Integrated Annual Report 2021

Exploring minimum manning floating storage units (FSU) operation solutions KEY DEVELOPMENTS Becoming the single largest owner of very large ethane carriers (VLEC) in the world by capacity In 2020, the GAS Business segment unveiled our ambition to diversify into the global ethane market by purchasing six VLECs. More specifically, we had targeted the China market, as a good entry point for our venture. This move takes advantage of growth arising from VLEC opportunities, with projections that ethylene demand growth in China, in comparison to world demand, will rise to 23% in 2030 from 18% in 2020. We took delivery of our first VLEC, Seri Everest in 2020. In 2021, we received the delivery of the rest of the VLECs (Seri Erlang, Seri Emei, Seri Emory, Seri Emperor) with our sixth and final delivery, Seri Elbert in April 2021, for our long-term charter contract with Satellite Chemical Co. Ltd. (STL). This effectively made MISC Group the single largest owner of VLECs globally by capacity. We have also established our strategic footprint in China which is the largest ethane market in the world. VLECs in our portfolio of vessels, making us the single largest VLEC owner globally by capacity 6 Continuing to strengthen and rejuvenate our LNG carrier (LNGC) segment GAS Business segment has continued to strengthen our LNGC segment in 2021. During the year, we took two LNGC deliveries as part of our 18-year charter contract with Diamond Gas International (DGI), a wholly owned subsidiary of Mitsubishi Corporation, via a joint venture company of MISC Berhad’s subsidiary Asia LNG Transport Dua Sdn. Bhd. (ALT Dua). These were the Diamond Gas Crystal on 31 May 2021 and Diamond Gas Victoria on 29 July 2021. We progressed well with the newbuilding of two LNGCs for the charter contracts we secured in 2019 with SeaRiver Maritime LLC (SRM), a wholly owned affiliate of ExxonMobil Corporation. During the year, steel cutting works have started on these two vessels at the Samsung Heavy Industries (SHI) shipyards in South Korea, which is slated for final delivery in 2023. Effectively, these two LNGCs will add new and modern generation of LNGC to our asset base, featuring state-of-the-art technologies such as modern XDF propulsion, Mark III Flex Plus containment system and a full reliquefaction facility. These will drive vessel higher efficiencies and meet the demand for worldwide trading and longhaul voyages. • Took delivery of 2 LNGCs • Progressed with steel cutting on 2 LNGCs MOU with Wison to commercialise L2P solutions Selectively pursue LNGC opportunities Diversifying into LNG-to-Power (L2P) solutions L2P is a cleaner power generation solution that is in line with energy transition and climate-change demands. In comparison to liquid fuel, L2P solutions provide 20% less CO2 emissions, 90% lower NOx, 97% less particle emissions and 100% reduction in SOx emissions. In 2021, the GAS Business segment signed an MOU with Wison Group to develop and commercialise L2P solutions, mainly focusing on floating storage regasification power (FSRP). Wison is an EPC firm that specialises in the energy and high technology industries. Selectively pursue global LNGC tenders We have continued to selectively pursue new contracts in the LNGC segment in line with our aim to expand market presence through a prudent approach. In 2021, we participated in many pre-qualifications and tenders for LNG shipping requirements globally. MOVING FORWARD Entering 2022, we expect LNG prices to remain high throughout the year backed by strong demand from both Asia and Europe, although new supply is expected to come onstream towards the mid-2022 and 2023 which may balance out the market demand. China will continue to play a dominant role as the largest global LNG importer, having surpassed Japan as the world’s largest importer of LNG in 2021. However, the US is set to top the list from 2022 onwards with rising outputs from scheduled completions in the coming years before Qatar could again attempt to retake the top spot by mid-decade upon completion of its flagship North Field Expansion (NFE) project. Our venture into non-conventional gas carriers in the years ahead will be a challenge due to the uncertainty of these new markets and the financial standing of the counterparties involved. This could lead to potential counterparty risk during new project sanction evaluations. Shorter contract periods are expected for conventional LNGCs due to extremely competitive charter hire rates, with many charterers already indicating the preference to secure vessels based on a medium-term (7 to 10 years) period which will result in increased uncertainty of return and higher asset residual value risk to shipowners. Currently, majority of the existing fleet are not fuel efficient, with a smaller carrying capacity and higher boil-off rate. However, the latest generation LNGCs utilise advanced slow-speed fuel-efficient propulsion system incorporating gas injection technologies such as XDF and MEGI. Charterers have opted for these latest designs which are larger and have a lower boiloff rate. Bearing these in mind within the immediate future, GAS Business segment plan to optimise revenue from our existing assets, by maximising the utilisation and availability of our vessels. In the near term, we will further strengthen and diversify our asset portfolio by expanding into new asset classes including VLECs, and selectively seek opportunities to add modern and energy-efficient conventional LNGCs to our asset portfolio. In the longer term, our strategic focus is on exploring opportunities presented by new technology and asset solutions, including those associated with liquefied carbon dioxide (LCO2) carriers and minimum manning FSUs. GAS ASSETS & SOLUTIONS BUSINESS REVIEW Exploring minimum manning FSU operation leading to cost efficiency Operational optimisation and digitalisation could be a game changer in the maritime and energy sector. The minimum manning operation concept with remote operation capability on FSU which incorporates digitalisation, Internet of Things, and automation technologies would open a new world of possibilities by enabling systems monitoring from an onshore operation centre. This would lead to cost efficiencies and carbon footprint reduction, both imperatives in transitioning which would lead to cost efficiency. We are exploring future options in this area and have completed the first phase of our concept feasibility study in 2021. MISC Berhad 124 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 125