MISC Annual Report 2019

SYED HASHIM SYED ABDULLAH Vice President, Offshore Business Over the years, we have been very focused on delivering safe, reliable and optimised offshore solutions while pushing ourselves to greater heights Management Discussion & Analysis 2019 marked a period of revitalisation for the oil and gas industry and it was a watershed year for the Offshore Business segment with the oil majors recognising our capability and tremendous potential to add valuable offshore solutions as part of the energy value chain. We received numerous inquiries and requests for quotations, as well as invitations to participate in new projects such as design competitions for brownfield development. This is a very important milestone which is the result of our resilience, passion and determination; it signifies that we are now being welcomed by international players and the global oil and gas market at large. Over the years, we have been very focused on delivering safe, reliable and optimised offshore solutions while pushing ourselves to greater heights. Today, our excellent track record for delivering projects in a timely manner as well as the stellar results of our operational and HSSE performance is a testament to our capability. An example of this would be the FSO Benchamas 2 project, which was MISC’s first partnership with Chevron Thailand and maiden foray into Thailand’s offshore oil and gas sector. The project was a ground-breaking achievement for MISC in many ways as it proves our capability to secure new contracts competitively from renowned oil majors, our diligence in adhering to strict tender requirements and meeting the very high expectations of our client. MISC has established ourselves in Southeast Asia’s offshore floating solutions market with a strong reputation in our operating and maintenance capabilities. Nevertheless, we know that there are more possibilities out there for us to pursue and we are poised to do more, grow bigger and vigorously explore other playing fields beyond Southeast Asia. Our priority and a strategic opportunity that we have been pursuing is to enhance our presence to be a major player in Brazil, where most of the oil and gas activities are taking place. We are optimistic of the potential to secure notable projects of the many developments in Brazil, including the Mero development. The FPSO projects in Brazil are known to be complex and challenging in nature. We have been preparing ourselves diligently for this endeavour, starting with establishing the right organisational requirement and having people with the experience, knowledge and expertise to meet the huge undertaking. For this purpose, we have embarked on large-scale capability building since 2018 to enhance our team and diversify our people with the right skillset, depth and breadth of the engineering and technical knowledge to meet those demands. In line with MISC’s principles of shared success, we leveraged on the cross-collaboration and synergy within the Group, united by our mutual commitment of continuous and consistent improvement and driven by our passion to optimise our business performance and success in the long term. Beyond Brazil, we are also exploring other prospects and opportunities in Mexico as well as the African continent. In these regions, there are potential opportunities for inorganic growth. Nonetheless, we will continue to maintain our significant presence in Malaysia and Southeast Asia as these are our key business areas. Ultimately, my aspiration for 2020 is securing projects in Brazil as it will be an achievement that signifies emphatic validation by the industry that we have arrived, and a clear recognition that we have made our mark as a major player in the FPSO market, which will open up a horizon of new opportunities for MISC. SYED HASHIM SYED ABDULLAH Vice President, Offshore Business Market Review 2019 has been a strong year for offshore exploration and production companies, with free cashflow remaining strong as an indication of imminent new offshore investment cycles. Globally, the amount of oil and gas resources approved for development was reported to be 20.6 billion barrels of oil equivalent, an increase of 50% as compared to 2018. In the FPSO market there have been 13 new contract awards, putting the global backlog of FPSO units under construction and on order at a total of 28 vessels. Of the 28, only two are scheduled for production in 2020 while the bulk of the other projects are expected to begin production only in 2023. Key Developments The Offshore Business segment continues to remain active in the domestic market and other countries where we have established our footprint. In Malaysia, we have demonstrated our value-adding capability by successfully retrofitting our first Marginal Marine Production Unit ( MaMPU 1 ) with an additional module that supports its function to enhance the development of marginal and stranded fields. MaMPU 1 is currently deployed in offshore Sarawak. Our Vietnamese joint venture through Malaysia Vietnam Offshore Terminal (L) Ltd, is currently well-advanced in the construction of FSO Golden Star for our client in Vietnam. To date, this project has achieved one million manhours and once commissioned by July 2020, it will further expand our presence in Vietnam. The year also saw the extension of our existing assets whereby FPSO Ruby II and FPSO Bunga Kertas obtained a one-year extension from PetroVietnam and PCSB respectively, with further extensions under discussion. On the tender front, the Offshore Business segment participated in tenders for projects in Sabah and Sarawak, including one for a deepwater FPSO. We have also been actively pursuing several bids within Southeast Asia and the Middle East. Beyond Asia Pacific and the Middle East, we have been successfully pre-qualified to participate in tenders from Petrobras and will continue to actively source for opportunities in Brazil. In the medium term, we will continue to develop our capability and capacity to go further in this challenging and evolving offshore marketplace. We also place sustainability high on our agenda, aligned with the Group’s aspiration to conduct our business in a responsible and sustainable manner as well as to ensure value creation through our range of solutions. With a view to transform MISC into a credible FPSO turnkey contractor on a global scale that is capable of winning, executing and operating deepwater projects, we have also rolled out and implemented transformation initiatives that cover yard strategy, developing deepwater capabilities, enhancing operations and maintenance capabilities. We are also positioning ourselves to look at future challenges of the industry through our research and development initiatives that will lead to innovative designs to exceed the expectations of our customers. Offshore Business V I C E P R E S I D E N T ’ S R E M A R K S 105 104 OUR BUSINESS PERFORMANCE MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019