MISC Annual Report 2019

There was a slew of ongoing offshore projects which made up our backlog as at December 2019 such as the Bokor Phase 3 redevelopment project for the Central Processing Platform (CPP) for PCSB that is nearing completion at 73% progress with the EPCIC works expected to be completed in the second half of 2020. The EPCIC works for the 1,596 tonne Pluto Water Handling Module for TechnipFMC was also close to completion at 87% progress and is scheduled to sail away in the second quarter of 2020. As a result of our continuous efforts to replenish our order book, we were awarded several new contracts throughout 2019, one of which was a significant milestone when another major EPCIC contract for the Kasawari Gas Development project was secured. Awarded by PCSB, this is going to be the heaviest and largest offshore platform in the region. The Kasawari Gas Development project contract also includes the transportation and installation of an 85 km pipeline linking the Kasawari CPP to the existing E11R-A platform. We were also awarded the Bergading Central Processing Platform-Mercury Removal Unit (CPP-MRU) Integration Project from Hess Exploration and Production Malaysia B.V. under the six-year PETRONAS Frame Agreement for the provision of EPC works that was awarded to us in late 2018. This project covers EPCC works for the Bergading MRU module. Upon completion, the module will be installed and integrated with the existing Bergading CPP in the North Malay Basin of Peninsular Malaysia. Additionally, we are undertaking the EPCIC provision for the Bekok Oil Project from PCSB that includes the supply and installation of new BEDP-A and BEDP-B wellhead platforms (WHP) which consist of topsides, substructures and bridges linking each topside to the existing Bekok-A and Bekok-B platforms. Upon completion of fabrication works for the Bekok Oil Project, the new WHPs will be installed at the PM9 Field, located in the south- eastern Malay Basin of Peninsular Malaysia, approximately 260 km from the Terengganu Crude Oil Terminal. Our presence in the industry was further strengthened when we successfully secured a conversion contract for an FSO facility and the construction of its external turret for the Sao Vang and Nguyet Development Project, offshore Vietnam in 2019. Awarded by Malaysia Vietnam Offshore Terminal (L) Limited, the conversion contract involves fabrication engineering, fabrication procurement, construction and commissioning (epCC) for the repair, life extension and conversion of the FSO facility. In the marine segment, of the 86 projects secured in 2019, four were en bloc agreements, and we served 24 new clients comprising 12 new domestic clients and 12 new international clients from Russia, Cyprus, France, Korea and Indonesia. 20 LNG vessels were repaired during the year and we also successfully delivered dry docking repairs for two drilling rigs, UMW Naga 5 and Naga 2 , from Velesto Energy Berhad, Malaysia. As part of our strategy to develop a larger recurring income base to reduce cyclicality of the business and for future growth, through our joint venture with Hiap Seng Engineering Limited, we were awarded the Master Service Agreement for Integrated Turnaround Main Mechanical & Maintenance Mechanical Static from PETRONAS in the first quarter of 2019. This agreement is valid for five years with an option for extension and covers integrated plant turnaround works and daily maintenance work on mechanical static for Melaka Refinery Sdn. Bhd. The year under review was also momentous for MHB’s subsidiary company, MMHE EPIC Marine & Services Sdn. Bhd. (MEMS), as they have secured four new marine repair and refurbishment contracts. Now in its third year of operations, MEMS has been awarded with 40 repair and refurbishment contracts and successfully delivered 38 vessels in total. The contract awards have significantly contributed to the business stability and growth of MEMS while establishing it as Peninsular Malaysia’s East Coast one-stop-centre for marine repair and refurbishment services. The construction of our third dry dock, Dry Dock 3, is progressing at 86% with expected completion in second half of 2020. This will increase our marine repairs revenue opportunities especially for LNG vessels and tankers thus elevating our competitive advantage in terms of capacity offering, among others. Sustainability We recognise that our people are one of our most valuable assets, therefore their development is key to operational excellence. In order to nurture skilful and competent project management teams for quality project execution, various training programmes were conducted to empower them throughout the year. In support of the UNSDG 4 - Quality Education, we implemented the following programmes: Moving Forward We will enter 2020 with opportunities to pursue due to highly prospective projects in the pipeline, hoping to ride the wave of the improved market to sustain us going forward. Sizable opportunities will be coming from the Middle East, North America, South America and Asia Pacific where respective NOCs are committed to their capital spending on sanctioned projects. Locally, a pipeline of fabrication projects is lined up for 2020 and 2021, mainly within the light to medium structure space. Nevertheless, oil price instability would still affect any FIDs on the planned projects. On the downstream capacity expansion projects, the majority of the projects will be coming from the Middle East, North America and Asia Pacific. With surging energy demand from Asia Pacific, NOCs in the Middle East are amplifying investments in refinery projects to meet the demand. For the LNG market, LNG exports have surged in recent years out of Qatar, Australia, Russia and the United States and with a new wave of LNG liquefaction FIDs under way. Global LNG trade is expected to increase rapidly led by East Asia with more vessels from Russia using the shorter Northern Sea route. Demand for tankers is also expected to grow mainly supported by growth in global oil consumption and changes in route dynamics caused by OPEC production cuts which are positive for tankers’ tonne-mile demand. Meanwhile, renewable energy is also playing an increasing role in decarbonising the global power sector and the global offshore wind market is set to expand significantly over the next two decades. In the next five years, offshore wind projects will be concentrated mainly in Asia, Europe and North America. Nurturing Youth Leadership Skills - We engaged with future science and technology leaders through MHB Art of Science 2019 Internship programmes with local education institutions, which benefitted a total of 45 interns in 2019 Sponsorship of UTM Engineering Programme - Industry Innovation Day 2019 With HSE being of the utmost priority in our business, we remained committed to ensuring that all HSE procedures are in place and in line with regulations and safety standards. Key HSE programme highlights in 2019 included: 3R – Waste recycling awareness on segregation at source and prohibition of single use-plastic resulted in the collection of 225.36 MT of recycled waste from July until December 2019 Energy Savings Programme – We invested in the installation of 1,033 units of LED lighting, changed old air-conditioners to inverter types and standardised as well as set timer controls for electrical installations at the end of working hours. As part of our ongoing cost optimisation and energy conservation effort, a Memorandum of Understanding was signed for the installation of solar rooftop solutions at MMHE West in Pasir Gudang, Johor with PETRONAS Water Conservation Programme – Measures such as usage of spray-water piping fitings and dual flush tank among others, resulted in water savings of 32.6% We continuously contribute to emergency response resources in the Pasir Gudang Emergency Mutual Aid Team and our extended support and resources in line with UNSDG 17 – Partnership for Goals In 2019, as part of our contribution to UNSDG 1 – No Poverty Goal, we made contributions to assist underprivileged communities such as Rumah Kebajikan Nur Hidayah and organised a series of ‘Free Market’ events, a market place where one can shop for goods and services for free. The first ‘Free Market’ was in collaboration with Kementerian Pembangunan & Kebajikan Masyarakat, to ease the burden of underprivileged families in their Ramadhan and Syawal preparations, while the second was to help underprivileged students with the theme ‘All Things School’. In summary, our community programmes in 2019 covered the environment, donations, science education and event sponsorships which saw 165 employees volunteering a total of 2,863 hours. Management Discussion & Analysis Marine & Heavy Engineering 113 OUR BUSINESS PERFORMANCE ANNUAL REPORT 2019 112 MISC BERHAD PEOPLE. PASSION. POSSIBILITIES