MISC Annual Report 2018

LIGHTERING SUPPORT VESSELS (LSV) 10 UNITS CHEMICAL TANKERS 13 UNITS CLEAN PRODUCT TANKERS 5 UNITS AFRAMAX TANKERS 35 UNITS* + 2 ON ORDER DYNAMIC POSITIONING SHUTTLE TANKERS (DPST) 4 UNITS+ 7 ON ORDER SUEZMAX TANKERS 6 UNITS VERY LARGE CRUDE CARRIER (VLCC) 14 UNITS Transports mooring equipment and crew to conduct lightering operations Used to ship a variety of chemicals and vegetable oils in both inter and intra-regional trades Includes Mid-Range (MR) and Long-Range 2 (LR2) tanker vessels with capacity of approximately 0.3 million barrels for MR and 0.7 million barrels for LR2. Used to ship refined petroleum products over both long haul and short haul trades Tanker vessel with a capacity of approximately 1 million barrels of crude oil. Used to ship crude oil and have the flexibility to do longer haul cargo as well as shorter regional trades Dynamic Positioning Shuttle Tankers possess dynamic positioning technology to carry crude oil from offshore production facilities to the shore for storage or distribution Tanker vessel with a capacity of approximately 0.7 million barrels of crude oil. Used to carry crude oil or dirty products (i.e. fuel oil) in mainly regional trades * Includes one Panamax tanker and three LR2 tankers currently trading crude oil Tanker vessel with a capacity of approximately 2 million barrels of crude oil. Used to transport crude oil over long distances in inter-regional trade MANAGEMENT DISCUSSION & ANALYSIS PETROLEUM & PRODUCT SHIPPING MARKET REVIEW In 2018, weak growth in seaborne petroleum trade and vessel oversupply continued to persist, resulting in a depressed freight market for the tanker industry across all sectors. Crude tanker tonnage demand growth rate was lower in 2018, whilst the oversupplied global crude tanker fleet grew marginally, despite an increase in tonnage scrapping during the year. Meanwhile, product tanker tonnage demand growth rate was quite steady, however, the global fleet remained structurally oversupplied. OPEC and Russia-led production cuts aimed at curtailing oil output and shoring up oil prices adversely affected the demand for crude tankers in the first half of 2018. The re-imposition of US sanctions on Iran in May 2018, followed by some temporary export waivers, created uncertainty over Iranian crude oil exports. Additionally, political instability in Venezuela and Libya further affected crude oil supply whilst geopolitical events such as the US-China trade war impacted seaborne crude trade with zero crude trade between the two countries in August and September 2018. On a more positive note, the seasonal higher tonnage demand and freight markets of winter cycles returned as forecasted, driving charter rates that were consistent with winter cycles. Rising US crude oil exports to the Far East bolstered tonne mile demand while the highest number of scrappings in more than a decade helped eased the tonnage oversupply situation. In the chemical tanker sector, key factors that impacted chemical seaborne trade were the US-China trade war, and China imposing anti-dumping duties on countries such as Japan and South Korea on some chemical products, which altered global trading patterns. In addition, India, the world’s largest edible oil importer, substantially raised import duties on edible oils. Coupled with high tanker deliveries, growth in the chemical tanker fleet considerably outpaced growth in global chemical seaborne trade in 2018. KEY DEVELOPMENTS IN 2018 In line with AET’s strategy to grow secured income business, AET won five DPST newbuild contracts to provide four vessels and one vessel to Petrobras and Shell respectively, on a long term basis. Along with two newbuild DPST contracts won in 2017 with Equinor, these contracts will increase AET’s DPST fleet size from four to 11 when deliveries are completed by 2020, thereby strengthening our presence in the shuttle tanker market. The five newbuild DPSTs are earmarked for Brazilian waters and are capable of operating globally. All five vessels comply with impending International Maritime Organisation (IMO) regulations on global sulphur cap and ballast water treatment systems. As a responsible ship owner and operator, we endeavour to minimise our environmental impact and carbon footprint by investing in fuel-efficient tankers and the pioneering use of MODULAR CAPTURE VESSELS (MCV) 2 UNITS Unique Aframax sized vessels that combine FPSO and Dynamic Positioning technology. These vessels form part of an innovative marine system solution designed to respond to a subsea well control incident HIGHLIGHTS OF THE YEAR OUR BUSINESS OUR LEADERSHIP OUR PERFORMANCE OUR COMMITMENT TO SUSTAINABILITY OUR GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 50 TH ANNUAL GENERAL MEETING 101 MISC BERHAD ANNUAL REPORT 2018 100