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, 2005

                                       OR

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

                                       OR

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

Date of event requiring this shell company report ______________________________

Commission file number                    033-79220-03


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

                                     Bahamas
         (State or other jurisdiction of incorporation or organization)

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

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

       Title of each class             Name of each exchange on which registered

          None                          Not applicable

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

          None

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

          None

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

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

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.           [  ]  Yes     [ X ] No

If this report is an annual or transition report,  indicate by check mark if the
registrant  is not required to file  reports  pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.                 [  ]  Yes     [ X ] No

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.                   [ X ] Yes     [   ] No

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

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

Indicate by check mark which financial statement item the registrant has elected
to follow:                                           [  ] Item 17  [ X ] Item 18

If this is an annual  report,  indicate by check mark
whether  the  registrant  is a shell  company  (as  defined in Rule 12b-2 of the
Exchange Act).                                       [  ]  Yes     [ X ] No

<PAGE>

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

                                                                            Page
PART I
Item 1.     Identity of Directors, Senior Management and Advisers..............1
Item 2.     Offer Statistics and Expected Timetable............................1
Item 3.     Key Information....................................................2
Item 4.     Information on the Company.........................................5
Item 4A.    Unresolved staff comments.........................................19
Item 5.     Operating and Financial Review and Prospects......................19
Item 6.     Directors, Senior Management and Employees........................21
Item 7.     Major Shareholders and Related Party Transactions.................22
Item 8.     Financial Information.............................................23
Item 9.     The Offer and Listing.............................................23
Item 10.    Additional Information............................................23
Item 11.    Quantitative and Qualitative Disclosures about Market Risk........24
Item 12.    Description of Securities Other than Equity Securities............25
PART II
Item 13.    Defaults, Dividend Arrearages and Delinquencies...................25
Item 14.    Material Modifications to the Rights of Security Holders and Use of
            Proceeds..........................................................26
Item 15.    Controls and Procedures...........................................26
Item 16.    [Reserved]
Item 16A.   Audit Committee Financial Expert..................................26
Item 16B.   Code of Ethics....................................................26
Item 16C.   Principal Accountant Fees and Services............................26
Item 16D.   Exemptions from the Listing Rules for Audit Committees............27
Item 16E.   Purchases of Equity Securities by the Issuer and Affiliated
            Purchasers........................................................27
PART III
Item 17.    Financial Statements..............................................27
Item 18.    Financial Statements..............................................27
Item 19.    Exhibits..........................................................28

<PAGE>
                                     PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Financial Data

The selected  statement of operations and retained  earnings data of the Company
with respect to the fiscal years ended December 31, 2005, 2004 and 2003, and the
selected  balance  sheet data at December  31, 2005 and 2004,  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, 2002 and 2001 and the selected balance sheet data at December
31, 2003, 2002 and 2001 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.

                                            Year ended December 31,
                               2005       2004       2003       2002       2001
 (U.S. Dollars in thousands except per share data)

 Statement of operations and
 retained earnings data:
 Net operating revenues       1,381      1,596      1,808      2,019      2,227
 Net income (loss)              (41)         8         46         78         98

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

 Balance sheet data:
 Total assets                16,861     19,482     22,056     24,562     27,061
 Current portion of
 Serial Loans                 2,530      2,530      2,530      2,530      2,530
 Long-term loans             12,744     15,274     17,804     20,334     22,864
 Stockholder's equity         1,241      1,282      1,274      1,228      1,150

Risk Factors

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

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

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

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

The Charter  runs for a period of two years until April 1, 2008.  The  Charterer
holds  options to charter the vessel for further  seven one year  periods  until
April 1 2014.

If the Charterer  should decide not to extend the Charter at any point,  we will
attempt to arrange a replacement  charter,  or may sell the Vessel.  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

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 Charter with
the Charterer we are less exposed to the risk associated with this  competition.
If the Charterer terminates the charter on any 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

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  the  Charterer  is  responsible  for  all
operational  matters and bears all these expenses during the term of our current
Charter,  these expenses could have an adverse effect on our business operations
at any time after the  termination  of the Charter or in the event the Charterer
fails to make a necessary payment.

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

Our Vessel is  single-hulled.  The United  States,  the  European  Union and the
International  Maritime  Organization,  or the IMO,  have all imposed  limits or
prohibitions  on the use of these types of tankers in  specified  markets  after
certain  target dates,  which range from 2010 to 2015. The sinking of the single
hull m.t.  Prestige  offshore  Spain in November  2002 led to  proposals  by the
European  Union  and the IMO to  accelerate  the  prohibition  to  trade  of all
non-double hull tankers, with certain limited exceptions.  In December 2003, the
Marine Environmental Protection Committee of the IMO adopted an 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.  The IMO may  adopt  further
regulations that could adversely affect the useful life of our Vessel as well as
our  ability to  generate  income  from it.  Based on the present and future oil
consumption,  the tanker  fleet,  the  current  order  books for tankers and the
available  capacities of  shipyards,  we believe that in order to meet the world
transport  demand for oil, the industry  will need to continue to employ  single
hull tankers after 2010.

