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28 I 2020 ANNUAL REPORT I mANAgEmENT DISCUSSION & ANALYSIS

mARKET

ChALLENgES

The COvID-19 pandemic has BRENT CRUDE OIL PRICES - 10 YEAR DAILY ChART
caused more disruptions to the
140
energy sector than any other
events in recent history. 120 111.5 108.6
Oil refiners remained subject to 100 111.6 99.0
1
heightened levels of uncertainty 80 80.6 64.3
because responses to COvID-19 Brent Crude Oil Price (USD / Barrel) 60 71.3
continue to evolve. 40 53.0 54.7
Reduced economic activity as 45.1 41.7
a result of the pandemic had 20
impacted energy demand and 0
supply patterns in 2020. 28/5/2000 28/11/2000 28/5/2011 28/11/2011 28/5/2012 28/11/2012 28/5/2013 28/11/2013 28/5/2014 28/11/2014 28/5/2015 28/11/2015 28/5/2016 28/11/2016 28/5/2017 28/11/2017 28/5/2018 28/11/2018 28/5/2019 28/11/2019 28/5/2020 28/11/2020

Refining margins in South East Asia have been struggling throughout 2020
as volatile crude oil prices and refinery over-capacity impacted margins. With oil
ON ThE gLOBAL FRONT
demand subdued as the world economy grapples with COVID-19 repercussions,
On average, the International Energy there is risk of continued narrow refining margins in 2021. However as vaccinations
Agency (IEA) estimates global oil demand are rolling out as planned, there are now stronger expectations of economic
have plunged 9 per cent across the year recovery in the second half of 2021. HRC is poised and ready to ramp up our refinery
2020. According to The U.S. Energy run rate to capitalise on better margins from improved demand.
Information Administration (EIA) forecasts,
year-on-year oil demand growth dropped Amidst these challenges, some positive developments from vaccine developments
to an estimated average of 92.4 million and stimulus packages from central banks will provide a boost of quick economic
barrels a day (b/d), which is about recovery, which will support the recovery of petroleum demand.
8.8 million b/d less than 2019’s average.
Brent crude prices averaged lower to ON ThE LOCAL FRONT
USD41.7 per barrel (/ bbl) in 2020 compared In Malaysia, the industry was impacted by a year of new norms as well as political
to USD64.3 / bbl in 2019. and economic upheavals. Domestic GDP growth contracted by 5.6 per cent in 2020,
There is high likelihood that oil price remains it’s lowest contraction after 1998. The restricted movement brought about by
dampened throughout the COVID-19 the Movement Control Order (MCO) has led to reductions in HRC’s inland Jet-A1,
pandemic. Uncertainties in US-China trade LPG, Gasoil and U95 sales in 2020.
relations, especially the uncertainties in US New norms and regulations led to a major shift in interaction as more sectors
trade policy and tariff policy, will also have implemented work from home guidelines and leveraged on online meetings,
a negative impact on the recovery effectively reducing petrol consumption. In the adoption of increased digitalisation
prospects of global economies. and automated work processes, the pandemic turned into a “fast-forward”
scenario, where what might have taken years to happen had instead unfolded in
a matter of months.
Digitalisation is expected to play a key role in effective energy transition strategies
in 2021. Apart from enabling remote operations and driving human-machine
collaboration, digitalisation has an important role to play in setting near-term
emissions targets, using standardised and credible reporting, and tracking
accountability across the hierarchy.
On the environmental front, in view of unprecedented challenges that the
industry had to cope with, the Government officially deferred the Euro 5 Gasoil
1 MIDF Research 2019 Report, and EIA Short–Term Energy
Outlook December 8, 2020 Go-Live date to April 2021, of which HRC has successfully implemented before
the stipulated due date.