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

                                    FORM 20-F

(Mark One)

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

                                        OR

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

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

                                       OR

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

                                       OR

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

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


Commission file number              033-79220-03
                       ---------------------------------------------------------

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


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


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

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

Title of each class                 Name of each exchange on which registered

      None                                        Not applicable

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

                                      None

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

                                      None

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

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

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

                                [ ] Yes          [X] No

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

                               [ ] Yes          [X] No

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

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

                                [X] Yes          [_] No

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

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

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

 [_] Item 17   [X] Item 18

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

                                [ ] Yes          [X] No


<PAGE>



                          INDEX TO REPORT ON FORM 20-F

                                                                      Page
PART I
Item 1.     Identity of Directors, Senior Management and Advisers        2
Item 2.     Offer Statistics and Expected Timetable                      2
Item 3.     Key Information                                              2
Item 4.     Information on the Company                                   7
Item 4A.    Unresolved staff comments                                   21
Item 5.     Operating and Financial Review and Prospects                21
Item 6.     Directors, Senior Management and Employees                  25
Item 7.     Major Shareholders and Related Party Transactions           26
Item 8.     Financial Information                                       27
Item 9.     The Offer and Listing                                       27
Item 10.    Additional Information                                      27
Item 11.    Quantitative and Qualitative Disclosures about Market Risk  29
Item 12.    Description of Securities Other than Equity Securities      30

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

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

<PAGE>


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

CalPetro Tankers (Bahamas 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.


<PAGE>


                                     PART I

Item 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

Item 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

Item 3.    KEY INFORMATION

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

A. Selected Financial Data

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

<TABLE>

                                                                                 Fiscal Years ended December 31,
                                                      2006             2005               2004            2003               2002
                                                      ----             ----               ----            ----               ----
<S>                                                  <C>              <C>                <C>             <C>                <C>
 (in thousands of $, except share data)
 Income Statement data:
 Net operating revenues                              2,255            1,381              1,596           1,808              2,019
 Net income / (loss)                                 1,335             (41)                  8              46                 78

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

 Balance sheet data:
 Total assets                                       18,789           16,861             19,482          22,056             24,562
 Current portion loans                                 570            2,530              2,530           2,530              2,530
 Long-term loans                                     12,174          12,744             15,274          17,804             20,334
 Stockholder's equity                                2,576            1,241              1,282           1,274              1,228
 Number of shares                                      100              100                100             100                100
</TABLE>

B. Capitalization and Indebtedness

Not Applicable

C. Reason for the offer and use of proceeds

Not Applicable

D. Risk Factors

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

Our vessel, the Front Voyager (formerly Virgo Voyager), (the "Vessel") is
currently operated under a bareboat charter (the "Charter") to Front Voyager
Inc. (the "Charterer"), a subsidiary of Frontline Ltd. ("Frontline"), one of the
world's largest tanker companies. Frontline is our ultimate parent company. The
Vessel was previously on a bareboat charter to Chevron Transport Corporation
("Chevron") until it was redelivered to us on April 1, 2006 due to the
termination of the charter.

Historically, the tanker industry has been highly cyclical, with volatility in
profitability and asset values resulting from changes in the supply and demand
for tanker capacity. If the tanker industry is depressed in the future when our
Vessel's Charter expires or is terminated, our earnings and available cash flow
may decrease. Our ability to recharter our Vessel on the expiration or
termination of its current Charter and the charter rates payable under any
renewal or replacement charters will depend upon, among other things, economic
conditions in the tanker market. Fluctuations in charter rates and vessel values
result from changes in the supply and demand for tanker capacity and changes in
the supply and demand for oil and oil products. We may not be able to arrange
further charters at rates sufficient to meet interest and principal payments due
by us on our Term Loans.

Because our Charter may be terminated in April 2008, we may incur additional
expenses and not be able to recharter our Vessel profitably

The Charter runs for a period of two years until April 1, 2008. The Charterer
holds options to charter the Vessel for seven additional one-year periods until
April 1, 2015.

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

If the Charterer should decide not to extend the Charter at any point, we will
attempt to arrange a replacement charter, or may sell the Vessel to satisfy our
obligations under the Term Loans. Replacement charters may include shorter-term
time charters and employing the Vessel on the spot charter market (which is
subject to greater fluctuation than the time charter market). Any replacement
charter may bring us lower charter rates and would likely require us to incur
greater expenses which may reduce the amounts available, if any, to pay
principal and interest on the Notes, defined below.

Front Voyager Inc., our current charterer, is a wholly owned subsidiary of
Frontline, which also is our manager and as such conflicts of interest might
arise where Frontline would favour its own interests over ours

Front Voyager Inc. the current charterer of the Front Voyager, is a wholly owned
subsidiary of Frontline. As such, situations might arise where Frontline may
favour its own interest to the detriment of the Front Voyager's owner, CalPetro
Bahamas III, or the Company's security holders. Possible conflicts of interest
may arise in re-negotiation of our charter with Front Voyager Inc. or
negotiations of disputes arising from the Charter, where Frontline may act in
its own best interests and not our best interests.

We operate in the highly competitive international tanker market which could
affect our position at the end of our current Charter

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

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

Our operations are affected by extensive and changing international, national,
state and local laws, regulations, treaties, conventions and standards in force
in international waters, the jurisdictions in which our Vessel operates and the
country in which our Vessel is registered, including those governing the
management and disposal of hazardous substances and wastes, the cleanup of oil
spills and other contamination, air emissions, and water discharges and ballast
water management. These regulations include the U.S. Oil Pollution Act of 1990,
or OPA, the International Convention on Civil Liability for Oil Pollution Damage
of 1969, International Convention for the Prevention of Pollution from Ships,
the IMO International Convention for the Safety of Life at Sea of 1974, or
SOLAS, the International Convention on Load Lines of 1966 and the U.S. Marine
Transportation Security Act of 2002. In addition, vessel classification
societies also impose significant safety and other requirements on our vessel.
In complying with current and future environmental requirements, we may also
incur significant additional costs in meeting new maintenance and inspection
requirements, in developing contingency arrangements for potential spills and in
obtaining insurance coverage. Government regulation of vessels, particularly in
the areas of safety and environmental requirements, can be expected to become
stricter in the future and require us to incur significant capital expenditures
on our vessel to keep it in compliance, or even to scrap or sell the vessel
altogether.

