98 YINSON HOLDINGS BERHAD STRATEGY & OUTLOOK BUSINESS REVIEW - OFFSHORE PRODUCTION MARKET OVERVIEW Brent crude oil price has been trending upwards in 2021 as a response to global intensification of Covid-19 vaccination efforts and loosening of pandemic-related restrictions. As more and more economies reopen and resume normalcy, demand for petroleum-based products have outstripped supply; the outcome of OPEC+’s decision to limit production increases throughout the year to support higher crude oil prices. Brent crude oil hovered at USD50 per barrel at the start of 2021 and peaked at USD86 per barrel in October before stabilising towards the year-end. Oil price rose to a seven-year high, crossing USD100 per barrel in early 2022, that was unfortunately triggered by the Russian invasion of Ukraine in February. International sanctions brought about by the geopolitical tension in the region is anticipated to complicate energy supply, which may lead to a further rise in oil prices. Major oil producers are encouraged to ramp up production to ease oil prices hikes. The IEA also revised its 2022 demand outlook to 100.6 million barrels per day, an increase of 3.2 million barrels per day following a reassessment of historical data. BRENT CRUDE OIL PRICE PER BARREL FYE 2022 On the offshore production front, there is a shrinking pool of skilled FPSO contractors, caused in part by the challenging economic environment, increasingly complicated technical demands, rising capital expenditure costs and challenges in securing project funding due to investor appetites moving away from fossil fuel-based investments. There has also been a significant increase in project awards this year, with many postponed oil & gas developments resumed in light of rebounding oil prices and an economy emerging from the worst of the pandemic. These two factors have resulted in a particularly strong FPSO market for Yinson, allowing us to obtain more balanced commercial contracts. We are optimistic that the outlook for Yinson’s project portfolio over the next 5 to 8 years will be one of the strongest in our history, and this has led us to embark on a strategic review to unlock the value of Yinson Production to fuel the growth and sustainability of the Group. The upcoming opportunities we see in the FPSO sector is worth the excitement as it not only addresses the need for more production to prevent global energy security issues on both supply and price, but also encourages our potential clients to warm up to the idea of lower emission FPSOs. The rationale of this strategic review has been elaborated by my colleague Daniel within the Strategy Review in this Report. Strategy Review, pg 54 Source: markets.businessinsider.com (2022) 40 20 0 80 1 February 2021 1 June 2021 1 October 2021 1 February 2022 60 100 USD
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