Given the high crude oil prices, CAPEX spending on global upstream E&P in 2022 continued to grow to pre-pandemic levels as seen in both onshore and offshore sectors. The international demand for FPSO vessels remained robust while the FPSO market remained tight. There were 12 FPSOs awarded throughout the year, a historic 10-year high. Meanwhile, 2022 is a record year for FSRU as 14 FSRUs were awarded during the year, the highest in history. The demand for FSRU surged rapidly mainly in the European region, in their effort to increase LNG imports to replace Russian gas supply. The seaborne oil trade has completely redefined as the EU decided to ban Russian seaborne oil imports. Trade data shows that China, the largest oil importer has increased its crude oil import from Russia while the EU was sourcing oil imports from other countries. As a result, the tanker market has shifted towards lessefficient, longer-haul trade, creating higher tonne-mile demand. Due to tight tonnage supply, tankers average earnings have recovered from record lows as seen in 2021 to a historic high in 2022. Similarly, the LNG tanker market benefited from the Russian-Ukraine war when the EU rushed to import LNG from other countries. As LNG imports surged, the Europe was facing bottlenecks in regasification and regional distribution. Many LNG carriers were stranded for longer time, unable to unload cargo at the European ports. This has put more pressure to the already tight LNG carrier supply, pushing the average spot rates to a new high. Meanwhile, an extraordinary number of LNG carrier newbuildings have been ordered in 2022. More than 150 full-size LNG carriers were contracted by the end of the year, double the previous tally in 2021. Outlook and Opportunities The global offshore E&P CAPEX spending is forecasted to continue growing for the next few years, mainly in the North American region. More FPSO awards are expected in 2023. At the same time, there are growing concerns about inflation and rising interest rates, access to finance, and supply chain constraints which are causing delays in vessel deliveries. Outlook and Opportunities The outlook of the oil tanker market is expected to remain positive mainly due to the ban of seaborne oil import from Russia, which is causing the trade market to change tides, as well as the increase in crude oil import quotas by China, following the re-opening of its borders and relaxation of its COVID-19 restrictions. The global LNG demand is expected to continue rising, with a large jump in volumes going to Europe. Meanwhile, the US is poised to become the world’s top LNG exporter in 2023, ahead of Australia. Implications to MISC • The Offshore Business segment continues to focus on the execution of the FPSO project in hand while sourcing for opportunities in targeted markets in the Atlantic Basin, Southeast Asia and Asia Pacific regions. In the meantime, its existing portfolio of long-term contracts will underwrite its financial performance. • In 2022, the Marine & Heavy Engineering segment secured two major contracts which will sustain its recurring income into the medium term future. These are the EPCIC Alliance contract for the Kasawari CCS Project by PCSB – the world’s largest and Malaysia’s first CCS project – and the EPC services for the offshore platform Rosmari-Marjoram gas project which will be powered by solar energy. • In the short- to medium-term, the segment remains focused on entering into strategic partnerships to expand its portfolio of solutions and services that answer the demands of energy transition and maritime decarbonisation. These include venturing into offshore wind farms and modular structures. The segment is also exploring opportunities for major EPCIC projects in Qatar, having been given the licence to bid as an EPCIC contractor in the country in 2022. Implications to MISC • Alongside positive business environment for petroleum shipping, the Petroleum & Product Shipping segment managed to deliver six dual-fuel DPSTs and two newbuild dual-fuel VLCCs. The segment will continue to focus on building long-term secured income through its niche shuttle tanker business and rejuvenation of its fleet with ecofriendly tankers. • During the year, the GAS business segment managed to secure 12 newbuilding LNGCs (25%) with QatarEnergy via consortium partners. Besides this, GAS business strengthened its partnership with SeaRiver Maritime via a long-term time charter for two more LNGCs, extending its total of four. The operating income of the segment continues to remain stable, supported by its existing portfolio of long-term charters. For the medium term, the segment selectively exploring conventional and nonconventional LNG shipping solutions to support its longterm growth strategy. SHORT AND MEDIUM TERM (< 5 YEARS) OFFSHORE SECTOR SHIPPING SECTOR For more information, kindly refer to respective segments’ Business Review on Petroleum & Product Shipping and GAS Business. Material Matters Financial Performance Asset Availability, Utilisation and Marketability Talent Development and Retention Project Management Risks Health and Safety Offshore 200 300 0 100 400 500 600 700 2024f 2023f 2026f 2025f 2017 2018 2019 2020 2021 2022 Onshore Source: IHS Markit Global upstream E&P CAPEX (USD billion) Source: Clarksons -20,000 0 20,000 40,000 60,000 80,000 120,000 100,000 VLCC Suezmax Aframax Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Petroleum tankers average earnings (USD/day) LNG carrier 160k cbm average rates (USD/day) Source: Clarksons, Affinity 0 100,000 200,000 300,000 400,000 500,000 Spot Rate 3-year Time Charter Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Material Matters Financial Performance Climate Change Asset Availability, Utilisation and Marketability Project Management Risks Health and Safety OUR OPERATING ENVIRONMENT Energy Management Talent Development and Retention Strategic Review Strategic Review 67 66 MISC Berhad Integrated Annual Report 2022
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