UNITED
STATES
  SECURITIES
AND EXCHANGE COMMISSION
 Washington,
DC. 20549
  FORM
20-F
  (Mark
One)
  o
              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, 2007
  OR
  o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d)OF
      THE SECURITIES EXCHANGE ACT OF 1934
 
 OR
  o
              SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934Date of event requiring this
      shell company report
    ______________________________________
 
  For
      the transition period fromCommission
      file number
              033-79220-01
 
 CALPETRO
      TANKERS (BAHAMAS I) LIMITED(Exact
      name of Registrant as specified in its charter)CALPETRO
      TANKERS (BAHAMAS I) LIMITED(Translation
      of Registrant’s name into English)Bahamas(Jurisdiction
      of incorporation or organization)Mareva
      House, 4 George Street, PO Box N-3937, Nassau Bahamas(Address
      of principal executive offices)Georgina
      Sousa, Tel : (1) 441 295 6935 Fax : (1) 441 295 3494,
      Par-la-Ville Place,
                14
      Par-la-Ville Road, Hamilton, HM 08, Bermuda ,(Name,
      Telephone, E-mail and/or Facsimile number and Address of Company Contact
      Person)
  Securities
registered or to be registered pursuant to section 12(b) of the Act
   1
    Title
      of each class
              
              Name
      of each exchange on which registeredNone
              
              Not
      applicable
 
 Securities
registered or to be registered pursuant to section 12(g) of the
Act.
  None(Title
      of Class)
 Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act.
  None(Title
      of Class)Indicate
      the number of outstanding shares of each of the issuer’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 o No x
  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 o No x
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
  Yes x No o
  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  o
              Accelerated
      filer  o
              Non-accelerated
      filer  x
 Indicate
by check mark which financial statement item the registrant has elected to
follow.
  Item 17
o   Item
18 x
  Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
  U.S. GAAP x
                International Financial Reporting
      Standards   o
                Other o
   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 o   No x
 
  2
 
 INDEX
TO REPORT ON FORM 20-F
 
 PagePART
      IItem
      1.
              Identity
      of Directors, Senior Management and Advisers
              5Item
      2.
              Offer
      Statistics and Expected Timetable
              5Item
      3.
              Key
      Information
              5Item
      4.
              Information
      on the Company
              9Item
      4A.
              Unresolved
      Staff Comments
              19Item
      5.
              Operating
      and Financial Review and Prospects
              19Item
      6.
              Directors,
      Senior Management and Employees
              24Item
      7.
              Major
      Shareholders and Related Party Transactions
              24Item
      8.
              Financial
      Information
              25Item
      9.
              The
      Offer and Listing
              25Item
      10.
              Additional
      Information
              25Item
      11.
              Quantitative
      and Qualitative Disclosures about Market Risk
              26Item
      12.
              Description
      of Securities Other than Equity Securities
              26PART
      IIItem
      13.
              Defaults,
      Dividend Arrearages and Delinquencies
              27Item
      14.
              Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
              27Item
      15.
              Controls
      and Procedures
              27Item
      16.
              Reserved
              28Item
      16A.
              Audit
      Committee Financial Expert
              28Item
      16B.
              Code
      of Ethics
              28Item
      16C.
              Principal
      Accountant Fees and Services
              28Item
      16D.
              Exemptions
      from the Listing Rules for Audit Committees
              29Item
      16E.
              Purchases
      of Equity Securities by the Issuer and Affiliated Purchasers
              29PART
      IIIItem
      17.
              Financial
      Statements
              30Item
      18.
              Financial
      Statements
              30Item
      19.
              Exhibits
              31
 
 
 3
 
 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 I) 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 I) Limited with the Securities
and Exchange Commission.
 Please
note: In this section, “we”, “us” and “our” all refer to the
Company.
  
 
 4
 
 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 I) Limited. We use the term deadweight ton, or dwt, in describing the
size of vessels. Dwt, expressed in metric tons, each of which is equivalent to
1,000 kilograms, refers to the maximum weight of cargo and supplies that a
vessel can carry. Unless otherwise indicated, all references to “USD” and “$” in
this report are to, and amounts are presented in, U.S. dollars.
 
 A.
Selected Financial Data
 
 The
selected statement of operations data of the Company with respect to the fiscal
years ended December 31, 2007, 2006, and 2005, and the selected balance sheet
data at December 31, 2007 and 2006, 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, 2004 and
2003 and the selected balance sheet data at December 31, 2005, 2004 and 2003
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.
 
 Fiscal
      Years ended December 31,2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003(in
      thousands of $, except share data)Statement
      of operations dataTotal
      operating revenues
              
              
              2,352
              
              
              
              2,691
              
              
              
              2,982
              
              
              
              3,269
              
              
              
              3,577Net
      (loss) / income
              
              
              (93
              )
              
              
              (23
              )
              
              
              (75
              )
              
              
              (31
              )
              
              
              (61
              )Per
      share data:Dividends
      per share
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Balance
      sheet data:Total
      assets
              
              
              28,806
              
              
              
              32,313
              
              
              
              35,749
              
              
              
              39,254
              
              
              
              42,721Current
      portion loans
              
              
              3,355
              
              
              
              3,355
              
              
              
              3,355
              
              
              
              3,355
              
              
              
              5,210Long-term
      loans
              
              
              23,487
              
              
              
              26,842
              
              
              
              30,197
              
              
              
              33,552
              
              
              
              35,052Stockholder’s
      equity
              
              
              1,340
              
              
              
              1,433
              
              
              
              1,456
              
              
              
              1,531
              
              
              
              1,562Number
      of shares
              
              
              100
              
              
              
              100
              
              
              
              100
              
              
              
              100
              
              
              
              100
 
 B.
Capitalization and Indebtedness
 
 Not
Applicable.
 
 5
 
 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 Cygnus Voyager (the “Vessel”) is currently operated under a bareboat
charter (the “Initial Charter”) to Chevron Transport Corporation
(“Chevron”).  The term of the Initial Charter expires on April 1,
2015. Chevron’s option to terminate the charter on April 1, 2009, has now passed
as no notice had been given 12 months prior to the option date.
 
 If the
tanker industry is depressed in the future when our Vessel’s Initial Charter
expires or is terminated, our earnings and available cash flow may
decrease.  Our ability to re-charter our Vessel at the expiration or
termination of its Initial 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
operate in the highly competitive international tanker market which could affect
our position when the Initial Charter expires or is terminated by
Chevron
 
 The
operation of tanker vessels and transportation of crude and petroleum products
is an extremely competitive business. During the term of the existing Initial
Charter with Chevron, we are not exposed to the risk associated with this
competition.  At the end of the Initial Charter or in the event that
Chevron terminates the Initial 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 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. 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.
 
 
 6
 
 Many of
these requirements are designed to reduce the risk of oil spills and other
pollution, and our compliance with these requirements can be costly. These
requirements also can affect the resale value or useful lives of our vessel,
require a reduction in cargo-capacity, ship modifications or operational changes
or restrictions, lead to decreased availability of insurance coverage for
environmental matters or result in the denial of access to certain
jurisdictional waters or ports, or detention in, certain ports.
 
 Under
local, national and foreign laws, as well as international treaties and
conventions, we could incur material liabilities, including cleanup obligations,
natural resource damages and third-party claims for personal injury or property
damages, in the event that there is a release of petroleum or other hazardous
substances from our vessel or otherwise in connection with our current or
historic operations. We could also incur substantial penalties, fines and other
civil or criminal sanctions, including in certain instances seizure or detention
of our vessel, as a result of violations of or liabilities under environmental
laws, regulations and other requirements.
 
 For
example, OPA affects all vessel owners shipping oil to, from or within the
United States.  OPA allows for potentially unlimited liability without
regard to fault for owners, operators and bareboat charterers of vessels for oil
pollution in United States waters. Similarly, the International Convention on
Civil Liability for Oil Pollution Damage, 1969, as amended, which has been
adopted by most countries outside of the United States, imposes liability for
oil pollution in international waters. OPA expressly permits individual states
to impose their own liability regimes with regard to hazardous materials and oil
pollution incidents occurring within their boundaries. Coastal states in the
United States have enacted pollution prevention liability and response laws,
many providing for unlimited liability.
 
 Compliance
with extensive and changing environmental laws and other regulations may entail
significant expenses including expenses for ship modifications and changes in
operating procedures and therefore affect the operation of the Vessel. Although
Chevron is responsible for all operational matters and bears all these expenses
during the term of the Initial Charter, these expenses could have an adverse
effect on our business operations at any time after the expiration or
termination of the Initial Charter or in the event Chevron fails to make a
necessary payment.
 
 We
may not have adequate insurance in the event the existing charter is
terminated
 
 There are
a number of risks associated with the operation of ocean-going vessels,
including mechanical failure, collision, property loss, cargo loss or damage and
business interruption due to political circumstances in foreign countries,
hostilities and labor 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 Initial Charter, Chevron
bears all risks associated with the operation of our Vessel including the total
loss of the Vessel. However, we cannot assure holders of the Term Loans, defined
below, that we will adequately insure against all risks or in the event the
initial Charter expires or is terminated. We may not be able to obtain adequate
insurance coverage at reasonable rates for our Vessel in the future and the
insurers may not pay particular claims.
 
 We
are highly dependent on Chevron and Chevron Corporation
 
 We are
highly dependent on the performance by Chevron of its obligations under the
Initial Charter and by its guarantor, Chevron Corporation, of its obligations
under its guarantee. A failure by Chevron and Chevron Corporation to perform
their obligations under the Initial Charter could result in our inability to
service the Term Loans.  If the Notes holders had to enforce the
mortgages securing the Notes, defined below, they may not be able to recover the
principal and interest owed to them.
 
 7
 
 
 We
may not be able to pay down our debt in the future
 
 Currently,
we must dedicate a large portion of our cash flow from operations to satisfy our
debt service obligations. Our ability to pay interest on, and other amounts due
in respect of, our Term Loan will depend on our future operating performance,
prevailing economic conditions and financial, business and other factors, many
of which are beyond our control. There can be no assurance that our cash flow
and capital resources will be sufficient for payment of our indebtedness in the
future. If we are unable to service our indebtedness or obtain additional
financing, as needed, this could have a material adverse effect on the holders
of the Term Loans, defined below.
 
