Integrated Annual Report 2021

2021 has been a moderate year of growth within the Offshore Business segment as new COVID-19 variants and differing pace of global vaccine rollouts affected the rate of economic recovery. Although commodity prices improved, some investment decisions were deferred on the back of continuing uncertainties. However, floater demand remained consistent, and in the first five months of 2021, five new awards were given for FPSO units. Despite negative market conditions, the Offshore Business segment leveraged on our strong track record and successfully secured major contracts during the year. Our positive financial performance is underpinned by our existing major long-term contracts which has secured our revenue into the future. As such, our primary aim has been to ensure excellent project execution and on time delivery. Following on from our milestone achievement in 2020 to secure a major Brazilian FPSO project, we have focused on ensuring project milestones are delivered on time and within cost. Conversion of the FPSO hull and fabrication of the topsides modules have begun in China, and engineering and procurement activities have progressed to meet project schedule, cost and quality. We are confident that our priority to ensure excellent project delivery will build our reputation in the global premium FPSO market. Our FPSO and FSO assets performed well, and we have worked closely with our clients to give them added value by improving their commercial returns. SYED HASHIM SYED ABDULLAH Vice President, Offshore Business VICE PRESIDENT’S REMARKS Within our operations and maintenance contracts, we have obtained extensions on charter periods for the FPSO Ruby II, FSO Dulang, FPSO Bunga Kertas and FPSO Kikeh. These contract extensions have secured our future income, ensuring our ability to maintain our growth, and generate a stable, recurring revenue. At the same time, we have continued to evaluate opportunities where we believe we can add value in regions like the Asia Pacific, the Americas, Europe, Africa and the Middle East. Our dedicated pursuit of achieving operational excellence has seen us maintaining our sterling track record of safe, reliable and efficient contract operational uptime performance of more than 99%. We have retained our top-class health and safety performance, with significant improvements in our Occupational Safety and Health processes through our sound Safety and Health Management System. During the year, the FSO Orkid obtained the Malaysian Society for Occupational Safety and Health (MSOSH) Gold Class 1 Award for the second year running, testament of our commitment to propagating an excellent safety culture. As COVID-19 has entrenched itself in the way we work and do business, we have learnt from our previous experiences to better manage our business and operations. Although some slowdown in planned work was inevitable, we reassessed our approach by implementing new ways of working and adapting to pandemic-related limitations and restrictions by devising creative and innovative ways to get things done. Our people’s seamless integration of virtual communication tools such as Microsoft Teams to keep in touch with each other and our clients have ensured that we remained on track with project deliverables in line with client expectations and needs. Our office staff in numerous locations were guided by a comprehensive COVID-19 management plan that was driven and executed by our HSE and leadership teams. Our sitebased personnel, operations and logistics have suffered the greatest impacts in terms of uncertainties in travel, visas, quarantine requirements and associated protocols which have proven to be challenging and cumbersome. Nevertheless, we have worked through these challenges to overcome commercial and schedule impacts by working closely with our clients. The energy landscape is changing rapidly in response to climate change and energy transition towards renewable energy in the global energy mix. Considering this shift, we have remained focus on decarbonisation by reducing emissions on our existing and new assets. Although the need to comply with Environmental, Social and Governance (ESG) policies has affected floaters’ financing trends worldwide, our focused investments in new technology and digitalisation by including ESG elements in our new projects, as well as exploring alternative ways of project structuring puts us on solid ground. Sustainability is an integral part of our business strategy and we have further embedded our commitment into our operations through the Offshore Business Sustainability Strategy Plan that is aligned with MISC 2050. We have identified actions that will be undertaken in the year ahead, which will be delivered progressively by the project owners. A key move was the establishment of our Special Project Team focusing on business sustainability, which has been tasked with examining new business lines, energy transition and sustainability projects based around new technologies. This will further enhance our sustainability focus and outcomes for 2022 and beyond. Moving into 2022, we are keenly focused on ensuring our business sustainability through various focus areas. These include engendering excellent health, safety and environmental outcomes to retain our strong HSE track record. We are committed to progressing with our projects on time and on budget, as we maintain and enhance our existing contracts’ operational performance and secure further contract renewals. With regards to new contract awards, we plan to employ a targeted opportunistic approach that considers potential risks. Bearing in mind energy transition needs, we will build our capabilities in this space, to secure our position as a global player. We believe that a business is only as strong as the talents that drive it. Towards this end, we will continue investing in our people and growing our team’s capabilities and support systems. SYED HASHIM SYED ABDULLAH Vice President, Offshore Business KEY DEVELOPMENTS Progressed with the execution of our current projects In 2020, we had been awarded a major FPSO project in Brazil, as well as its corresponding operations and maintenance. During the year, we embarked on conversion of the hull and topsides fabrication in China for which Petrobras will lease for a period of 22.5 years. Project engineering and procurement activities have largely progressed to meet the project schedule, cost and quality. The FPSO is slated to commence operations in 2024. Maintained growth by extending existing contracts Testament to our ability to provide services that exceed customer expectations, we secured extensions on several contracts during the year. The FPSO Ruby contract was extended by six months to 31 December 2022, while the FSO Dulang has been extended for a period of four years to 31 March 2025. Similarly, the FPSO Bunga Kertas has been extended for a period of a year to 14 April 2022, while the FPSO Kikeh has been extended by six years to 23 January 2028. Collectively, these contract extensions have secured our income streams into the near-term future. OFFSHORE BUSINESS BUSINESS REVIEW Focused on project execution FPSO Ruby 31 December 2022 FSO Dulang 31 March 2025 FPSO Bunga Kertas 14 April 2022 FPSO Kikeh 23 January 2028 MISC Berhad 138 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 139