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

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

We are dependent on the Charterer Front Voyager Inc.

At the  termination  of  the  previous  charter  with  Chevron,  we  received  a
termination  fee of $5.05  million.  In  addition  the  Charterer  under the new
charter  prepaid  the first two  years  hire  totalling  $5.05  million.  We are
dependent on the due performance by the Charterer of its  obligations  under the
Charter. A failure by Front Voyager Inc. to perform its obligations could result
in our  inability to service the Term Loan.  If the Notes holders had to enforce
the mortgages  securing the Notes, 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 Term Loan will  depend on our future  operating
performance,  prevailing economic  conditions and financial,  business and other
factors,  many of which are beyond our control.  There can be no assurance  that
our cash flow and  capital  resources  will be  sufficient  for  payment  of our
indebtedness  in the  future.  If we are unable to service our  indebtedness  or
obtain additional financing, as needed, this could have an adverse effect on the
holder of the Notes.

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

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

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, 2005, we had $15.3 million in total
indebtedness outstanding and stockholder's equity of $1.2 million. The degree to
which we are leveraged could have important  consequences for the holders of the
Notes, including:

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

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

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

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

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

We have a limited business purpose which limits our flexibility

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

Item 4.  Information on the Company

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

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

Overview of the Business

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

Frontline is principally  engaged in the marine  transportation of oil products.
Frontline's vessels  transportation  routes are from the Middle East, Indonesia,
Mexico, West Africa and the North Sea to ports in the United States, Europe, the
United Kingdom and Asia.

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

The Management

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

The International Tanker Market

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

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

In order to benefit from economies of scale,  tanker  charterers  will typically
charter the largest  possible  vessel to transport  oil or products,  consistent
with port and canal  dimensional  restrictions  and optimal cargo lot sizes. The
oil tanker fleet is generally  divided  into the  following  five major types of
vessels, based on vessel carrying capacity:
(i) ULCC-size  range of  approximately  320,000 to 450,000 dwt;  (ii)  VLCC-size
range of  approximately  200,000 to 320,000;  dwt; (iii)  Suezmax-size  range of
approximately  120,000 to 200,000 dwt; (iv) Aframax-size  range of approximately
60,000 to 120,000 dwt; and (v) small tankers of less than  approximately  60,000
dwt.

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

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

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

     o    demand for oil and oil products;

     o    global and regional economic conditions;

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

     o    changes in sea borne and other transportation patterns

The factors that influence the supply of tanker capacity include:

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels;

     o    potential conversion of tankers to other purposes; and

     o    the number of vessels that are out of service.

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

For the third year in a row the tanker market was very profitable,  even if 2005
could not compete with 2004. The extreme volatility witnessed in rates over 2004
was experienced to a smaller extent in2005.  According to industry reports,  the
time charter equivalent  earnings,  or TCEs, for a modern Suezmax ranged between
lows of $23,000 per day and highs of $107,000 in 2005.

The International  Energy Agency ("IEA") reported in their May issue, that world
oil demand in 2005 was 83.59 million  barrels per day (mbd), an increase of 1.05
mbd over 2004. The Middle East, China and North America  contributed with 55% of
this increase which is an indicator of their strong economic growth.

Lack of spare oil  production  capacity  drove crude oil prices to about $70 per
barrel  towards the end of the year and dampened the extremely  strong growth in
oil consumption of close to 4.0% in 2004 to 1.3% in 2005 according to IEA. China
continued  its  rapid  economic  growth  with full  force  also in 2005 with GDP
increasing  9.8% however  their growth in oil demand was down from 15.4% in 2004
to 2.4% in 2005.  Hurricanes  Katrina  and Rita  which hit the US Gulf  Coast in
August and September  were each among the top five most  powerful  storms of all
time and  lead to  damages  to  production  platforms  which  caused  additional
ton-miles for the last quarter of 2005. It is estimated that hurricanes  reduced
U.S.  production  by 0.4 million  barrels per day, as an average  over the year.
Geopolitical  tension in Nigeria,  Venezuela,  Iraq, Iran and other parts of the
Middle East,  seems to have had limited  effect on their  production as the OPEC
members in total  increased  their  production by 3.2% in 2005 compared to total
world supply which increased 1.3%.

The size of the world Suezmax fleet  increased by 7% in 2005 from 315 vessels to
337. Two Suezmaxes were scrapped while 24 were  delivered.  The total  orderbook
for Suezmaxes  was at 63 at the end of the year, of which 7 were ordered  during
the year. The total  orderbook for Suezmaxes  equates to 18.7%,  of the existing
fleet.

Even  though  spot market  rates have  declined  during the first four months of
2006,  we believe the outlook for the  remainder  of 2006 is positive due to the
continued  growth in oil  consumption  combined with  relatively few deliveries,
combined with an increasing  amount of  conversions  for other  purposes,  which
should lead to a positive demand environment for tankers.

