INTERVIEW: Japan's MOL expects up to a month for Hormuz transit to take shape: CEO

Japan's Mitsui O.S.K. Lines, among the world's largest ship operators, expects it to take "at least several weeks, and possibly about a month" for navigation through the Strait of Hormuz to take shape, President and CEO Jotaro Tamura told Platts, part of S&P Global Energy.

"At the very least, until the high-level agreement that has now been reached is reflected on the ground and transit through the strait takes some shape, I think it will take at least several weeks, and possibly about a month," Tamura said in an interview at the company's head office in Tokyo June 17.

Asked whether his view was a general navigation trend rather than about the company's ships, Tamura said: "That's right. Of course, for our vessels that remain inside the [Persian] Gulf, we want to get them out as soon as possible."

The comments came ahead of the US and Iran signing a memorandum of understanding to end the war late June 17, following the announced agreement of an interim peace deal earlier in the week.

"At present, only the announcement has been made, and the actual situation on the ground in the Strait of Hormuz has not changed," he said. "Therefore, we are closely watching how the situation on the ground will change based on the announcement."

Commenting on how the effective closure of the Strait of Hormuz would impact oil shipping practices, Tamura said: "Even if transit through the Strait of Hormuz resumes this time, based on what has happened, industry will to some extent have no choice but to diversify procurement sources while considering geopolitical risk."

Noting a potential increase in oil tanker demand across the industry, Tamura said the shipping industry will likely need to respond to those needs to some extent.

MOL currently has a fleet of 35 crude oil tankers.

Although the Strait of Hormuz situation is yet to be resolved, Tamura, who took the helm of the ship operator April 1, said the company needs to be better prepared for contingencies after a series of geopolitical events in recent years.

"There is the Russia-Ukraine conflict, then the avoidance of transit through the Red Sea caused by the Palestine issue, and now the Persian Gulf situation. Events that seem sudden have continued to occur," Tamura said.

"However, if we think on a larger scale and consider changes in geopolitical structures, one could say that rather than being sudden, these types of events are likely to continue to some degree, and that this may now be the normal state of affairs."

LNG business

As a means to stabilize income in the volatile shipping business, MOL -- already the world's largest LNG carrier operator -- is working to expand its LNG businesses as one of the pillars in its energy business, Tamura said.

"We would like to expand the LNG carrier business, which has become one of our strengths, vertically as well, and broaden our business opportunities across the LNG value chain," Tamura said. "In this way, we have expanded our business areas both upstream and downstream in the value chain and increased earnings."

Most recently, MOL said June 4 it has, together with Delfin Midstream and Vitol, reached a final investment decision and formally decided to participate as an investor in an offshore floating LNG project known as Delfin FLNG 1 with an annual LNG nameplate production capacity of 4.4 million metric tons, which is slated to begin first production in 2030.

"This is not downstream but upstream [business], with gas that has been produced is liquefied offshore, temporarily stored, and then loaded onto vessels," Tamura said of Delfin FLNG 1.

Tamura added that MOL has placed the upstream business in the LNG carrier value chain as a stable earning business based on medium-to-long term contracts.

"The significance of having these stable-earnings businesses is that, for a shipping company like ours, many other vessel types have earnings that are very unstable, or highly volatile," he added. "Amid that volatility, having stable businesses contributes to stabilizing the performance of the company as a whole, and therefore has very significant meaning."

MOL has designated the Indian Ocean Arc as the regional focus for its medium-to-long term business developments.

"If we speak specifically about LNG, the country in this region where demand growth is currently expected is India," Tamura said. "Our company also owns and operates several LNG carriers for customers in India, and we expect business opportunities to continue in the future, so India will be one of the priority regions for acquiring LNG carrier contracts."

MOL currently operates a fleet of a little over 100 LNG carriers, with an order backlog of 53 ships across its energy business, Tamura said, adding that the fleet is expected to increase to about 130 to 140 carriers after some retirements by 2030.

Asked to comment on the global flow of LNG transportation from the EU ban on Russian LNG imports from Jan. 1, 2027, Tamura said: "For the directly involved parties, the EU and Russia, there will naturally be something like a reorganization of trade, so there will be an impact."

"However, from a global perspective, it will be a reorganization of trade, and I do not think it will significantly change the overall structure," he added.

Asked whether MOL will be able to transport Yamal LNG cargoes from next year, Tamura said: "We will respond while carefully assessing the direction of the sanctions measures."

Balancing decarbonization

Against the backdrop of developments in the Middle East and the importance of energy security being re-evaluated, MOL does not see a turnaround in its pursuit of decarbonization businesses, Tamura said.

"This is a matter of time horizon. In the near term, with growing awareness of energy security, to put it somewhat extremely, there is a need to secure the supply of oil and LNG firmly. Also, based on recent events, there is a sense that procurement must be strategically diversified to some extent," Tamura said.

"Even if it is more expensive or farther away, there is a sense that procurement portfolios may need to shift somewhat and include additional procurement sources."

Such efforts might appear not to extend beyond that to decarbonization, he said.

"However, over a longer time horizon, I do not think the fundamental concept of decarbonization has changed, and we must continue working on it," Tamura said.

"In that sense, there is a difficult aspect: we may need to pursue what appear to be conflicting objectives in parallel until around the first half of the 2030s," he said, adding that a striking balance will be needed.

"In the world of shipping, the next main fuel for decarbonization has not necessarily been determined yet," Tamura said.

"Therefore, while keeping a broad eye on commodities such as LNG, which is regarded as a transition fuel, as well as ammonia, methanol, and biofuels, we will prepare for the coming turning point."