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

                                    FORM 20-F

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

                                       OR

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

For the fiscal year ended             December 31, 2003
                         -------------------------------------------------------

                                       OR

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

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


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


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


     Suite 4350, One International Place, Boston, Massachusetts, 02101-2624
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

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

Title of each class                    Name of each exchange on which registered

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

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


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

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

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

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

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

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

                                 Yes [X] No [ ]

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


                             Item 17 [ ] Item 18 [X]

<PAGE>



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

                                                                            Page
PART I

Item 1.    Identity of Directors, Senior Management
           and Advisors                                          Not applicable
Item 2.    Offer Statistics and Expected Timetable               Not applicable
Item 3.    Key Information                                                   1
Item 4.    Information on the Company                                        6
Item 5.    Operating and Financial Review and Prospects                     15
Item 6.    Directors, Senior Management and Employees                       17
Item 7.    Major Shareholders and Related Party Transactions                18
Item 8.    Financial Information                                            18
Item 9.    The Offer and Listing                                            18
Item 10.   Additional Information                                           18
Item 11.   Quantitative and Qualitative Disclosures
           about Market Risk                                                20
Item 12.   Description of Securities Other than Equity Securities           21

PART II

Item 13.   Defaults, Dividend Arrearages and Delinquencies                   21
Item 14    Material Modifications to the Rights of Security
           Holders and Use of Proceeds                                       21
Item 15.   Controls and Procedures                                           21
Item 16A.  Audit Committee Financial Expert                                  22
Item 16B.  Code of Ethics                                                    22
Item 16C.  Principal Accountant Fees and Services                            22
Item 16D.  Exemptions from the Listing Rules
           for Audit Committees                                  Not applicable

PART III

Item 17    Financial Statements                                  Not applicable
Item 18.   Financial Statements                                              23
Item 19.   Exhibits                                                          23


<PAGE>

                                     PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Financial Data

The selected  statement of operations and retained  earnings data of the Company
with respect to the fiscal years ended December 31, 2003, 2002 and 2001, and the
selected  balance  sheet data at December  31, 2003 and 2002,  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, 2000 and 1999 and the selected balance sheet data at December
31, 2001, 2000 and 1999 have been derived from audited  financial  statements of
the Company not  included  herein.  The  following  table should also be read in
conjunction  with Item 5 "Operating and Financial  Review and Prospects" and the
Company's  audited financial  statements and notes thereto included herein.  The
Company's accounts are maintained in US dollars.

<TABLE>
<CAPTION>

                                                       Year ended December 31,
                                          2003        2002       2001      2000       1999
                                         (U.S. Dollars in thousands except per share data)

Statement of operations and
retained earnings data:

<S>                                        <C>         <C>        <C>        <C>       <C>
Net operating revenues                     1,869       2,068      2,282      2,494     2,694
Net income                                    46          78         98        139       149
Per share data:
Dividends per share                            -           -          -          -         -
Balance sheet data:
Total assets                              22,056      24,562     27,061     29,476    31,396
Long term liabilities (1)                 20,334      22,864     25,394     27,924    32,984
Stockholder's equity                       1,274       1,228      1,150      1,052       913
</TABLE>


(1) Includes current portion.

Risk Factors

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

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

Our vessel (the "Vessel") is currently  operated  under a bareboat  charter (the
"Charter")  to Chevron  Transport  Corporation  (the  "Initial  Charterer".  The
Charter  has a term  expiring  on April 1,  2015,  subject  to the fact that the
Initial  Charterer  has an option to  terminate  the  charter  earlier  on three
specified  dates.  The  first  option  to  terminate  is on  April  1,  2006 and
subsequent  options exist on each of the two subsequent  two-year  anniversaries
thereof. Notice of the intention to exercise the option to terminate the Charter
must be  given  at  least  twelve  months  in  advance  for the  first  Optional
Termination Date and seven months in advance for subsequent Optional Termination
Dates.

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

Because our charter may be  terminated  in April 2006,  we may incur  additional
expenses and not be able to recharter our Vessel profitably

CalPetro  Tankers  (Bahamas III) Limited was  incorporated in the Bahamas on May
13, 1994  together  with three other  companies:  CalPetro  Tankers  (Bahamas I)
Limited and CalPetro Tankers (Bahamas II) Limited, each of which is incorporated
in the Bahamas,  and CalPetro Tankers (IOM) Limited which is incorporated in the
Isle of Man  (together  the  "Owners").  Each of the Owners was  organized  as a
special  purpose  company for the purpose of  acquiring  one of four Suezmax oil
tankers from  Chevron  Transport  Corporation.  California  Petroleum  Transport
Corporation, a Delaware corporation, acting as agent on behalf of the Companies,
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 the Chevron
Transport Corporation. The Company was allocated $27,640,000 of the Serial Loans
and  $12,744,000  of the Term Loans and acquired its Vessel,  the VIRGO  VOYAGER
(previously WILLIAM E CRAIN).

Chevron  Transport  Corporation has its first option to terminate its Charter on
April 1, 2006 and on each of the two subsequent two-year  anniversaries thereof.
Chevron Transport  Corporation has the sole discretion to exercise these options
and will not owe any  fiduciary  or other  duty to the  holders  of the Notes in
deciding  whether  to  exercise  the  termination   options,   and  the  Initial
Charterer's decision may be contrary to our interests or those of the holders of
the Notes.

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

In the event Chevron Transport  Corporation does terminate the Charter,  we will
attempt to arrange a replacement  charter,  or may sell the Vessel.  Replacement
charters may include  shorter-term time charters and employing the Vessel on the
spot  charter  market  (which is subject to  greater  fluctuation  than the time
charter  market).  Any replacement  charter may bring us lower charter rates and
would likely  require us to incur greater  expenses which may reduce the amounts
available, if any, to pay principal and interest on the Notes.