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

Inspection by Classification Society

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

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

The Vessel will be  maintained  during the term of the Charter by Front  Voyager
Inc. in accordance with good commercial  maintenance practice  commensurate with
other vessels in Frontline's fleet of similar size and trade, as required by the
Charter.  The  Charter  requires  Front  Voyager  Inc.  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 us). In
addition,  we have the right to inspect the Vessel and to require  surveys  upon
redelivery,  and the Charterer will be responsible for making or compensating us
for certain necessary repairs in connection with such redelivery.

Insurance

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

Under the Charter,  Front Voyager Inc. is to 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.  There can be no assurance  that all
risks will be  adequately  insured  against,  that any  particular  loss will be
covered  or that we will be able  to  procure  adequate  insurance  coverage  at
commercially   reasonable   rates  in  the  future.   In  particular,   stricter
environmental  regulations  may result in  increased  costs for,  or the lack of
availability  or,  insurance  against  the  risks  of  environmental  damage  or
pollution.

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

Environmental and Other Regulations

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

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

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

International Maritime Organization

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

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

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

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

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

     o    all tankers are subject to enhanced inspections.

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

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

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

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

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

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

a)   Category 1 (Pre-  PL/SBT)  oil  tankers--any  tanker of 20,000 dwt or above
     carrying crude oil, fuel oil, heavy diesel oil or lubricating  oil as cargo
     or of 30,000 dwt or above carrying other types of oil.
b)   Category 2 (PL/SBT) oil tankers--any tanker of 20,000 dwt or above carrying
     crude oil,  fuel oil,  heavy diesel oil or  lubricating  oil as cargo or of
     30,000 dwt or above carrying other types of oil.
c)   Category  3 oil  tankers--any  tanker of  between  5,000 dwt and 20,000 dwt
     carrying crude oil, fuel oil, heavy diesel oil or lubricating  oil as cargo
     or less than 30,000 dwt carrying other types of oil.

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

Baseline Phase Out Scheme

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

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

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

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

Exception  One - a flag state may  permit oil  tankers to operate to 25 years of
age provided  that, not later than July 1, 2001, the entire cargo tank length is
protected  with one of the following  arrangements  which cannot be used for the
carriage of oil: |X| Double bottoms having a height at centerline which does not
meet that required by the MARPOL Regulation 13E; or

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

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

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

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

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

Under MARPOL Regulation 13H, HGO means any of the following:
     o    crude oils having a density at 15(0)C higher than 900 kg/m3;
     o    fuel oils having  either a density at 15(0)C higher than 900 kg/ m3 or
          a kinematic viscosity at 50(0)C higher than 180 mm2/s;
     o    bitumen, tar and their emulsions.

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

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

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

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

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

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

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

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

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

     o    natural resources damages and related assessment costs;
     o    real and personal property damages;
     o    net loss of taxes, rents, royalties, fees and other lost revenues;
     o    net cost of public  services  necessitated by a spill response such as
          protection from fire, safety or health hazards; and
     o    loss of subsistence use of natural resources.

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

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

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

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

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

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

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

     o    describe crew training and drills; and

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

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

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

Other U.S. Environmental Requirements

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

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

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

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

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

European Union Tanker Restrictions

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

International Conventions on Civil Liability for Oil Pollution Damage

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

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

Vessel Security Regulations

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

     o    on-board  installation of automatic  information  systems,  or AIS, to
          enhance vessel-to-vessel and vessel-to-shore communications;
     o    on-board installation of ship security alert systems;
     o    the development of vessel security plans; and
     o    compliance with flag state security certification requirements.

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

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

Organisational Structure

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

Property, Plants and Equipment

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

Item 4A.  Unresolved Staff Comments

None

Item 5.  Operating and Financial Review and Prospects

Operating results

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

Total revenues
Finance lease  interest  income for the year ended December 31, 2005 amounted to
$1,381,000,  compared  with  $1,596,000  for the year ended  December  31, 2004.
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  $1,327,000  for the
year ended  December 31,  2005.  The  amortisation  of discount on loans for the
period  amounted to $31,000.  We amortise the discount over the life of the Term
and Serial Loans. The corresponding  figures for the period to December 31, 2004
were $1,514,000 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, 2004 compared with the year ended December 31, 2003

Total Revenues
Finance lease  interest  income for the year ended December 31, 2004 amounted to
$1,596,000,  compared  with  $1,808,000  for the year ended  December  31, 2003.
Interest  income  has  fallen  in line  with  expectations.  As the value of the
finance  lease falls on an annual  basis,  so does the interest  received on the
finance leases.

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

Liquidity and Capital Resources

As set forth above, revenues from the Initial Charter were sufficient to pay our
obligations  under the Term  Loans.  Following  the  termination  of the Initial
Charter by Chevron, the Manager, acting on behalf of the Company, has secured an
acceptable  replacement  charter for the Vessel. This charter runs for two years
until April 1, 2008. The bareboat hire for the two year period has been prepaid.
Effectively  this means that in early April 2006, we received a termination  fee
from Chevron amounting to $5.05 million, and a similar amount as prepaid charter
hire from the new  charterer,  Front Voyager Inc. These amounts have been placed
in cash equivalent  instruments.  The new charterer has the option to extend the
charter for seven one year periods.  For each option exercised the new charterer
accepts to pay a charter hire  sufficient to secure that we avoid  negative cash
flow.

