MISC Annual Report 2017

95 Strategy & Performance BUSINESS RISKS & MITIGATING ACTIONS Summary of Business Risks Mitigating Actions • Tonnage oversupply continues to exert pressure on freight rates across all tanker sectors, exacerbated by continued fleet growth (albeit at decelerated rates). • High inventory levels and the OPEC-led crude oil supply cuts have and will continue to curb oil tanker demand growth, delaying any freight market recovery. • Increasing oil price on supply cuts and production outages is likely to limit demand growth for oil (and hence tanker), despite the projected continued global economic growth. • Reduced oil price volatility is likely to curb “trading cargoes”, which ultimately depresses demand for tankers. • Seek to reduce its exposure in the cyclical spot market and pursue more time charters and fixed contracts. • Continue to build, leveraging on its leading position and capability, the less volatile, semi-secured lightering/STS (and the growing reverse lightering) operations in the US Gulf and South America. • Continue to seek long-term employment for its larger tanker fleet at the opportune time, to ride out the market downturn. • Seek to grow its specialised asset (with long-term, secured employment) portfolio such as DPSTs and MCVs. • Increasing bunker cost due to rising oil price. • New regulatory requirements (Ballast Water Management System (BWMS) and the IMO Sulphur Cap) will increase the P&L breakeven and operating costs. • Macroeconomic/general inflationary pressures that continue to push the cost of doing business and operations up. • AET has a bunker procurement strategy to optimise its future bunker purchases. • Invested in the LNG dual fuel systems to maximise fuel efficiency whilst minimising its impact to the environment. • Developing options in complying with the new regulatory requirements. • Continue to exercise prudency in its cost management that has successfully lowered its overall P&L breakeven over the years. MANAGEMENT DISCUSSION & ANALYSIS PETROLEUM & PRODUCT SHIPPING