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

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

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

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

An acceleration of the current prohibition to trade deadlines for our non-double
hull tanker could adversely affect our operations.

Our Vessel is a non-double hull tanker. The United States, the European Union
and the International Maritime Organization, or IMO, have all imposed limits or
prohibitions on the use of these types of tankers in specified markets after
certain target dates, depending on certain factors such as the size of the
vessel and the type of cargo. In the case of our non-double hull tanker, these
phase out dates range from 2010 to 2015. As of April 15, 2005, the Marine
Environmental Protection Committee of the IMO has amended the International
Convention for the Prevention of Pollution from Ships to accelerate the phase
out of certain categories of single hull tankers, including the types of vessel
in our fleet, from 2015 to 2010 unless the relevant flag states extend the date.
This change could result in non-double hull tankers being unable to trade in
many markets after 2010. The phase out of single hull tankers will also reduce
the demand for single hull tankers, force the remaining single hull tankers into
employment on less desirable trading routes and increase the number of tankers
trading on those routes. As a result, single hull tankers are likely to be
chartered less frequently and at lower rates. Moreover, the IMO may still adopt
regulations in the future that could adversely affect the useful life of the
non-double hull vessel as well as our ability to generate income which will
affect our ability to service its debt to us.

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, the Charterer
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, defined
below, 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 dependent on our Charterer Front Voyager Inc.

At the termination of the previous charter with Chevron, we received a
termination fee of $5.05 million. In addition the Charterer under the new
charter prepaid the first two years hire totalling $5.05 million. We are
dependent on the due performance by the Charterer of its obligations under the
Charter. A failure by Front Voyager Inc. to perform its obligations could result
in our inability to service the Term Loan. If the Notes holders had to enforce
the mortgages securing the Notes, defined below, they may not be able to recover
the principal and interest owed to them.

We may not be able to pay down our debt in the future, which could result in the
loss of our Vessel

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

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

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

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

The Notes, defined below, are not listed on any national securities exchange or
traded on the NASDAQ National Market and have no established trading market.
Consequently, the Notes, defined below 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, 2006, we had $12.7 million
outstanding in total indebtedness and $2.6 million of stockholders' equity. The
degree to which we are leveraged could have important consequences for the
holders of the Notes, defined below, including:

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

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

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

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

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

We have a limited business purpose which limits our flexibility

Our activity is limited to engaging in the acquisition, disposition, ownership,
and chartering of a Suezmax oil tanker. During the terms of our Charter with
Front Voyager Inc., we expect that the only source of operating revenue from
which we may pay principal and interest on the Term Loan will be from this
Charter and from any subsequent charters following the termination of the
Charter with Front Voyager Inc.

Item 4.  INFORMATION ON THE COMPANY

A  History and Development of 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. We are wholly-owned by California Tankers Investments
Limited, a company organized under the laws of the Bahamas, which is in turn a
wholly-owned subsidiary of CalPetro Holdings Limited, an Isle of Man company.
CalPetro Holdings Limited is a wholly-owned subsidiary of Independent Tankers
Corporation ("ITC"), a Cayman Islands company which is a wholly-owned subsidiary
of Frontline.

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

California Petroleum Transport Corporation ("California Petroleum"), a Delaware
corporation, acting as agent on behalf of the Owners, issued as full recourse
obligations $167,500,000 Serial First Preferred Mortgage Notes and $117,900,000
8.52% First Preferred Mortgage Notes due 2015 (together the "Notes"). The
proceeds from the sale of the Notes were applied by way of long-term loans,
being Serial Loans in respect of the Serial First Preferred Mortgage Notes and
Term Loans in respect of the First Preferred Mortgage Notes due 2015, to the
Owners to fund the acquisition of the Vessels from Chevron. We were allocated
$27,640,000 of the Serial Loans and $12,744,000 of the Term Loans and acquired
our Vessel, the Front Voyager, as described below. We will engage in no business
other than the ownership and chartering of our Vessel and activities resulting
from or incidental to such ownership and chartering.

On April 21, 2005, we received irrevocable notice from Chevron regarding the
termination of its bareboat charter of the Vessel on April 1, 2006 pursuant to
that charter's terms. On April 1, 2006, the Front Voyager was redelivered to us
and immediately delivered to Front Voyager Inc, a wholly owned subsidiary of
Frontline, for an initial two year period (the "Initial Period") under the
Charter which provides for prepaid charterhire of $5.05 million for the two
years ended April 1, 2008. The Charter contains seven annual options to extend
the charter after April 1, 2008 and provides sufficient funds to allow us to
satisfy our obligations to make all of our mandatory sinking fund payments and
to pay all related expenses.

Under the Charter, if Front Voyager Inc. does not exercise any charter extension
option or if the Charter is otherwise terminated, Front Voyager Inc is obligated
to pay us an amount, after accounting for the termination fee, equal to the
Initial Period charterhire and all expenses incurred to recharter the vessel
that is sufficient to cover:

(a)  the principal and interest due on the Serial and Term Loans from California
     Petroleum based on the revised sinking fund schedule that took effect when
     the charter was terminated by Chevron;

(b)  any recurring fees and taxes for the vessel;

(c)  the management fee and technical advisor's fees allocated to the Company;

(d)  the amount of fees and expenses of the Indenture Trustee, trustee fees and
     designated representative fees allocable to us; and

(e)  an amount equal to at least 30% of the estimated annual amounts above to
     cover miscellaneous and unexpected expenses.