If Front  Voyager Inc does not  exercise  its right to extend the charter in the
future,  the Manager,  acting on our behalf,  shall seek to secure an acceptable
replacement charter. It such a charter is commercially unavailable,  the Manager
will solicit bids for the sale or recharter of the Vessel. The Manager's ability
to obtain an acceptable replacement charter, to sell the Vessel or recharter the
Vessel will depend on market rates for new and used vessels,  both of which will
depend on the supply of and demand for tanker  capacity for oil  transportation,
and the advantages or  disadvantages  of the Vessel  compared with other vessels
available at the time.

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

Tabular disclosure of contractual obligations

As at December  31,  2005,  we had the  following  contractual  obligations  and
commitments:


                                          Payments due by period
                             Less than                        More than
(in $'000)                      1 year 1-3 years  3-5 years     5 years    Total
Serial Loans (7.62%)             2,530         -          -           -    2,530
Term Loans (8.52%)                   -     2,832      2,832       7,080   12,744
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total contractual obligations    2,530     2,832      2,832       7,080   15,274
--------------------------------------------------------------------------------

Critical Accounting Policies

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

     o    Accounting for financing leases as lessor

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

Trend Information

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

Recently Issued Accounting Standards

There were no recently issued accounting  standards that would have an impact on
our results.

Item 6.  Directors, Senior Management and Employees

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

                                             Age         Position

Tor Olav Troim                                43         Director and President
Kate Blankenship                              41         Director and Secretary

Tor Olav Troim has been a Director  of  CalPetro  Tankers  (Bahamas III) Limited
since October 31, 2001. He has been  Vice-President  and a director of Frontline
since  November 3, 1997.  He previously  served as Deputy  Chairman of Frontline
from July 4, 1997.  Mr. Troim has also served as a director and Chairman of Ship
Finance International  Limited, a Bermuda  company listed  on the New York Stock
Exchange, since May 2000, has been a director and Vice-Chairman of Knightsbridge
Tankers Limited  ("Knightsbridge").  He  is a  director  of Aktiv  Inkasso ASA a
Norwegian Oslo Stock Exchange  listed  company and  Golden Ocean Group  Limited,
a Bermuda company  listed on the Oslo Stock Exchange. Mr. Troim has  served as a
director  of Golar  LNG Limited  since  May  2001.  Prior to  his  service  with
Frontline, from January 1992, Mr. Troim served as Managing Director and a member
of the Board of Directors of DNO AS, a Norwegian oil company.

Kate Blankenship has been a Director of CalPetro  Tankers  (Bahamas III) Limited
since  October 31, 2001.  She has  been  Chief  Accounting  Officer  and Company
Secretary of Frontline and resigned from these  positions  in  October 2005, and
since 2003 she has been a director of Frontline.  Mrs Blankenship also serves as
a director of Ship Finance  International  Limited.  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. She is  a member of  the  Institute of Chartered
Accountants in England and Wales.

Compensation

During  the  year  ended  December  31,  2005,  we paid no  compensation  to our
directors and officers.

Board Practices

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

We have neither an audit nor a remuneration committee.

Employees

We do not have any employees involved in the management of the Vessel. Frontline
is our manager as described below in Item 7- Related Party Transactions.

Share Ownership

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

Item 7.  Major Shareholders and Related Party Transactions

Major Shareholders

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

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

Related Party Transactions

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

Under the terms of the  management  agreement,  the Management Fee consists of a
fee of $13,625  initially per annum for each Vessel,  along with a fee of $3,000
covering all four Vessels, payable semi-annually in arrears for the period until
the third anniversary of the closing of the Notes issue then increasing by 4% on
each subsequent anniversary of the closing of the issue of the Notes.

The Technical  Advisor's  Fee was  initially  $10,000 per annum for each Vessel,
payable semi-annually in arrears,  during the initial first three year period as
described  above. On each subsequent  anniversary of the closing of the issue of
the Notes,  the fee will increase by 4%. In addition,  the Technical  Advisor is
entitled  to be  reimbursed  for the fees,  costs  and  expenses  of  conducting
periodic inspections of the Vessels.

Pursuant to a Designated  Representative  Agreement,  CalPetro  Holdings Limited
(the  "Designated   Representative")   was  appointed  to  represent  California
Petroleum as its Designated  Representative to act on its behalf with respect to
certain  administrative  matters  such as the  filing of  periodic  reports  and
financial  statements  with the  Securities  and  Exchange  Commission.  The fee
payable to the Designated  Representative (the "Designated  Representative Fee")
during the initial three year period  described above was $15,000 per annum with
a 4% increase on each subsequent  anniversary of the closing of the issue of the
Notes.