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

The  operation  of tanker  vessels  and  transportation  of crude and  petroleum
products is an extremely competitive business. Competition arises primarily from
other tanker owners, including major oil companies as well as independent tanker
companies,  some  of  whom  have  substantially  greater  resources  than we do.
Competition  for the  transportation  of oil and oil products can be intense and
depends on price,  location,  size, age,  condition and the acceptability of the
tanker and its  operators  to the  charterers.  During the term of our  existing
Charter  with  Chevron  Transport  Corporation  we are not  exposed  to the risk
associated with this  competition.  At the end of our current Charter and in the
event that Chevron Transport Corporation terminates the charter in April 2006 or
at any subsequent optional  termination date, we will have to compete with other
tanker  owners,  including  major oil  companies as well as  independent  tanker
companies for charters. Due in part to the fragmented tanker market, competitors
with  greater   resources   could  enter  and  operate   larger  fleets  through
acquisitions  or  consolidations  and may be able to  offer  better  prices  and
fleets,  which could result in our achieving lower revenues from our Suezmax oil
tanker.

Compliance  with  environmental  laws or  regulations  may adversely  affect our
earnings  and  financial  conditions  at the end of the  existing  Charter or if
Chevron Transport Corporation terminates its Charter prior to that time

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

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

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

We are highly dependent on Chevron Transport Corporation and Chevron Corporation

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

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

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

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

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

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

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

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

We are highly leveraged.  As of December 31, 2003, we had $20.3 million in total
indebtedness outstanding and stockholder's equity of $1.3 million. The degree to
which we are leveraged could have important  consequences for the holders of the
Notes, including:

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

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

--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.

We have a limited business purpose which limits our flexibility

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

Item 4. Information on the Company

The Company

CalPetro  Tankers  (Bahamas III) Limited was  incorporated in the Bahamas on May
13, 1994 together with two other companies: CalPetro Tankers (Bahamas I) Limited
and CalPetro  Tankers  (Bahamas II). In addition  CalPetro Tankers (IOM) Limited
was incorporated in the Isle of Man. Together these companies are referred to as
the "Owners".  Each of the Owners was organized as a special purpose company for
the purpose of acquiring one of four oil tankers (each a "Vessel",  together the
"Vessels") from Chevron Transport  Corporation.  California  Petroleum Transport
Corporation,  a Delaware  corporation,  acting as agent on behalf of the Owners,
issued as full recourse obligations $167,500,000 Serial First Preferred Mortgage
Notes and $117,900,000  8.52% First Preferred  Mortgage Notes due 2015 (together
the  "Notes").  The  proceeds  from the sale of the Notes were applied by way of
long-term  loans,  being Serial  Loans in respect of the Serial First  Preferred
Mortgage Notes and Term Loans in respect of the First  Preferred  Mortgage Notes
due 2015, to the Owners to fund the  acquisition of the Vessels from the Chevron
Transport Corporation. The Company was allocated $27,640,000 of the Serial Loans
and  $12,744,000  of the Term Loans and acquired its Vessel,  the VIRGO  VOYAGER
(previously  WILLIAM E CRAIN),  as described  below.  The Company  engages in no
business  other than the ownership and  chartering of its Vessel and  activities
resulting from or incidental to such ownership and chartering.

The Company is wholly owned by California Tankers Investments Limited, a company
organized  under  the  laws of the  Bahamas,  which  is in turn a  wholly  owned
subsidiary of CalPetro Holdings Limited, an Isle of Man company.

On May 12,  1998,  ownership of CalPetro  Holdings  Limited was  transferred  to
Independent Tankers  Corporation,  a Cayman Islands company ("ITC"). On the same
date,  all of the issued and  outstanding  shares of ITC were sold to  Frontline
Ltd. ("Frontline"), a publicly listed Bermuda company.

Pursuant to a share  purchase  agreement  dated December 23, 1998, as amended on
March 4, 1999,  Frontline  sold,  effective  July 1, 1999, all of the issued and
outstanding  shares of ITC to Hemen Holding Limited, a Cyprus company ("Hemen").
Hemen is the principal  shareholder of Frontline and is indirectly controlled by
Mr. John Fredriksen,  the Chairman and Chief Executive Officer of Frontline.  On
July 1, 2003,  Frontline  entered into an option agreement with Hemen to acquire
all shares in ITC. This option was exercised effective May 27, 2004.

Overview of the Business

The Company's Vessel is a  150,000-deadweight  tonne ("dwt") Suezmax oil tanker,
called the VIRGO VOYAGER (previously WILLIAM E. CRAIN),  which was acquired from
Chevron Transport Corporation.  Suezmax tankers are medium-sized vessels ranging
from  approximately  120,000 to 200,000 dwt, and of maximum length,  breadth and
draft  capable of passing  fully loaded  through the Suez Canal.  The Vessel has
been chartered  back to Chevron  Transport  Corporation.  The Charter has a term
expiring on April 1, 2015; subject to the Initial Charterer's right to terminate
the  Initial  Charter on certain  specified  dates.  The  Initial  Charterer  is
principally  engaged in the marine  transportation  of oil and refined petroleum
products.  The Initial  Charterer'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  Transport  has
advised the Company  that it expects to use the Vessel  worldwide  as  permitted
under the Charter.  The  obligations of the Initial  Charterer under the Initial
Charter  are  guaranteed  by  Chevron  Corporation,  a major  international  oil
company, pursuant to a guarantee (the "Chevron Guarantee").  The Initial Charter
is an indirect, wholly-owned subsidiary of Chevron.

The Vessel is a single-hull oil carrier of and is presently registered under the
Bahamian flag. The Vessel was  constructed  under the supervision of the Initial
Charterer  and  designed to the Initial  Charterer'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  VIRGO  VOYAGER
(previously WILLIAM E. CRAIN) was Ishikawajima do Brasil Estaleiros S.A.

The Management

On March 31,  1999,  P.D.Gram & Co.  A.S.  resigned  as Manager  and Barber Ship
Management  resigned as Technical Advisor. On the same date each was replaced by
Frontline Ltd, pursuant to an assignment of the Management Agreement.

The  Initial   Charterer  may  elect  to  terminate  the  Charter  on  specified
termination  dates  commencing in 2006. If the Initial  Charter is terminated by
the Initial Charterer, the Manager (Frontline), acting on behalf of the Company,
will attempt to find an  acceptable  replacement  charter for the Vessel.  If an
acceptable  replacement  charter is commercially  unavailable,  the Manager will
solicit bids for the sale or recharter of the Vessel.  The Manager's  ability to
obtain an acceptable  replacement  charter,  to sell the Vessel or recharter the
Vessel will depend on market rates for new and used vessels,  both of which will
depend on the supply of and demand for tanker  capacity for oil  transportation,
and the advantages or  disadvantages  of the Vessel  compared with other vessels
available at the time.