 Governments
could requisition our Vessel during a period of war or emergency, resulting in a
loss of earnings
 
 A
government could requisition for title or seize our Vessel. Requisition for
title occurs when a government takes control of a vessel and becomes her
owner.  Also, a government could requisition our Vessel for hire.
Requisition for hire occurs when a government takes control of a vessel and
effectively becomes her charterer at dictated charter rates. Generally,
requisitions occur during a period of war or emergency. This amount could be
materially less than the charterhire that would have been payable otherwise. In
addition, we would bear all risk of loss or damage to a vessel under requisition
for hire. Government requisition of one or more of our vessels would negatively
impact our revenues and therefore impact our ability to service our
debt.
  The
Notes may not be as liquid as other securities with established trading markets,
which may affect the value of the Notes and your ability to trade
them
 
 The
Notes, defined below are not listed on any national securities exchange or
traded on the NASDAQ National Market and have no established trading market.
Consequently, the Notes could trade at prices that may be higher or lower than
their principal amount or purchase price, depending on many factors, including
prevailing interest rates, the market for similar notes and warrants, and our
financial performance. The placement agents for the Notes currently make a
market for the Notes, but are not obligated to do so and may discontinue their
market making activity at any time. In addition, their market making activity is
subject to the limits imposed by the Securities Act and the Exchange Act. We
cannot assure that an active trading market will exist for the Notes or that any
market for the Notes will be liquid.
 
 Substantial
leverage and debt service could affect our ability to grow and service our debt
obligations
 
 We are
highly leveraged. As of December 31, 2007, we had $26.8 million in total
indebtedness outstanding and stockholders’ equity of $1.3 million. The degree to
which we are leveraged could have important consequences for the holders of the
Notes, including:
 
 ·
              we
      may have trouble withstanding competitive pressures and responding to
      changing business conditions;
 
 ·
              we
      may be more vulnerable than others in the event of a downturn in general
      economic conditions or in our business;
and
 
 ·
              we
      may be more highly leveraged than other tanker owners with which we
      compete, which may put us at a competitive
  disadvantage.
 
 8
 
 
 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 Initial Charter with
Chevron, we expect that the only source of operating revenue from which we may
pay principal and interest on the Term Loans will be from this
Charter.
 
 Item
4.  INFORMATION ON THE COMPANY
 
 A. 
History and Development of the Company
 
 CalPetro
Tankers (Bahamas I) Limited was incorporated in the Bahamas on May 13, 1994
together with two other companies: CalPetro Tankers (Bahamas II) Limited and
CalPetro Tankers (Bahamas III) Limited.  In addition, CalPetro Tankers
(IOM) Limited was incorporated in the Isle of Man. Together these companies are
referred to as the “Owners”. Each of the Owners was organized as a special
purpose company for the purpose of acquiring one of four oil tankers (each a
“Vessel”, together the “Vessels”) from Chevron.  We are wholly-owned
by California Tankers Investments Limited, a company organized under the laws of
the Bahamas, which is in turn a wholly-owned subsidiary of CalPetro Holdings
Limited, an Isle of Man company. CalPetro Holdings Limited is a wholly-owned
subsidiary of Independent Tankers Corporation (“ITC”), a Cayman Islands company.
In February, 2008, Frontline Ltd. (“Frontline”), a Bermuda company listed on the
New York Stock Exchange (‘FRO’), established an intermediary holding company,
Independent Tankers Corporation Limited (“ITCL”) to hold their investment in ITC
and distributed 17.53% of ITCL’s common shares to Frontline’s ordinary
shareholders in March 2008.
  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
$41,410,000 of the Serial Loans and $40,262,000 of the Term Loans and acquired
our Vessel, the Cygnus Voyager, as described below. We engage in no business
other than the ownership and Initial Chartering of our Vessel and activities
resulting from or incidental to such ownership and
Initial  Chartering.
 
 Our
principal executive offices are located at Mareva House, 4 George
Street, PO Box N-3937, Nassau, Bahamas.
 
 B  Business
Overview
 
 Our
Vessel, the Cygnus Voyager, is a 150,000 dwt Suezmax oil tanker, 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 is initially chartered to Chevron for a term expiring on April 1, 2015,
subject to Chevron’s right to terminate the Initial Charter on April 1, 2009.
For this optional termination date a non-binding notice of the intention to
exercise the option to terminate the Initial Charter must be given at least
twelve months in advance, with irrevocable notice to be given seven months prior
to the termination date.
Chevron is required to pay us a termination payment (the “Termination Payment”)
of $9.97 million on or prior to the termination date. In accordance with terms
of the charterhire, no notice has been received within the 12 month period, so
Chevron is prevented from invoking its right to terminate on April 1, 2009,
therefore, the charter continues to April 1, 2015.
 
 9
 
 Chevron
is principally engaged in the marine transportation of oil and refined petroleum
products.  Chevron’s primary transportation routes are from the Middle
East, Indonesia, Mexico, West Africa and the North Sea to ports in the United
States, Europe, the United Kingdom and Asia. Chevron has advised us that it
expects to use the Vessel worldwide as permitted under the Initial Charter. The
obligations of Chevron under the Initial Charter are guaranteed by Chevron
Corporation, a major international oil company, pursuant to a guarantee (the
“Chevron Guarantee”). Chevron is an indirect, wholly-owned subsidiary of Chevron
Corporation.
 
 The
Vessel is a double-hull oil carrier and is presently registered under the
Bahamas flag. The Vessel was constructed under the supervision of Chevron and
designed to Chevron’s specifications to enhance safety and reduce operating and
maintenance costs, including such features as high performance rudders, extra
steel (minimal use of high tensile steels), additional fire safety equipment,
redundant power generation equipment, extra coating and electrolytic corrosion
monitoring and protection systems, additional crew quarters to facilitate added
manning and a double-hull design patented by one of Chevron Corporation’s
subsidiaries. The builder of the Vessel was Ishikawajima Harima Heavy Industries
Co., Ltd.
 
 Management
 
 On March
31, 1999, Frontline became our Manager and Technical Advisor pursuant to an
assignment of our management agreement ("Management Agreement"). Under the
Management Agreement, Frontline provides administrative, management and advisory
services to us along with technical advisory services. If the Initial Charter is
terminated by Chevron, Frontline, acting on our behalf, will provide all
technical management services and will attempt to find an acceptable replacement
charter for the Vessel.  If an acceptable replacement charter is
commercially unavailable, the Manager will solicit bids for the sale or
re-charter of the Vessel. The Manager’s ability to obtain an acceptable
replacement charter, to sell the Vessel or re-charter 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.
 
 Environmental
and Other Regulations
 
 Government
regulation significantly affects the ownership and operation of our tanker. We
are subject to international conventions, national, state and local laws and
regulations in force in the countries in which our vessel may operate or are
registered. Compliance with such laws, regulations and other requirements
entails significant expense, including vessel modifications and implementation
of certain operating procedures.
 
 A variety
of government and private entities subject our vessel to both scheduled and
unscheduled inspections. These entities include the local port authorities
(United States Coast Guard, harbor master or equivalent), classification
societies, flag state administrations (country of registry) and charterers,
particularly terminal operators and oil companies. Certain of these entities
require us to obtain permits, licenses and certificates for the operation of our
tanker. Failure to maintain necessary permits, certificates or approvals could
require us to incur substantial costs or temporarily suspend the operation of
our vessel.
  We
believe that the heightened level of environmental and quality concerns among
insurance underwriters, regulators and charterers is leading to greater
inspection and safety requirements on all vessels and may accelerate the
scrapping of older vessels throughout the tanker industry. Increasing
environmental concerns have created a demand for vessels that conform to
stricter environmental standards. Our charterers, Chevron, are required to
maintain operating standards for our vessel to emphasize operational safety,
quality maintenance, continuous training of our officers and crews and
compliance with United States and international regulations. We believe that the
operation of our vessel is in substantial compliance with applicable
environmental laws and regulations; however, because such laws and regulations
are frequently changed and may impose increasingly stringent requirements, we
cannot predict the ultimate cost of complying with these requirements, or the
impact of these requirements on the resale value or useful life of our tanker.
In addition, a future serious marine incident that results in significant oil
pollution or otherwise causes significant adverse environmental impact could
result in additional legislation or regulation that could negatively affect our
profitability.
 
 As of the
date of this annual report, our vessel complies with the latest IMO and European
Union amended regulations for double-hull requirements, are not subject to
phase-out under IMO and U.S. requirements and current European Union legislation
and are eligible to carry heavy grade oil without any time limitation under IMO
and U.S. requirements and current European Union legislation. Because such laws
and regulations are frequently changed and may impose increasingly stricter
requirements, we cannot predict the ultimate cost of complying with these
requirements, or the impact of these requirements on the resale value or useful
lives of our vessel.
 10
   International
Maritime Organization
 The
International Maritime Organization, or IMO (the United Nations agency for
maritime safety and the prevention of 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 implements 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.  Under
IMO regulations, in order for a tanker to trade in ports of IMO member nations,
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:
 
 ·
              is
      the subject of a contract for a major conversion or original construction
      on or after July 6, 1993;
 
 ·
              commences
      a major conversion or has its keel laid on or after January 6, 1994;
      or
 
 ·
              completes
      a major conversion or is a newbuilding delivered on or after July 6,
      1996.
 
 Since the
enactment of these regulations, the IMO has accelerated the timetable for the
phase-out of single-hull oil tankers.
 
