MISC BERHAD INTEGRATED ANNUAL REPORT 2025 08 11 09 05 12 SEC 06 STRATEGIC REVIEW 10 07 13 01 02 03 04 60 www.miscgroup.com 61 www.miscgroup.com #deliveringProgress OUR OPERATING ENVIRONMENT OUR OPERATING ENVIRONMENT MEDIUM TO LONG TERM DECARBONISATION OF THE MARITIME INDUSTRY What Happened in 2025 Decarbonisation efforts in the maritime industry continued to exhibit inconsistent progress, reflecting the absence of a unified global pathway amid evolving regulatory requirements across jurisdictions. During the year, the IMO approved the draft Net-Zero Framework (NZF). However, the voting on the adoption of its mid-term measures, including technical requirements such as the GHG Fuel Intensity (GFI) standard and market based measures (carbon tax), was deferred to October 2026. At the regional level, the European Union advanced implementation of FuelEU Maritime, introducing limits on the carbon intensity of marine fuels, alongside the inclusion of shipping under the EU Emissions Trading System (EU ETS), requiring operators to surrender emissions allowances for CO₂ emissions. Despite regulatory fragmentation, shipbuilding activity continued to reflect transition momentum. The global orderbook recorded strong growth in alternative-fuel capable vessels, which accounted for approximately 26% of vessels by number and 47% by gross tonnage. LNG remained the dominant alternative fuel, supported by its relative technological maturity and established infrastructure, followed by methanol, ammonia and other emerging fuel pathways. E6 Decarbonisation efforts across the maritime industry are expected to progress gradually as regulatory frameworks continue to evolve at both global and regional levels. Further clarity on mid-term measures under the IMO’s NZF, alongside the continued implementation of regional carbon pricing and emissions regulatory framework, is expected to shape compliance pathways and investment decisions across the industry. How We Were Impacted and How We Responded What Is the Outlook? Impact: Mixed industry signals, together with delays in the implementation of global carbon pricing mechanisms, which are widely regarded as a primary catalyst for decarbonisation, created headwinds for broader industry transition efforts. Response: The Group remained steadfast in advancing its decarbonisation agenda, achieving a 36% reduction in shipping fleet GHG emissions intensity relative to our 2008 baseline. This progress was underpinned by improved operational efficiencies, ongoing fleet optimisation and rejuvenation initiatives, and active collaboration with industry partners to accelerate the adoption of low-carbon solutions. Key actions during the year included signing shipbuilding agreements with Samsung Heavy Industries for two LNG dual-fuel Suezmax tankers and partnering with Fleetzero to retrofit a plug-in hybrid-electric system into one of AET's lightering support vessels. The Group also installed efficiency-enhancing technologies across the gas and petroleum fleet and rolled out structured upskilling and reskilling programmes to support seafarers operating alternative fuel vessels. M3 M5 M1 M11 M4 M6 R2 R3 R9 R10 Key Capitals: Material Matters: Risks: Strategic Pillars: SP2 SP3 SHORT TO MEDIUM TERM OFFSHORE SECTOR What Happened in 2025 The offshore sector experienced strong delivery activity during the year, with FPSO start-ups reaching a decade-high level, driven largely by Petrobras-led developments in Brazil. The completion and commissioning of multiple projects reflected the industry's focus on executing previously sanctioned developments as offshore production capacity continued to expand. However, only five contract awards were recorded during the year amid muted oil prices, elevated costs and extended yard lead times. Simultaneously, operators adapted their contracting strategies, carefully balancing traditional Lease and Operate (L&O) models with Engineering, Procurement and Construction (EPC) plus operations and maintenance, as well as Build–Operate–Transfer (BOT) arrangements. Impact: Expanding global offshore production and evolving contracting strategies supported overall sector growth. Response: The Offshore segment remained focus on delivering operational excellence, ensuring high asset uptime and reliability. Alongside this, the segment continued to pursue and secure opportunities for long-term income streams. During the year, the segment achieved asset uptime of 97%, while FPSO Marechal Duque de Caxias completed its first full year of operations with zero LTI. At the same time, the segment secured a long-term contract from PETRONAS Carigali Brunei Ltd. (PCBL) for the provision of a Floating Production Unit (FPU) for a key natural gas development project in Brunei. Offshore project activity is expected to remain supported over the medium term, with S&P Global estimates indicating more than 50 FPSO awards and over USD 75 billion in associated investments globally through 2030. South America, led by Brazil, is projected to remain the primary growth region, alongside continued development in parts of Africa and Asia-Pacific. The evolving pipeline points to a more dynamic and competitive FPSO market. Flexible models, including EPC with operations and maintenance as well as BOT arrangements, are likely to play an increasingly important role. How We Were Impacted and How We Responded What Is the Outlook? No. of award USD billion 25 60 20 50 15 40 10 20 30 5 10 0 0 Africa Europe South America Asia Pacific Central America Mediterranean and Middle East North America Russia and Caspian FPSO Award & FPSO Spending by Region (2026-2030) Lease and Operate (L&O) Owned (EPC O&M/BOT) Expenditure (RHS) E5 Source: S&P Global Key Capitals: Material Matters: Risks: Strategic Pillars: SP1 M1 M2 M3 M4 M5 M6 M7 M11 R1 R3 R4 R5 R6 R7 R8 R9 R10 R11
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