In this ESG case study report, we read through YINSON’s recently published Climate Goals Roadmap on achieving carbon neutrality by 2030 and net zero by 2050. With net emissions from FPSOs expected to gradually increase until 2030 – in tandem with additional new contract wins in the coming years, carbon neutrality will be achieved by heavily relying on renewable energy (RE). Post 2030 and working towards net zero 2050, the group will seek to fully integrate carbon removal technologies into its FPSO operations – striving towards the zero emissions FPSO concept. Meanwhile, the group’s renewable energy and green technologies divisions will also take on increasingly more pivotal roles within the group’s long-term growth story. Overall, our read-through yields positively, with YINSON firmly entrenched as a market leader within the sector in terms of energy transition. Reiterate OUTPERFORM with SoP-TP of RM7.35.

Case study on YINSON’s Climate Goals Roadmap. In line with the group’s climate goals established in March 2021 of achieving carbon neutrality by 2030 and net zero by 2050, YINSON had just recently published its Climate Goals Roadmap, detailing on steps it intends to take in reaching these goals. In this case study report, we attempt to briefly look through these initiatives and assess their viability.

Emissions from offshore production division expected to rise until 2030. The group’s main business division, offshore production is its largest GHG emitter representing 93% of the Group’s emissions. From present until 2030, net emissions from offshore production are expected to steadily increase – in tandem with the additions of new FPSO contract awards in the coming years, before tapering off thereafter. Nonetheless, throughout this period, the group will still be able to achieve 30% reduction in carbon intensity via prudent carbon removal methods – e.g. closed flare and hydrocarbon blanketing.

Carbon neutral 2030 will be dependent on renewable energy ventures. With the group’s net emissions from offshore productions expected to steadily rise until 2030, the group will be heavily reliant on RE to offset emissions from its FPSO business and achieve its target of carbon neutrality by 2030. As such, the group’s RE production is expected to grow exponentially, from 0.3TWh currently, to 1.75TWh by 2025, and 5.6TWh by 2030. Currently, the group has 140MW solar capacity in India’s Bhadla Solar Park. Moving forward for the immediate-term, the group has plans in place to expand its India solar capacity to ~330MW, as well as venture into RE projects in Chile. Over the mid-term, the group is seeking to achieve 3-5GW RE capacity in the coming 3-5 years.

Post 2030, striving towards net-zero by 2050. Beyond 2030, YINSON’s key focus would be to integrate carbon removal technologies (e.g. direct air capture, carbon capture utilisation and storage) into its FPSO operations to achieve actual reduction in net emissions – working towards the zero emissions FPSO concept. During this stage, the group will implement a ‘No Venting and No Flaring Philosophy’ across all its offshore production businesses. In fact, all new projects deployed from 2025 onwards will have completely eliminated regular venting and flaring – thereby reducing carbon intensity of FPSO operations by a further 30% from 2030 levels. Additionally, RE will be the crucial business division within the group as it expects to reach 22.4TWh energy generation by 2050. Meanwhile, its green technologies division will also play an increasingly vital role via strategic investments in marine, mobility and energy.

Source: Kenanga Research - 11 Nov 2021