 In
December 2003, the Marine Environmental Protection Committee of the IMO, or
MEPC, adopted an amendment to the MARPOL Convention, which became effective in
April 2005. The amendment revised an existing regulation 13G accelerating the
phase-out of single-hull oil tankers and adopted a new regulation 13H on the
prevention of oil pollution from oil tankers when carrying heavy grade oil.
Under the revised regulation, single-hull oil tankers were required to be phased
out no later than April 5, 2005 or the anniversary of the date of delivery of
the vessel on the date or in the year specified in the following
table:
  Category
      of Oil Tankers
              Date
      or Year for Phase OutCategory
      1 - oil tankers of 20,000 dwt and above carrying crude oil, fuel oil,
      heavy diesel oil or lubricating oil as cargo, and of 30,000 dwt and above
      carrying other oils, which do not comply with the requirements for
      protectively located segregated ballast tanks
              April
      5, 2005 for vessels delivered on April 5, 1982 or earlier 2005 for vessels
      delivered after April 5, 1982Category
      2 - oil tankers of 20,000 dwt and above carrying crude oil, fuel oil,
      heavy diesel oil or lubricating oil as cargo, and of 30,000 dwt and above
      carrying other oils, which do comply with the protectively located
      segregated ballast tank requirements
                and
                Category
      3 - oil tankers of 5,000 dwt and above but less than the tonnage specified
      for Category 1 and 2 tankers.
              April
      5, 2005 for vessels delivered on April 5, 1977 or earlier
                2005
      for vessels delivered after April 5, 1977 but before January 1,
      1978
                2006
      for vessels delivered in 1978 and 1979
                2007
      for vessels delivered in 1980 and 1981
                2008
      for vessels delivered in 1982
                2009
      for vessels delivered in 1983
                2010
      for vessels delivered in 1984 or
later
 
 Under the
revised regulations, a flag state may permit continued operation of certain
Category 2 or 3 tankers beyond their phase out date in accordance with the above
schedule. Under regulation 13G, the flag state may allow for some newer
single-hull oil tankers registered in its country that conform to certain
technical specifications to continue operating until the earlier of the
anniversary of the date of delivery of the vessel in 2015 or the 25th
anniversary of their delivery. Under regulations 13G and 13H, certain Category 2
and 3 tankers fitted only with double bottoms or double sides may be allowed by
the flag state to continue operations until their 25th anniversary of delivery.
Any port state, however, may deny entry of those single-hull oil tankers that
are allowed to operate until the earlier of their anniversary date of delivery
in 2015 or the year in which the vessel reaches 25 years of age after the date
of its delivery, whichever is earlier under any of the flag state
exemptions.  These regulations have been adopted by over 150 nations,
including many of the jurisdictions in which our tanker operates.
 
 Because
our vessel is of double-hull construction, it is not subject to the current
phase-out regulations of the IMO.
 
 In
September 1997, the IMO adopted Annex VI to the MARPOL Convention to
address air pollution from vessels. 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 all commercial vessel exhausts and prohibits deliberate
emissions of ozone depleting substances (such as halons and
chlorofluorocarbons), emissions of volatile compounds from cargo tanks, and the
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. We believe that we
are in substantial compliance with the Annex VI regulations. Additional or new
conventions, laws and regulations may be adopted that could adversely affect our
ability to manage our vessel. For example, in April 2008, MEPC approved proposed
amendments to Annex VI regarding particulate matter, nitrogen oxide and sulfur
oxide emissions standards. The emissions program described in the proposal would
reduce air pollution from vessels by establishing a series of progressive
standards to further limit the sulfur content in fuel oil, which would be phased
in through 2020, and by establishing new tiers of nitrogen oxide emission
standards for new marine diesel engines, depending on their date of
installation. These amendments will be considered for adoption by the MEPC in
October 2008, and could enter into force in 2010.
 
 11
 
 In
addition, the IMO adopted the International Convention for the Control and
Management of Ships’ Ballast Water and Sediments, or the BWM Convention, in
February 2004. The BWM Convention’s implementing regulations call for a phased
introduction of mandatory ballast water exchange requirements, to be replaced in
time with mandatory concentration limits. The BWM Convention will not enter into
force until 12 months after it has been adopted by 30 states, the combined
merchant fleets of which represent not less than 35% of the gross tonnage of the
world’s merchant shipping tonnage. To date, there has not been sufficient
adoption of this standard for it to take force.
 
 The
operation of our vessel is also affected by the requirements set forth in the
IMO’s Management Code for the Safe Operation of Ships and Pollution Prevention,
or ISM Code. The ISM Code requires vessel-owners and bareboat charterers to
develop and 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
dealing with emergencies. We rely on the safety management system that has been
developed by Chevron.
 
 The ISM
Code requires that vessel operators obtain a safety management certificate for
each vessel they operate. This certificate evidences compliance by a vessel’s
management with the 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. Chevron is
required to renew these documents of compliance and safety management
certificates periodically.
 
 Non-compliance
with the ISM Code and other IMO regulations may subject the vessel-owner or a
bareboat charterer to increased liability, may lead to decreases in available
insurance coverage for affected vessels and may result in a tanker’s denial of
access to, or detention in, some ports. Both the United States Coast Guard and
EU authorities have indicated that vessels not in compliance with the ISM Code
will be prohibited from trading in U.S. and EU ports, respectively.
 
 Although
the United States is not a party to these conventions, many countries have
ratified and follow the liability plan adopted by the IMO and set out in the
International Convention on Civil Liability for Oil Pollution Damage of 1969.
Under this convention and depending on whether the country in which the damage
results is a party to the 1992 Protocol to the International Convention on Civil
Liability for Oil Pollution Damage, a vessel’s registered owner is strictly
liable for pollution damage caused in the territorial waters of a contracting
state by discharge of persistent oil, subject to certain complete defenses.
Under an amendment to the Protocol that became effective on November 1,
2003, 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
approximately $6.7 million plus $933 for each additional gross ton over
5,000. For vessels of over 140,000 gross tons, liability will be limited to
approximately $133.0 million. As the convention calculates liability in
terms of a basket of currencies, these figures are based on currency exchange
rates on June 1, 2008. Under the 1969 Convention, the right to limit liability
is forfeited where the spill is caused by the owner’s actual fault; under the
1992 Protocol, a vessel owner cannot limit liability where the spill is caused
by the owner’s intentional or reckless conduct. Vessels trading to states that
are parties to these conventions must provide evidence of insurance covering the
liability of the owner. In jurisdictions where the International Convention on
Civil Liability for Oil Pollution Damage has not been adopted, various
legislative schemes or common law govern, and liability is imposed either on the
basis of fault or in a manner similar to that convention. Operators, such as
Chevron in the case of our Vessel, are required to insure their vessels with
pollution liability insurance in the maximum commercially available amount of
$1 billion per incident per vessel. We believe that our P&I insurance
will cover the liability under the plan adopted by the IMO.
 
 IMO
regulations also require owners and operators of vessels to adopt Ship Oil
Pollution Emergency Plans, or SOPEPs. Periodic training and drills for response
personnel and for vessels and their crews are required.
 
 12
 
 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 our operations.
 
 United
States Oil Pollution Act of 1990 and Comprehensive Environmental Response,
Compensation, and Liability Act
 
 The
United States regulates the tanker industry with an extensive regulatory and
liability regime for environmental protection and cleanup of oil spills,
consisting primarily of OPA, and the Comprehensive Environmental Response,
Compensation, and Liability Act, 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 imposes liability for cleanup and natural
resource damage from the release 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:
 
 ·
              natural
      resource damage and related assessment
costs;
 
 ·
              real
      and personal property damage;
 
 ·
              net
      loss of taxes, royalties, rents, fees and other lost
    revenues;
 
 ·
              net
      cost of public services necessitated by a spill response, such as
      protection from fire, safety or health hazards;
  and
 
 ·
              loss
      of subsistence use of natural
resources.
 
 OPA
previously limited 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). Amendments to OPA signed into law in July
2006 increased these limits on the liability of responsible parties to the
greater of $1,900 per gross ton or $16.0 million per double-hull tanker that is
over 3,000 gross tons. 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 which 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 vessels, contains a
similar liability regime and provides for cleanup, removal and 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 U.S. federal safety, construction or operating
regulations, or by the responsible party’s gross negligence or willful
misconduct. These limits also do not apply if the responsible party fails or
refuses to report the incident or to cooperate 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. We believe that we are
in substantial compliance with OPA, CERCLA and all applicable state regulations
in the ports where our vessel calls.
 
 13
 
 OPA also
requires owners and operators of vessels to establish and maintain with the U.S.
Coast Guard evidence of financial responsibility sufficient to meet the limit of
their potential strict liability under the act. The U.S. Coast Guard has enacted
regulations requiring evidence of financial responsibility in the amount of
$1,500 per gross ton for tankers, coupling the former OPA limitation on
liability of $1,200 per gross ton with the CERCLA liability limit of $300 per
gross ton. On February 5, 2008, the U.S. Coast Guard proposed a new rule that
will require evidence of financial responsibility in amounts that reflect the
higher limits of liability imposed by the July 2006 amendments to OPA, as
described above. Under the regulations, evidence of financial responsibility may
be demonstrated by insurance, surety bond, self-insurance or guaranty. Under OPA
regulations, an owner or operator of more than one tanker is required to
demonstrate evidence 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. We have
provided the evidence of financial responsibility in the form of guarantees
issued by a guarantor approved by the United States Coast Guard and received
certificates of financial responsibility from the United States Coast Guard for
our vessel that calls in United States waters.
 
 Under
OPA, with certain limited exceptions, all newly-built or converted vessels
operating in U.S. waters must be built with double-hulls, and existing vessels
that do not comply with the double-hull requirement will be prohibited from
trading in U.S. waters over a 20-year period (1995-2015) based on size, age and
place of discharge, unless retrofitted with double-hulls. Notwithstanding the
prohibition to trade schedule, the act currently permits existing single-hull
and double-sided tankers to operate until the year 2015 if their operations
within U.S. waters are limited to discharging at the Louisiana Offshore Oil
Port, or LOOP, or off-loading by lightering within authorized lightering zones
more than 60 miles off-shore. Lightering is the process by which vessels at sea
off-load their cargo to smaller vessels for ultimate delivery to the discharge
port. Our vessel complies with U.S. double-hull requirements and will not be
subject to the phase-outs described above.
 
 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:
 
 ·
              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”;
 
 ·
              describe
      crew training and drills; and
 
 ·
              identify
      a qualified individual with full authority to implement removal
      actions.
 
 The
vessel response plan for our tanker operating in the waters of the United States
has been approved by the United States Coast Guard. 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. Our vessel currently carries 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.
 
 
 14
 
 In
addition, the United States Clean Water Act prohibits the discharge of oil or
hazardous substances in United States navigable waters and imposes strict
liability in the form of penalties for unauthorized discharges. The Clean Water
Act also imposes substantial liability for the costs of removal, remediation and
damages and complements the remedies available under OPA and CERCLA, discussed
above. The United States Environmental Protection Agency, or EPA, has exempted
the discharge of ballast water and other substances incidental to the normal
operation of vessels in U.S. ports from Clean Water Act permitting requirements.
However, on March 31, 2005, a U.S. District Court ruled that the EPA exceeded
its authority in creating an exemption for ballast water. On September 18, 2006,
the court issued an order invalidating the exemption in the EPA’s regulations
for all discharges incidental to the normal operation of a vessel as of
September 30, 2008, and directing the EPA to develop a system for regulating all
discharges from vessels by that date. Under the court’s ruling, owners and
operators of vessels visiting U.S. ports would be required to comply with the
Clean Water Act permitting program to be developed by the EPA or face penalties.
The EPA has appealed this decision, and oral arguments on the appeal were heard
by the Ninth Circuit Court of Appeals on August 13, 2007. No decision has
yet been issued.  In June 2007, the EPA provided notice and solicited
public comment regarding its intention to promulgate rules governing the
regulation of ballast water discharges and other discharges incidental to the
normal operation of vessels. If the EPA’s exemption is ultimately repealed, our
vessels may be subject to Clean Water Act permit requirements that could include
ballast water treatment obligations that could increase the cost of operating in
the United States. For example, this could require the installation of equipment
on our vessel to treat ballast water before it is discharged or the
implementation of other port facility disposal arrangements or procedures at
potentially substantial cost, and/or otherwise restrict our vessel from entering
U.S. waters. Various states have also enacted legislation restricting ballast
water discharges and the introduction of non-indigenous species considered to be
invasive. These and any similar restrictions enacted in the future could
increase the costs of operating in the relevant waters.
 
