MISC BERHAD 56 INTEGRATED ANNUAL REPORT 2023 57 www.miscgroup.com STRATEGIC REVIEW SECTION 6 Our Operating Environment Our Operating Environment Energy Security What Happened in 2023? Energy security remains a concern due to geopolitical uncertainties stemming from the Russia-Ukraine conflict and the ongoing tensions in the Middle East. Meanwhile, the OPEC+ has extended and deepened its production cuts in the second half of 2023. Concurrently, the oil trade landscape has witnessed an escalating share of Russian oil exports flowing into Asia. The ongoing global energy crisis stemming from the Russian-Ukraine conflict has reshaped natural gas markets, resulting in Europe’s pivot towards importing LNG from alternative sources, notably the US. This strengthened the US’s position as the leading LNG exporter in 2023. Despite continued growth in LNG exports, prices remained stable throughout the year due to mild winter conditions and ample gas inventories, particularly in the European region. Offshore Sector What Happened in 2023? How We Were Impacted The Offshore Business segment continued to focus on the timely completion of FPSO Marechal Duque de Caxias. However, we continued to closely monitor the industry developments to identify potential international opportunities within the sector. In 2023, Carigali-PTTEPI Operating Co. (CPOC) awarded the Marine & Heavy Engineering segment with an EPCI contract for the Joint Development Area (JDA) Field Development Project (Phase 6). Furthermore, the segment continued to focus on driving growth for its heavy engineering business and was qualified as an EPCIC contractor with reputable oil majors internationally. The global offshore investment cycle witnessed an upturn, marked by heightened spending in oil and gas projects. The positive momentum is expected to fuel a surge in the global FPS market with a high number of awards in the short to medium-term. Six FPSOs and one FSRU were awarded in 2023. Notwithstanding the robust demand, financial institutions are adopting a cautious stance in providing financing for the hydrocarbon sectors. Funding availability has been tightened and is now more inclined towards investments that facilitate the energy transition. SHORT TO MEDIUM-TERM Global upstream E&P CAPEX 700 600 500 100 0 200 300 400 2018 2019 2020 2021 2022 2023 2024f Onshore Offshore USD bil Source: EIA Source: Woodmac World liquid fuels production and consumption balance Global LNG Imports 90 86 # 105 mbpd 100 96 2019 2020 2021 2022 2023f 2024f World consumption World production Forecast 2018 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Source: S&P For more information, please refer to Offshore Business Business Review on page 86 and Marine & Heavy Engineering Business Review on page 89. Over the next five years, the FPSO market anticipates 40 to 75 orders with an estimated capital cost of between USD72 billion to USD117 billion, predominantly in the Americas. Material Matters Key Capitals F Financial Capital P Physical Capital H Human Capital Climate Change Energy Management Financial Performance Risks Asset Availability, Utilisation and Marketability Health and Safety Project Management Shift in Stakeholders’ Preference Towards New Energy and Low-Carbon Solutions Ocean Health How We Were Impacted Our business segments remained steady, underpinned by strong fundamentals and stable portfolio of existing long-term contracts. Amidst the heightened geopolitical and energy crises, surrounded by uncertainties during the year, the Group focused on project execution and delivery excellence and extension of existing contracts. Outlook While demand for oil and gas will continue to grow in this decade, the intensified geopolitical conflicts could influence an escalation of energy security concerns, potentially exerting upward pressure on energy prices. This may strengthen the demand for oil and gas further in the short-term while expediting the transition towards clean energy sources. Material Matters Risks Key Capitals F Financial Capital Climate Change Energy Management P Physical Capital N Natural Capital Financial Performance Increasing Climate-Related Regulations and Requirements Shift in Stakeholders’ Preference Towards New Energy and Low-Carbon Solutions Asset Availability, Utilisation and Marketability Geopolitical Instability Project Management 2018 2019 2020 2021 2022 2023 2024f 450 mmtpa 400 350 300 250 200 150 100 50 0 Sustainable Supply Chain Technology Developments Outlook
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