 and $2,284,000 in 2009.

4.   Deferred Charges

Deferred charges represent the capitalization of debt issue costs. These costs
are amortized over the term of the Notes to which they relate. The deferred
charges are comprised of the following amounts:

     (in thousands of $)                                     2004          2003

     Debt arrangement fees                                    384           384
     Accumulated amortisation                                (303)         (272)
     --------------------------------------------------------------------------
                                                               81           112
     ==========================================================================

5.   Debt

                                                                2004       2003
                                                               $'000      $'000

     7.60% to 7.62% Serial Loan maturing April 1, 2006         5,060      7,590
     8.52% Mortgage Term Loans due 2015                       12,744     12,744
     --------------------------------------------------------------------------
     Total Debt                                               17,804     20,334
     Less: current portion                                    (2,530)    (2,530)
     --------------------------------------------------------------------------
                                                              15,274     17,804
     ==========================================================================

The outstanding debt as of December 31, 2004 is repayable as follows:

     (in thousands of $)
     Year ending December 31,
     2005a                                                                 2,530
     2006a                                                                 2,530
     2007a                                                                 1,416
     2008a                                                                 1,416
     2009a                                                                 1,416
     2010 and later                                                        8,496
     ---------------------------------------------------------------------------
     Total debt                                                           17,804
     ===========================================================================

The Serial Loans mature on April 1, 2006.Interest is payable semi-annually on
April 1 and October 1.

The Term Loans bear interest at a rate of 8.52% per annum. Interest is payable
semi-annually on April 1 and October 1. Principal is repayable on the Term Loans
in accordance with a 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 $5.5m.

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.

                                             Charter       Charter       Charter
Scheduled payment          Charter not    terminated    terminated    terminated
date                        terminated          2006          2008          2010
                                 $'000         $'000         $'000         $'000

April 1, 2007                    1,416           570         1,416         1,416
April 1, 2008                    1,416           620         1,416         1,416
April 1, 2009                    1,416           670           490         1,416
April 1, 2010                    1,416           730           530         1,416
April 1, 2011                    1,416           790           570           270
April 1, 2012                    1,416           850           620           290
April 1, 2013                    1,416           930           670           310
April 1, 2014                    1,416         1,010           730           340
April 1, 2015                    1,416         6,574         6,302         5,870
--------------------------------------------------------------------------------
                                12,744        12,744        12,744        12,744
================================================================================

The Term and Serial 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.

6.   Share Capital

                                                                 2004       2003
     Authorised share capital:
        1,000 shares of $1 each                                 1,000      1,000
     ===========================================================================

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

7.   Financial Instruments

Fair values

The carrying value and estimated fair value of the Company's financial
instruments at December 31, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                           2004       2004     2003       2003
                                                           Fair   Carrying     Fair   Carrying
     (in thousands of $)                                  Value      Value    Value      Value
<S>                                                      <C>        <C>      <C>        <C>
     Non-Derivatives:
     Cash and cash equivalents                            1,735      1,735    1,715      1,715
     7.57 to 7.62% Serial Loans maturing April 1, 2006    5,193      5,060    8,076      7,590
     8.52% Mortgage Loans due 2015                       14,608     12,744   14,251     12,744
</TABLE>

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

The carrying value of cash and cash equivalents, which are 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 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 Loans is
wholly dependent upon the financial condition, results of operations and cash
flows from Chevron.

8.   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 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 4% 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 4%. 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 4%
increase on each subsequent anniversary of the closing of the issue of the
Notes.

In 2004, 2003 and 2002, management fees paid were $36,654, $43,800 and $33,560
respectively. Management fees payable in 2004 and 2003 were $9,253 and $8,897
respectively.

9.   Commitments and Contingencies

The Term and Serial 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.

As at December 31, 2004, Chevron holds an option to purchase the Vessel for $1
on April 1, 2015 provided the Initial Charter is still in place.

10.  Subsequent events

On March 28, 2005, CalPetro Bahamas III received non-binding notice of Chevron's
intention to exercise its first termination option on the single hull vessel
Virgo Voyager.

On April 21, 2005, pursuant to Clause 2 (a) (ii) of the bareboat charter dated
April 5, 1995 between CalPetro Tankers (Bahamas III) Limited ( the "Owner") and
Chevron Transport Corporation Ltd ("Chevron"), the Owner received irrevocable
notice from Chevron regarding the termination of the bareboat charter of the
vessel Virgo Voyager on April 1, 2006.

Frontline Ltd (the "Manager"), as the appointed manager to the Owner, will
attempt to arrange for an acceptable replacement charter. Should an acceptable
replacement charter be unavailable, the Manager will solicit bids for the sale
of the vessel and if there are no bids that provide net proceeds that, together
with the termination payment, at least equal the allocated principal amount of
the Registrant's term mortgage notes plus any interest accrued, the Manager will
forward to the appointed Indenture Trustee copies of all bids for the recharter
of the vessel. Unless instructed by all the holders of the Term Mortgage Notes
to accept a sale bid that is below the required minimum bid, the Manager will
attempt to recharter the vessel on such terms as it deems appropriate provided
that

     (i)  such charter is at arms length;

     (ii) such charter shall have a termination date no later than April 1,
          2015; and

the charterhire payable is sufficient to make the mandatory sinking fund
payments together will all related interest, recurring fees and taxes for the
vessel and the cost of insurance not maintained by the charterer, management
fees and technical advisor's fees and the fees of the designated representative,
the indenture trustee and the collateral trustee as defined in the prospectus
for the Registrant's 8.52% First Preferred Mortgage Notes due 2015.
<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 III) Limited


                              /s/ Kate Blankenship
                              --------------------
                                Kate Blankenship
                             Director and Secretary

Date: June 30, 2005

02089.0006 #582968