MISC Annual Report 2019

Management Discussion & Analysis Environment We also reduced our carbon emissions from all our operations by an overall 7%, compared to 2016, although transport work increased by 10% within the same period. The overall reduction can be attributed to an increase in operational efficiency as well as the introduction of newer and more efficient vessels into our fleet. In 2019, MISC recorded a 16% reduction in CO 2 intensity from the LNG fleet, 13% reduction from the petroleum fleet and 9% reduction from the product fleet, against the 2016 baseline. Our CO 2 intensity is calculated in tonnes of CO 2 divided by displacement tonnage multiplied with distance travelled in nautical miles. Changing global trends coupled with increasing scrutiny on climate change and environmental issues from stakeholders are impacting the way shipping is currently being operated. MISC is a member of the ‘Getting to Zero Coalition’, committed to developing zero emission vessels by 2030, which is closely aligned with the International Maritime Organisation’s (IMO) initial Greenhouse Gas Strategy. The strategy prescribes that international shipping must reduce its total annual greenhouse gas emissions by at least 50% of 2008 levels by 2050, while pursuing efforts towards phasing them out as soon as possible in this century. In view of this, operating in a responsible manner and minimising the impact on the environment are essential to how business is managed at MISC. In 2017, we established and formalised the MISC Carbon Commitments to improve the energy efficiency of vessels operated by MISC and prioritised vessel energy efficiency capacity in newbuilds and acquisitions. Our newbuilds (year built ≥2016) are on average, FLEET 2019 2020 TARGET LNG 16% 6% PETROLEUM 13% 9% PRODUCT 9% 1% 2,359 1,825 283 2,110 1,622 286 2,129 1,695 270 2,260 1,698 208 4,466 4,018 4,095 4,166 Total MISC Fleet GHG Emissions (thousand tonnes CO 2 e) Product Petroleum LNG 2016 2017 2018 2019 Product Total Fleet Transport Work (billions tonne-nm) 2016 2017 2018 2019 Petroleum 351 324 349 378 LNG 171 130 166 201 23 17 20 19 545 471 535 598 Puteri Puteri Satu Seri A Seri C Aman ENI Seri B (steam) Seri B (DFDE) 10.22 10.06 10.97 10.10 9.00 8.33 7.85 7.53 22.42 26.41 10.53 8.79 8.10 5.90 LNG Fleet Average Carbon Intensity by Vessel Class/Group Steam Dual-fuel diesel electric (DFDE) 2018 2019 gCO 2 /tonne-nm • 71% vessels showed improvement in CO 2 intensity from 2018 • Average CO 2 intensity reduced by 10% in 2019 compared to 2018 • 50% vessels showed improvement in CO 2 intensity from 2018 • Average CO 2 intensity reduced by 2% in 2019 compared to 2018 Petroleum Fleet Average Carbon Intensity by Vessel Class/Group 2018 2019 gCO 2 /tonne-nm 3.77 B Class B Class 2 DP- Shuttle K Class Kasturi Series Kelana Series LR-2 MCV Paramount Series P-Max Suezmax -1 Suezmax -2 T Class V Class 1 V Class 2 V Class 3 3.24 4.06 5.66 6.38 4.24 4.17 2.67 2.75 5.44 5.82 3.37 3.95 5.36 4.90 6.29 5.76 5.07 5.76 3.37 3.42 2.14 2.71 4.74 4.30 2.70 3.00 2.48 2.64 2.20 2.40 LNG CO 2 Intensity (gCO 2 /t-nm) 16% (LNG) and 20% (Petroleum) more carbon efficient than older fleet. Additionally, carbon intensity reduction targets and strategies for our shipping operations were established and endorsed. In 2019, we invested approximately RM23 million for our environmental protection initiatives. MISC Fleet Carbon Reduction in 2019 vs. Carbon Reduction Target by 2020 (baseline year 2016) Our LNG and petroleum fleet have showed a decreasing trend in carbon intensity performance since 2016 Product Fleet Average Carbon Intensity by Vessel Class/Group 2016 2017 2018 2019 10.45 10.01 9.65 8.73 2020 Target: 9.82 Product CO 2 Intensity (gCO 2 /t-nm) 2016 2017 2018 2019 10.23 9.16 8.83 9.69 2020 Target: 9.59 Petroleum CO 2 Intensity (gCO 2 /t-nm) 2016 2017 2018 2019 3.52 3.25 3.19 3.66 2020 Target: 3.33 Bunga A Bunga L 8.59 8.48 10.08 9.43 2018 2019 • Average CO 2 intensity reduced by 4% in 2019 compared to 2018 gCO 2 /tonne-nm 0.00 0.00 0.00 Operating Safely and Sustainably 143 142 OUR BUSINESS PERFORMANCE MISC BERHAD PEOPLE. PASSION. POSSIBILITIES ANNUAL REPORT 2019