Several factors contributed to the weakening of spot market rates. These included the introduction of new vessels into the market without an equal increase in LNG trade, and delays in the completion of new LNG projects in Australia which reduced spot charter opportunities for ramp-up cargoes. Outages in several liquefaction plants, namely in Yemen, Angola and Egypt, which reduced the LNG supply and eventually shipping demand, also led to weaker spot market rates. Key developments For the year in review, MISC made a total of 372 shipments carrying cargoes amounting to 20.74 million tonnes of LNG for our customers, carving 8.3% of the total world LNG trade. In early 2015, we secured a contract novation from PETRONAS for five new LNG carriers together with long-term charter contracts. Orders for the Moss type carriers have been placed with Hyundai Heavy Industries Co. Ltd. (HHI) with the first newbuild LNG carrier scheduled for delivery by the end of 2016. This new contract will provide income stability for the Group in the coming years. As part of our efforts to defend our steady income stream, we successfully secured extensions for our Puteri Class vessels for long-term contracts. The Puteri Intan and Puteri Delima were delivered to PETRONAS LNG Sdn. Bhd. (PLSB) in October 2015 signifying the completion of the repair and life extension (RLE) programmes for both vessels and the beginning of their contract extensions. By the year’s end, the Puteri Nilam was delivered to PLSB upon completion of its RLE programme with its contract extension kicking in. The year also saw the Group expanding its presence in Australia when our Seri Bakti vessel became the first MISC vessel to berth at the Santos GLNG terminal in the month of September. The terminal successfully completed loading 150,000 cbm of LNG or 98.5% of the total capacity of the vessel. The first shipment from GLNG, Curtis Island was successfully delivered on schedule to Pyeong Taek Terminal in South Korea on 27 October 2015. Moving forward With no sign of an uptrend in the oil price, the market for LNG is expected to remain below the desired level. This will prolong the low vessel utilisation environment and low in-charter hire rates in the LNG shipping market. Globally, 44 newbuilds are expected to be delivered in 2016 whereby 20% out of the total number will be delivered without any employment. Most of these vessels are expected to be deployed to Australian and US-based liquefaction projects. In view of this, spot charter rates for LNG shipping are expected to remain low. MI SC w i l l con t i nue t o suppo r t PETRONAS LNG shipping requirements while continuing to explore opportunities with third-party charterers to provide income stability. To reinforce the Group’s position as one of the world’s most preferred LNG carriers, we remain f l e x i b l e t owa rds adop t i ng new technology and larger size vessels. We look forward to the introduction of our Moss type carriers we have secured for PETRONAS requirements. This will provide an avenue to greater operational flexibility where predominantly MISC is operating membrane type carriers. Apart from our focus on LNG shipping, we will continue to monitor the development of LNG floating facilities, namely Floating Storage Regasification Units (FSRUs) and Floating LNG (FLNG) opportunities in the marketplace. MISC BERHAD Annual Report 2015 57
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