In 2005,  a total of  $38,120  was paid  under  the  Management  and  Designated
Representative Agreements.

Item 8.  Financial Information

Consolidated Statements and Other Financial Information

See Item 18 below.

Legal Proceedings

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

Item 9.  The Offer and Listing

Not applicable.

Item 10.  Additional Information

Memorandum and Articles of Association

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

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

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

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

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

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

We are subject to the informational  requirements of the Securities Exchange Act
of 1934, as amended.  In accordance with these  requirements we file reports and
other information with the Securities and Exchange Commission.  These materials,
including this annual report and the accompanying  exhibits may be inspected and
copied at the public reference facilities  maintained by the Commission at 100 F
Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the
operation of the public reference room by calling 1 (800) SEC-0330,  and you may
obtain  copies at  prescribed  rates  from the Public  Reference  Section of the
Commission at its principal office in Washington,  D.C. 20549. The SEC maintains
a website  (http://www.sec.gov.)  that contains  reports,  proxy and information
statements and other information  regarding registrants that file electronically
with the SEC. In addition,  documents  referred to in this annual  report may be
inspected  at the office of the  Manager  at  Par-la-Ville  Place 4th Floor,  14
Par-la-Ville Road, Hamilton, Bermuda.

Item 11.  Quantitative and Qualitative Disclosures about Market Risk

Quantitative information about market risk

Quantitative  information  about market risk instruments at December 31, 2005 is
as follows:

i) Serial Loan:
The principal  balance of the Serial Loan bears  interest at a rate of 7.62% and
matures on April 1, 2006.  The loan is reported  net of the  related  discounts,
which are amortized over the term of the loan. The  outstanding  serial loan has
the following characteristics:


 Maturity date                               Interest rate        Principal due
                                                                      ($ 000's)
 April 1, 2006                                       7.62%                2,530
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
                                                                          2,530
 ==============================================================================

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

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

     Scheduled payment date                    Charter terminated 2006
                                                                 $'000
     April 1, 2007                                                 570
     April 1, 2008                                                 620
     April 1, 2009                                                 670
     April 1, 2010                                                 730
     April 1, 2011                                                 790
     April 1, 2012                                                 850
     April 1, 2013                                                 930
     April 1, 2014                                               1,010
     April 1, 2015                                               6,574
 ----------------------------------------------------------------------
 ----------------------------------------------------------------------
                                                                12,744
 ======================================================================

Qualitative information about market risk

We were  organised  solely for the purpose of the  acquisition of one Vessel and
subsequently   entered  into  a  long-term  agreement  with  Chevron  which  was
terminated on April 1, 2006. A  replacement  charter has been found as discussed
in Note 5 of the financial statements included in Item 18 herein.

Item 12.  Description of Securities Other than Equity Securities

Not applicable.

                                     PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies

None.

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

None.

Item 15.  Controls and Procedures

     (a)  Evaluation of disclosure controls and procedures.

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

     (b)  Changes in internal controls

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

Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

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

Item 16B. Code of Ethics

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

Item 16C. Principal Accountant Fees and Services

     a)   Audit Fees
     Our principal  accountant  for 2005 and 2004 was Grant Thornton and Ernst &
     Young for 2003.  The following  table sets forth the aggregate  fees billed
     for professional  services  rendered and services provided by the principal
     accountant  in  connection   with  statutory  and  regulatory   filings  or
     engagements for the two most recent fiscal years.

     Fiscal year ended December 31, 2005         $19,425
     Fiscal year ended December 31, 2004         $18,000

     b)   Audit Related Fees
     For the fiscal  years ended  December  31, 2005 and 2004 there have been no
     assurance and related  services  rendered by Grant Thornton  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, 2005 and 2004 there have been no
     tax related  services  rendered by Grant Thornton 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, 2005 and 2004 there have been no
     aggregate fees billed for professional  services rendered by Grant Thornton
     for services other than Audit Fees, as set forth above.

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

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

Not Applicable

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

Not Applicable

                                    PART III
Item 17.    Financial Statements

Not applicable.

Item 18.    Financial Statements

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

     Report of Independent Registered Public Accounting Firm                 F-1

     Report of Independent Registered Public Accounting Firm                 F-2

     Statements of Operations and Retained Earnings for the Years Ended      F-3
     December 31, 2005, 2004 and 2003

     Balance Sheets as of December 31, 2005 and 2004                         F-4

     Statements of Cash Flows for the Years Ended                            F-5
     December 31, 2005, 2004 and 2003

     Notes to the Financial Statements                                       F-6

Item 19.  Exhibits

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

13   Certification  pursuant  to 18 USC  Section  1350,  as adopted  pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

* Incorporated by reference to the filing indicated.

<PAGE>

                                     F-5
Report of Independent Registered Public Accounting Firm

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

We have audited the  accompanying  balance sheets of Calpetro  Tankers  (Bahamas
III)  Limited (the  "Company")  as of December 31, 2005 and 2004 and the related
statements of  operations  and retained  earnings,  and cash flows for the years
then ended.  These financial  statements are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Calpetro Tankers (Bahamas III)
Limited at December 31, 2005 and 2004 and the results of its operations and cash
flows  for the  years  then  ended  in  conformity  with  accounting  principles
generally accepted in the United States of America.