The International Tanker Market

International sea borne oil and petroleum products  transportation  services are
mainly provided by two types of operator: major oil company captive fleets (both
private  and  state-owned)  and  independent  shipowner  fleets.  Both  types of
operators  transport oil under  short-term  contracts  (including  single-voyage
"spot  charters") and long-term  time charters with oil companies,  oil traders,
large oil consumers,  petroleum product producers and government  agencies.  The
oil companies own, or control through long-term time charters, approximately one
third of the current world tanker capacity,  while independent  companies own or
control the balance of the fleet. The oil companies use their fleets not only to
transport their own oil, but also to transport oil for third-party charterers in
direct  competition with independent  owners and operators in the tanker charter
market.

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

In order to benefit from economies of scale,  tanker  charterers  will typically
charter the largest  possible  vessel to transport  oil or products,  consistent
with port and canal  dimensional  restrictions  and optimal cargo lot sizes. The
oil tanker fleet is generally  divided  into the  following  five major types of
vessels, based on vessel carrying capacity: (i) ULCC-size range of approximately
320,000  to  450,000  dwt;  (ii)  VLCC-size  range of  approximately  200,000 to
320,000;  (iii) Suezmax-size range of approximately 120,000 to 200,000 dwt; (iv)
Aframax-size range of approximately 60,000 to 120,000 dwt; and (v) small tankers
of less than approximately 60,000 dwt. ULCCs and VLCCs typically transport crude
oil in long-haul trades, such as from the Arabian Gulf to Rotterdam via the Cape
of Good Hope.  Suezmax tankers also engage in long-haul crude oil trades as well
as in medium-haul  crude oil trades,  such as from West Africa to the East Coast
of the United States.  Aframax-size  vessels generally engage in both medium-and
short-haul  trades of less than  1,500  miles and carry  crude oil or  petroleum
products.  Smaller tankers mostly transport  petroleum products in short-haul to
medium-haul trades.

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

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

     -    demand for oil and oil products;

     -    global and regional economic conditions;

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

     -    changes in sea borne and other transportation patterns

The factors that influence the supply of tanker capacity include:

     -    the number of newbuilding deliveries;

     -    the scrapping rate of older vessels; and

     -    the number of vessels that are out of service.

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

The year 2003  started with  extremely  strong  charter  rates which were mainly
driven by factors such as the strike in Venezuela  which resulted in longer haul
imports, a cold winter in the northern hemisphere  resulting in increased demand
for heating oil and increased  consumption in the Far East especially China, all
of which have resulted in spot market rates being significantly stronger than in
2002.  Suezmax rates have  fluctuated over the year ranging from $17,000 per day
to $40,000 per day.

There is no guarantee  that Suezmax  rates would be  sufficient to meet the debt
service  required if the  bareboat  charters  entered  into with Chevron are not
extended. Spot market rates are volatile and generally linked to global economic
development and especially demand for oil but also to political events affecting
oil producing countries.

Inspection by Classification Society

Every   commercial   vessel's  hull  and  machinery   must  be  "classed"  by  a
classification society authorized by its country of registry. The classification
society ensures that a vessel is constructed and equipped in accordance with the
International  Maritime  Organization (the "IMO")  regulations and the Safety of
Life at Sea Convention.

A vessel must be inspected  by a surveyor of the  classification  society  every
year ("Annual Survey"),  every two years ("Intermediate  Survey") and every four
years ("Special Survey"). Each vessel is also required to be dry docked every 30
to 60 months  for  inspection  of the  underwater  parts of the  vessel.  If any
defects are found,  the  classification  surveyor will issue a  "recommendation"
which has to be acted upon,  and the defect must be rectified  by the  shipowner
within a prescribed time limit.  At the Special  Survey,  the vessel is examined
thoroughly,  including an  inspection  to determine  the  thickness of the steel
plates in various  parts of the  vessel,  and repairs  may be  recommended.  For
example,  if the  thickness  of the steel  plates is found to be less than class
requirements,  steel renewals will be prescribed. A one-year grace period may be
granted by the  classification  society to the shipowner  for  completion of the
Special Survey. If the vessel experiences  excessive wear and tear,  substantial
amounts  of money  may have to be spent  for  steel  renewals  to pass a Special
Survey.  In lieu of the Special Survey every four years (five years, if grace is
given), a shipowner has the option of arranging with the classification  society
for the vessel's hull or machinery to be on a continuous  survey cycle,  whereby
every  part of the  vessel  is  surveyed  within a  five-year  cycle.  Insurance
underwriters  make it a condition  of  insurance  coverage  for the vessel to be
"classed" and "class maintained" and the failure of a vessel to be "classed" and
"class maintained" may render such a vessel unusable.

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

Insurance

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

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

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

Environmental and Other Regulations

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

We believe  the  heightened  environmental  and quality  concerns  of  insurance
underwriters,  regulators and  charterers are leading to greater  inspection and
safety  requirements on all vessels and creating an increasing demand for modern
vessels that are able to conform to the  stricter  environmental  standards.  We
maintain high  operating  standards for our tanker that  emphasizes  operational
safety,  quality maintenance,  continuous training of our crews and officers and
compliance  with  United  States and  international  regulations.  Our tanker is
subject to scheduled and  unscheduled  inspections by a variety of  governmental
and  private  entities,   including  local  port   authorities,   classification
societies,  flag state  administration  or country of registry,  and charterers,
particularly terminal operators and major oil companies,  which conduct frequent
vessel inspections.  Each of these entities may have unique requirements that we
must comply with.

Environmental Regulation--IMO.

The United Nation's  International  Maritime  Organization,  or IMO, has adopted
regulations that set forth pollution prevention  requirements for tankers. These
regulations,  which have been  implemented  in many  jurisdictions  in which our
tanker operates, provide, in part, that:

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

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

               (2)  they are capable of hydrostatically  balanced loading, which
                    means that they are loaded in such a way that if the hull is
                    breached,  water  flows  into  the  tanker,  displacing  oil
                    upwards instead of into the sea

          o    30-year  old  tankers  must  be of  double-hull  construction  or
               mid-deck design with double-sided construction.

