KNOT Offshore Partners LP : ESG Report

2022

ESG : Report

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1 : Introduction

ABOUT THE COMPANY

KNOT OFFSHORE PARTNERS LP ("KNOP" or the "Company") is a market-leading shuttle tanker owner and operator serving the oil and gas industry. KNOP is organized as a master limited partnership and is listed on the New York Stock Exchange (NYSE) under the ticker 'KNOP'.

KNOP owned 18 shuttle tankers as of December 31, 2022. KNOP's most critical objective is to operate safely. Shuttle tankers transport oil from offshore installations to onshore facilities in much the same way

as a pipeline but with greater flexibility and without requiring the construction and installation of extensive, fixed sub-sea infrastructure.

All shuttle tankers today are built to the customer's requirement, typically on a long-term contracted basis. KNOP's vessels primarily operate in Brazil, the North Sea and the Barents Sea, and are managed on third-party terms by one of its sponsors, Knutsen NYK Offshore Tankers AS ("KNOT") who themselves are also a market-leading operator of shuttle tankers. KNOT is part of the wider Knutsen Group of shipping companies that have owned and operated shuttle tankers since the market's inception in the 1970s.

ABOUT THIS REPORT

This report is compiled in accordance with the Norwegian Shipowners' Association's 2021 ESG reporting guidelines. These guidelines are based on a set of predefined material issues and corresponding disclosures for the shipping industry developed by the Sustainability Accounting Standards Board (SASB)/Value Reporting Foundation, and reference is also made to the UN Sustainable Development goals. This report covers the period 1 January to 31 December 2022.

SEAFARERS ONBOARD AT DEC 31, 2022:

470

2021: 447

FLEET SIZE AT DEC 31, 2022:

18

2021: 17

DEADWEIGHT TONNAGE AT DEC 31, 2022:

2 384 814

2021: 2 231 946

NUMBER OF CARGOES IN 2022:

393

2021: 337

NAUTICAL MILES TRAVELLED BY VESSELS IN 2022:

519 000

2021: 468 000

EBITDA FOR 2022:

208.7M

2021: 211.4M

EQUITY RATIO* AT DEC 31, 2022:

33%

2021: 35%

* Equity ratio excluding preferred capital

THE PAST YEAR WE HAVE MAINTAINED OUR FOCUS on environmental, social and governance (ESG) matters as we take responsibility for the environment in which we operate, the people we work with and to meet increasing stakeholder expectations.

The transition towards a more sustainable economy remains on top of the global agenda, and regulations addressing this area are increasing. We are closely monitoring new developments, and the Company is well-positioned to meet upcoming regulatory requirements.

To meet climate goals and align with the targets set by the International Maritime Organization (IMO) we are actively engaged in improving our Energy Efficiency Existing Ship Index (EEXI) and Emission Reduction Trajectories (CCI ratings). Close cooperation between all relevant players including owners, regulators, charterers and funding institutions, will be essential.

The Company's environmental plan has a long-term focus, whilst, at the same time, the plan is reviewed regularly

to ensure it adapts to rapidly changing regulations and new technologies. To meet the different environmental challenges faced by the Company and to find solutions to these, we have established an internal environmental group consisting of naval architects, environmental and operational personnel.

In 2022 we prioritised and focused on reducing greenhouse (GHG) gas emissions; improving energy efficiency in operations; optimising technical design in newbuildings; meeting ballast water treatment requirements; and curtailment of waste generation. We take an active approach regarding our operations and the employment of technology to reduce fleet emissions, like the application of Ship Energy Efficiency Management Plans (SEEMP) to improve and follow up energy-saving actions onboard vessels.

We focus on innovation and driving technological developments in the direction needed to face relevant environmental and social challenges. For example, Knutsen Technology, as part of the Knutsen Group, developed a technology to reduce the emissions of volatile organic compounds (VOC) into the atmosphere during the loading of cargo.

The Norwegian Sector is today the only area where this technology is required in order to meet the VOC emission regulations, however as of the end of 2022, despite only 4 KNOP vessels typically operating in the Norwegian Sector, 12 of KNOP's fleet have so far installed KVOC or similar technology.

KNOP's most critical objective is to operate safely, and ensuring the health, safety and motivation of the crew is our primary concern. We achieve this focus by treating health and safety with the same importance as operational and financial matters.

Corporate governance remains essential for maintaining the trust of our stakeholders and the Company's standing in financial markets. We remain committed to implementing high standards in all areas of our business conduct and operations including through financial and operational audits, applying our Supplier Due Diligence policy, conducting business partner integrity due diligence, and through governance arising from our Governing Business Principles and our Conflicts and Audit committees.

