MISC Annual Report 2019

We believe that Environment, Social and Governance (ESG) is a strong proposition that helps AET tap into new markets and expand into existing ones. This helps increase our top line, thus driving financial value for our shareholders. AET’s business strategies remain fundamentally geared towards pursuing long- term sustainability by growing our secured income portfolio and participating in other energy-related maritime services either on our own or through strategic partnerships. We enter into 2020 with great momentum with 13 tanker newbuilds currently on order or under construction. Management Discussion & Analysis ENVIRONMENT The shift towards greener shipping also presents opportunities for us. We intend to rejuvenate our fleet through eco-solution assets, particularly in the VLCC segment. This will help us differentiate as well as build sustainability in the fleet portfolio and will position us to capture the growing potential in eco-solution vessels with key clients. We are already geared up for 2020 which we have prepared for with conscientious planning to take any opportunities that can maximise the growth potential and sustainability of AET. This will include leveraging our experience and agility to consistently provide better energy-related maritime solutions and services that our customers and industry have come to expect of us. In 2019, we reduced our carbon emission intensity by 13% and 9% for our petroleum (to 3.19 gCO2/tonne-nm) and product fleet (8.83 gCO2/tonne-nm for Chemical alone) respectively, against the 2016 baseline. We aim to reduce the carbon emission intensity from our tankers ahead of the IMO’s stipulated 2030 goal by investing in greener vessels. We believe these low-carbon initiatives will support the business to live up to the demands of our customers for low-carbon transportation. AET took delivery of the world’s first two LNG dual-fuel Aframax tankers in early 2019 and named the world’s first LNG dual fuel shuttle tankers in Q4 2019. The new greener tankers emit 85% less SOx, 98% less NOx, 98% less particulate matter and 93% less black carbon particulates than DPSTs burning conventional fuel. Both the LNG dual-fuel Aframax tankers Eagle Brasilia and Eagle Bintulu successfully completed their first ship-to-ship (STS) LNG bunkering at the Port of Rotterdam, marking AET’s commitment on climate action towards a low carbon economy. In line with our goal to make our offices environmentally sustainable, AET’s offices in Singapore, Houston, London and Rio de Janeiro are Green Seal certified, which recognises offices that have made significant steps in purchasing, operations, internal recycling regulations, and educating employees to reduce the office’s environmental footprint and provide a cleaner, healthier working environment. To commemorate our 25th Anniversary in 2019, we launched the ‘AET Travels the World’ campaign to raise money for WaterAid and create a positive difference to the lives of communities in need of proper sanitation and clean water facilities. Over a two-month period, AET’s self-driven and motivated employees in their own time collectively walked, ran and swam around the globe for a total of about 28,700 km and raised USD27,041. The funds will help transform the lives of more than 1,000 families by providing them with access to clean water, toilets and hygiene which are the building blocks of progress. We also participated in annual beach cleaning project at Singapore’s East Coast Beach and Arpoador Beach in Rio de Janeiro. Employees from AET and Eaglestar volunteered at the Houston Food Bank over two events, contributing to the preparation of more than 15,000 meals to feed children aged 18 and under in the Houston Food Bank’s Kids Café programme. COMMUNITY Moving Forward For AET, 2020 is projected to be a year with abundant opportunities but also some challenges. The tanker market is widely expected to remain firm in 2020 as tonnage growth slows due to historically-limited orderbooks as well as vessels undergoing scrubber retrofitting to comply with the IMO 2020 sulphur cap regulation. The implementation of IMO 2020 is also likely to positively drive the crude and product tanker markets as additional refinery throughput is required to meet the increased demand for compliant fuels, thus increasing the demand for tankers. Crude tanker demand in 2020 will also continue to benefit from the ongoing robust growth in US crude exports and growing pipeline takeaway capacity along with sizeable increases in North Sea crude supply, following the start-up of the massive Johan Sverdrup oil field in Norway. However, a range of factors could challenge the outlook including the ongoing geopolitical issues that continue to cloud economic and oil demand outlook, including unrest in the Middle East and the recent US-Iran tensions. The tanker market will benefit from the decision by OPEC and its allies to end their production cuts by end of March 2020, as higher crude production spurs the demand for tankers. However, a range of uncertainty continues to cloud the outlook. The extent of the recent coronavirus outbreak’s impact on the global economy and oil demand remains highly uncertain. On the vessel supply side, the high number of deliveries and minimum scrapping activities during 2019 presents a risk of excess tonnage across all sectors in 2020. Petroleum & Product Shipping 101 100 OUR BUSINESS PERFORMANCE MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019