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

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

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

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

Effective  September 2002, the IMO  accelerated  its existing  timetable for the
phase-out of single hull oil tankers. These regulations require the phase-out of
most single hull oil  tankers by 2015 or  earlier,  depending  on the age of the
tanker and whether it has  segregated  ballast  tanks.  After 2007,  the maximum
permissible age for single hull tankers will be 26 years. As a result of the oil
spill in  November  2002  relating to the loss of the m.t.  Prestige,  which was
owned  by a  company  not  affiliated  with us,  in  December  2003  the  Marine
Environmental  Protection  Committee of the IMO adopted a proposed  amendment to
the  International  Convention  for the  Prevention  of Pollution  from Ships to
accelerate  the phase out of single  hull  tankers  from 2015 to 2010 unless the
relevant flag states extend the date to 2015. This proposed  amendment will come
into effect in April 2005 unless  objected to by a  sufficient  number of member
states.  Our tanker is a single hulled tanker built in 1992 and as such, will be
able to operate until 2015 before being  required to be scrapped or  retrofitted
to conform to international  environmental standards. Under current regulations,
retrofitting  will  enable a vessel to operate  until the earlier of 25 years of
age and the anniversary  date of its deliver in 2017. We do not know whether our
vessel will be subject to the proposed accelerated phase out described above but
this could  result in our vessel  being  unable to trade in many  markets  after
2010.  Moreover,  the IMO may still adopt  regulations  in the future that could
adversely affect the remaining useful lives of our vessel.

The IMO has also negotiated international  conventions that impose liability for
oil pollution in international  waters and a signatory's  territorial waters. In
September 1997, the IMO adopted Annex VI to the International Convention for the
Prevention of Pollution from Ships to address air pollution from ships. Annex VI
was  ratified  at the  end of  2003,  and  becomes  effective  12  months  after
ratification.  Annex VI, when it becomes  effective,  will set limits on sulphur
oxide and nitrogen oxide  emissions  from ship exhausts and prohibit  deliberate
emissions of ozone depleting substances,  such as chlorofluorocarbons.  Annex VI
also  includes  a global cap on the  sulphur  content of fuel oil and allows for
special  areas  to be  established  with  more  stringent  controls  on  sulphur
emissions.  Compliance with these  regulations could require the installation of
expensive  emission control systems.  Although Chevron Transport  Corporation is
responsible for all operational  matters and bears all these expenses during the
term of our current Charter,  these expenses could have an adverse effect on our
business  operations  at any time after the  expiration  or  termination  of the
Charter or in the event Chevron Transport  Corporation fails to make a necessary
payment.

The IMO's  International  Safety  Management Code, or ISM Code, also affects our
operations. The ISM Code requires the party with operational control of a vessel
to develop a safety  management  system that includes,  among other things,  the
adoption  of  a  safety  and  environmental   protection  policy  setting  forth
instructions  and  procedures  for operating its vessels  safely and  describing
procedures for responding to emergencies.  Our Vessel manager is certified as an
approved ship manager under the ISM Code.

The  ISM  Code  requires  that  vessel  operators  obtain  a  safety  management
certificate for each vessel they operate.  This certificate evidences compliance
by a vessel's  management  with ISM Code  requirements  for a safety  management
system. No vessel can obtain a certificate unless its manager has been awarded a
Document  of  Compliance,  issued by each flag  state,  under the ISM Code.  Our
tanker has received its safety management certificate.

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 tankers denial of access to, or detention in, some ports.  Both the U.S. Coast
Guard  and  European  Union  authorities  have  indicated  that  vessels  not in
compliance with the ISM Code by the applicable deadlines will be prohibited from
trading in U.S. and European Union ports, as the case may be.

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

Environmental Regulation--OPA/CERCLA

The U.S. Oil Pollution Act of 1990, or OPA,  established an extensive regulatory
and liability regime for environmental protection and cleanup of oil spills. 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  waters and the two
hundred  nautical  mile  exclusive  economic  zone  of the  United  States.  The
Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
which also  impacts  our  operations,  applies  to the  discharge  of  hazardous
substances whether on land or at sea.

Under OPA,  vessel  owners,  operators and bareboat or "demise"  charterers  are
"responsible parties" who are liable regardless of fault,  individually and as a
group, for all containment  costs,  clean-up costs and for other damages arising
from oil spills from their  vessels.  These other damages may include  injury to
natural  resources and real and personal  property,  loss of subsistence  use of
natural resources,  the loss of taxes,  rents,  royalties,  profits and earnings
capacity   resulting  from  an  oil  spill  and  the  cost  of  public  services
necessitated by an oil spill. OPA limits a responsible  party's liability to the
greater of $1,200 per gross ton or $10 million per vessel over 3,000 gross tons,
subject to adjustment for inflation.  OPA specifically permits individual states
to impose their own  liability  regimes with regard to oil  pollution  incidents
occurring  within their  boundaries,  and some states have  enacted  legislation
providing  for unlimited  liability  for  discharge of  pollutants  within their
waters.  In some cases,  states that have enacted this type of legislation  have
not yet issued implementing regulations defining tanker owners' responsibilities
under these laws.

CERCLA,  which applies to owners and operators of vessels,  contains a liability
regime  similar to OPA and provides for  cleanup,  removal and natural  resource
damages.  Liability under CERCLA is limited to the greater of $300 per gross ton
or $5  million.  These  limits of  liability  do not apply,  however,  where the
incident is caused by violation of applicable U.S. federal safety,  construction
or operating  regulations,  or by the  responsible  party's gross  negligence or
wilful  misconduct.  These limits do not apply if the responsible party fails or
refuses to report the incident or to co-operate  and assist in  connection  with
the  substance  removal  activities.  OPA and CERCLA each  preserve the right to
recover damages under existing law, including maritime tort law. We believe that
we are in  substantial  compliance  with OPA,  CERCLA and all  applicable  state
regulations in the ports where our tanker will call.

OPA 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 aggregate  potential strict  liability under OPA and CERCLA.  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
OPA  limitation  on liability of $1,200 per gross ton with the CERCLA  liability
limit of $300 per  gross  ton.  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
must 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 liability under OPA/CERCLA.

Under  OPA,  with  limited  exceptions,  all newly  built or  converted  tankers
operating in U.S. waters must be built with double-hulls.  Existing vessels that
do not comply with the double-hull requirement must be phased out over a 20-year
period  beginning  in 1995  based on size,  age and place of  discharge,  unless
retrofitted  with  double-hulls.   Notwithstanding  the  phase-out  period,  OPA
currently permits existing single-hull 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  unloading  with the aid of  another  vessel,  a  process
referred to as  "lightering,"  within  authorized  lightering zones more than 60
miles offshore.