In 2023, the European Sustainability Reporting Standard (ESRS), the draft reporting framework set out under the EU Corporate Sustainability Reporting Directive (CSRD), will be finalised and adopted by the European Commission. In preparation for this transition, the Company is actively monitoring these regulatory developments and researching the requirements of the new standards to best align our reporting processes ahead of time.

Through focus, innovation and commitment, we continue to improve as a Company and prepare for the work that lies ahead. This report summarises our values, intentions and progress to date. Through this publication we aim to transparently convey our overriding commitment to ESG matters and provide consistent reporting on all of our key initiatives, policies and performance matters.

August 2023

Trygve Seglem	Gary Chapman
Chairman	Chief Executive Officer
KNOT Offshore Partners LP	KNOT Offshore Partners LP

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2 : ESG framework and disclosures

MANAGEMENT SYSTEM

KNOP has outsourced the day-to-day management of its vessels to KNOT and the Partnership also receives administrative and technical support from the wider Knutsen Group. To monitor the fleet's ESG performance, the Board of Directors ("the Board") receives quarterly reports from KNOT which include performance metrics on ESG issues, operational KPIs and financial variances as

third-party ships visiting EU ports to ensure the safe and environmentally viable management of hazardous materials, and the sustainable recycling of ships.

A central requirement is to document any hazardous materials on board (Inventory of Hazardous Materials [IHM]). KNOP supports the Hong Kong Convention and seeks to fulfil all requirements set by the EU regarding ship recycling. All

KNOP IS CONVINCED that sustainable operations support the long-term interests of the Company and its stakeholders, as well as being in its best financial interest. The Company's core values are credibility, innovation, and care, and these are reflected in the Company's work, culture and reputation amongst business partners.

KNOP reports in accordance with the Norwegian Shipowners' Association's ESG Guidelines (the "Guidelines") as updated in November 2021. The Guidelines allow KNOP to report on issues that are material and relevant to both internal and external stakeholders. The Guidelines are based on internationally recognized reporting frameworks, including the Sustainable Stock Exchange Initiative, the Poseidon Principles, the Global Reporting Initiative (GRI)

and the Marine Transportation Disclosure Framework established by the Value Reporting Foundation and the Sustainability Accounting Standards Board (SASB).

SASB has developed 77 globally applicable industry-specific standards which identify financially material sustainability topics and associated metrics.

The 17 Sustainable Development Goals (SDGs) define global sustainable development priorities and aspirations for 2030. The SDGs call for worldwide action among governments, businesses and civil society to end poverty and create a life of dignity and opportunity for all, within the boundaries of the planet. While not a reporting framework per se, many businesses refer to the SDGs in their reports.

well as maintaining regular dialogue with KNOT's technical management teams.

The KNOT Management System is an ISM Code-certified system, ensuring compliance with all applicable requirements and regulations for vessels and companies. This system is regularly audited and approved by a third party. All vessels and crew hold the necessary permits, licenses and certificates to carry out operations and did so throughout 2021. KNOT is also ISO 14001-2015, ISO 9001-2015 and OHSAS 18001 certified.

The Company is regularly vetted and audited by the oil majors as well as Class and Flag States which ensures alignment with regulatory standards and application of best practices. In 2022, KNOP had five office audits by oil majors, and Class and Flag administrations. KNOP's vessels are vetted by the oil majors on average every 4 to 6 months.

RESPONSIBLE SUPPLY CHAIN MANAGEMENT

In selecting suppliers, KNOP works hard to choose reputable business partners who are committed to the highest ethical standards and who maintain strong and robust business practices. All suppliers above a de minimis limit must sign

KNOP ships have received IHM certificates and documents of compliance. In the event of a sale to a scrap yard or to

a buyer intending to scrap the vessel, environmental and safety procedures and audits are carried out prior to signing a contract. In 2022, no KNOP vessels were recycled or sold to be recycled.

COOPERATION INITIATIVES

Incentra supports the International Marine Purchasing Association (IMPA) ACT and its member companies to become sustainability frontrunners. IMPA has been representing the interests of the marine procurement profession and promoting cooperation between buyers and suppliers since 1978. The IMPA ACT is a standardised responsible supply chain management system which decreases bureaucracy both for suppliers and shipping companies. KNOT, through the Knutsen Group's membership of Incentra, has implemented a responsible supply chain management system in line with the IMPA ACT.

The International Association of Independent Tanker Owners (INTERTANKO) is a trade association working on a range of operational, technical, legal and commercial issues affecting tanker owners and operators around the world. The

THE GLOBAL REPORTING INITIATIVE is the most widely used international reporting framework for sustainability reporting, with over 90 per cent of

the largest companies in the world using this standard. GRI is based on international standards such as the UN Guiding Principles of Business and Human Rights, UN Global Compact and OECD Guidelines for Multinational Enterprises.