 Other
Regulations
 
 The U.S.
Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and
1990, or the CAA, required the 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. Our vessel that operates in such port areas with
restricted cargoes are equipped with vapor recovery systems that satisfy these
requirements. The 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. As indicated above, our vessel
operating in covered port areas are already equipped with vapor recovery systems
that satisfy these existing requirements. The EPA and the state of California,
however, have each proposed more stringent regulations of air emissions from
ocean-going vessels. Although a risk exists that new regulations could require
significant capital expenditures and otherwise increase our costs, based on the
regulations that have been proposed to date, we believe that no material capital
expenditures beyond those currently contemplated and no material increase in
costs are likely to be required.
 
 The U.S.
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 vessels in foreign ports. The United States Coast
Guard adopted regulations under NISA in July 2004 that impose mandatory ballast
water management practices for all vessels equipped with ballast water tanks
entering U.S. waters. These requirements can be met by performing mid-ocean
ballast exchange, by retaining ballast water on board the vessel, or by using
environmentally sound alternative ballast water management methods approved by
the United States Coast Guard. Mid-ocean ballast exchange is the primary method
for compliance with the United States Coast Guard regulations, since holding
ballast water can prevent vessels from performing cargo operations upon arrival
in the United States, and alternative methods are still under development.
Vessels that are unable to conduct mid-ocean ballast exchange due to voyage or
safety concerns may discharge minimum amounts of ballast water (in areas other
than the Great Lakes and the Hudson River), provided that they comply with
recordkeeping requirements and document the reasons they could not follow the
required ballast water management requirements. The United States Coast Guard is
developing a proposal to establish ballast water discharge standards, which
could set maximum acceptable discharge limits for various invasive
species,
 
 15
 
 and/or
lead to requirements for active treatment of ballast water. The U.S. House of
Representatives has recently passed a bill that amends NISA by prohibiting the
discharge of ballast water unless it has been treated with specified methods or
acceptable alternatives. Similar bills have been introduced in the U.S. Senate,
but we cannot predict which bill, if any, will be enacted into law. In the
absence of federal standards, states have enacted legislation or regulations to
address invasive species through ballast water and hull cleaning management and
permitting requirements. The state of California has recently enacted
legislation extending its ballast water management program to regulate the
management of “hull fouling” organisms attached to vessels and adopted
regulations limiting the number of organisms in ballast water discharges. A U.S.
District Court dismissed challenges to the state of Michigan’s ballast water
management legislation mandating the use of various techniques for ballast water
treatment, and an appeal is now pending in the Sixth Circuit Court of Appeals.
Other states may proceed with the enactment of similar requirements that could
increase the costs of operating in state waters.
  European
Union Tanker Restrictions
  
 In
July 2003, in response to the M/T Prestige oil spill in
November 2002, the European Union adopted legislation, which was amended in
October 2003 that prohibits all single-hull tankers from entering into its
ports or offshore terminals by 2010 or earlier, depending on their age. The
European Union has also already banned all single-hull tankers carrying heavy
grades of oil from entering or leaving its ports or offshore terminals or
anchoring in areas under its jurisdiction. Commencing in 2005, certain
single-hull tankers above 15 years of age will also be restricted from
entering or leaving European Union ports or offshore terminals and anchoring in
areas under European Union jurisdiction. The European Union is also considering
legislation that would: (1) ban manifestly sub-standard vessels (defined as
those more than 15 years old that have been detained by port authorities at
least twice in a six month period) from European waters and create an obligation
of port states to inspect vessels posing a high risk to maritime safety or the
marine environment; and (2) provide the European Union with greater
authority and control over classification societies, including the ability to
seek to suspend or revoke the authority of negligent societies. The sinking of
the Prestige and
resulting oil spill in November 2002 has led to the adoption of other
environmental regulations by certain European Union nations, which could
adversely affect the remaining useful life of our tanker and our ability to
generate income from it. It is impossible to predict what legislation or
additional regulations, if any, may be promulgated by the European Union or any
other country or authority.
 
 Greenhouse
Gas Regulation
 
 In
February 2005, the Kyoto Protocol to the United Nations Framework Convention on
Climate Change, which we refer to as the Kyoto Protocol, entered into force.
Pursuant to the Kyoto Protocol, adopting countries are required to implement
national programs to reduce emissions of certain gases, generally referred to as
greenhouse gases, which are suspected of contributing to global warming.
Currently, the emissions of greenhouse gases from international shipping are not
subject to the Kyoto Protocol. However, the European Union has indicated that it
intends to propose an expansion of the existing European Union emissions trading
scheme to include emissions of greenhouse gases from vessels. In the United
States, the California Attorney General and a coalition of environmental groups
in October 2007 petitioned the EPA to regulate greenhouse gas emissions from
ocean-going vessels under the Clean Air Act. Any passage of climate control
legislation or other regulatory initiatives by the IMO, European Union or
individual countries where we operate that restrict emissions of greenhouse
gases could entail financial impacts on our operations that we cannot predict
with certainty at this time.
 
 16
 
 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 the 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 the ISPS
Code. The ISPS Code is designed to protect ports and international shipping
against terrorism. After July 1, 2004, to trade internationally, a vessel must
attain an International Ship Security Certificate from a recognized security
organization approved by the vessel’s flag state.
 
 Among the various requirements
are:
 
 ·
              on-board
      installation of automatic identification systems to provide a means for
      the automatic transmission of safety-related information from among
      similarly equipped vessels and shore stations, including information on a
      vessel’s identity, position, course, speed and navigational
      status;
 
 ·
              on-board
      installation of vessel security alert systems, which do not sound on the
      vessel but only alert the authorities on
shore;
 
 ·
              the
      development of vessel security
plans;
 
 ·
              vessel
      identification number to be permanently marked on a vessel’s
      hull;
 
 ·
              a
      continuous synopsis record kept onboard showing a vessel’s history
      including the name of the vessel and the state whose flag the vessel is
      entitled to fly, the date on which the vessel was registered with that
      state, the vessel’s identification number, the port at which the vessel is
      registered and the name of the registered owner(s) and their registered
      address; and
 
 ·
              compliance
      with flag state security certification
  requirements.
 
 The U.S.
Coast Guard regulations, intended to align with international maritime security
standards, exempt from MTSA vessel security measures non-U.S. vessels that have
on board, as of July 1, 2004, a valid ISSC attesting to the vessel’s compliance
with SOLAS security requirements and the ISPS Code. We have implemented the
various security measures addressed by MTSA, SOLAS and the ISPS Code, and our
fleet is in compliance with applicable security requirements.
 Inspection
by Classification Societies
  
 Every
seagoing vessel must be “classed” by a classification society. 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.
 
 17
 
 The
classification society also undertakes or requests 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:
 
 •
              Annual
      Surveys. For seagoing vessels, 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.
 
 •
              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.
 
 •
              Class
      Renewal Surveys. Class renewal surveys, also known as special
      surveys, are carried out for the vessel’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 ultrasonic 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. 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. The vessel’s machinery is surveyed on
      a continuous survey cycle, in which every part of the vessel’s machinery
      would be surveyed within a five-year
cycle.
 
 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 otherwise required. The period between two subsequent surveys of
each area must not exceed five years.
 
 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 Initial 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
Initial Charter, Chevron is entitled to self-insure against marine and war risks
relating to the Vessel and against protections and indemnity risks relating to
the Vessel during the term of the Initial Charter and, accordingly, purchasers
of the Notes cannot rely on the existence of third-party insurance. There can be
no assurance that all risks will be adequately insured against, that any
particular loss will be covered or that we will be able to procure adequate
insurance coverage at commercially reasonable rates in the future.  In
particular, stricter environmental regulations may result in
increased costs for, or the lack of availability or, insurance against the risks
of environmental damage or pollution.
 
 Chevron
will, pursuant to the Initial Charter, indemnify us from damages arising from a
failure to maintain any financial responsibility requirements whether relating
to oil or other pollution damage. Chevron will also indemnify us to the extent
losses, damages or expenses are incurred by us relating to oil or other
pollution damage as a result of the operation of the Vessel by
Chevron
 
 C.  Organizational
Structure
 
 As
described above, and also in Item 7. “Major Shareholders and Related Party
Transactions”, we are a wholly-owned subsidiary of California Tankers
Investments Limited, a company organised under the laws of the Bahamas, which is
a wholly-owned subsidiary of ITC. In February, 2008, Frontline established an
intermediary holding company, ITCL to hold their investment in ITC and
distributed 17.53% of ITCL’s common shares to Frontline’s ordinary shareholders
in March 2008.
 
 18
 
 D.  Property,
Plant and Equipment
 
 Other
than the Vessel described above, we do not have any property.
 
 Item
4A.  UNRESOLVED STAFF COMMENTS
 
 None.
 
 Item
5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
 Overview
 
 The
following discussion should be read in conjunction with Item 3 “Selected
Financial Data” and the Company’s audited Financial Statements and Notes thereto
included herein.
 
 Our
strategy has been to acquire a Vessel and charter it to Chevron under a bareboat
charter which is expected to provide:
 
 a)
              charterhire
      payments sufficient to pay, so long as the Initial Charter is in
      effect:
 
  i.
              the
      obligations under the loans for acquiring the
  Vessel,
 ii.
              management
      fees and technical advisor’s fees,
 iii.
              recurring
      fees and taxes, and
 iv.
              any
      other costs and expenses incidental to the ownership and chartering of the
      Vessel;
 
 b)
              termination
      payments sufficient to make sinking fund and interest payments on the Term
      Loans, to the extent allocable to the Vessel for which the related Initial
      Charter has been terminated, for at least two years following any such
      termination, during which time the Vessel may be sold or re-chartered;
      and
 
 c)
              that
      the Vessel will be maintained in accordance with the good commercial
      maintenance practices required by the Initial Charter and to arrange for
      vessel management and remarketing services to be available in case the
      Initial Charter is terminated by Chevron, or the Vessel is for any other
      reason returned to our possession and
use.
 