Environmental Regulation--Other

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
and the  Convention  for the  Establishment  of an  International  Fund  for Oil
Pollution of 1971. Under these conventions, 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 defences. Under an amendment that became effective 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 $938 for each additional  gross ton over 5,000. For vessels of
over  140,000  gross tons,  liability  will be limited to  approximately  $133.4
million.  The current  maximum amount is  approximately  $81.2  million.  As the
convention  calculates  liability  in  terms of a basket  of  currencies,  these
figures are based on currency  exchange  rates on January 2, 2004.  The right to
limit  liability  is  forfeited  under  the  International  Convention  on Civil
Liability  for Oil  Pollution  Damage  where the spill is caused by the  owner's
actual  fault  and  under  the 1992  Protocol  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 governs,  and liability is imposed  either on
the basis of fault or in a manner  similar to that  convention.  We believe that
our P&I insurance covers the liability under the plan adopted by the IMO.

In July 2003, in response to the m.t.  Prestige oil spill in November  2002, the
European Union adopted  legislation  that prohibits all single hull tankers from
entering into its ports or offshore  terminals by 2010.  The European  Union has
also 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  considering  legislation  that  would:  (1) ban  manifestly
sub-standard vessels (defined as those over 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
Commission  with greater  authority and control over  classification  societies,
including  the ability to seek to suspend or revoke the  authority  of negligent
societies.  The sinking of the m.t. Prestige and resulting oil spill in November
2002 has lead to the  adoption  of other  environmental  regulations  by certain
European Union nations,  which could adversely affect the remaining useful lives
of all of our tankers and our ability to generate income from them. For example,
Italy announced a ban of single-hull  crude oil tankers over 5,000 dwt from most
Italian ports,  effective April 2003. Spain has announced a similar prohibition.
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.

In addition, most U.S. states that border a navigable waterway have enacted laws
that impose strict  liability for clean-up  costs and damages  resulting  from a
discharge  of oil or a release of a hazardous  substance.  As  permitted by OPA,
these state laws may provide for unlimited  liability  for oil spills  occurring
within their boundaries.

Vessel Security Regulations

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

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

          o    on-board installation of ship security alert systems;

          o    the development of vessel security plans; and

          o    compliance with flag state security certification requirements.

The U.S. Coast Guard regulations,  intended to align with international maritime
security standards,  exempt non-U.S.  tankers from MTSA vessel security measures
provided such vessels have on board, by July 1, 2004, a valid International Ship
Security  Certificate (ISSC) that attests to the vessel's  compliance with SOLAS
security  requirements and the ISPS Code. The Manager will implement the various
security measures addressed by the MTSA, SOLAS and the ISPS Code and ensure that
our tankers attain compliance with all applicable  security  requirements within
the prescribed  time periods.  We do not believe these  additional  requirements
will have a material financial impact on our operations.

Organisational Structure

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

Property, Plants and Equipment

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

Item 5.  Operating and Financial Review and Prospects

Operating results

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

Total Revenues

Finance lease  interest  income for the year ended December 31, 2003 amounted to
$1,777,000,  compared  with  $1,988,000  for the year ended  December  31, 2002.
Interest  income  has  fallen  in line  with  expectations.  As the value of the
finance  lease falls on an annual  basis,  so does the interest  received on the
finance leases.

Expenses

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

Year ended December 31, 2002 compared with the year ended December 31, 2001

Total Revenues

Finance lease  interest  income for the year ended December 31, 2002 amounted to
$1,988,000,  compared  with  $2,196,000  for the year ended  December  31, 2001.
Interest  income  has  fallen  in line  with  expectations.  As the value of the
finance  lease falls on an annual  basis,  so does the interest  received on the
finance leases.

Expenses

Interest  payable on the Term Loans and the Serial Loans  amounted to $1,901,000
for the year ended December 31, 2002. The  amortization of discount on loans for
the period amounted to $31,000. The Company amortises the discount over the life
of the Term and  Serial  Loans.  The  corresponding  figures  for the  period to
December 31, 2001 were $2,090,000 and $31,000,  respectively.  Interest  payable
has fallen in line with expectations, with interest payable falling in line with
the loan outstanding in the year.

Liquidity and Capital Resources

As set forth above,  revenues from the Initial Charter are sufficient to pay the
Company's obligations under the Term and Serial Loans. The Initial Charterer may
elect to terminate  the Charter on specified  termination  dates  commencing  in
2006.  If the  Initial  Charter is  terminated  by the  Initial  Charterer,  the
Manager,  acting on behalf of the Company,  will  attempt to find an  acceptable
replacement  charter for the Vessel.  If an  acceptable  replacement  charter is
commercially  unavailable,  the  Manager  will  solicit  bids  for  the  sale or
recharter  of  the  Vessel.  The  Manager's  ability  to  obtain  an  acceptable
replacement  charter,  to sell the Vessel or recharter the Vessel will depend on
market rates for new and used  vessels,  both of which will depend on the supply
of and demand for tanker capacity for oil transportation,  and the advantages or
disadvantages of the Vessel compared with other vessels available at the time.

Off-balance Sheet Arrangements

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

Critical Accounting Policies

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

          o    Accounting for financing leases as lessor

          o    Revenue and expense recognition

Trend Information

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

Recently Issued Accounting Standards

In December 2003, the Financial Accounting Standards Board issued Interpretation
No. 46R,  Consolidation of Variable Interest Entities,  an Interpretation of ARB
No. 51 ("the  Interpretation"),  which replaces Interpretation No. 46, issued in
January  2003.  The  Interpretation  addresses  the  consolidation  of  business
enterprises (variable interest entities) to which the usual condition (ownership
of  a  majority  voting  interest)  of  consolidation   does  not  apply.   This
Interpretation   focuses  on  financial  interests  that  indicate  control.  It
concludes  that in the absence of clear  control  through  voting  interests,  a
company's  exposure  (variable  interest)  to the economic  risks and  potential
rewards from the variable  interest  entity's assets and activities are the best
evidence of control.  Variable  interests are rights and obligations that convey
economic  gains or losses  from  changes in the value of the  variable  interest
entity's  assets and  liabilities.  Variable  interests may arise from financial
instruments, service contracts, and other arrangements. If an enterprise holds a
majority of the variable  interests  of an entity,  it would be  considered  the
primary  beneficiary.  The  primary  beneficiary  would be  required  to include
assets,  liabilities,  and the results of operations  of the variable  interests
entity  in its  financial  statements.  Adoption  of the  interpretation  is not
expected to have a significant impact on the financial statements.


