Interview with Junichiro Ikeda, president of Mitsui O.S.K. Lines
Q: What do you predict will happen in liquefied natural gas (LNG) markets and what is your firm’s investment strategy?
Ikeda: At present, long-term contracts are popular in the LNG transport business, but LNG spot trading on short-term contracts are projected to gain steam. Domestic utility firms are eager to secure and sell more LNG than what they need for power generation. LNG has been long thought to be difficult to handle, but it can be used in many products and will give rise to a range of business opportunities.
For fiscal 2020, we will keep our LNG-related investments at around 90 billion yen, the same as in the current fiscal year. We believe now is not the best time to cut back on our investments. But since many players are joining the LNG transport market, we can no longer anticipate that the more LNG we transport, the greater the profit we can reap.
Q: Besides the transport ship business, what investment plans do you have in mind?
Ikeda: We are shifting our investment priority to floating storage regasification unit (FSRU) and floating storage unit (FSU) projects. Plans are underway to ship LNG produced in Russia’s Yamal Peninsula to base stations in Kamchatka, in the Russian Far East, and Murmansk, which is in Russia’s northwest, for transshipment.
We have many investment opportunities in the LNG marine equipment field. Since there are so many, we won’t be able to have stakes in all of them due to our financing capabilities. In the latest year, we generated operating profits of around 5 to 6 billion yen in non-transport LNG businesses, but we hope to raise the amount to 10 billion yen within five years. I don’t rule out the possibility of clinching merger and acquisition (M&A) deals with foreign players in the FSRU business.
Q: LNG is drawing a great deal of attention as a ship fuel.
Ikeda: We’ve already stated in our management plan a commitment to LNG projects. As we have announced, we will build Japan’s first LNG-powered ferries and put two of them into service by the first half-year of 2023. Though nothing has been decided, we also believe that LNG can be of great use in our large container business, which we have merged with Nippon Yusen Kaisha [NYK Line] and Kawasaki Kisen Kaisha [“K” LINE].
More LNG needs to be supplied once the number of LNG-powered ships increases. In the future, we may need LNG bunker vessels (that can provide a large amount of LNG at once). Whether we can use LNG bunker ships to refuel LNG-powered vessels, which we are building, depends on when those vessels will be put into service. We do not have a concrete plan yet, but this will happen in the not-so-distant future.
Q: How does the use of LNG as a fuel relate to international environmental regulations?
Ikeda: Cutting greenhouse gas emissions is imperative. In the mid-term, we will promote the use of LNG, but LNG alone is not enough to meet the target of halving GHG emissions by 2050 compared with the 2008 level. We must think about the option of switching to a fuel-efficient engine at lower speed and harnessing wind power.
Shipping firms are coming under scrutiny as [tougher] international regulations are being introduced. European firms are constantly watching shipping firms’ efforts to reduce GHGs in overall value chains. Companies that fail to take steps [to reduce GHGs] are weeded out and are not selected as freighters either. This is already happening. (Abridged)
Interviewed by Keigo Yoshida