THE SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB) aims to help businesses identify, manage and report on the sustainability topics that matter most to their investors. SASB has developed 77 globally applicable industry-specificstandards which identify a minimum set of financially material sustainability topics and their associated metrics for the typical company in an industry.

THE 17 SUSTAINABLE DEVELOPMENT GOALS (SDGS) define global sustainable priorities and aspirations for 2030. The SDGs call for worldwide action among governments, business and civil society to end poverty and create a life of dignity and opportunity for all, within the boundaries of the planet. While not a reporting framework per se, many businesses refer to the SDGs in their reports.

a Supplier Code of Conduct (unless they have their own policy that is similar or stronger) stating the Company's expectations and standards regarding legal obligations as well as covering issues such as human and labor rights, employment conditions, health and safety, environment and corruption.

RESPONSIBLE SHIP RECYCLING

The Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships aims to ensure that ship recycling processes do not pose any unnecessary risks to human health, safety or the environment. In 2021, EU ship recycling rules entered into force requiring EEA/EU flagged ships and

Knutsen Group has been a member since the organization was established in 1970.

The Knutsen Group, of which KNOT is a part, joined the NCE Maritime Clean-Tech in 2016. This is a Norwegian cluster focusing on finding new clean maritime solutions with commercial potential.

The Knutsen Group has been an active member of the Maritime Anti-CorruptionNetwork (MACN) since 2014. This is a global business network, working towards the vision of a maritime industry free of corruption, enabling fair trade to the benefit of society at large.

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3 : Environment and ecology

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The IMO's Carbon Intensity regulation became effective from January 1st 2023. Our data collection and monitoring systems are being upgraded and measures to improve the carbon intensity have been evaluated with our charterers. The prioritized areas in our five-year plan (2019 - 2023) are:

1. Reduction of CO2 emissions
2. Energy efficiency in operations
3. Technical design of newbuildings
4. Implementation of the 0.5 per cent global sulphur cap in fuel
5. Ballast water treatment requirements
6. Curtailment of waste generation

Environmental risks are managed through the ISO and ISM- certified Knutsen OAS Shipping's Shipping Management System (SMS). The system allows for continuous monitoring of operations to make sure they are aligned with Company policies, international and statutory regulations, and

REGULATORY FRAMEWORK

International environmental regulations are primarily set by IMO (UN Agency for international shipping). IMO's Initial GHG Strategy envisages a reduction in the Carbon Intensity of international shipping by at least 40 per cent by 2030, pursuing efforts towards 70 per cent by 2050, compared to 2008. This Initial Strategy has been revised in 2023 to ensure alignment with the Paris Agreement ambitions. For 2023 IMO introduces "Annual Emission Ratio (AER)" and the corresponding Carbon Intensity Index rating (CII).

Each ship will get its first "CII rating" within the first few months of 2024. This rating will become a key performance indicator for charterers, operators and regulators. In 2026 the effectiveness of this regulation will be evaluated.

KNOP supports the Norwegian Shipowners' Association's Greenhouse Gas ("GHG") Strategy for 2030 and towards 2050, which is more stringent than the current IMO's ambitions.

The ship must also comply with the regulations in the country of registration (Flag State). However, we believe that regional and national requirements, first and foremost EU and US regulations, will drive the technical and operational improvements.

The most important regional set of regulations are the maritime directives in EU's "Fit for 55" program. For calculation of carbon intensity, the "FuelEU Maritime" directive will include the Green House Gases (GHG) methane and nitric acids in addition to CO2. Furthermore, the GHG footprint will be based on "well to wake" emissions, i.e.

it will include emissions related to the production and transportation of bunkers to the ship. One result of this approach is that the advantage of LNG to MGO as fuel will be substantially reduced.

The European Parliament (EP), Council of the European Union, and the European Commission reached agreement this year on including shipping in the EU's Emission Trading Scheme (EU ETS) from 2024. The Company will be responsible for surrendering CO2 quotas (EU Allowances, EUA's) to the authorities. Since the emissions are directly related to fuel consumption, the acquisition, cost and administration of EUA's will have to be clarified with charterers.

The EU ETS will include CO2 emissions only, while the EU MRV (Monitoring, Reporting and Verification) system, will be extended the same year to include reporting of methane (CH4) and nitrous oxide (N2O) which are two other greenhouse gases (GHG) emitted by ships. From 2026 the EU ETS will also include these two GHGs.

THE COMPANY'S ENVIRONMENTAL RESPONSIBILITY The Company recognizes its responsibility to take proactive measures in addressing the challenges - and opportunities - of climate change. We seek to protect the local environment and ecosystems where the vessels operate. The Company's policy commits to delivering environmentally friendly services that meet or exceed contractual obligations. Suppliers and business partners, including charterers, are expected to adhere to the same environmental standards as the Company, which are stated in the Company's Supplier Code of Conduct.

