MISC Annual Report 2017

89 Strategy & Performance MANAGEMENT DISCUSSION & ANALYSIS Lng shipping LNG Shipping segment continues to strengthen its capabilities while exploring new concepts for non- conventional LNG solutions. This segment is well positioned to capitalise on emerging opportunities by leveraging on in-house shipmanagement capability as well as expertise in managing and supervising LNG newbuildings and refurbishment projects. MARKET REVIEW In 2017, demand for LNG continued to rise sharply, particularly in Asia and Europe. Three of the world’s largest import markets, namely Japan, South Korea and China, registered material year-on-year increases in imports of LNG by 5%, 21% and 44% respectively. This fast-growing demand set the stage for long-term growth of the LNG Shipping segment. The year saw a total of 29 Million Metric Ton Per Annum (MMtpa) of new liquefaction capacity coming online which led to a rise in shipping charter rates throughout most of the year. As new projects began absorbing the excess shipping availability already present in the market, there was an increase in spot charter rates around April 2017. By the fourth quarter of 2017, spot charter rates had increased dramatically, with day-rates reaching levels not seen in over three years. This was primarily attributable to China’s aggressive environmental mandate to switch from coal to gas, leaving it with a winter gas shortage. With Chinese LNG buyers increasing their spot purchases, Far East spot LNG prices also began to rise, prompting Atlantic Basin volumes to flow to the Far East. These longer voyages kept the Atlantic Basin tanker market extremely tight, with multiple weeks going by with no spot tanker availability in the region. Looking at the longer-term, Final Investment Decisions (FIDs) for new liquefaction projects continue to be limited, although a number of projects are making further progress towards FID in the US and other regions. The market continues to see healthy delivery of 32 newbuilds for the year bringing the total number of active LNG vessels in the market to 492. In an oversupplied market, the spot charter rates have remained depressed for most part of the year and newbuild orders have been largely curtailed due to the extended poor market. The year in review saw our LNG Shipping segment facing a more competitive business environment. A shift from long-term charters to shorter- term charters pushed the segment to explore new areas of opportunity outside the conventional LNG shipping solutions. KEY DEVELOPMENTS In 2017, the Seri Bakti successfully completed the first of multiple Ship-to- Ship (STS) LNG transfers with charterer, KOCH Commodities Europe Limited and sub-charterer, JOVO, a privately owned Chinese energy company. This was a Flexible fleet of 28 LNG CARRIERS are able to call at more than 80 LNG Receiving Terminals and over 30 LNG Liquefaction Terminals worldwide THREE DECADES of proven experience in LNG transportation Cumulatively made more than 9,000 voyages carrying more than 460 million tonnes of LNG Further details on LNG Shipping www.misc.com.my/solutions/lng-shipping