New York, New York
June 22, 2006

<PAGE>

Report of Independent Registered Public Accounting Firm

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

We  have audited  the  accompanying  statements  of  operations,  cashflows  and
retained earnings of CalPetro  Tankers  (Bahamas III) Limited for the year 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 audit.

We  conducted  our audit in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  We were not engaged to perform an
audit of the Company's  internal  control over  financial  reporting.  Our audit
included  consideration of internal control over financial  reporting as a basis
for designing audit  procedures that are appropriate in the  circumstances,  but
not for the  purpose  of  expressing  an  opinion  on the  effectiveness  of the
Company's internal control over financial reporting.  Accordingly, we express no
such  opinion.  An audit also  includes  examining,  on a test  basis,  evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the results of  operations  and  cashflows of CalPetro
Tankers  (Bahamas  III)  Limited  for the  year  ended  December  31,  2003,  in
conformity with United States generally accepted accounting principles.




Ernst & Young LLC
Chartered Accountants



Douglas, Isle of Man
June 8, 2004

<PAGE>

CalPetro Tankers (Bahamas III) Limited
Statements of Operations and Retained  Earnings For the Years Ended December 31,
2005, 2004 and 2003 (in thousands of US$)

                                                       2005      2004     2003
Operating revenues
    Finance lease interest income                     1,381     1,596    1,808
-------------------------------------------------------------------------------
    Total operating revenues                          1,381     1,596    1,808
-------------------------------------------------------------------------------
Operating expenses
    Administrative expenses                            (97)      (72)     (77)
-------------------------------------------------------------------------------
    Total operating expenses                           (97)      (72)     (77)
-------------------------------------------------------------------------------
Net operating income                                  1,284     1,524    1,731
-------------------------------------------------------------------------------
Other operating income (expenses)
    Interest income                                      33        29       61
    Interest expense                                (1,327)   (1,514)  (1,715)
    Other financial items                              (31)      (31)     (31)
-------------------------------------------------------------------------------
    Net other expenses                              (1,325)   (1,516)  (1,685)
-------------------------------------------------------------------------------
Net income (loss)                                      (41)         8       46

Retained earnings at the start of year                1,282     1,274    1,228
-------------------------------------------------------------------------------
Retained earnings at the end of year                  1,241     1,282    1,274
===============================================================================

See accompanying Notes that are an integral part of these Financial Statements

<PAGE>


CalPetro Tankers (Bahamas III) Limited
Balance Sheet as of December 31, 2005 and 2004
(in thousands of US$)

                                                                 2005     2004
ASSETS
Current Assets
    Cash and cash equivalents                                   1,733    1,735
    Current portion of net investment in finance lease          2,036    2,557
    Interest receivable                                           312      367
    Other current assets                                            3       10
-------------------------------------------------------------------------------
Total current assets                                            4,084    4,669
Net investment in finance lease,  less current portion         12,727   14,732
Deferred charges                                                   50       81
-------------------------------------------------------------------------------
Total assets                                                   16,861   19,482
===============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
    Short-term debt and current portion of long-term debt       2,530    2,530
    Accrued interest                                              320      368
    Other current liabilities                                      26       28
-------------------------------------------------------------------------------
Total current liabilities                                       2,876    2,926
    Long-term debt                                             12,744   15,274
-------------------------------------------------------------------------------
Total liabilities                                              15,620   18,200
-------------------------------------------------------------------------------
Commitments and Contingencies                                       -        -
Minority Interest                                                   -        -

Stockholder's equity
    Unclassified  stock:  100 shares of $1 par value                -        -
    Retained earnings                                           1,241    1,282
-------------------------------------------------------------------------------
Total stockholder's equity                                      1,241    1,282
-------------------------------------------------------------------------------
Total liabilities and stockholder's equity                     16,861   19,482
===============================================================================

See accompanying Notes that are an integral part of these Financial Statements

<PAGE>

CalPetro Tankers (Bahamas III) Limited
Statements of Cash Flows For the Years Ended December 31, 2005, 2004 and 2003
(in thousands of US$)

                                                       2005      2004     2003
Net income                                             (41)         8       46
    Adjustments to reconcile net income to net cash provided by operating
    activities:
    Amortisation of deferred charges                     31        31       31
Changes in operating assets and liabilities, net of effect of acquisitions:
    Interest receivable                                  55        53       53
    Other current assets                                  7         6       28
    Accrued interest payable                           (48)      (52)     (43)
    Other current liabilities                           (2)         -       21
-------------------------------------------------------------------------------
Net cash provided by operating activities                 2        46      136
-------------------------------------------------------------------------------
Investing activities
    Finance lease payments received                   2,526     2,504    2,483
-------------------------------------------------------------------------------
Net cash provided by (used in) investing activities   2,526     2,504    2,483
-------------------------------------------------------------------------------
Financing activities
    Repayments of debt                              (2,530)   (2,530)  (2,530)
-------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (2,530)   (2,530)  (2,530)
-------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents    (2)        20       89
Cash and cash equivalents at beginning of year        1,735     1,715    1,626
Cash and cash equivalents at end of year              1,733     1,735    1,715
===============================================================================
Supplemental disclosure of cash flow information:
    Interest paid                                     1,375     1,567    1,758
===============================================================================