Item 6.  Directors, Senior Management and Employees

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

                                       Age           Position

Tor Olav Tr0im                         41            Director and President
Kate Blankenship                       39            Director and Secretary

Tor Olav Tr0im has been a Director of CalPetro  Tankers  (Bahamas  III)  Limited
since  1998.  He has been  Vice-President  and a  director  of  Frontline  since
November 3, 1997. He previously served as Deputy Chairman of Frontline from July
4, 1997.  Mr.  Tr0im also  serves as a director  of Ship  Finance  International
Limited,  a subsidiary of Frontline and since May 2000,  has been a director and
Vice-Chairman  of  Knightsbridge  Tankers  Limited  ("Knightsbridge").  He  is a
director of Aktiv  Inkasso ASA and Northern Oil ASA, both  Norwegian  Oslo Stock
Exchange listed  companies and Northern  Offshore Ltd., a Bermuda company listed
on the Oslo Stock Exchange.  Prior to his service with  Frontline,  from January
1992,  Mr.  Tr0im  served  as  Managing  Director  and a member  of the Board of
Directors of DNO AS, a Norwegian oil company. Mr. Tr0im has served as a director
of Golar LNG Limited since May 2001.

Kate  Blankenship has been a Director of CalPetro  Tankers (Bahamas III) Limited
since 1998. She is Chief Accounting  Officer and Company  Secretary of Frontline
and has been a director of Frontline since 2003. Mrs Blankenship  also serves as
a director of Ship Finance  International  Limited,  a subsidiary  of Frontline.
Prior to joining Frontline, she was a Manager with KPMG Peat Marwick in Bermuda.
She is a member of the Institute of Chartered  Accountants in England and Wales.
Mrs.  Blankenship has been Chief Financial Officer of Knightsbridge  since April
2000 and Secretary of  Knightsbridge  since December 2000. Mrs.  Blankenship has
been a director of Golar LNG Limited since 2003.

Compensation

During the year ended December 31, 2003, the Company paid to its directors and
officers total compensation of $nil.

Board Practices

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

The Company has neither an audit nor a remuneration committee.

Employees

There are no employees apart from the directors detailed above.

Share Ownership

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

Item 7.  Major Shareholders and Related Party Transactions

Major Shareholders

The Company is a  wholly-owned  subsidiary  of  California  Tankers  Investments
Limited,  a  company  organized  under  the  laws  of the  Bahamas,  which  is a
wholly-owned  subsidiary of ITC.  Frontline  ultimately  controls the Company as
described  in more  detail in Item 4. All the issued and  outstanding  shares of
capital stock of the Company are beneficially owned by ITC and have been pledged
to the Chase Manhattan Trust Company of California (the "Collateral Trustee") as
part of the  collateral  for the Notes.  ITC has full  voting  control  over the
Company subject to the rights of the Collateral Trustee.

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

Related Party Transactions

Frontline,  the  ultimate  parent (see Item 4),  manages the  Company.  In 2003,
$34,903 was paid to Frontline for management of the Company.

Item 8.  Financial Information

Consolidated Financial Statements and Notes

See Item 18 below.

Legal Proceedings

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

Item 9.  The Offer and Listing

Not applicable.

Item 10.  Additional Information

Memorandum and Articles of Association

The Company is No. 23063B in the Bahamian register.

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

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

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

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

Material Contracts

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

Exchange Controls

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

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

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

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

Taxation

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

Documents on Display

The  Company is  subject to the  informational  requirements  of the  Securities
Exchange Act of 1934, as amended.  In accordance with these requirements we file
reports and other information with the Securities and Exchange Commission. These
materials,  including  this annual report and the  accompanying  exhibits may be
inspected  and  copied at the  public  reference  facilities  maintained  by the
Commission at 450 Fifth Street, N.W., Room 1024,  Washington,  D.C. 20549 and at
500 West  Madison  Street,  Suite 1400,  Northwestern  Atrium  Center,  Chicago,
Illinois  60661.  You may  obtain  information  on the  operation  of the public
reference  room by  calling  1 (800)  SEC-0330,  and you may  obtain  copies  at
prescribed  rates from the Public  Reference  Section of the  Commission  at its
principal  office  in  Washington,  D.C.  20549.  The SEC  maintains  a  website
(http://www.sec.gov.)  that contains reports,  proxy and information  statements
and other information  regarding  registrants that file  electronically with the
SEC. In addition,  documents  referred to in this annual report may be inspected
at the office of the Manager at  Par-la-Ville  Place 4th Floor,  14 Par-la-Ville
Road,  Hamilton,  Bermuda  and at Suite 4350 One  International  Place,  Boston,
Massachusetts.

Item 11.  Quantitative and Qualitative Disclosures about Market Risk

Quantitative information about market risk

Quantitative information about market risk instruments at December 31, 2003 is
as follows:

i) Serial Loans:

The  principal  balances of the Serial Loans bear interest at rates ranging from
7.57% to 7.62% and mature over a three-year period from April 1, 2004. The loans
are reported net of the related discounts,  which are amortized over the term of
the loans. The outstanding serial loans have the following characteristics:


 Maturity date                  Interest rate                    Principal due
                                                                ($ 000's)
 April 1, 2004                  7.57%                            2,530
 April 1, 2005                  7.60%                            2,530
 April 1, 2006                  7.62%                            2,530

                                                                 7,590
                                                                -------

ii) Term Loans:

The Term Loans bear  interest at a rate of 8.52% per annum.  Interest is payable
semi-annually on April 1 and October 1. Principal is repayable on the Term Loans
in accordance with a twelve-year sinking fund schedule. The table below provides
the revised  scheduled  sinking  fund  redemption  amounts  and final  principal
payment  of  the  Allocated   Principal  Amount  of  the  Term  Loans  following
termination of the related Initial  Charter on each of the optional  termination
dates.

