The world of LNG shipping and decarbonization is a complex and challenging landscape, especially for Japan's Mitsui O.S.K. Lines (MOL). In a recent interview, MOL's President and CEO, Takeshi Hashimoto, shed light on the geopolitical hurdles his company faces. The future of energy and trade is at stake, and MOL finds itself caught in the crossfire.
Let's delve into the controversies and the potential impact on global trade.
Geopolitical Sanctions and LNG Shipping
MOL's LNG tankers have become a focal point of geopolitical tensions. In May, the EU sanctioned three of MOL's vessels for supporting Russia's energy trade. However, the situation took an interesting turn in July when the ships were delisted after Brussels received assurances that they would not transport cargo from the Yamal and Arctic LNG 2 projects. Here's where it gets controversial: Western authorities have not sanctioned Yamal, commissioned before Russia's invasion of Ukraine, due to supply disruption concerns. In contrast, Arctic LNG 2, a new project, faces trade restrictions from the EU despite being sanctioned by the US and UK.
Hashimoto expressed his frustration, stating, "Our vessels were suddenly designated as subject to sanctions, even though they were carrying Yamal cargo, which is not sanctioned by the EU. Other shipping companies transporting the same Yamal cargo have not been sanctioned. This is what we thought was unfair. Imposing sanctions without respecting established rules may create obstacles for international shipping and global trade."
He further added, "The EU may believe transporting Yamal cargo to Europe is acceptable due to demand, but Asia also has a demand for LNG from Russia."
MOL operates over 100 LNG tankers, with seven dedicated to transporting Yamal LNG, including three icebreaking ships designed for the Arctic region. They also have one tanker shipping from Russia's Sakhalin 2 project in the Pacific.
Hashimoto emphasized that further shipping deals with Russian LNG projects are "out of the question" until the Russia-Ukraine war concludes and sanction rules become clearer.
Russia has exported 26.1 million metric tons of LNG this year, with significant volumes going to the EU, China, Japan, and other Asian countries. The EU plans to halt Russian LNG imports from early 2027, potentially leaving Japan as the sole G7 member buying Russian energy in the future.
If Japan aligns with the West and stops purchasing Russian LNG, MOL could explore shipping opportunities to China without violating sanctions, according to Hashimoto. However, he added, "It's more and more difficult... We definitely do not want to be a part of the shadow fleet, established to transport sanctioned energy."
Decarbonization and Net-Zero Emissions
The challenges extend beyond geopolitics. After member states of the International Maritime Organisation voted to delay the adoption of the Net-Zero Framework, MOL faces difficulties in its transition to net-zero emissions by 2050. The US has threatened supporters of decarbonization regulations with sanctions and port fees, preventing the scheduled implementation from 2028.
Hashimoto commented, "As of today, commercially, economically, technically, and politically, it seems not so easy to increase the number of zero-emission vessels. International regulatory assistance will definitely be necessary for us to increase the number."
MOL, with its fleet of over 900 tankers, container ships, and other vessels, consumes 3-3.5 million mt of oil equivalent marine fuels. The company's bunker mix is primarily conventional, oil-based fuels. In its fiscal year 2024-25, LNG use amounted to 73,000 mt, and biofuels to 20,000 mt.
Aside from its LNG tankers, MOL is building a fleet of at least 42 ships capable of running on LNG, with 15 already in service. They are also constructing seven methanol-capable ships, five of which are operational. By 2030, MOL aims to have 90 ships capable of running on LNG or methanol, reducing Scope 1 and 2 GHG by 23% from 2019 levels. Group-wide, MOL will have 130-150 ships powered by alternative fuels in a few years, including LNG carriers. However, this still represents a minority percentage of their total fleet.
Looking ahead, the company targets a 45% reduction in Scope 1, 2, and 3 GHG intensity from 2019 by 2035. They plan to have 130 net-zero-emission ships, likely running on ammonia, by the same year and have contracted for five. Hashimoto said, "We decided to construct a series of zero-emission vessels using ammonia, and we are determined to complete the project. After 2030, our plan is to dramatically increase their number."
He added, "If it will not economically make sense, we can do it for 10 vessels. But we cannot do it for 100."
Sustainable marine fuels are significantly more expensive than conventional fuels, and shipping companies struggle to pass on these costs. Industry participants believe regulations like the IMO's NZF, which place a cost on maritime GHG globally, are essential to promote their uptake.
According to the Platts bunker cost calculator, the average delivered bunker price for 0.5% sulfur fuel oil in October was $11.17/Gigajoule in Singapore, compared to $13.77/Gj for LNG and $46/66.Gj for 100% sustainable methanol. Renewable ammonia cargo prices for delivery to East Asia were $44.07/Gj.
Hashimoto stated, "Quite many customers are willing to accept LNG bunker. The next step is to maximize the utilization of ammonia and methanol, but as of today, we cannot rely solely on our clients' cooperation."
He concluded, "We definitely need a global framework or tax regulation."
The future of LNG shipping and decarbonization is complex, and MOL's challenges highlight the intricate relationship between energy, trade, and geopolitics. What are your thoughts on these issues? Feel free to share your opinions and engage in the discussion below!