 As of
June 23, 2008, no notice had been received from Chevron regarding the
termination of the Initial Charter.
    19
 
 
 Market
Overview and Trend Information
 
 The year
started at a time charter equivalent or, TCE of approximately about $70,700 per
day for the Suezmaxes. The Suezmax segment of the tanker market in the first
quarter of 2007 compared to the last quarter of 2006. A strike at the port of
Lavera in late March, which kept a large number of Suezmaxes waiting to
discharge, made the Suezmax earnings spike.
 
 This set
the stage for a gradual decline in Suezmax TCE rates throughout the summer and
well into autumn. The main reasons for this decline in the TCE rates can most
likely be found in reduced global oil production over the summer, the price
structure on oil turning from a situation where the current price is expected be
less than the future price to the future price being greater than the current
price, which initiated a significant draw on crude stocks world wide.
Volatility, the trade mark of these tanker segments, was relatively low until a
boom in the rates of very large crude carriers or VLCCs in mid
November.
 
 The
primary factor contributing to this boom was the discounting of crude prices
offered by Saudi Aramco to mainly U.S. refiners, towards the end of November.
This resulted in more than normal VLCC TCE rates between the last week in
November and the third week in December, and this increase in activity had the
effect of upsetting the balance of supply and demand in vessel owners’ favor
which resulted in an upward rate spiral which vessel owners successfully
exploited. The oil-spill by a Chinese owned single hull VLCC off the coast of
South Korea in early December also contributed to the increased VLCC TCE
rates. Another important factor which further increased VLCC TCE rates
was a joint decision by several major vessel owners to reduce laden and ballast
speeds to save bunkers and reduce costs. In a low market at the time, when
higher bunkers reduced owners earnings by as much as $50,000 per day, the
reduction in speed from 15 to 12 knots saved owners an estimated $20,000 per day
and reduced the overall ‘market capacity’ by approximately 10%.
 
 According
to Clarksons, the average TCE for the year was approximately $44,800 per day for
a double hulled Suezmax.
 
 There is
a trend that oil majors discriminate single hull tonnage when transporting
persistent oils and therefore also avoid inspecting single hull ships on the
same basis. Oil traders with crude or fuel oil cargoes often require double hull
tonnage in order to have full flexibility with regards to cargo delivery. Hence,
single hull ships appear no longer able to trade to their full capacity compared
to the double hull vessels which implies a further gap in the already existing
’two tier market’ between the double and the single vessels.
 
 Bunkers
followed the movements in the oil market closely in 2007 with Fujairah’s lowest
bunker quote for the year set in early January at $256 per metric ton and the
highest bunker quote set in early November at $513 per metric ton. The average
bunker price in 2007 was calculated at approximately $374 per metric
ton.
 
 It was
reported by the International Energy Agency, or IEA, in March 2008 that average
OPEC Oil production, including Iraq but not Angola, was approximately 29.1
million barrels per day during 2007, a 0.7 million barrel per day decrease from
2006. Saudi Arabia and Venezuela contributed the most to the reduced crude
productions by about 0.65 million barrels per day while Iran and Iraq offset
this to a certain degree with increased production by about 0.26 million barrels
per day. The balance stems from minor changes in all remaining OPEC countries.
On December 1, 2007, the Republic of Ecuador became the thirteenth member of
OPEC and thereby rejoined the Organization after an absence of a decade and a
half. It will be interesting to see if the inclusion of the Republic of Ecuador
will strengthen the capability of OPEC in fulfilling its objectives and help to
further stabilize the market.
 
 20
 
 OPEC-12
and Iraq are expected to reach a production capacity of 35.8 million barrels per
day in 2008 according to IEA. Production could hence accelerate in 2008 as
capacity at the start of the year was at 32 million barrels per day. The growth
is expected to be heavily skewed towards Saudi Arabia, Nigeria and UAE together
accounting for about 75% of the net increase.
 
 The IEA
further estimates that the average world oil demand was 85.8 million barrels per
day in 2007, a 1.1% increase from 2006. The IEA has forcasted that in 2008,
world oil demand will increase by 2.0% or 1.7 million barrels per day because of
the increased demand for oil in China, Latin America and the Middle East among
other things.
 
 The
International Monetary Fund, or IMF, expects global growth of 4.1% in 2008, 0.8
% lower than in 2007 according to their February 2008 Update. In the United
States, growth is expected to decrease to 1.5% in 2008, from 2.2% in 2007.
Growth is also expected to decrease in Europe, Japan and for emerging markets
and developing countries. China’s growth is projected to remain rapid in 2008,
albeit a little below the torrid pace set in 2007 of 11.4%.
 
 The total
world Suezmax fleet increased by 2.4% in 2007 to 348 vessels according to
Fearnleys Fleet Update from December 31, 2007. The report further states that a
total of 25 new vessels were delivered to owners during 2007 and 37 newbuilding
orders were placed. The total newbuilding order book amounted to 134 vessels at
the end of the year which represented approximately 38% of the existing world
fleet. Half the newbuilding order book is set to be delivered in
2009.
 
 Fearnleys
further expects 19 Suezmaxes to be delivered from shipyards during
2008.
  Operating
results
 
 Year
ended December 31, 2007 compared with the year ended December 31,
2006
 
 Total
Revenues
 
 (in
      thousands of $)
              
              2007
              
              
              2006
              
              
              %
      ChangeFinance
      lease interest income
              
              
              2,352
              
              
              
              2,691
              
              
              
              (13
              )%
 
 Revenue
comes in the form of charterhire from Chevron which is then allocated between
capital and interest. Interest income has fallen in line with expectations. As
the value of the finance lease falls on an annual basis, so does the interest
allocated to the finance lease.
 
 Expenses
 
 (in
      thousands of $)
              
              2007
              
              
              2006
              
              
              %
      ChangeInterest
      expense
              
              
              2,358
              
              
              
              2,644
              
              
              
              (11
              )%Amortization
      of loan discount
              
              
              21
              
              
              
              26
              
              
              
              (19
              )%
 
 Interest
expense has fallen in line with expectations, with interest expense falling in
line with the principal loan outstanding each year. The Company amortizes the
discount over the life of the Term Loans.
 
 21
  
 Year
ended December 31, 2006 compared with the year ended December 31,
2005
 
 Total
Revenues
 
 (in
      thousands of $)
              
              2006
              
              
              2005
              
              
              %
      ChangeFinance
      lease interest income
              
              
              2,691
              
              
              
              2,982
              
              
              
              (10
              )%
 
 Refer to
explanation for 2007.
 
 Expenses
 
 (in
      thousands of $)
              
              2006
              
              
              2005
              
              
              %
      ChangeInterest
      expense
              
              
              2,644
              
              
              
              2,930
              
              
              
              (10
              )%Amortization
      of loan discount
              
              
              26
              
              
              
              76
              
              
              
              (65
              )%
 
 Refer to
explanation for 2007.
 
 Liquidity
and Capital Resources
 
 As of
December 31, 2007, revenues from the Initial Charter were sufficient to pay our
obligations under the Term Loans. Chevron’s option to terminate the Initial
Charter on the last specified termination date, April 1, 2009, has now passed,
therefore the charter will run until April 1, 2015.
 
  Off-balance Sheet Arrangements
 None.
 
 Tabular
disclosure of contractual obligations
 
 As at
December 31, 2007, we had the following contractual obligations and
commitments:
 
 Payments
      due by period(in
      thousands of $)
              
              Less
      than 1 year
              
              
              1-3
      years
              
              
              3-5
      years
              
              
              More
      than 5 years
              
              
              TotalTerm
      Loans (8.52%)
              
              
              3,355
              
              
              
              6,710
              
              
              
              6,710
              
              
              
              10,067
              
              
              
              26,842Total
      contractual obligations
              
              
              3,355
              
              
              
              6,710
              
              
              
              6,710
              
              
              
              10,067
              
              
              
              26,842
 
 Critical
Accounting Policies
 
 Our
principal accounting policies are described in Note 2 to the financial
statements, which are included in Item 18“Financial Statements”
of this Annual Report. The most critical accounting policies
include:
 
 ·
              Financing
      lease and revenue recognition
 
 22
 
 As the
lease has been classified as a finance lease, the minimum lease payments (net of
amounts representing estimated executory costs including profit thereon) plus
the unguaranteed residual value are recorded as the gross investment in the
lease. The difference between the gross investment in the lease and the sum of
the present values of the two components of the gross investment is recorded as
unearned income which is amortized to income over the lease term as finance
lease interest income to produce a constant periodic rate of return on the net
investment in the lease.
 
 Recently
Issued Accounting Standards
 
 In
February 2007 the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial
Liabilities – including an amendment of FASB  Statement No.
115” (SFAS 159). SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. SFAS is effective for fiscal years beginning after November 15 2007.
The Company does not expect the adoption of SFAS 159 to have an impact on its
financial statements.
 
 In
December 2007 the FASB issued SFAS No. 160 “Non-controlling Interests in
Consolidated Financial
Statements – an amendment of ARB No. 51” (SFAS 160). SFAS 160 is intended
to improve the relevance, comparability and transparency of financial
information that a reporting entity provides in its consolidated financial
statements with reference to a non-controlling interest in a subsidiary. Such a
non-controlling interest, sometimes called a minority interest, is the portion
of equity in a subsidiary not attributable, directly or indirectly, to the
parent entity. SFAS 160 is effective for fiscal years beginning on or after
December 15 2008. The Company does not expect the adoption of SFAS 160 to have
an impact on its financial statements.
 