If the Charter is extended, Front Voyager Inc is to pay us, on or before the
date of the extension, an additional amount equal to the lesser of:

(i)  the amount of principal and interest on the Term Loan that will become due
     in the period of the extension; or

(ii) the amount that provides sufficient funds to pay in full all amounts due
     under the revised sinking fund schedule after taking into account prior
     amounts of prepaid charterhire, termination fees and expenses to recharter
     the vessel.

If this charter agreement is not renewed and an acceptable replacement charter
cannot be found, Frontline will solicit bids for the sale of the vessel. If
there are no bids that provide net proceeds that, together with the termination
payment, at least equal the allocated principal amount of our Term Loans plus
any interest accrued, Frontline 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, Frontline 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

(iii) charterhire payable is sufficient to make the mandatory sinking fund
      payments together with 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.

B  Business Overview

Our Vessel is a 155,000-deadweight tonne ("dwt") Suezmax oil tanker, called the
Front Voyager, which was acquired from Chevron. Suezmax tankers are medium-sized
vessels ranging from approximately 120,000 to 200,000 dwt, and of maximum
length, breadth and draft capable of passing fully loaded through the Suez
Canal. The Vessel was chartered back to Chevron until April 1, 2006 at which
time that charter was terminated. Since the termination of the charter, the
vessel has been chartered to Front Voyager Inc., a subsidiary of Frontline. The
Charter is for a period of two years with seven one year options to extend the
Charter.

Frontline is principally engaged in the marine transportation of oil products.
Frontline's vessels 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.

The Vessel is a single-hull oil carrier of and is presently registered under the
Bahamas flag. The Vessel was constructed under the supervision of Chevron and
designed to Chevron's specifications to enhance safety and reduce operating and
maintenance costs, including such features as high performance rudders, extra
steel (minimal use of high tensile steels), additional fire safety equipment,
redundant power generation equipment, extra coating and electrolytic corrosion
monitoring and protection systems and additional crew quarters to facilitate
added manning. The builder of Front Voyager was Ishikawajima do Brasil
Estaleiros S.A.

Management

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

Industry Conditions

The market for international seaborne crude oil transportation services is
highly fragmented and competitive. Seaborne crude oil transportation services
generally are provided by two main types of operators: major oil company captive
fleets (both private and state-owned) and independent shipowner fleets. In
addition, several owners and operators pool their vessels together on an ongoing
basis, and such pools are available to customers to the same extent as
independently owned and operated fleets. Many major oil companies and other oil
trading companies, also operate their own vessels and use such vessels not only
to transport their own crude oil but also to transport crude oil for third party
charterers in direct competition with independent owners and operators in the
tanker charter market. Competition for charters is intense and is based upon
price, location, size, age, condition and acceptability of the vessel and its
manager. Competition is also affected by the availability of other size vessels
to compete in the trades in which we engage.

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

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

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

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

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

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

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

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

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

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

o    changes in global crude oil production;

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

o    changes in oil production and refining capacity;

o    global and regional economic and political conditions;

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

o    environmental and other regulatory developments; and

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

The factors that influence the supply of tanker capacity include:

o    the number of newbuilding deliveries;

o    the scrapping rate of older vessels;

o    potential conversion of tankers to other purposes;

o    port or canal congestion;

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

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

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

There is no guarantee that Suezmax rates would be sufficient to meet the debt
service required if the bareboat charter entered into with Front Voyager Inc is
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 Societies

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

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

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

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

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

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

All areas subject to survey as defined by the classification society are
required to be surveyed at least once per class period, unless shorter intervals
between surveys are prescribed elsewhere. The period between two subsequent
surveys of each area must not exceed five years.

Most vessels are also drydocked every 30 to 36 months for inspection of the
underwater parts and for repairs related to inspections. If any defects are
found, the classification surveyor will issue a recommendation which must be
rectified by the ship owner within prescribed time limits.

Insurance

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

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

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

Environmental Regulations and Other Regulations

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

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

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

International Maritime Organization

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

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

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

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

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

o    all tankers are subject to enhanced inspections.

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

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

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

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


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

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

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

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

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

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

Baseline Phase Out Scheme
<TABLE>

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


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

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

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

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

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

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

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

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

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

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

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

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

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

o    bitumen, tar and their emulsions.

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

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

The operation of our Vessel is also affected by the requirements set forth in
the IMO's Management Code for the Safe Operation of Ships and Pollution
Prevention, or the ISM Code. The ISM Code requires ship owners and bareboat
charterers to maintain an extensive "Safety Management System" that includes the
adoption of a safety and environmental protection policy setting forth
instructions and procedures for safe operation and describing procedures for
emergencies. The failure of a ship owner or a bareboat charterer to comply with
the ISM Code may subject such party to increased liability, may decrease
available insurance coverage for the affected vessels and may result in a denial
of access to, or detention in certain ports. We rely on the safety management
system that has been developed by Frontline.

The ISM Code requires that vessel operators obtain a safety management
certificate for each vessel they operate. This certificate evidences compliance
by a vessel's management with ISM Code requirements for a safety management
system. No vessel can obtain a certificate unless its manager has been awarded a
Document of Compliance, issued by each flag state, under the ISM Code. All of
our vessels and their operators have received ISM certification. Front Voyager
Inc. is required to renew these documents of compliance and safety management
certificates annually.

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

The IMO continues to review and introduce new regulations. It is impossible to
predict what additional regulations, if any, may be passed by the IMO and what
effect, if any, such regulations might have on the operation of oil tankers.

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

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

Under OPA, vessel owners, operators and bareboat charterers are "responsible
parties" who are jointly, severally and strictly liable (unless the spill
results solely from the act or omission of a third party, an act of God or an
act of war) for all containment and clean-up costs and other damages arising
from oil spills from their vessels. These other damages are defined broadly to
include:

o    natural resources damages and related assessment costs;

o    real and personal property damages;

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

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

o    loss of subsistence use of natural resources.

