MISC Integrated Annual Report 2020

///// Sustainability / Financial Review / Business Review / Leadership / Governance /// MISC Berhad / Integrated Annual Report 2020 7 158 MISC Berhad / Integrated Annual Report 2020 7 159 /// Governance / Leadership / Business Review / Financial Review / Sustainability ///// Section Section KEY DEVELOPMENTS A milestone contract the Offshore Business segment secured in 2020 was the Mero 3 FPSO project, located in Brazil. More information on this project can be found in the Vice President’s Remarks in this Business Review. In December 2020, we entered into an agreement with Shell to renew leasing and operations contracts for a further five years for the FPSO Espirito Santo in Brazil. The contractual lease and operate period has now been extended to December 2028, thus securing MISC’s long-term income stream. MISC holds 49% equity ownership in the FPSO Espirito Santo , while SBM Offshore N.V. holds 51%. In 2020, all of our existing FPSO and FSO contracts continued to contribute to MISC’s cash flow. The contracts that have been extended will sustain our revenue into 2021 and beyond. Among these are contracts with PETRONAS for the FPSO Bunga Kertas and FSO Puteri Dulang , PETROFAC for the FPSO Cendor , Vestigo for MAMPU 1 , REPSOL for FSO Orkid , Murphy Oil Corporation for FPSO Kikeh , Sabah Shell Petroleum Company for Semi-FPS Gumusut Kakap , PC Vietnam Limited for FPSO Ruby II , Chevron for FSO Benchamas , and Hess Exploration for FSO Mekar Bergading . On the business development front, we pursued the highly anticipated PETRONAS deepwater FPSO in Limbayong offshore Sabah which was re-tendered in September 2020. Apart from that, we have participated in several market surveys out of Asia Pacific and Brazil, and have been closely engaging with major clients to support field developments in Africa and the Americas. These activities are set to continue into 2021 and beyond. During the year, our exemplary HSSE culture was externally validated by a number of awards. Among them was the Repsol Marine Vessel Safety and Operational Excellence Award for the FSO Orkid . OFFSHORE BUSINESS MOVING FORWARD The massive reduction in oil and gas companies’ CAPEX in 2020 as a result of the crisis has led to some USD155 billion worth of greenfield projects that is now waiting to be sanctioned in 2021. This represents USD60 billion more than what was actually sanctioned in 2020. Given this shift, Energy Maritime Associates (EMA) shared that 137 FPSO projects will continue to be assessed from 2021 to 2025. We are expecting around 10 project awards in 2021, and potentially a further 35 until 2025. Our oil and gas clients are more keenly focused on the energy transition which is opening up new opportunities for us. Our Special Projects team is looking into these opportunities, to identify those that will provide us sustainable long- term returns. We will also be looking at engendering greater collaborations with our clients on this front. A large part of our forward moving plans is centred on our employees. We will continually improve our HSSE outcomes, to ensure the health and safety of our employees in their work environments. In the spirit of diversity and inclusion, we continue to invest in programmes to attract diversified talents whilst providing an inclusive environment and equal opportunities for our existing employees to thrive and upskill themselves. Our main focus for the year ahead is to ensure that we deliver on the major projects we have secured during the year, on time and on budget. As part of the MISC’s growth agenda, we will continue to explore potential projects that will serve MISC’s best interests both locally and internationally. In addition to expanding in Brazil, Offshore Business segment remains open to opportunities in Asia Pacific, the Americas and Africa, as well as new partnerships that are related to our core business. Sustainability Pillar Initiatives and outcomes Shareholders In 2020, we established our Special Projects team that is focusing on capturing valuable sustainability-centred opportunities that will drive our future growth. The team will look into how to better manage greenhouse gas (GHG) emissions and improve our water and waste management efforts throughout our FPS operations. They are also identifying new technologies that could potentially improve our fleet efficiency or enhance our commercialisation capabilities. As well as that, they are exploring the use of wind, current and wave as new sources of clean energy for our fleet. By exploring these sustainability long-term opportunities, we are also gearing towards increasing shareholder value, as the world continues to drive the climate change agenda. Customers A customer survey was conducted during the year and the Offshore Business segment obtained excellent feedback. Respondents indicated they were satisfied with our overall services and facilities provided. We scored a rating of ‘Meeting Expectation’. Based on the outcomes of the survey, an action plan with respect to the identified gaps and areas of recommendation has been developed and is being progressively implemented. For more details on the customers survey, please refer to the Anchoring Sustainability @ MISC section on page 104 of this Integrated Annual Report. Sustainability Pillar Initiatives and outcomes Governance and Business Ethics In 2020, the Offshore Business segment embarked on the Social Risk Assessment (SRA) exercise by conducting an SRA awareness session for key employees. Based on the SRA materiality assessment, we have decided to conduct SRA on one of our joint venture assets in 2021. Employees With regards to our employees, we have in place a Behavioural Health and Safety programme that promotes an excellent HSSE culture by offering practical ways that our employees can enhance their health and safety awareness and attitudes. Due to the challenges associated with COVID-19, we opted to implement the programme via a digital platform in 2020, which involved all our 340 employees. Environment In 2020, we continued with our environmental contributions through the following initiatives: • Electronic Waste (e-waste) Collection Initiative We created more awareness through our e-waste collection campaign which provided convenient e-waste collection points for all employees to responsibly dispose of their e-waste. A Department of Environment approved e-waste collector was appointed to manage e-waste collection and disposal. We disseminated information on this initiative through workplace talks and emails. • Ozone Depleting Substance Phase Out Programme In line with MISC’s sustainability agenda, we are progressively replacing R-22 as an air-conditioning refrigerant with more eco-friendly alternatives within all our FPS assets. The programme began in 2019 and will be completed in 2021. • Green Ship Recycling The disposal of offshore floating assets after it reaches the end of its service life leaves a huge amount of waste, posing a potential hazard to the environment. While shipbreaking has emerged as the most common method of ship disposal, environmentally unsustainable shipbreaking practices have resulted in the dumping of dangerous toxic materials on beaches and other open spaces. Towards an effective greener and more responsible operations, we had embarked on our first green ship recycling experience with the demobilisation of FSO Abu in October 2018. In 2020, we continued with our green ship recycling efforts with the demobilisation of FSO Cendor and FSO Angsi . Our green ship recycling efforts are in line with our commitment towards the International Maritime Organisation’s Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships 2009. During the year, as part of the Group’s community initiatives, we conducted a detailed study, the FPSO Kikeh GHG Emission Reduction Studies, which looked into available solutions and technologies to reduce GHG emissions on the FPSO Kikeh . The scope of the study is focused on the recovery of cargo vent gas that is currently released to the atmosphere via cold venting. Community The offshore business segment proactively supported community investment through the group initiatives in investing for the next generation of talent. For more details on MISC’s community initiatives, please refer to the Anchoring Sustainability @ MISC section on page 104 of this Integrated Annual Report. SUSTAINABILITY In 2020, we maintained our sustainability commitments within the Environmental, Social and Governance (ESG) spheres.