 In
November 2007 the SEC issued Staff Accounting Bulletin No. 109 (SAB 109),
relating to written loan commitments recorded at fair value through earnings.
Previously Staff Accounting Bulletin No. 105 “Application of Accounting Principles
to Loan Commitments”(SAB 105) provided the views of the staff regarding
derivative loan commitments that are accounted for at fair value through
earnings pursuant to Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging
Activities”. SAB
105 stated that in measuring the fair value of a derivative loan commitment, the
staff believed it would be inappropriate to incorporate the expected net future
cash flows related to the associated servicing of the loan. This new SAB 109
supersedes SAB 105 and expresses the current view of the staff that, consistent
with the guidance in Statement of Financial Accounting Standards No. 156 “Accounting for Servicing of
Financial Assets” and Statement of Financial Accounting Standards No. 159
“The Fair Value Option for
Financial Assets and Financial Liabilities”, the expected net future cash
flows related to the associated servicing of the loan should be included in the
measurement of all written loan commitments that are accounted for at fair value
through earnings. SAB 105 also indicated that the staff believed that
internally-developed intangible assets (such as customer relationship intangible
assets) should not be recorded as part of the fair value of a derivative loan
commitment. SAB 109 retains that staff view and broadens its application to all
written loan commitments that are accounted for at fair value through earnings.
The Company adopted the provisions of SAB 109 as of December 31 2007. The
adoption did not have any effect on the Company’s results of operations or
financial position.
 
 
 23
 
 
 Item
6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
 A.Directors
and Senior Management
 
 Name
              Age
              PositionTor
      Olav Troim
              45
              Director
      and PresidentKate
      Blankenship
              43
              Director
      and Secretary
 Tor Olav
Trøim has been a Director of CalPetro Tankers (Bahamas I) Limited since October
31, 2001. Mr. Trøim 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. Trøim 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 Trøim was also the Chief Executive Officer of Seadrill Ltd. until
the recent takeover and integration of Smedvig ASA. In addition, Mr
Trøim  is a director 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 Marine Harvest Group (OSE).
 
 Kate
Blankenship has been a Director of CalPetro Tankers (Bahamas I) 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 1994and October 2005and asChief Financial Officer of Knightsbridge Tankers Limited from
April 2000 to September 2007 and Secretary of Knightsbridge from December 2000
to March 2007. Mrs. Blankenship also serves as a 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, 2007, we paid no compensation to our directors and
officers.
 
 C.Board
Practices
 
 The
directors have no fixed date of expiry of their term of office. The details of
their service are shown above. The directors have no entitlement to any benefits
on termination of their office.
 
 We have
neither an audit nor a remuneration committee.
 
 D.Employees
 
 We do not
have any employees involved in the management of the Vessel.
 
 Frontline
is our Manager as described below in Item 7 - Related Party
Transactions.
 
 E.Share
Ownership
 
 The
directors have no interest in the share capital of the Company, nor do they have
any arrangements for involvement in our capital.
 
 Item
7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
 Major
Shareholders
 
 We are a
wholly owned subsidiary of California Tankers Investments Limited, a company
organized under the laws of the Bahamas, which is a wholly-owned subsidiary of
ITC. In February, 2008, Independent
Tankers Corporation Limited (“ITCL”) was established by Frontline as an
intermediary holding company to hold its investment in ITC and Frontline
distributed 17.53% of ITCL’s common shares to Frontline’s ordinary shareholders
in March 2008. 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 “Information on the Company”
and there are no known arrangements that may lead to a change in control of the
company.
 
 
 24
 Related
Party Transactions
 
 As
discussed in Item 4. “Information on the Company”,  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 an annual fee
of $13,625 for each Vessel, along with an additional annual fee of $3,000
covering all four Vessels, (“Management Fee”). The technical advisor’s fee
consists of an annual fee of $10,000 for each vessel, payable semi-annually in
arrears (“Technical Advisor’s Fee”). Both the Management Fee and The Technical
Fee is 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.
 
 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 2007,
a total of $41,231 was paid under the Management and Designated Representative
Agreements.
 
 Item
8.  FINANCIAL INFORMATION
 
 Consolidated
Statements and Other Financial Information
 
 See Item
18 below.
 
 Legal
Proceedings
 
 To the
best of the Company’s knowledge, there are no legal or arbitration proceedings
existing or pending which have had or may have significant effects on the
Company’s financial position or profitability and no such proceedings are
pending or known to be contemplated by governmental authorities.
 
 Item
9.  THE OFFER AND LISTING
 
 Not
Applicable.
 
 Item
10.  ADDITIONAL INFORMATION
 
 A.
              Share
      Capital
 
 Not
Applicable.
  B.   
Memorandum and Articles of Association
 
 The
Company is No. 23065B 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.
 25
 Company
meetings may be convened by the directors or held on request of members holding
50% of the voting shares. Annual meetings are held according to Bahamian
law.  Members, their properly appointed proxies and corporate members’
representatives are entitled to attend.
 
 There are
no limits to ownership of Company securities or to the exercise of voting
rights.  Disclosure of ownership is governed by Bahamian law and any
laws operative in the jurisdictions pertaining to the owners of the securities.
The directors of the Company may, without giving a reason, decline to register a
transfer of shares.
 
 C.
              Material
      Contracts
 
 The
Company has no material contracts apart from those pertaining to its normal
business.
 
 D.
              Exchange
      Controls
 
 The
Company was registered under the International Business Companies Act, 1989 of
the Commonwealth of the Bahamas (the “IBC Act”) in May 1994. As a result of such
registration the Company is exempt from the provisions of the Exchange Control
Regulations Act of the Bahamas.  Interests in the Registered
Securities may be freely transferred among non-residents of The Bahamas under
Bahamian Law.
 
 There are
no restrictions upon the payment of foreign (non-Bahamian) currency dividends,
interest or other payments in respect of the Registered Securities.
 
 The
Company is not permitted to deal in the currency of the Bahamas except in an
external Bahamian dollar account which can be funded only with foreign currency
funds or funds the Company has permission to convert.
 
 None of
the Company’s Articles of Association, Memorandum of Association or any other
document, nor any Bahamian law nor, to the knowledge of the Company, any foreign
law, imposes limitations on the right of non-residents or foreign owners to hold
the Company’s shares of common stock.
  E.
              Taxation
  No
Bahamian income or withholding taxes are imposed on the payment by the Company
of any principal or interest to any holder of Notes who is either an individual
citizen or resident of the United States or an entity formed under the laws of
the United States. There is no income tax treaty currently in effect between the
United States and Bahamas.
 
 F.
              Dividends
      and Paying Agents
 
 Not
Applicable.
 
 G.
              Statement
      by Experts
 
 Not
Applicable.
 
 H.
              Documents
      on Display
 
 We are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended. In accordance with these requirements, we file reports and
other information with the Securities and Exchange Commission (“SEC”). These
materials, including this annual report and the accompanying exhibits, may be
inspected and copied at the public reference facilities maintained by the SEC at
100 F Street, N.E., Washington, 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 the our
principal executive offices at Mareva House, 4 George
Street, PO Box N-3937, Nassau, Bahamas or at the offices of our Manager
at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda HM
08.
 
 I.
              Subsidiary
      Information
 
 Not
Applicable.
 
 Item
11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Quantitative information about market
risk
 
 Quantitative
information about market risk instruments at December 31, 2007 is as
follows:
 
 The Term
Loans bear interest at a rate of 8.52% per annum. Interest is payable on April 1
and October 1 of each year. Principal is repayable on the Term Loans in
accordance with a remaining ten-year sinking fund schedule.
 
 The table
below provides the revised scheduled sinking fund redemption amounts and final
principal payment of the allocated principal amount of the Term Loans following
termination of the related Initial Charter on last termination
date.
 
 
 Scheduled
      payment date
              Initial
      Charter not terminated
                $’000
              Initial
      Charter terminated 2009
                $’000April
      1, 2008
              3,355
              3,355April
      1, 2009
              3,355
              3,355April
      1, 2010
              3,355
              1,770April
      1, 2011
              3,355
              1,920April
      1, 2012
              3,355
              2,080April
      1, 2013
              3,355
              2,260April
      1, 2014
              3,355
              2,450April
      1, 2015
              3,357
              9,65226,842
              26,842
 
 As at
June 23, 2008, no termination notice had been received from Chevron for the
Initial Charter.
 
 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 charter agreement with
Chevron.
 
 Item
12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
 Not
Applicable.
 
 26
 
 PART
II
 
 Item
13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
 None.
 
 Item
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
 USE OF PROCEEDS
 
 None.
 
 Item
15.  CONTROLS AND PROCEDURES
 
 (a) 
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, 2007. 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)  Management’s
annual report on internal controls over financial reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) promulgated under
the Securities Exchange Act of 1934.
  Internal
control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f)
promulgated under the Securities Exchange Act of 1934 as a process designed by,
or under the supervision of, the Company’s principal executive and principal
financial officers and effected by the Company’s board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
  ·
              Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;
  ·
              Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorizations of Company’s management and
      directors; and
  ·
              Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the financial
statements.
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree or compliance
with the policies or procedures may deteriorate.
  Management
conducted the evaluation of the effectiveness of the internal controls over
financial reporting using the control criteria framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) published in its
report entitled Internal Control-Integrated Framework.
  
 27
 
 Our
management with the participation of our Principal Executive Officer and
Principal Financial Officer assessed the effectiveness of the design and
operation of the Company’s internal controls over financial reporting pursuant
to Rule 13a-15 of the Securities Exchange Act of 1934, as of December 31,
2007. Based upon that evaluation, the Principal Executive Officer and Principal
Financial Officer concluded that the Company’s internal controls over financial
reporting are effective as of December 31, 2007.
  This
annual report does not include an attestation report of the Company’s current
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s
current registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
 
 (c)
              Changes
      in internal controls over financial
reporting
 
 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 2007 and 2006 was Grant Thornton LLP, New
York.  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
LLP.
 
 (in
      thousands of $)
              
              2007
              
              
              2006Audit
      fees (a)
              
              
              25
              
              
              
              20Audit
      related fees (b)
              
              
              -
              
              
              
              -Tax
      fees (c)
              
              
              -
              
              
              
              -All
      other fees (d)
              
              
              -
              
              
              
              -Total
              
              
              25
              
              
              
              20
 
 
 
 
 28
 
 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.
 
 
 29
 
 PART
III
 Item
17.    FINANCIAL STATEMENTS
 
 Not
Applicable.
 
 Item
18.    FINANCIAL STATEMENTS
 
 The
following financial statements and notes, together with the report of the
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, 2007, 2006 and
2005
 
 Balance Sheets as of December 31, 2007
and 2006        F-3
 
 Statements of Cash Flows for the Years
Ended         F-4
 December 31, 2007, 2006 and
2005
 
 Notes to the Financial
Statements          F-5
 
 
 30
 
 Item
19.  EXHIBITS
 
 1.1*
              Certificate
      of Incorporation and Memorandum of Association of CalPetro Tankers
      (Bahamas I) 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 I) 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.
 
 31
 
 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 I) 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.
 