See accompanying Notes that are an integral part of these Financial Statements

<PAGE>

1.   GENERAL

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

     The Owners only  source of funds with  respect to the Serial and Term Loans
     are payments from Chevron,  including any termination payments as discussed
     in Note 5. The Owners do not have any other  source of funds for payment of
     the Serial and Term Loans.  As  discussed  in Note 5, the Company  received
     irrevocable  notice from Chevron  regarding the termination of the bareboat
     charter of the Vessel on April 1, 2006.

2.   ACCOUNTING POLICIES

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

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

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

     Investment in finance leases
     The Company  charters out its vessel under an agreement  that is classified
     as a direct  financing  lease.  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 amortised to income over the life of the charter
     agreement  to  produce  a  constant  periodic  rate  of  return  on the net
     investment in the finance lease.

     Deferred charges
     Deferred  charges  comprise   expenses  incurred  in  connection  with  the
     structuring  of the  financing  transactions  and  issuance  of debt.  Such
     expenses are being amortised over the life of the debt.

     Revenue and expense recognition
     Revenues and  expenses  are  recognised  on the accrual  basis.  Revenue is
     substantially  generated  from bareboat  charter hires and is recorded over
     the term of the  charter as service is  provided.  Interest  payable on the
     Serial and Term Loans is accrued on a daily basis.

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

3.   TAXATION

     The Company is not liable to pay income taxes in the  Bahamas.  No Bahamian
     income or  withholding  taxes are  imposed on the payment by the Company of
     any  principal  or  interest  to any  holder  of  Notes  who is  either  an
     individual  citizen or  resident of the United  States or an entity  formed
     under  the  laws of the  United  States.  There  is no  income  tax  treaty
     currently in effect between the United States and Bahamas.

4.   CASH AND CASH EQUIVALENTS

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

5.   INVESTMENT IN FINANCE LEASE

     The Company has chartered  its vessel on a long term bareboat  charter (the
     "Charter") to Chevron which has a term expiring on April 1, 2015 subject to
     Chevron's  right to  terminate  the  Initial  Charter on certain  specified
     dates.  Chevron  can  elect  to  terminate  the  Charter  on  any  of  four
     termination  dates  occurring at two-year  intervals  beginning in April 1,
     2006.  In  accordance  with the initial  charter,  on April 21,  2005,  the
     Company received  irrevocable notice from Chevron regarding the termination
     of the  bareboat  charter  of the  vessel  Virgo  Voyager on April 1, 2006.
     Chevron  is  required  to  pay  the  Company  a  termination  payment  (the
     "Termination Payment") on or prior to the termination date as follows:

     (In millions of $)
     Optional Termination Date                 Termination Payment
     April 1, 2006                                     5.05

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

     (in thousands of $)                                         2005     2004
     Total minimum lease payments to be received               20,857   24,819
     Less: Unearned income                                    (6,094)  (7,530)
    ---------------------------------------------------------------------------
     Net investment in finance lease                           14,763   17,289
    ===========================================================================

     In  accordance  with the initial  charter,  on April 21, 2005,  the Company
     received  irrevocable  notice from Chevron regarding the termination of the
     bareboat  charter of the  vessel  Virgo  Voyager  on April 1,  2006.  Lease
     payments under the charter agreement are $3,226,000 in 2006.

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

          (i)  such charter is at arms length;

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

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

     As discussed further in Note 11, an acceptable replacement charter has been
     found.

6.   DEFERRED CHARGES

     Deferred charges represent the  capitalisation  of debt issue costs.  These
     costs are  amortised  over the term of the Loans to which they relate.  The
     deferred charges are comprised of the following amounts:

     (in thousands of $)                                         2005     2004
     Debt arrangement fees                                        384      384
     Accumulated amortisation                                   (334)    (303)
    ---------------------------------------------------------------------------
                                                                   50       81
    ===========================================================================

7.   DEBT

     (in thousands of $)                                         2005     2004
     7.60% to 7.62% Serial Loan maturing April 1, 2006          2,530    5,060
     8.52% Mortgage Term Loans due 2015                        12,744   12,744
    ---------------------------------------------------------------------------
       Total Debt                                              15,274   17,804
     Less: current portion                                    (2,530)  (2,530)
    ---------------------------------------------------------------------------
                                                               12,744   15,274
    ===========================================================================

     The outstanding debt as of December 31, 2005 is repayable as follows:

     (in thousands of $)
     Year ending December 31,
     2006                                                                2,530
     2007                                                                1,416
     2008                                                                1,416
     2009                                                                1,416
     2010                                                                1,416
     2011 and later                                                      7,080
    ---------------------------------------------------------------------------
     Total debt                                                         15,274
    ===========================================================================

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

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

     When the Initial  Charter is terminated,  the scheduled  mandatory  sinking
     fund  payments  on the Term Loans  will be  revised  so that the  allocated
     principal  amount of the Term Loans for the related Vessel will be redeemed
     on  the  remaining  sinking  fund  redemption  dates  on  a  schedule  that
     approximates level debt service with an additional principal payment on the
     maturity date of $5.5m.

