82 YINSON HOLDINGS BERHAD | INTEGRATED ANNUAL REPORT 2023 YINSON PRODUCTION OUTLOOK Energy security remains high on the policy agenda as a result of a surge in energy prices sparked by the RussiaUkraine conflict, so oil prices are likely to remain elevated for the foreseeable future. This surge has caused challenges for individuals and communities everywhere, leading governments to recalibrate their policies to support the transition to a cleaner, more sustainable energy system. At the same time, the global fight against climate change is pushing for more sustainable practices among corporates. These factors will continue to drive demand for the services and expertise we can provide as a top-tier FPSO contractor with experience and track records in sustainability leadership. Our goal is to rapidly grow our offshore production business while the market conditions are positive, while also reducing the carbon intensity of our fleet. The continued growth of our FPSO business is critical to fuel the concurrent expansion of our renewables and green technologies businesses – which we believe is the most important way we can contribute to the stability, availability and affordability of energy supply to the communities where we operate throughout the transition. One of YP’s goals is to increase our portfolio of profitable assets, creating a long-term EBITDA of USD500 million. We are reasonably optimistic that this goal can be achieved given current market conditions which are favourable to contractors. We will continue to be very selective about the projects that we bid for, choosing to participate only in those projects that will enable our portfolio to shift as quickly as possible to meet our ambitious climate targets. We believe that rising energy demand and high oil prices will continue to ensure there are more than enough project opportunities for YP in the years to come. Risks Opportunities YP’s response Long-term (6 to 10 years) We are developing our Zero Emissions FPSO Concept to help decarbonise the offshore production industry. The increasing importance of ESG and sustainability and financiers tightening policies on oil & gas affects the availability of financing for offshore oil & gas projects. Financiers who remain active in oil & gas increasingly focus on ESG and sustainability aspects in their decision-making processes. An increasing focus of financiers on ESG and sustainability aspects favours projects that support the pathway to a greener economy and therefore benefit FPSO contractors who embed energy efficiency and the reduction of GHG emissions in their business models. Offshore oil & gas also remains highly relevant as an important building block in diversifying energy sources and providing affordable and reliable energy to societies. Transitional projects that not only reduce the environmental impact but provide a balanced risk profile and stable returns remain attractive to financiers active in the oil & gas space. ESG awareness and the growing green economy furthermore provides synergistic opportunities for companies within the marine and energy industries looking to diversify and pursue strategies in the areas of ESG and sustainability. Clear strategies and action plans as well as transparency on ESG matters help to align stakeholder expectations and support the sustainability transition. YP has established a leading position in the industry in the areas of ESG and sustainability. We continue building a profitable, sustainable, and resilient business and asset portfolio business that is attractive to clients and financiers by leveraging on our strengths, expertise, and experience in the energy space to strategically diversify and adapt our business model in a changing environment. Alongside the Zero Emissions FPSO Concept and the introduction of the latest technologies to reduce the environmental footprint of our assets under construction and future assets, this also includes Yinson’s strategic diversification into the renewables and green technologies businesses. YP proactively capitalises on opportunities to create synergies between technological innovation, our financial strategy, and Groupwide ESG practices to ensure access to capital and maximise the value creation.
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