 32
 
 
 12.1
              Certification
      of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as
  amended.
 
 12.2
              Certification
      of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as
  amended.
 
 13.1
              Certification
      of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 
 13.2
              Certification
      of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 
 *
Incorporated by reference to the filing indicated.
 
 
 33
 
 Report of
Independent Registered Public Accounting Firm
 To the
Board of Directors
 Calpetro
Tankers (Bahamas I) Limited
 
 We have
audited the accompanying balance sheets of Calpetro Tankers (Bahamas I) Limited
(the “Company”) as of December 31, 2007 and 2006 and the related statements
of operations and retained earnings, and cash flows for each of the three years
in the period ended December 31, 2007. 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 I)
Limited as of December 31, 2007 and 2006 and the results of its operations
and cash flows for each of the three years in the period ended December 31,
2007, in conformity with accounting principles generally accepted in the United
States of America.
 
  
   /s/ Grant
Thornton LLP
      Grant
Thornton LLP
 New York,
New York
 June 20,
2008
  
 F-1
 
 CalPetro
Tankers (Bahamas I) Limited
 Statements
of Operations and Retained Earnings
 For
the years ended December 31, 2007, 2006 and 2005
 (in
thousands of $)
 
  2007
              
              
              
              2006
              
              
              
              2005
  Operating
      revenuesFinance
      lease interest income
              
              
              2,352
              
              2,691
              
              2,982Total
      operating revenues
              
              
              2,352
              
              2,691
              
              2,982Operating
      expensesGeneral
      and administrative expenses
              
              
              (122
              )
              (108
              )
              (97
              )Total
      operating expenses
              
              
              (122
              )
              (108
              )
              (97
              )Net
      operating income
              
              
              2,230
              
              2,583
              
              2,885Other
      operating income / (expenses)Interest
      income
              
              
              56
              
              64
              
              46Interest
      expense
              
              
              (2,358
              )
              (2,644
              )
              (2,930
              )Amortization
      of deferred charges
              
              
              (21
              )
              (26
              )
              (76
              )Net
      other expenses
              
              
              (2,
      323
              )
              (2,606
              )
              (2,960
              )Net
      loss
              
              
              (93
              )
              (23
              )
              (75
              )Retained
      earnings at the start of the year
              
              
              1,433
              
              1,456
              
              1,531Retained
      earnings at the end of the year
              
              
              1,340
              
              1,433
              
              1,456
 
 
  The accompanying notes are an integral
part of thesefinancial statements
  
 F-2
 
 CalPetro
Tankers (Bahamas I) Limited
 Balance
Sheets as of December 31, 2007 and 2006
 (in
thousands of $)
 
 2007
              2006ASSETSCurrent
      assets:Restricted
      cash
              
              
              2,180
              2,176Current
      portion of net investment in finance lease
              3,450
              3,446Interest
      receivable
              
              
              546
              618Other
      current assets
              
              
              9
              8Total
      current assets
              
              
              6,185
              6,248Net
      investment in finance lease, less current portion
              
              
              22,479
              25,903Deferred
      charges
              
              
              142
              162Total
      assets
              
              
              28,806
              32,313LIABILITIES
      AND STOCKHOLDER’S EQUITYCurrent
      liabilities:Accrued
      interest
              
              
              572
              643Current
      portion of term loans
              
              
              3,355
              3,355Other
      current liabilities
              
              
              52
              40Total
      current liabilities
              
              
              3,979
              4,038Long-term
      loans
              
              
              23,487
              26,842Total
      liabilities
              
              
              27,466
              30,880Stockholder’s
      equity:Unclassified
      stock: 100 shares of $1 par value
              
              
              -
              -Retained
      earnings
              
              
              1,340
              1,433Total
      stockholder’s equity
              
              
              1,340
              1,433Total
      liabilities and stockholder’s equity
              
              
              28,806
              32,313
 
 
  The accompanying notes are an integral
part of thesefinancial
statements
  
 
 F-3
 
 CalPetro
Tankers (Bahamas I) Limited
 Statements
of Cash Flows for the years ended
 December
31, 2007, 2006 and 2005
 (in
thousands of $)
   2007
              
              
              
              2006
              
              
              
              2005Net
      loss
              
              
              (93
              )
              
              
              (23
              )
              
              
              (75
              )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Amortization
      of discount on loans
              
              
              21
              
              
              
              26
              
              
              
              76Changes
      in assets and liabilities:Interest
      receivable
              
              
              72
              
              
              
              72
              
              
              
              72Other
      current assets
              
              
              (1
              )
              
              
              (2
              )
              
              
              15Accrued
      interest payable
              
              
              (71
              )
              
              
              (72
              )
              
              
              (71
              )Other
      current liabilities
              
              
              11
              
              
              
              14
              
              
              
              (4
              )Net
      cash (used in) provided by operating activities
              
              
              (61
              )
              
              
              15
              
              
              
              13Investing
      activities:Finance
      lease payments received
              
              
              3,420
              
              
              
              3,367
              
              
              
              3,364Placement
      of restricted cash
              
              
              (4
              )
              
              
              (27
              )
              
              
              (22
              )Net
      cash provided by investing activities
              
              
              3,416
              
              
              
              3,340
              
              
              
              3,342Financing
      activities:Repayments
      of term loan
              
              
              (3,355
              )
              
              
              (3,355
              )
              
              
              (3,355
              )Net
      cash used in financing activities
              
              
              (3,355
              )
              
              
              (3,355
              )
              
              
              (3,355
              )Net
      increase in cash and cash equivalents
              
              
              -
              
              
              
              -
              
              
              
              -Cash
      and cash equivalents at start of the year
              
              
              -
              
              
              
              -
              
              
              
              -Cash
      and cash equivalents at end of the year
              
              
              -
              
              
              
              -
              
              
              
              -
 
 Supplemental
disclosure of cash flow information:
  Interest
      paid
              2,430
              2,176
              3,001
 
  The accompanying notes are an integral
part of thesefinancial
statements
  
 F-4
 CalPetro
Tankers (Bahamas I) Limited
 Notes
to the Financial Statements
 
 1.  Description
of Business
 
 The
Company was incorporated in the Bahamas on May 13, 1994
with two other entities: CalPetro Tankers (Bahamas II) Limited and CalPetro
Tankers (Bahamas III) Limited. In addition, CalPetro Tankers (IOM) Limited was
incorporated in the Isle of Man.  These entities (the “Owners”) were
organized as special purpose companies for the purpose of acquiring one of four
oil tankers (each a “Vessel”, together the “Vessels”) from Chevron Transport
Corporation (“Chevron”) which were concurrently chartered on long-term charter
agreements back to Chevron.  California Petroleum Transport
Corporation, acting as agent on behalf of the Owners, issued as full recourse
obligations Term Mortgage Notes and Serial Mortgage Notes (the Serial and Term
Notes), and subsequently loaned the proceeds to the Owners in the form of Term
Mortgage Loans and Serial Mortgage Loans (the “Term Loans” and “Serial Loans”
respectively) to fund the acquisition of the Vessels from
Chevron.  The final tranche of the principal balances of the Serial
Loans payable by the Company to California Petroleum Transport Corporation
matured on April 1, 2003.
 
 The
Company’s only source of funds with respect to the Term Loans is payments from
Chevron, including Termination Payments.  The Company does not have
any other source of funds for payment of the Term Loans.
 
 The
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP).
 
 2.  Principal
Accounting Policies
 
 A summary
of the Company’s accounting policies is set out below.
 
 (a)
              Financing
      lease and revenue recognition
 The
      long-term charter agreement between the Company and Chevron transfers to
      Chevron all the risks and rewards associated with ownership, other than
      legal title, and contains a bargain purchase option.  As such,
      it is classified as a direct financing lease in accordance with Statement
      of Financial Accounting Standards No.
13.
 
 Accordingly,
      the minimum payments under the charter agreement are recorded as the gross
      investment in the finance lease.  The difference between the
      gross investment in the finance lease and the cost of the Vessel is
      recorded as unearned income which is amortized to income over the life of
      the charter agreement to produce a constant periodic rate of return on the
      net investment in the finance
lease.
 
 (b)
              Interest
      payable recognition
 Interest
      payable on the Term Loans is accrued on a daily
  basis.
 
 (c)
              Discount
      on loans
 Discount
on issue of the long-term debt is being amortized to maturity of the debt on a
straight line basis.
 
 (d)
              Taxation
 No
      Bahamian income or withholding taxes are imposed on the payment by the
      Company of any principal or interest to any holder of Notes who is either
      an individual citizen or resident of the United States or an entity formed
      under the laws of the United States.  There is no income tax
      treaty currently in effect between the United States and
      Bahamas.
 
 (e)
              Reporting
      currency
 The
      reporting currency is United States dollars.  The functional
      currency is United States dollars.
 
  
 F-5
   CalPetro
Tankers (Bahamas I) Limited
 Notes
to the Financial Statements
  (f)
              Use
      of estimates
  The
      preparation of financial statements in accordance with accounting
      principles generally accepted in the United States of America requires the
      Company to make estimates and assumptions in determining the reported
      amounts of assets and liabilities and disclosures of contingent assets and
      liabilities on the dates of the financial statements and the reported
      amounts of revenues and expenses during the reporting
      periods.  Actual results could differ from these
      estimates.
 
 Recently
issued Accounting Standards
 In
February 2007 the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial
Liabilities – including an amendment of FASB Statement No. 115” (SFAS
159). SFAS 159 permits entities to choose to measure many financial instruments
and certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. SFAS is effective
for fiscal years beginning after November 15 2007. The Company does not expect
the adoption of SFAS 159 to have an impact on its financial
statements.
 
 In
December 2007 the FASB issued SFAS No. 160 “Non-controlling Interests in
Consolidated Financial
Statements – an amendment of ARB No. 51” (SFAS 160). SFAS 160 is intended
to improve the relevance, comparability and transparency of financial
information that a reporting entity provides in its consolidated financial
statements with reference to a non-controlling interest in a subsidiary. Such a
non-controlling interest, sometimes called a minority interest, is the portion
of equity in a subsidiary not attributable, directly or indirectly, to the
parent entity. SFAS 160 is effective for fiscal years beginning on or after
December 15 2008. The Company does not expect the adoption of SFAS 160 to have
an impact on its financial statements.
 