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

     Scheduled payment date                                   Charter   Charter
                                                               not    terminated
                                                           terminated     2006
                                                             $'000       $'000
     April 1, 2007                                              1,416      570
     April 1, 2008                                              1,416      620
     April 1, 2009                                              1,416      670
     April 1, 2010                                              1,416      730
     April 1, 2011                                              1,416      790
     April 1, 2012                                              1,416      850
     April 1, 2013                                              1,416      930
     April 1, 2014                                              1,416    1,010
     April 1, 2015                                              1,416    6,574
    ---------------------------------------------------------------------------
                                                               12,744   12,744
    ===========================================================================

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

8.   SHARE CAPITAL

     Authorised share capital:                                   2005     2004
     1,000 shares of $1 par value                               1,000    1,000
    ===========================================================================
     Issued and outstanding share capital:                       2005     2004
     100 common shares of $1 par value                            100      100
    ===========================================================================

9.   FINANCIAL INSTRUMENTS

     Fair values
     The carrying  value and  estimated  fair value of the  Company's  financial
     instruments at December 31, 2005 and 2004 are as follows:
                                                 2005     2005      2004    2004
     (in thousands of $)                     Carrying     Fair  Carrying    Fair
                                                Value    Value     Value   Value
     Cash and cash equivalents                  1,733    1,733     1,735   1,735
     7.62% Serial Loans maturing April 1, 2006  2,530    2,530     5,060   5,193
     8.52% Mortgage Loans due 2015             12,744   14,273    12,744  14,608

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

     The carrying value of cash and cash  equivalents,  which are highly liquid,
     is a reasonable estimate of fair value.

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

     Concentrations of risk
     As at  December  31,  2005 the  Company's  only  source  of  funds  for the
     repayment  of  the  principal  and  interest  on the  Loans  are  from  the
     termination payment from Chevron,  and the proceeds,  if any, from the sale
     of  the  Vessel.   Accordingly,   the  Company's  ability  to  service  its
     obligations on the Loans is wholly  dependent upon  Frontline's  ability to
     secure an acceptable replacement charter.

10.  COMMITMENTS AND CONTINGENCIES

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

11.  RELATED PARTY TRANSACTIONS

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

     Under the terms of the management agreement, the Management Fee consists of
     a fee of $13,625  initially per annum for each Vessel,  along with a fee of
     $3,000 covering all four Vessels,  payable semi-annually in arrears for the
     period until the third  anniversary  of the closing of the Notes issue then
     increasing by 4% on each subsequent anniversary of the closing of the issue
     of the Notes.

     The  Technical  Advisor's  Fee was  initially  $10,000  per  annum for each
     Vessel,  payable  semi-annually in arrears,  during the initial first three
     year period as  described  above.  On each  subsequent  anniversary  of the
     closing  of the  issue  of the  Notes,  the fee  will  increase  by 4%.  In
     addition,  the Technical Advisor is entitled to be reimbursed for the fees,
     costs and expenses of conducting periodic inspections of the Vessels.

     Pursuant  to  a  Designated  Representative  Agreement,  CalPetro  Holdings
     Limited  (the  "Designated  Representative")  was  appointed  to  represent
     California Petroleum as its Designated  Representative to act on its behalf
     with  respect  to  certain  administrative  matters  such as the  filing of
     periodic reports and financial  statements with the Securities and Exchange
     Commission.   The  fee  payable  to  the  Designated   Representative  (the
     "Designated  Representative  Fee")  during the  initial  three year  period
     described above was $15,000 per annum with a 4% increase on each subsequent
     anniversary of the closing of the issue of the Notes.

     Management fee expenses and management fee payable as of December 31, 2005,
     2004, and 2003 are as follows:

                                                        2005     2004     2003
         Management fee expenses                      38,120   36,654   43,800
         Management fee payable                        9,622    9,253    8,897

12.  SUBSEQUENT EVENTS
     On April 1, 2006,  the Virgo  Voyager  was  redelivered  to the  Company by
     Chevron and a termination  payment  totalling $5.05 million was received on
     March 31,  2006.  On the same date,  the vessel was  delivered  to a wholly
     owned subsidiary of Frontline Ltd, the Company's ultimate parent, under for
     an initial two year  period  under a bareboat  charter  that  provides  for
     charterhire of $5.05 million for the two years ended April 1, 2008.

<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 XX, 2006




SK 02089 0006 682072