56 YINSON HOLDINGS BERHAD | INTEGRATED ANNUAL REPORT 2023 MARKET LANDSCAPE OFFSHORE PRODUCTION The price of Brent crude oil trended even higher in 2022, rising significantly in the first half of 2022 as the RussiaUkraine conflict sparked a range of sanctions on Russia by the international community that contributed to higher crude oil prices. Although prices generally declined in the second half of 2022, the average Brent crude oil spot price was USD100 per barrel. Oil-producing nations under the OPEC+ banner cut production by 2 million barrels per day or about 2% of global supply, which temporarily kept prices elevated. For the full year of 2022, Brent crude gained about 10% over 2021’s prices. As a result of the higher oil price environment, the demand for FPSOs was robust in FYE 2023, driven by countries focusing on energy security and oil & gas companies investing gains from high oil prices into new production projects. The demand has surpassed the capacity of FPSO contractors, which has consequently turned the market into one that is more favourable to contractors. As a result, contractors like Yinson have been able to obtain more balanced contract terms that align with the contractors’ strategies. We are leveraging this window of opportunity to advance our own sustainability strategies by proposing solutions that can reduce carbon emissions in FPSOs to our clients. As an upstream oil & gas service company, Yinson is committed to combating climate change within the sphere of our influence by designing and constructing FPSOs that operate with low emissions. Given that the oil & gas industry is responsible for over 40% of global emissions, with 25% resulting from direct emissions, we are also seeing a greater willingness by oil & gas companies to implement such technologies. Looking ahead, FPSO Agogo will incorporate all available technologies for reducing emissions, such as Combined Cycle Power Generation, CCS, Hydrocarbon Blanketing, Closed Flare and Seawater Generating Turbine. Yinson views its focus on sustainability as an opportunity to enhance its track record and gain a competitive advantage in the industry. RENEWABLES In the context of the global energy market, 2022 provided even stronger impetus for the transition to low-carbon or renewable energy sources. The combination of energy security concerns related to the ongoing conflict in Ukraine combined with clear messaging on the inability to meet global warming targets from the United Nations Framework Convention on Climate Change (UNFCCC) and COP27 in Sharm el-Sheikh has driven political ambition levels for renewable and low-carbon energy sources even higher. This has led to more supportive policies and regulations around the world, and greater public acceptance of the need for change. In 2022, ETI increased by 31% from the prior year to a record total of USD1.1 trillion, according to BloombergNEF. This was an important milestone as the total ETI was equal to the total fossil fuel investment globally for the first time ever. Nevertheless, putting this in perspective, the investment level still needs to increase threefold to achieve the net zero scenario. USD1.11 trillion Global ETI in 2022 31% 2021-2022 increase in ETI 3x Increase in investment levels needed to get on track for net zero (Source: BloombergNEF) Note: Start years differ by sector but all sectors are present from 2019. Nuclear figures start in 2015. 200 0 400 600 800 1,000 1,200 USD billion 2018 2015 2013 2012 2011 2010 2009 2007 2005 2004 GLOBAL ETI BY SECTOR 2006 2008 2014 2016 2022 2021 2019 2020 2017 Sustainable materials Electrified heat Electrified transport Hydrogen CCS Energy storage Nuclear Renewable energy
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