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

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

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

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

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

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

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

o    describe crew training and drills; and

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

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

OPA does not prevent individual states from imposing their own liability regimes
with respect to oil pollution incidents occurring within their boundaries. In
fact, most U.S. states that border a navigable waterway have enacted
environmental pollution laws that impose strict liability on a person for
removal costs and damages resulting from a discharge of oil or a release of a
hazardous substance. These laws may be more stringent than United States federal
law.

Other U.S. Environmental Requirements

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

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

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

Our operations occasionally generate and require the transportation, treatment
and disposal of both hazardous and non-hazardous wastes that are subject to the
requirements of the U.S. Resource Conservation and Recovery Act or comparable
state, local or foreign requirements. In addition, from time to time we arrange
for the disposal of hazardous waste or hazardous substances at offsite disposal
facilities. If such materials are improperly disposed of by third parties, we
might still be liable for clean up costs under applicable laws.

Our Vessel currently carry cargoes to U.S. waters regularly and we believe that
it is suitable to meet OPA and other U.S. environmental requirements and that it
would also qualify for trade if chartered to serve U.S. ports.

European Union Tanker Restrictions

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

International Conventions on Civil Liability for Oil Pollution Damage

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

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

Vessel Security Regulations

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

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

o    on-board installation of ship security alert systems;

o    the development of vessel security plans; and

o    compliance with flag state security certification requirements.

The United States Coast Guard regulations, intended to align with international
maritime security standards, exempt non-U.S. vessels from MTSA vessel security
measures provided such vessels have on board a valid International Ship Security
Certificate that attests to the vessel's compliance with SOLAS security
requirements and the ISPS Code.

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

C  Organizational Structure

As described above, and also in Item 7. Major Shareholders, and Related Party
Transactions, we are a wholly owned subsidiary of California Tankers Investments
Limited, a company 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.

D  Property, Plants and Equipment

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

Item 4A.  UNRESOLVED STAFF COMMENTS

None

Item 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

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

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

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

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

ii.  management fees and technical advisor's fees,

iii. recurring fees and taxes, and

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

b)   that the Vessel will be maintained in accordance with the good commercial
     maintenance practices required by the Charters; and to arrange for vessel
     management and remarketing services to be available in case the Charter is
     not extended by Front Voyager Inc., or the Vessel is for any other reason
     returned to our possession and use.

Trend Information

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

Market Overview

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

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

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

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

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

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

Operating results

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

Total Revenues

(in thousands of $)                            2006       2005        % Change
Charter revenue                               1,894          -               -
Finance lease interest income                   361      1,381           (74)%


On April 1, 2006, the Front Voyager was redelivered from Chevron. At this time
we entered into a two year charter with Front Voyager Inc. Under the terms of
this Charter we received a $5.05 million payment in advance. The charter is
classified as an operating lease, and earnings recorded as charter revenue.
While the Front Voyager was under charter to Chevron, the charter was classified
as a capital lease. Finance lease interest income in 2006 relates only to the
period from January 1 to April 1. 2005 includes a full year of finance lease
interest income as the vessel was under capital lease during the whole year.

Expenses

 (in thousands of $)                           2006       2005        % Change
Interest expense                              1,134      1,327           (15)%
Amortization of loan discount                    11         31           (65)%


Interest payable has fallen in line with expectations, with interest payable
falling in line with the loan principal outstanding in the year. We amortize the
loan discount over the life of the Term and Serial Loans on a straight line
basis. The Serial Loan discount was fully amortized during 2005 following the
full repayment of the Serial Loans.

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

Total Revenues

 (in thousands of $)                           2005       2004        % Change
Finance lease interest income                 1,381      1,596           (13)%


As the value of the finance lease falls on an annual basis, so does the interest
received on the finance leases, therefore the above reduction is in line with
expectations.

Expenses

 (in thousands of $)                           2005       2004        % Change
Interest expense                              1,327      1,514           (12)%
Amortization of loan discount                    31         31               -


Amortization of the loan expenses relates to both the Serial and Term Loans. For
both years interest payable has fallen as the loan principal as reduced.

Liquidity and Capital Resources

As set forth above, revenues from the Charter entered into with Chevron (the
"Initial Charter") were sufficient to pay our obligations under the Term Loans.
Following the termination of the Initial Charter by Chevron we received a
termination fee of $5.05 million. The Manager acting on our behalf has secured
an acceptable replacement Charter with Front Voyager Inc. who has prepaid their
charterhire of $5.05 million on April 1, 2006. Under this Charter, Front Voyager
Inc. has the option to extend the Charter for a further seven one year periods.
For each option exercised, Front Voyager Inc. will pay charter hire sufficient
to ensure that we will avoid negative cash flow.

If Front Voyager Inc. does not exercise its right to extend the charter in the
future, the Manager, acting on our behalf, shall seek to secure an acceptable
replacement charter. If such a 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.

As discussed in Item 11, the termination of the Initial Charter with Chevron has
led to a revision of the sinking fund repayment schedule.

The final tranche of the principal balances of the Serial Loans payable by the
Company to California Petroleum was repaid on April 1, 2006.

Off-balance Sheet Arrangements

None

Tabular disclosure of contractual obligations

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

                                                                           Payments due by period

(in thousands of $)                 Less than 1 year         1-3 years       3-5 years          More than 5 years       Total
-------------------                 ----------------         ---------       ---------          -----------------       -----
<S>                                              <C>             <C>             <C>                        <C>        <C>
Term Loans (8.52%)                               570             1,290           1,520                      9,364      12,744


Total contractual obligations                    570             1,290           1,520                      9,364      12,744
</TABLE>


Critical Accounting Policies

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

Revenue Recognition

Revenue is generated from bareboat charter hire and is recorded over the term of
the charter as service is provided.