<TABLE>
<CAPTION>

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

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

Qualitative information about market risk

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

Item 12.  Description of Securities Other than Equity Securities

Not applicable.

                                     PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies

Not applicable.

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

Not applicable.

Item 15. Controls and Procedures

(a)  Evaluation of disclosure controls and procedures.

Within the 90 days prior to the date of this report,  the Company carried out an
evaluation,  under the supervision and with the  participation  of the Company's
manager Frontline Ltd, including the Company's President and Principal Financial
Officer,  of the  effectiveness  of the design and  operation  of the  Company's
disclosure controls and procedures  pursuant to Exchange Act Rule 13a-14.  Based
upon that evaluation,  the President and Principal  Financial  Officer concluded
that the Company's  disclosure controls and procedures are effective in alerting
them timely to  material  information  relating  to the  Company  required to be
included in the Company's periodic SEC filings.


(b)  Changes in internal controls

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

Item 16A. Audit Committee Financial Expert

The Company's equity is neither listed nor publicly  traded.  The equity is held
by one beneficial holder,  California Tankers Investments Limited. The Company's
obligations toward its bondholders are set out in detail in covenants  contained
in the Indenture for their Notes.  Accordingly  the Company's Board of Directors
has  determined  that  the  role  played  by an audit  committee  would  have no
applicability to the Company.

Item 16B. Code of Ethics

The Company's equity is neither listed nor publicly  traded.  The equity is held
by one beneficial holder,  California Tankers Investments Limited. The Company's
obligations toward its bondholders are set out in detail in covenants  contained
in the Indenture for their Notes.  Accordingly  the Company's Board of Directors
has  determined  that  the  role  played  by a code  of  ethics  would  have  no
applicability to the Company.

Item 16C. Principal Accountant Fees and Services

     a)   Audit Fees

     The following  table sets forth the aggregate fees billed for  professional
     services  rendered  by  the  principal  accountant  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 for the two most recent fiscal years.

      Fiscal year ended December 31, 2003 $5,639
      Fiscal year ended December 31, 2002 $5,639

     b)   Audit Related Fees

     For the fiscal  years ended  December  31, 2003 and 2002 there have been no
     assurance and related services rendered by the principal accountant related
     to the  performance  of the  audit or  review  of the  Company's  financial
     statements.

     c)   Tax Fees

     For the fiscal  years ended  December  31, 2003 and 2002 there have been no
     tax related services  rendered by the principal  accountant  related to tax
     compliance  (i.e.,  preparation  of original and amended tax returns),  tax
     advice (i.e., assistance with tax audits and appeals), and tax planning.

     d)   All Other Fees

     For the fiscal  years ended  December  31, 2003 and 2002 there have been no
     aggregate fees billed for professional  services  rendered by the principal
     accountant for services other than Audit Fees, as set forth above.

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

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

Not Applicable

                                    PART III

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

The following financial statements and notes,  together with the report of Ernst
& Young, Independent Auditors thereon, are filed as part of this annual report

                                                                            Page

Report of Independent Auditors                                              F-1

Statements of Operations and Retained Earnings for the Years Ended          F-2
December 31, 2003, 2002 and 2001

Balance Sheets as of December 31, 2003 and 2002                             F-3

Statements of Cash Flows for the Years Ended                                F-4
December 31, 2003, 2002 and 2001

Notes to the Financial Statements                                           F-5

Item 19.  Exhibits

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

* Incorporated by reference to the filing indicated.


<PAGE>


Report of Independent Auditors


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


We have audited the  accompanying  balance sheets of CalPetro  Tankers  (Bahamas
III) Limited as of December  31, 2003 and 2002,  and the related  statements  of
operations  and  retained  earnings,  and cash flows for each of the three years
ended December 31, 2003. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of CalPetro Tankers (Bahamas III)
Limited at December 31, 2003 and 2002, and the results of its operations and its
cash flows for each of the three years ended  December 31, 2003,  in  conformity
with U.S. generally accepted accounting principles.



Ernst & Young
Chartered Accountants



Douglas, Isle of Man
June 8, 2004


<PAGE>



CalPetro Tankers (Bahamas III) Limited
Statements of Operations and Retained Earnings
(in thousands of US$)

<TABLE>
<CAPTION>

                                               Year ended       Year ended     Year ended
                                               December 31,     December 31,   December 31,
                                                 2003            2002             2001

<S>                                            <C>              <C>            <C>
Revenues
   Finance lease interest receivable             1,777          1,988         2,196
   Bank interest receivable                         61             49            55
   Recognition of unearned income                   31             31            31
                                                -------        ------        ------
   Net operating revenues                        1,869          2,068         2,282
                                                -------        ------        ------
Expenses
   General and administrative expenses            (77)            (58)          (63)
   Amortization of loan discount                  (31)            (31)          (31)
   Interest expense                            (1,715)         (1,901)     (  2,090)
                                                -------        ------        ------
                                               (1,823)          1,990         2,184
                                                -------        ------        ------
Net income                                         46              78            98
                                                =======        ======        ========
Retained earnings at the start of the year      1,228           1,150         1,052
                                                -------        ------        ------
Retained earnings at the end of the year        1,274           1,228         1,150
                                                -------        ------        ------
</TABLE>


See accompanying Notes to the Financial Statements



<PAGE>


CalPetro Tankers (Bahamas III) Limited
Balance Sheets
(in thousands of US$)

                                                        As at         As at
                                                      December 31,  December 31,
                                                        2003          2002
Assets
 Current assets:
 Cash and cash equivalents                                 1,715        1,626
 Current portion of net investment in finance lease        2,535        2,514
 Interest receivable                                         419          472
 Other current assets                                         17           45
                                                       ---------      ----------
 Total current assets                                     4,686         4,657
 Net investment in finance lease, less current portion   17,258        19,761
 Loan discount, net of amortization                         112           144
                                                       ---------      ----------
 Total assets                                            22,056        24,562
                                                       =========      ==========
Lbilities and stockholder's equity
 Current liabilities:
 Accrued interest                                           420           463
 Current portion of serial loans                          2,530         2,530
 Other current liabilities                                   28             7
                                                       ---------      ----------
 Total current liabilities                                2,978         3,000
 Long-term loans                                         17,804        20,334
                                                       ---------      ----------
 Total liabilities                                       20,782        23,334
                                                       ---------      ----------
 Stockholder's equity:
 Common stock: 100 shares of $1 par value                     -             -
 Retained earnings                                        1,274         1,228
                                                       ---------      ----------
 Total stockholder's equity                               1,274         1,228
                                                       ---------      ----------
 Total liabilities and stockholder's equity              22,056        24,562
                                                       =========      ==========