 In
November 2007 the SEC issued Staff Accounting Bulletin No. 109 (SAB 109),
relating to written loan commitments recorded at fair value through earnings.
Previously Staff Accounting Bulletin No. 105 “Application of Accounting Principles
to Loan Commitments”(SAB 105) provided the views of the staff regarding
derivative loan commitments that are accounted for at fair value through
earnings pursuant to Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging
Activities”. SAB
105 stated that in measuring the fair value of a derivative loan commitment, the
staff believed it would be inappropriate to incorporate the expected net future
cash flows related to the associated servicing of the loan. This new SAB 109
supersedes SAB 105 and expresses the current view of the staff that, consistent
with the guidance in Statement of Financial Accounting Standards No. 156 “Accounting for Servicing of
Financial Assets” and Statement of Financial Accounting Standards No. 159
“The Fair Value Option for
Financial Assets and Financial Liabilities”, the expected net future cash
flows related to the associated servicing of the loan should be included in the
measurement of all written loan commitments that are accounted for at fair value
through earnings. SAB 105 also indicated that the staff believed that
internally-developed intangible assets (such as customer relationship intangible
assets) should not be recorded as part of the fair value of a derivative loan
commitment. SAB 109 retains that staff view and broadens its application to all
written loan commitments that are accounted for at fair value through earnings.
The Company adopted the provisions of SAB 109 as of December 31 2007. The
adoption did not have any effect on the Company’s results of operations or
financial position.
 
 
 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.
   
 F-6
 CalPetro
Tankers (Bahamas I) Limited
 Notes
to the Financial Statements
  4.  Finance
Lease
 
 The
Company has chartered its Vessel on a long term bareboat charter (the “Initial
Charter”) to Chevron Transport Corporation (the “Chevron”) which has a term
expiring on April 1, 2015 subject to Chevron’s right to terminate the Initial
Charter on certain specified dates. Chevron did not elect to terminate the
Initial Charter on any of the specified dates, the last being April 1, 2009. A
notice period of at least 12 months would have been required in order to
exercise this option.
 
 Chevron
has the option to purchase the vessel for $1 on April 1, 2015 provided the
Initial Charter is still in place. As at June 23, 2008 termination notice had
been received from Chevron for the Initial Charter.
 
 The
following schedule lists the components of the net investment in finance
lease:
 
 
 (in
      thousands of $)
              
              2007
              
              
              2006Total
      minimum lease payments to be received
              
              
              34,759
              
              
              
              40,604Less:
      Unearned income
              
              
              (8,830
              )
              
              
              (11,255
              )Net
      investment in finance lease
              
              
              25,929
              
              
              
              29,349
 
 Lease
payments under the charter agreement for each of the five succeeding years are
as follows; $5,559,000 in 2008, $5,273,000 in 2009, $4,987,000 in 2010,
$4,701,000 in 2011 and $4,415,000 in 2012.
 
 5.  Deferred
Charges
 
 Deferred
charges represent the capitalization of debt issue costs.  These costs
are amortized over the term of the Loans on a straight line basis. The deferred
charges are comprised of the following amounts:
 
 (in
      thousands of $)
              
              2007
              
              
              2006
 Debt
      arrangement fees
              
              
              1,005
              
              
              
              1,005Accumulated
      amortization
              
              
              (863
              )
              
              
              (843
              )142
              
              
              
              162
 
 6.  Debt
  (in
      thousands of $)
              
              2007
              
              
              2006
  8.52%
      Term Loans due 2015
              
              
              26,842
              
              
              
              30,197Less:
      current portion
              
              
              (3,355
              )
              
              
              (3,355
              )23,487
              
              
              
              26,842
 
  The
outstanding debt as of December 31, 2007 is repayable as
follows:
 (in
      thousands of $)Year
      ending December 31,2008
              
              
              3,3552009
              
              
              3,3552010
              
              
              3,3552011
              
              
              3,3552012
      and later
              
              
              13,422Total
      debt
              
              
              26,842
 
 The Term
Loans bear interest at a rate of 8.52% per annum.  Interest is payable
semi-annually on April 1 and October 1 each year. Principal is repayable on the
Term Loans in accordance with a remaining nine year sinking fund
schedule.
 
 F-7
  CalPetro
Tankers (Bahamas I) Limited
 Notes
to the Financial Statements
  If the
Initial Charter is terminated, the scheduled mandatory sinking fund payments on
the Term Loans will be revised so that the allocated principal amount of the
Term Loans for the related Vessel will be redeemed on the remaining sinking fund
redemption dates on a schedule that approximates level debt service with an
additional principal payment on the maturity date of $7 million.
 
 The table
below provides the revised scheduled sinking fund redemption amounts and final
principal payment of the Allocated Principal Amount of the Term Loans following
termination of the related Initial Charter on each of the optional termination
dates. The Company did not receive any notification from the Initial Charter of
their intention to terminate the Initial Charter on April 1,
2003,  April 1, 2005  April 1, 2007 or April 1, 2009,
therefore the Initial Charter remains in place with no Optional Termination
Dates left.
 
 
 Scheduled
      payment date
              Initial
      Charter not terminated
                $’000
              Initial
      Charter terminated 2009
                $’000April
      1, 2008
              3,355
              3,355April
      1, 2009
              3,355
              3,355April
      1, 2010
              3,355
              1,770April
      1, 2011
              3,355
              1,920April
      1, 2012
              3,355
              2,080April
      1, 2013
              3,355
              2,260April
      1, 2014
              3,355
              2,450April
      1, 2015
              3,357
              9,65226,842
              26,842
 
 The Term
Loans are collateralized by first preference mortgage on the Vessel to
California Petroleum Transport Corporation.  The earnings and
insurance relating to the Vessel have been collaterally assigned pursuant to an
Assignment of Earnings and Insurance to California Petroleum Transport
Corporation, which in turn has assigned such Assignment of Earnings and
Insurance to the Collateral Trustee.  The Initial Charter and Chevron
Guarantee relating to the Vessel have been collaterally assigned pursuant to the
Assignment of Initial Charter and Assignment of Initial Charter Guarantee to
California Petroleum Transport Corporation, which in turn has assigned such
Assignment to the Collateral Trustee. The Capital Stock of the Company has been
pledged to California Petroleum Transport Corporation pursuant to the Stock
Pledge Agreement.
 
 7.
              Share
      Capital
 
 (in
      $)
              
              2007
              
              
              2006Authorized
      share capital:1,000
      shares of $1 each
              
              
              1,000
              
              
              
              1,000Issued
      and outstanding share capital:100
      shares of $1 each
              
              
              100
              
              
              
              100
 
 8.
              Financial
      Instruments
 
 Fair
values
 The
carrying value and estimated fair value of the Company’s financial instruments
at December 31, 2007 and 2006 are as follows:
 
 (in
      thousands of $)
              
              2007
                Fair
                value
              
              
              2007
                Carrying
      value
              
              
              2006
                Fair
                value
              
              
              2006
                Carrying
      valueRestricted
      cash
              
              
              2,180
              
              
              
              2,180
              
              
              
              2,176
              
              
              
              2,1768.52%
      Term Loans due 2015
              
              
              28,836
              
              
              
              26,842
              
              
              
              32,198
              
              
              
              30,197
 
 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, being the Term Loans, is based on the
quoted market price of these or similar debt when available.
 
  F-8
 CalPetro
Tankers (Bahamas I) Limited
 Notes
to the Financial Statements
 Concentrations
of risk
 The
Company’s only source of funds for the repayment of the principal and interest
on the Term Loans are from charterhire payments from Chevron, investment income
and the proceeds, if any, from the sale of the Vessels. Accordingly, the
Company’s ability to service its obligations on the Term Loans is wholly
dependent upon the financial condition, results of operations and cash flows
from Chevron.
 9.
              Related
      Party Transactions
 
 Pursuant
to a management agreement, Frontline is the Company’s Manager and Technical
Advisor. Under the management agreement, Frontline is entitled to a Management
Fee and a Technical Advisor’s Fee.
 
 Under the
terms of the management agreement, the Management Fee consists of a fee of
$13,625 initially per annum for the Vessel, along with a fee of $3,000 covering
all four Vessels in the California Petroleum Group, payable semi-annually in
arrears for the period until the third anniversary of the closing of the Notes
issue then increasing by four percent on each subsequent anniversary of the
closing of the issue of the Notes.
 
 The
Technical Advisor’s Fee was initially $10,000 per annum for the Vessel, payable
semi-annually in arrears, during the initial first three year period as
described above. On each subsequent anniversary of the closing of the issue of
the Notes, the fee increases by four percent. In addition, the Technical Advisor
is entitled to be reimbursed for the fees, costs and expenses of conducting
periodic inspections of the Vessel.
 
 Pursuant
to a Designated Representative Agreement, CalPetro Holdings Limited (the
“Designated Representative”) was appointed to represent California Petroleum as
its Designated Representative to act on its behalf with respect to certain
administrative matters such as the filing of periodic reports and financial
statements with the Securities and Exchange Commission. The fee payable to the
Designated Representative (the “Designated Representative Fee”) during the
initial three year period described above was $15,000 per annum with a four
percent increase on each subsequent anniversary of the closing of the issue of
the Notes.
 
 Management
fee expenses and management fee payable for the year ended and as of December
31, 2007, 2006, and 2005 are as follows:
  (in
      thousands of $)
                
                2007
                
                
                2006
                
                
                2005Management
      fee expenses
                
                
                41
                
                
                
                40
                
                
                
                38Management
      fee payable
                
                
                10
                
                
                
                10
                
                
                
                10
 10.           Collateral
Arrangements
 
 The Term
Loans are collateralized by a first preference mortgage on the Vessel to
California Petroleum Transport Corporation.  The earnings and
insurance relating to the Vessel have been collaterally assigned pursuant to an
Assignment of Earnings and Insurance to California Petroleum Transport
Corporation, which in turn has assigned such Assignment of Earnings and
Insurance to the Collateral Trustee.  The Initial Charter and Chevron
Guarantee relating to the Vessel have been collaterally assigned pursuant to the
Assignment of Initial Charter and Assignment of Initial Charter Guarantee to
California Petroleum Transport Corporation, which in turn has assigned such
Assignment to the Collateral Trustee.  The Capital Stock of the
Company has been pledged to California Petroleum Transport Corporation pursuant
to the Stock Pledge Agreement.
 
 As at
December 31, 2007, Chevron holds an option to purchase the Vessel for $1 on
April 1, 2015 provided the Initial Charter is still in place.
 
 
 F-9
 
 
 
 
 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 I) Limited
 
 
 
 
 /s/
Kate Blankenship
 Kate
Blankenship
 Director
and Secretary
 
 
 
 Date:  June
30, 2008
 
 
 SK 02089 0006 896118