Vessel, Depreciation and Impairment

The Vessel is depreciated based on cost less estimated residual value over the
lesser of the period to the year 2015 or the useful life of the vessel. If the
estimated economic useful life is incorrect, or circumstances change and the
estimated economic useful life has to be revised, an impairment loss could
result in future periods and/or annual depreciation expense could be increased.
Our Vessel is reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Factors we consider important that could affect recoverability and trigger
impairment include significant underperformance relative to expected operating
results, new regulations that change the estimated useful economic lives of our
Vessel and significant negative industry or economic trends. In assessing the
recoverability of the Vessels' carrying amounts when an indicator of impairment
is present, we must make assumptions regarding estimated future cash flows.
These assumptions include assumptions about the spot market rates for Vessels,
the revenues the Vessel could earn under time charter, voyage charter or
bareboat charter, the operating costs of our Vessel and the estimated economic
useful life of our Vessel. In making these assumptions, the Company refers to
historical trends and performance as well as any known future factors. If our
review indicates impairment, an impairment charge is recognized based on the
difference between carrying value and fair value. Fair value is typically
established using an average of three independent valuations.

Recently Issued Accounting Standards

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

Item 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

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

Name                                      Age       Position

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

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

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

B.  Compensation

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

C.  Board Practices

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

We have neither an audit nor a remuneration committee.

D.  Employees

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

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

E.  Share Ownership

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

Item 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A  Major Shareholders

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

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

B  Related Party Transactions

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

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

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

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

In 2006, a total of $39,645 was paid under the Management and Designated
Representative Agreements.

Item 8.  FINANCIAL INFORMATION

Consolidated Statements and Other Financial Information

See Item 18 below.

Legal Proceedings

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

Item 9.  THE OFFER AND LISTING

Not Applicable

Item 10.  ADDITIONAL INFORMATION

A.  Share Capital

Not Applicable

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

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

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

C.  Material Contracts

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

D.  Exchange Controls

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

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

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

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

E.  Taxation

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

F.  Dividends and Paying Agents

Not Applicable

G.  Statement by Experts

Not Applicable

H.  Documents on Display

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

I.  Subsidiary Information

Not Applicable

Item 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative information about market risk

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

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

When the Initial Charter was terminated on April 1, 2006, the scheduled
mandatory sinking fund payments on the Term Loans were revised so that the
allocated principal amount of the Term Loans for the 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
$5.5 million.

 Scheduled payment date                                           $'000

 April 1, 2007                                                      570
 April 1, 2008                                                      620
 April 1, 2009                                                      670
 April 1, 2010                                                      730
 April 1, 2011                                                      790
 April 1, 2012                                                      850
 April 1, 2013                                                      930
 April 1, 2014                                                    1,010
 April 1, 2015                                                    6,574
                                                                 ------
                                                                 12,744
                                                                 ======

Qualitative information about market risk

We were organized solely for the purpose of the acquisition of one Vessel and
subsequently entered into a long-term agreement with Chevron which was
terminated on April 1, 2006. A replacement charter with Front Voyager Inc. has
been entered into as discussed above.

Item 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable


<PAGE>



                                     PART II

Item 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None

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

None

Item 15.  CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

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

(b) Changes in internal controls

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

Item 16. RESERVED

Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT

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

Item 16B. CODE OF ETHICS

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

Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

(in thousands of $)                              2006                     2005

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

Total                                              20                       19

a)         Audit Fees

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

b)         Audit Related Fees

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

c)         Tax Fees

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

d)         All Other Fees

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

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

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

Not Applicable

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

Not Applicable


<PAGE>


                                    PART III

Item 17.    FINANCIAL STATEMENTS

Not Applicable

Item 18.    FINANCIAL STATEMENTS

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

                                                                          Page


Report of Independent Registered Public Accounting Firm                   F-1

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

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

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

Notes to the Financial Statements                                         F-5

Item 19.  EXHIBITS

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

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

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

13.2 Certification of the Principal Financial Officer pursuant to 18 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, 2006 and 2005 and the related
statements of operations and retained earnings, and cash flows for each of the
three years in the period ended December 31, 2006. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

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

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



/s/ Grant Thornton LLP
-------------------------

New York, New York
June 22, 2007

<PAGE>

<TABLE>

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


                                                         2006                  2005                  2004
                                                         ----                  ----                  ----
<S>                                                     <C>                   <C>                   <C>
Operating revenues
        Charter revenue                                 1,894                     -                     -
        Finance lease interest income                     361                 1,381                 1,596

        Total operating revenues                        2,255                 1,381                 1,596


Operating expenses
        Administrative expenses                         (134)                  (97)                  (72)

        Total operating expenses                        (134)                  (97)                  (72)

Net operating income                                    2,121                 1,284                 1,524

Other operating income / (expenses)
        Interest income                                   403                    33                    29
        Interest expense                              (1,134)               (1,327)               (1,514)
        Depreciation                                     (44)                     -                     -
        Amortization of deferred charges                 (11)                  (31)                  (31)

        Net other expenses                              (786)               (1,325)               (1,516)

Net income / (loss)                                     1,335                  (41)                     8

Retained earnings at the start of year                  1,241                 1,282                 1,274

Retained earnings at the end of year                    2,576                 1,241                 1,282



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



<PAGE>

<TABLE>

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

<CAPTION>
                                                                            2006                       2005
                                                                            ----                       ----
<S>                                                                        <C>                        <C>
ASSETS                                                                                          (As restated)
Current Assets
        Restricted cash                                                   10,297                      1,733
        Current portion of net investment in finance lease                     -                      2,036
        Interest receivable                                                    -                        312
        Other current assets                                                  45                          3

Total current assets                                                      10,342                      4,084
Vessel                                                                     8,408                          -
Net investment in finance lease, less current portion                          -                     12,727
Deferred charges                                                              39                         50

Total assets                                                              18,789                     16,861


LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
        Short-term debt and current portion of long-term debt                570                      2,530
        Deferred charter revenue                                           3,156                          -
        Accrued interest                                                     271                        320
        Other current liabilities                                             42                         26

Total current liabilities                                                  4,039                      2,876
        Long-term debt                                                    12,174                     12,744

Total liabilities                                                         16,213                     15,620


Commitments and contingencies

Stockholder's equity
        Unclassified stock: 100 shares of $1 par value                         -                          -
        Retained earnings                                                  2,576                      1,241

Total stockholder's equity                                                 2,576                      1,241

Total liabilities and stockholder's equity                                18,789                     16,861


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

<PAGE>

<TABLE>

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

                                                                             2006            2005                2004
                                                                             ----             ----                ----
<S>                                                                         <C>               <C>                <C>
                                                                                       (As restated)       (As restated)
Net income (loss)                                                           1,335               (41)                   8
        Adjustments to reconcile net income (loss) to net cash
        provided by operating activities:
        Depreciation                                                           44                  -                   -
        Amortization of deferred charges                                       11                 31                  31
Changes in operating assets and liabilities:
        Interest receivable                                                   312                 55                  53
        Other current assets                                                 (42)                  7                   6
        Accrued interest payable                                             (49)               (48)                (52)
        Other current liabilities                                              16                (2)                   -
        Deferred charter revenue                                            3,156                  -                   -

Net cash provided by operating activities                                   4,783                  2                  46


Investing activities
        Finance lease payments                                              1,261              2,526               2,504
        Termination fee received                                            5,050                  -                   -
        (Placement) maturity of restricted cash                           (8,564)                  2                (20)

Net cash (used in) provided by investing activities                       (2,253)              2,528               2,484


Financing activities
        Repayments of debt                                                (2,530)            (2,530)             (2,530)

Net cash used in financing activities                                     (2,530)            (2,530)             (2,530)


Net increase (decrease) in cash and cash equivalents                            -                  -                   -
Cash and cash equivalents at beginning of year                                  -                  -                   -
Cash and cash equivalents at end of year                                        -                  -                   -


Supplemental disclosure of cash flow information:
        Interest paid                                                       1,182              1,375               1,567

</TABLE>

Significant Noncash Investing and Financing Activities

On April 1, 2006 following the termination of the Initial Charter with Chevron,
we transferred $8.45 million, being the value of the vessel Front Voyager at
that date less the $5.05 million termination fee, from Investment in Finance
Lease to Vessels. (See Note 5.)

The accompanying notes are an integral part of these financial statements

<PAGE>

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

1.  Description of Business

CalPetro Tankers (Bahamas III) Limited (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. These entities (the
"Owners") were organized as special purpose companies for the purpose of
acquiring one of four oil tankers (each a "Vessel", together the "Vessels") from
Chevron Transport Corporation ("Chevron") which were concurrently chartered on
long-term charter agreements back to Chevron. California Petroleum Transport
Corporation, acting as agent on behalf of the Owners, issued as full recourse
obligations Term Mortgage Notes and Serial Mortgage Notes (the "Serial and Term
Notes") and subsequently loaned the proceeds to the Owners in the form of Term
Mortgage Loans and Serial Mortgage Loans (the "Term Loans" and "Serial Loans",
respectively) to fund the acquisition of the Vessels from Chevron. The final
tranche of the principal balances of the Serial Loans payable by the Company to
California Petroleum Transport Corporation matured on April 1, 2006.

On April 21, 2005, pursuant to the bareboat charter dated April 5, 1995 between
the Company and Chevron, the Company received irrevocable notice from Chevron
regarding the termination of the bareboat charter of its Vessel Front Voyager,
on April 1, 2006. Under the terms of the bareboat charter between Chevron and
the Company, Chevron paid a termination fee of $5,050,000. As manager to the
Company, Frontline Ltd ("Frontline") was obligated to find an acceptable
replacement charter as defined by the indenture governing the issue of the Notes
that were issued on behalf of the Company and three affiliated companies.
Pursuant to a bareboat charter agreement between the Company and Front Voyager
Inc, a wholly owned subsidiary of Frontline, Front Voyager Inc agreed to charter
the Front Voyager as of April 1, 2006 for an initial two-year period (the
"Initial Period") with a further seven annual optional periods. The charterhire
payable for the Initial Period was $5,050,000 which was prepaid in full on March
31, 2006.

The Front Voyager is a single hull vessel. The United States, the European Union
and the International Maritime Organization, or the IMO, have all imposed limits
or prohibitions on the use of these types of tankers in specified markets after
certain target dates which range from 2010 to 2015. In December 2003, the Marine
Environmental Protection Committee of the IMO adopted a proposed amendment to
the International Convention for the Prevention of Pollution from Ships to
accelerate the phase out of single hull tankers from 2015 to 2010 unless the
relevant flag states extend the date to 2015. Management do not know whether the
non-double hull vessel will be subject to this accelerated phase-out, but this
change could result in the Vessel being unable to trade in many markets after
2010. Moreover, the IMO may still adopt regulations in the future that could
adversely affect the useful life of the non-double hull vessel as well as the
Owner's ability to generate income which will affect the Owner's ability to
service its debt to us.

The Company does not have any other source of capital for payment of the Term
Loans. The only sources of funds with respect to its obligation of the Company
are the payments by Front Voyager Inc. and investment income. We do not have any
other source of capital for payment of the Term Loans.

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

2.  Principal Accounting Policies

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

(a)       Basis of presentation

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

(b)       Deferred charges

          Deferred charges comprise expenses incurred in connection with the
          structuring of the financing transactions and issuance of debt. Such
          expenses are being amortized over the life of the debt on a straight
          line basis.

(c)       Revenue and expense recognition

          Revenues and expenses are recognised on the accrual basis. Revenue is
          substantially generated from bareboat charter hires and is recorded
          over the term of the charter as service is provided. Charter revenue
          received in advance is recorded as deferred charter revenue until
          such time as the service is provided. Interest payable on the Term
          Loans is accrued on a daily basis.

