The year also witnessed the dramatic fall in crude oil prices, from a high of approximately USD115 per barrel to as low as USD45 in the early 2015. The implications of a low oil price environment are far reaching, as Oil & Gas players took drastic measures in preparation of a more challenging operating environment, in particular, the significant reduction in the operational and capital expenditures. During the year, the petroleum shipping segment saw a steady climb in freight rates, to a level that we had not seen since global financial crisis broke in 2008. The improvement in freight rates was mainly due to the steady demand for the movement of crude oil worldwide throughout the year but more importantly, due to a much slower growth in new deliveries of tankers during the same period. It is worth highlighting that the drastic drop in oil prices have had little effect on freight rates as global production remains high, supporting a buoyant demand for crude oil movements. Besides the strength in freight rates, ship owners in general have also benefited from lower bunker costs on the back of lower oil prices. In contrast, the LNG shipping segment faced an onslaught of new vessel deliveries during the year. Unfortunately, this growth in supply of LNG vessels far outpaced the growth in demand. Due to this excess capacity and in the wake of further deliveries of new vessels expected in the coming one to two years, freight rates are expected to r ema i n unde r p r e s su r e i n t he foreseeable future. MISC’s long held strategy of not building a vessel without a charter in hand has served us well as most of our vessels are on long-term contracts or with a contract in hand. This will shield us from the present pressure on freight rates faced by the LNG shipping market. The last few years had been filled with challenges but we had been resilient and committed to our mission and objectives. I’m also very pleased to report that the health of the Group’s balance sheet has been fully restored through the various efforts we have undertaken in the last few years. p 47 MISC BERHAD - Annual Report 2014
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