MISC Annual Report 2017

MISC BERHAD | Annual Report 2017 90 significant commercial achievement for the segment. With recurring STS LNG transfers fast catching on amidst the evolving LNG landscape, the segment’s experience and expertise in this area augurs well for its continued success. This flexible solution goes beyond the conventional sale and delivery of LNG as it now opens up new markets for exporters as well as provides new supply sources for those with LNG requirements. Another notable highlight in 2017 was Seri Begawan delivery of the first commercial cargo to the newly-commissioned import terminal, the Regasification Terminal 2 (RGT2) in Pengerang, Johor. This milestone signifies MISC’s continuous commitment in delivering excellent services and maintaining the highest standards of vessel safety and operational reliability. Towards the end of 2017, Puteri Intan Satu successfully commissioned and marked the initial cooling down of the new Soma LNG terminal located in the Fukushima Prefecture in North Eastern Japan. Our clients’ trust in our ability to commission this new import terminal is a testament to the depth and breadth of our experience in the LNG shipping business. The segment also took delivery of Seri Cenderawasih and Seri Cempaka, both of which are on 15-year long-term charters to PETRONAS LNG Sdn. Bhd. (PLSB) with options to extend for an additional five years. They were delivered in January 2017 and August 2017 respectively. These MOSS-Type LNG Carriers reinforce our position as a reliable and safe LNG transporter. Our first MOSS LNG Carrier, Seri Camellia was one of the Top 4 candidates of Nor-Shipping Energy Efficiency Award 2017. Apart from that, in June 2017, Aman Sendai underwent Refurbishment and Life Extension (RLE) in preparing for her 10-year contract renewal with PLSB. The LNG Shipping segment also continued to expand its international footprint in 2017 by participating in pre-qualifications and tenders for LNG shipping, bunkering vessels and FSRUs in China, Australia and Europe. In collaboration with other business segments within the Group, LNG Shipping segment is evaluating the potential of offering FSRU solutions, FSUs, small-scale LNG bunkering services as well as LNG-to- Power (L2P) projects for niche markets in South Asia and ASEAN as to ensure that it is able to maintain its long-term revenue and profit streams. These are all new frontiers for MISC and we will continue to bid for these new LNG floating solutions and other market opportunities. In addition to improving vessel flexibility for trading, all maritime vessels today are required to perform modifications to meet regulatory requirements such as the Ballast Water Management System (BWMS) and IMO 2020 Global Sulphur Cap regulations. Seri C vessels have been installed with the BWMS requirement whilst Seri Bijaksana will be made BWMS-ready by April 2018 ahead of the September 2019 deadline. In June 2018, the Puteri Mutiara Satu will be arranged for modification to meet the Global Sulphur Cap requirement to consume fuel with a sulphur content of 0.5% or less, before the 1 January 2020 Global Sulphur Cap deadline. OUTLOOK Today, changes in market dynamics and customers’ requirements has led to market uncertainties in the LNG shipping sector. Charterers are no longer willing to charter LNG vessels on a long-term basis, most charters today involve a medium-term period of between seven to 10 years at lower rates. This has led to a decline in investments for LNG newbuilds. The unfavourable market conditions have also forced many LNG liquefaction project owners to postpone FID and this has put a cap on new LNG shipping projects. Charterers are also choosing to charter new LNG vessels which are bigger and have lower fuel consumption and boil-off rates. Due to the increasingly unpredictable nature of conventional LNG shipping contracts and businesses, market competition has intensified with more and more players venturing aggressively into new areas such as FSRUs and LNG bunkering activities. To overcome these challenges, LNG Shipping segment will explore all avenues to secure long-term charters that will bring about sustainable revenue streams. This will see the segment refocusing its efforts on non-conventional LNG shipping and alternative LNG floating solution projects in key LNG demand centres and emerging economies. The achievement of these initiatives, among other activities, will ensure that the LNG Shipping segment remains sustainable. MANAGEMENT DISCUSSION & ANALYSIS Lng shipping