(d)       Vessels and depreciation

          Vessels are stated at cost less accumulated deprecation. Depreciation
          is calculated based on cost less estimated residual value, using the
          straight-line method, over the useful life of the vessel. The useful
          life of our vessel is deemed to be 8 years and 11 months.

(e)       Investment in finance leases

          Up to April 1, 2006 the Company chartered out its vessel under an
          agreement that was classified as a direct financing lease. The
          minimum payments under the charter agreement were 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 was
          recorded as unearned income. Throughout the term of the charter
          agreement, the Company recorded as revenue interest income and
          unearned income, which was amortised 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.

(f)       Financial Instruments

          In determining the fair value of its financial instruments, the
          Company uses a variety of methods and assumptions that are based on
          market conditions and risks existing at each balance sheet date. For
          the majority of financial instruments, including long-term debt,
          standard market conventions and techniques are used to determine fair
          value. All methods of assessing fair value result in a general
          approximation of value, and such value may never actually be
          realised.

(g)       Taxation

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

(h)       Impairment of long-lived assets

          The carrying value of long-lived assets that are held and used by the
          Company are reviewed whenever events or changes in circumstances
          indicate that the carrying amount of an asset may no longer be
          appropriate. The Company assesses recoverability of the carrying
          value of the asset by estimating the future net cash flows expected
          to result from the asset, including eventual disposal. If the future
          net cash flows are less than the carrying value of the asset, an
          impairment loss is recorded equal to the difference between the
          asset's carrying value and fair value. In addition, long-lived assets
          to be disposed of are reported at the lower of carrying amount or
          fair value less estimated costs to sell.

Recently issued Accounting Standards

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

Restatement of balance sheet and statement of cash flow

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

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

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


<PAGE>

<TABLE>

                                                                             Year ended December 31, 2005
                                                      As previously reported                 Adjustments            As restated
                                                      ----------------------                 -----------            -----------
<S>                                                                    <C>                      <C>                 <C>
(in thousands of $)

Net cash provided by operating activities                                  2                           -                      2
Net cash provided by investing activities                              2,526                           2                  2,528
Net cash used in financing activities                                (2,530)                           -                (2,530)
Net increase in cash and cash equivalents                                (2)                           2                      -
Cash and cash equivalents at start of the year                         1,735                     (1,735)                      -
Cash and cash equivalents at end of the year                           1,733                     (1,733)                      -

                                                                             Year ended December 31, 2004
                                                      As previously reported                 Adjustments            As restated
                                                      ----------------------                 -----------            -----------

(in thousands of $)

Net cash provided by operating activities                                 46                           -                     46
Net cash provided by investing activities                              2,504                        (20)                  2,484
Net cash used in financing activities                                (2,530)                           -                (2,530)
Net increase in cash and cash equivalents                                 20                        (20)                      -
Cash and cash equivalents at start of the year                         1,715                     (1,715)                      -
Cash and cash equivalents at end of the year                           1,735                     (1,735)                      -
</TABLE>

3.   Restricted Cash

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

4.   Leases

     The minimum future revenues to be received on bareboat charters with are
     accounted for as operating leases as of December 31, 2006 are as follows:

     Year ending December 31,
     (in thousands of $)
     2007                                               2,525
     2008                                                 631
     --------------------------------------------------------
     Total minimum lease revenues                       3,156
     ========================================================

     The cost and accumulated depreciation of vessels leased to related parties
     at December 31, 2006 were $8.5 million and $0.04 million respectively.
     There were no comparative balances at December 31, 2005 as the Vessel was
     accounted for as a finance lease investment.

5.   Investment in Finance Lease

     The Company has historically chartered its vessel on a long term bareboat
     charter (the "Initial Charter") to Chevron which was classified and
     recorded as a direct finance lease. As outlined in Note 1 the Initial
     Charter terminated on April 1, 2006. Under the bareboat agreement with
     Chevron a termination payment was made of $5.05 million on the April 1,
     2006 and the Company recorded the carrying value of the lease net of
     termination payment as an owned Vessel.

     The following schedule shows the movement in the net investment in finance
     lease to December 31, 2006:

     (in thousands of $)
     Opening Balance - January 1, 2006                                 14,763
     Total lease payments received in 2006                            (1,311)
     Writeback of deferred interest                                        50
     Termination fee                                                  (5,050)
     Transfer to Vessels                                              (8,452)
     ------------------------------------------------------------------------
     Net investment in finance lease                                        -
     ========================================================================

     Following the termination of the Initial Charter by Chevron, the Manager,
     acting on behalf of the Company, has secured an acceptable replacement
     charter for the Vessel with Front Voyager Inc. This charter runs for two
     years until April 1, 2008 and is classified as an operating lease.

6.   Vessel

     (in thousands of $)                           2006                   2005
     Reinstatement of vessel                      8,452                      -
     Accumulated depreciation                      (44)                      -
     -------------------------------------------------------------------------
     Net book value at end of year                8,408                      -
     =========================================================================

     Upon termination of the Chevron Charter the Front Voyager was returned to
     the Company and reclassified as a fixed asset.

     Depreciation expense was $0.04 million, $nil and $nil for the years ended
     December 31, 2006, 2005 and 2004, respectively.

7.   Deferred Charges

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

     (in thousands of $)                           2006                   2005
     Debt arrangement fees                          384                    384
     Accumulated amortization                     (345)                  (334)
     -------------------------------------------------------------------------
                                                     39                     50
     =========================================================================

8.   Debt

     (in thousands of $)                           2006                   2005
     7.62% Serial Loan matured April 1, 2006           -                 2,530
     8.52% Term Loan due 2015                    12,744                 12,744
     -------------------------------------------------------------------------
     Total Debt                                  12,744                 15,274
     Less: current portion                        (570)                (2,530)
                                                 12,174                 12,744
     =========================================================================

     The final tranche of the Serial Loans was paid on April 1, 2006.