See accompanying Notes to the Financial Statements

<PAGE>


CalPetro Tankers (Bahamas III) Limited
Statements of Cash Flows
(in thousands of US$)
<TABLE>
<CAPTION>

                                                                        Year ended       Year ended      Year ended,
                                                                        December 31,     December 31,    December 31,
                                                                          2003               2002           2001
<S>                                                                      <C>             <C>             <C>
Cash flows from operating activities:
   Net income                                                                 46             78             98
   Adjustments to reconcile net income to net cash provided by
   operating activities:
       Amortization of discount on loans                                      31             31             31
       Recognition of unearned income                                       (31)            (31)           (31)
       Changes in assets and liabilities:
           Decrease in interest receivable                                    53             53             52
           Increase / (decrease) in other current assets                      28            (23)             -
           (Decrease) / increase  in accrued interest                       (43)            (48)            20
           Increase / (decrease) in other current liabilities                 21              1             (3)
                                                                        --------        --------       --------
           Net cash provided by operating activities                         105             61            167
                                                                        --------        --------       --------

Cash flows from investing activities:
   Finance lease payments received                                         2,514          2,495          2,474
                                                                        --------        --------       --------
   Net cash provided by investing activities                               2,514          2,495          2,474

Cash flows from financing activities:
   Repayments of Serial Loans                                             (2,530)        (2,530)        (2,530)
                                                                        --------        --------       --------
   Net cash used in financing activities                                  (2,530)        (2,530)        (2,530)
                                                                        --------        --------       --------
Net increase in cash and cash equivalents                                     89             26            111
Cash and cash equivalents at start of the year                             1,626          1,600          1,489
                                                                        --------        --------       --------
Cash and cash equivalents at end of the year                               1,715          1,626          1,600
                                                                        ========        ========       ========

Supplemental disclosure of cash flows information:

Interest paid                                                              1,758           1,949         2,070
</TABLE>


See accompanying Notes to the Financial Statements.


<PAGE>


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



1.  Basis of Preparation

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

The  charter  agreements  with the  Initial  Charterer  are  expected to provide
sufficient  payments to cover the Owners'  obligations under the Serial and Term
Loans due to California Petroleum Transport  Corporation.  The Initial Charterer
can  terminate  a charter at  specified  dates  prior to the  expiration  of the
charter,  provided  it  provide  notification  at least 12 months  prior to such
termination date for the initial Optional Termination Date (and at lest 7 months
prior to subsequent Optional  Termination Dates) and make a Termination Payment.
The Owners  only  source of funds  with  respect to the Serial and Term Loans is
payments from the Initial Charterer,  including Termination Payments. The Owners
do not have any other source of funds for payment of the Serial and Term Loans.

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

2.  Principal Accounting Policies

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

     (a)  Finance leases and revenue recognition

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

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

     (b)  Interest payable recognition

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

     (c)  Discount on loans

          Discount on issue of the long-term debt which comprises the Serial and
          Term Loans is being amortized over the respective  periods to maturity
          of the debt as described in Note 5.

     (d)  Income taxes

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

     (e)  Cash equivalents

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

     (f)  Reporting currency

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

     (g)  Use of estimates

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

3.   New Accounting Standards

In December 2003, the Financial Accounting Standards Board issued Interpretation
No. 46R,  Consolidation of Variable Interest Entities,  an Interpretation of ARB
No. 51 ("the  Interpretation"),  which replaces Interpretation No. 46, issued in
January  2003.  The  Interpretation  addresses  the  consolidation  of  business
enterprises (variable interest entities) to which the usual condition (ownership
of  a  majority  voting  interest)  of  consolidation   does  not  apply.   This
Interpretation   focuses  on  financial  interests  that  indicate  control.  It
concludes  that in the absence of clear  control  through  voting  interests,  a
company's  exposure  (variable  interest)  to the economic  risks and  potential
rewards from the variable  interest  entity's assets and activities are the best
evidence of control.  Variable  interests are rights and obligations that convey
economic  gains or losses  from  changes in the value of the  variable  interest
entity's  assets and  liabilities.  Variable  interests may arise from financial
instruments, service contracts, and other arrangements. If an enterprise holds a
majority of the variable  interests  of an entity,  it would be  considered  the
primary  beneficiary.  The  primary  beneficiary  would be  required  to include
assets,  liabilities,  and the results of operations  of the variable  interests
entity  in its  financial  statements.  Adoption  of the  interpretation  is not
expected to have a significant impact on the financial statements.

4.   Finance Lease

The following  schedule  lists the  components of the net  investment in finance
lease:
                                                   As at              As at
                                               December 31,       December 31,
                                                    2003               2002

                                                   $'000              $'000

Total minimum lease payments to be received*      19,905              22,419
Less: Unearned income                               (112)               (144)
                                                  ------               ------
Net investment in finance lease                   19,793              22,275

* Lease payments under the charter agreement for each of the five succeeding
years are as follows: $2,535,000 in 2004, $2,557,000 in 2005, $2,036,000 in
2006, $1,483,000 in 2007 and $1,487,000 in 2008.


5.  Long-Term Loans


                                                  As at              As at
                                               December 31,       December 31,
                                                    2003               2002

Serial Loans                                       7,590              10,120
Term Loans                                        12,744              12,744
                                                  ------              -------
                                                  20,334              22,864
                                                  ------              -------
Less: current portion                              2,530               2,530
                                                  17,804              20,334

Serial Loans

The serial loans have the following characteristics:

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

April 1, 2004                                       7.57%              2,530
April 1, 2005                                       7.60%              2,530
April 1, 2006                                       7.62%              2,530
                                                                      ------
                                                                       7,590

Interest is payable semi-annually on April 1 and October 1.

Term Loans

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

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


<TABLE>
<CAPTION>

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

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

</TABLE>


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


<PAGE>


                                   SIGNATURES

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


                     CalPetro Tankers (Bahamas III) Limited



                              /s/ Kate Blankenship


                                Kate Blankenship
                             Director and Secretary






Date: June 8 , 2004

02089.0006 #495277