INTEGRATED ANNUAL REPORT 2024 54 55 SECTION 6: STRATEGIC REVIEW www.miscgroup.com MISC BERHAD SHORT TO MEDIUM TERM MEDIUM TO LONG TERM ENERGY SECURITY Our Operating Environment What Happened in 2024 In 2024, energy security remained a key concern due to the ongoing Russia-Ukraine war and tensions in the Middle East. Despite ongoing US sanctions, Russian oil continued flowing into Asia throughout the year, primarily to China and India. Meanwhile, OPEC+ has extended its oil production cuts through 2025 in an effort to avoid oversupplying the market which could weigh on oil prices. Europe’s pivot to importing LNG from alternative sources, mainly the United States, continued during the year amid ongoing geopolitical conflicts. However, its LNG imports declined in 2024 due to high storage levels and lower gas consumption. Nevertheless, despite the persistent headwinds in the market, oil and gas prices were stable throughout the year. World production World consumption Source: EIA Short-term Energy Outlook (January 2025) Source: Woodmac (January 2025) mbpd 110 105 100 95 90 85 0 World Liquid Fuels Production and Consumption Balance 2020 2021 2022 2023 2024 2025f forecast 2026f Global LNG Demand mmtpa 500 400 300 200 100 0 2020 2021 2022 2023 2024 2025f 2026f SHORT TO MEDIUM TERM MEDIUM TO LONG TERM OFFSHORE SECTOR Our Operating Environment What Happened in 2024 While the global upstream spending declined slightly in 2024, the investment in the offshore sector was higher than in 2023, supported by resilient fossil fuel demand and stable oil and gas prices. During the year, six FPSO projects were awarded with total CAPEX of more than USD10 billion. The sector is also expecting a surge in the global FPSO market with a high number of awards in the short to medium term. However, financing difficulties amidst the energy transition, continued to be a major challenge for the sector. How We Were Impacted and How We Responded The Offshore segment maintained its focus on the timely completion of the FPSO Marechal Duque de Caxias, which achieved Final Acceptance in November 2024. The successful delivery of FPSO Marechal Duque de Caxias strengthened the Group’s stable cash flows, further enhancing our financial resilience. Meanwhile, the Marine & Heavy Engineering segment remained focused on project delivery excellence throughout the year. On the Heavy Engineering sub-segment, MHB successfully delivered the Kasawari Gas Development Project on time. What Is the Outlook? The offshore sector is poised for a high CAPEX cycle in the short to medium term, with significant opportunities in Brazil, APAC and Africa. Over the next five years, FPSO demand is expected to remain strong, with more than 50 FPSO awards anticipated and an estimated total CAPEX exceeding USD80 billion. Driven by deepwater reserves, key regions such as South America and Africa will remain as strategic priorities for major energy players. Additionally, the change in energy-related policies in the United States is expected to create favourable conditions for the oil and gas industry, providing additional growth momentum in the offshore sector. For more information, please refer to Offshore Business Review on page 84 and Marine & Heavy Engineering Business Review on page 87. How We Were Impacted and How We Responded Despite the lingering energy crisis and ongoing geopolitical conflicts, our business segments remained steady, underpinned by solid fundamentals and a strong portfolio of long-term contracts. Furthermore, the Group remained focus on project execution and delivery of existing contracts, alongside securing new contracts. During the year, our GAS Business segment successfully secured long-term charter contracts with QatarEnergy for three newbuild LNGCs. Meanwhile, AET swiftly delivered Eagle Veracruz, the final vessel in a series of three LNG dual-fuel VLCCs, on a long-term contract with Shell. What Is the Outlook? As we move towards 2030, the supply and demand for oil and gas are forecasted to increase, driven in part by US policy shifts, prioritising increased domestic production. However, the ongoing geopolitical conflicts may heighten energy security concerns and potentially lead to increased volatility in energy prices that could disrupt the economics and trade fundamentals of the oil and gas sector. For more information, please refer to Gas Assets & Solutions Business Review on page 78 and Petroleum & Products Business Review on page 81. Climate Change Energy Management Financial Performance Key Capitals: Material Matters: Risks: Physical P Natural N Financial F Energy Transition and Decarbonisation Risk Project Delivery Risk Geopolitical Risk Global Offshore Spending USD billion 200 250 300 100 50 150 0 Source: S&P (December 2024) 2023 2024 2025f 2026f 2027f 2028f Key Capitals: Material Matters: Risks: Physical P Financial F Human H Sustainable Supply Chain Ocean Health Financial Performance Climate Change Energy Management Waste Management Energy Transition and Decarbonisation Risk Financial Risk Project Delivery Risk Talent Risk
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