     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.

     When the Initial Charter was terminated on April 1, 2006, the scheduled
     mandatory sinking fund payments on the Term Loans were revised so that the
     allocated principal amount of the Term Loans for the 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 $5.05 million.

     The table below provides the revised scheduled sinking fund redemption
     amounts and final principal payment of the Allocated Principal Amount of
     the Term Loans following termination of the related Initial Charter on
     April 1, 2006:

     Scheduled payment date                                              $'000

     April 1, 2007                                                         570
     April 1, 2008                                                         620
     April 1, 2009                                                         670
     April 1, 2010                                                         730
     April 1, 2011                                                         790
     April 1, 2012                                                         850
     April 1, 2013                                                         930
     April 1, 2014                                                       1,010
     April 1, 2015                                                       6,574
     -------------------------------------------------------------------------
                                                                        12,744
     =========================================================================

     The Term Notes are collateralised by a first preference mortgage on the
     Vessel to California Petroleum Transport Corporation. The earnings and
     insurance relating to the Vessel have been collaterally assigned pursuant
     to an Assignment of Earnings and Insurance to California Petroleum
     Transport Corporation, which in turn has assigned such Assignment of
     Earnings and Insurance to the Collateral Trustee. The Front Voyager Inc.
     Charter relating to the Vessel has been collaterally assigned pursuant to
     the Assignment of Front Voyager Inc. Charter 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.

9.   Share Capital

     Authorized share capital:
                                                   2006                   2005
                                                   ----                   ----
     1,000 shares of $1 par value                 1,000                  1,000

     Issued and outstanding share capital:

                                                   2006                   2005
                                                   ----                   ----
     100 common shares of $1 par value              100                    100

10.  Financial Instruments

     Fair values

     The carrying value and estimated fair value of the Company's financial
     instruments at December 31, 2006 and 2005 are as follows:
<TABLE>
                                                                2006                  2006                 2005             2005
      (in thousands of $)                             Carrying Value            Fair Value       Carrying Value       Fair Value
      -------------------                             --------------            ----------       --------------       ----------
      <S>                                                     <C>                   <C>                  <C>              <C>
      Restricted cash                                         10,297                10,297                1,733            1,733
      7.62% Serial Loans maturing April 1, 2006                    -                     -                2,530            2,530
      8.52% Term Loans due 2015                               12,744                13,588               12,744           14,273
</TABLE>

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

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

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

     Concentrations of risk

     As at December 31, 2006 the Company's only source of funds for the
     repayment of the principal and interest on the Loans are from the
     termination payment received from Chevron of $5,050,000, the charterhire
     paid by Front Voyager Inc. of $5,050,000 to the period ended April 1, 2008
     and the proceeds, if any, from the sale of the Vessel. Accordingly, the
     Company's ability to service its obligations on the Loans is wholly
     dependent upon Frontline's ability to secure an acceptable replacement
     charter should Front Voyager Inc. chose not to extend the Charter.

11.  Commitments and Contingencies

     The Term Loans are collateralized by a first preference mortgage on the
     Vessel to California Petroleum Transport Corporation. The earnings and
     insurance relating to the Vessel have been collaterally assigned pursuant
     to an Assignment of Earnings and Insurance to California Petroleum
     Transport Corporation, which in turn has assigned such Assignment of
     Earnings and Insurance to the Collateral Trustee. The Front Voyager Inc.
     Charter relating to the Vessel has been collaterally assigned pursuant to
     the Assignment of Front Voyager Inc. Charter 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.

12.  Related Party Transactions

     Charterhire revenue

     The Company entered into a two year bareboat charter agreement with Front
     Voyager Inc. on April 1, 2006. Under this agreement charterhire of
     $5,050,000 was prepaid for entire period on commencement of the Charter.
     The following table outlines the revenue and payments related to this
     agreement during the year:

     (in thousands of $)
     Deferred charterhire revenue - January 1, 2006                  -
     Charterhire revenue received from Front Voyager Inc.        5,050
     Charterhire revenue recognised in 2006                    (1,894)
     -----------------------------------------------------------------
     Deferred charterhire revenue - December 31, 2006            3,156
     =================================================================

     The Charter contains seven annual options to extend the charter after April
     1, 2008 and provides sufficient funds to allow the Company to satisfy its
     obligations to make mandatory sinking fund payments and to pay all related
     expenses.

     Under the Charter, if Front Voyager Inc. does not exercise any charter
     extension option or if the Charter is otherwise terminated, Front Voyager
     Inc. is obligated to pay the Company an amount, after accounting for the
     termination fee, Initial Period charterhire and all expenses incurred to
     recharter the vessel that is sufficient to cover:

     o    the principal and interest due on the serial and term loans from
          California Petroleum based on the revised sinking fund schedule that
          took effect when the charter was terminated by Chevron;

     o    any recurring fees and taxes for the vessel;

     o    the management fee and technical advisor's fees allocated to the
          Company;

     o    the amount of fees and expenses of the Indenture Trustee, trustee fees
          and designated representative fees allocable to the Company; and

     o    an amount equal to at least 30% of the estimated annual amounts above
          to cover miscellaneous and unexpected expenses.

     If the Charter is extended, Front Voyager Inc. is to pay the Company, on or
     before the date of the extension, an additional amount equal to the lesser
     of:

     o    the amount of principal and interest on the term loan that will become
          due in the period of the extension; or

     o    the amount that provides sufficient funds to pay in full all amounts
          due under the revised sinking fund schedule after taking into account
          prior amounts of prepaid charterhire, termination fees and expenses to
          recharter the vessel.

     Management Fee

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

     Under the terms of the management agreement, the Management Fee consists of
     a fee of $13,625 initially per annum for the Vessel, along with a fee of
     $3,000 covering all four Vessels, 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.

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

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


<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 26, 2007