MISC Annual Report 2017

85 Strategy & Performance processes and rigorously develop identified successors. Moreover, through our maritime academy, ALAM, we have in hand a strong in-house pool of ready, high quality talent thru our cadet sponsorships. We are confident that these and the other mitigation strategies that we are already employing will help deflect any risks to our business. Further details of our business risk and mitigating actions are included at the end of the Management Discussion & Analysis section in this Annual Report for each of the Core Businesses. THE WAY FORWARD While global risks remain significant and difficult to predict, the continued upturn in global economic activity forecast for 2018 will see global market growth continue to be driven by the emerging markets with the developed economies making strides at a more gradual pace. The rebalancing of the global oil market is expected to continue on the back of OPEC and non-OPEC production cuts, rising drilling activity in the United States, inventory drawdowns and recovering Libyan and Nigerian production. With the OPEC production cut deal set to run until the end of 2018, it is generally expected that oil prices will remain stable and continue to hover around or above USD60 per barrel based on market forecast. Moving forward, this is how we foresee things playing out for our core businesses. As new gas/LNG capacity from the US and Australia comes onstream, this is impacting the way buyers of LNG are behaving in a market where the buyers have much stronger bargaining power. In view of this, gas buying contracts have become shorter, where buyers have more choices, and this is impacting shipping requirements in the LNG shipping space. Today, LNG shipping contracts are getting shorter and smaller and opportunities for new LNG shipping contracts are limited, with most of the new capacity coming on-stream having locked in most of their shipping requirements. The demand growth for LNG/gas is tilted towards emerging markets especially in Asia and this will be the driving force for demand, be it for heating, industrial or power generation. As such, shipowners like MISC will have to be more creative to develop non- conventional solutions which will help to expedite the build-up of infrastructure to cater to the downstream demand of LNG, in areas such as LNG for Power or LNG bunkering. These developments, however, are not expected to impact the steady performance of the Group’s LNG Shipping segment as the majority of our vessels are employed under long-term charters. In 2017, our Petroleum and Product Shipping segment experienced a challenging year as the tanker market continued to be suppressed by tonnage oversupply, oil production cuts and supply disruptions. In light of the OPEC- led agreement to extend its oil cuts untill the end of 2018, the Petroleum and Product Shipping segment’s performance may continue to face pressure as a result of dampening demand for petroleum tankers from OPEC countries. However, robust oil demand projections and dwindling global oil stock amidst abating aggressive tanker supply growth are expected to lend support to the overall supply/demand balance and improve charter rates in the later part of 2018. Meanwhile, expectations of a more stable oil price environment in 2018 will pave the way for a gradual recovery in investments in the global offshore exploration and production space, especially for developments within the Atlantic Basin. The expected increase in Foreign Investment Decisions (FIDs) will give rise to more opportunities and our Offshore Business will continue to pursue potential projects both locally and internationally including opportunities in Africa, the Middle East and the Americas. Notwithstanding the above, the current long-term and stable contracts in hand will support the financial performance of the Offshore Business segment. The strateg i c dec i s i ons we have i mplemented t hese past few years and t he pos i t i ve results t hat have ensued, place us i n a strong pos i t i on to tap i norganic growt h opportun i t i es and del i ver susta i ned growt h. PRESIDENT/GROUP CEO ’ S REVIEW