All operations within the Company's control are planned and executed in a manner that minimizes environmental consequences. Managing environmental risks is therefore integrated into the overall management of the Company and environmental issues are aligned with other business priorities. The Company's environmental plan has a long- term focus, but as regulations and available technologies change, it is periodically revised.

contractual and legal obligations.

The system registers, identifies and tracks all events including comprehensive preventive reporting and incidents covering all environmental aspects. This allows us to continuously improve operational procedures and technologies to meet environmental targets.

In 2022 Unisea software modules were successfully implemented to register, monitor and analyze HSE events and activities, in line with and above ISO and ISM standards. The system allows us to continuously improve operational procedures and technologies to meet environmental targets.

EFFORTS TO COMBAT CLIMATE CHANGE

The Carbon Intensity of our operations is reflected in the metrics "attained AER" and the corresponding "CII rating". This rating depends on vessel design as well as maintenance and operation of the ship and its equipment. The design

of shuttle tankers is based on charterers' requirements, regulations and the Yard's technical solution. Over time the design has become more efficient with less fuel consumption, reflected by the Energy Efficiency Design Index (EEDI). KNOP operates a young shuttle tanker fleet with an average age at the end of 2022 of 8.7 years , compared to the world average of 9.5 years.

KNOP continues to explore new technologies to cut emissions, such as the use of renewable energy alternatives, ammonia as a fuel, carbon capture technology as well as nuclear solutions. To minimize energy consumption and GHG emissions, we have implemented "Best Practices" for the operation and maintenance of the ships, as a part of the SEEMP. The greatest challenge is to minimize hull and propeller fouling on ships operating in Brazilian waters. Lastly, the commercial operation plays a significant role

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to improve CII-rating. IMO's carbon intensity is based on the ship's cargo carrying capacity (dwt) at summerdraft, which implies that the annual fuel consumption should be minimized and sailed distance maximized. On the other hand, the EU's carbon intensity is based on actual cargo carried which implies that fleet utilization becomes even more important compared with IMO. Close cooperation with the Charterers is therefore important.

Since 2015, an ECO Care action plan to promote energy- saving onboard vessels has also been implemented. Each ship is requested to carry out at least 15 defined actions. KNOP's fleet reported 490 ECO actions in 2022 (2021: 446), with an average of over 27 per vessel.

Combined with other initiatives this contributes to raising the crew's awareness of environmentally friendly ship operations. In 2022, KNOT took delivery of two energy efficient shuttle tankers with improved hull design and machinery with Liquefied Natural Gas ("LNG") whenever possible. They are designed to utilize energy recovered from volatile organic compound ("VOC") gases that would otherwise be vented into the atmosphere.

The vessels also benefit from new hybrid electric power systems for peak shaving, blackout prevention, enhancement of dynamic performance and reducing the overall consumption of power. In 2022 the ships did not operate as intended long enough to assess the exact improvement due to start up challenges and the actual trade of the vessels. An internal environmental group consisting of naval architects, and environmental and operational personnel has been established to find solutions to the environmental challenges the Company faces. One very significant and prime example of this is when Knutsen Technology (part of the Knutsen Group) developed a technology to reduce VOC emissions to the

atmosphere during the loading of cargo. As of the end of 2022, 12 vessels in the KNOP fleet have so far installed the KVOC or similar technology. Moreover, this technology is patented and sold as KVOC®. The Company's focus on innovation and its passion for sustainable operations drives technological development in the direction needed to meet the Company's responsibilities and face relevant challenges.

A ZERO-SPILL POLICY

KNOP has a zero-spill policy. The Company's risk management systems and procedures and the implementation of its environment plan reduce the risk of harming the environment in which the Company operates, as well as ensuring compliance with international and local regulations. There were zero incidents related to spills

in 2022.

TREATMENT OF BALLAST WATER

Ballast water is essential for safe and efficient modern shipping operations, however it may pose serious ecological, economic and health problems due to the multitude of marine species carried in ships' ballast water. In line with IMO requirements and KNOP's Ballast Water Management plan, each vessel complies with discharge standards. The whole KNOP fleet has installed Ballast Water Treatment Plants. 11 of the 18 systems are K-Bal (Knutsen design).

PLASTIC POLLUTION

Plastic pollution is harming the oceans and it endangers life at sea and on land. The IMO has announced a plan to prevent plastic pollution caused by the shipping industry.

The Company fully supports this initiative and abides by the MARPOL Convention Annex V, which states that plastic must either be incinerated or delivered ashore. Over the last few years, the Company's awareness campaign reinforced the Company's desire to operate according to best practices in all aspects of plastic management.