BIMCO: Gas Experts Ponder Proposed Voyage Charter for LNG Trade

Bimco: Gas Experts Ponder Proposed Voyage Charter for LNG Trade

Representatives of leading players in the LNG market gathered at the offices of Stephenson Harwood in London on 4 March to discuss the development of a standard voyage charter party for the LNG trade.

In this small but highly specialised sector of the industry the first signs of a nascent spot market are appearing. LNG has traditionally been shipped under long term time charter arrangements lasting 15-20 years, but recent changes in market conditions have seen a greater demand for cargoes to be shipped on trip or short term charter basis (less than 5 years). This in turn has opened the door to the prospect of LNG cargoes being carried on a voyage charter basis.

Asia accounts for over 70% of global demand for LNG with Japan and South Korea alone importing three-quarters of that amount. While demand for LNG in Asia continues to rise, the level of demand in Europe is in decline. The result is that these specialised ships operate in a market with only very limited backhaul opportunities – something that owners will have to reflect in their freight rates when contemplating offering business on a voyage charter basis.

BIMCO, working together with the Paris-based GIIGNL (the International Group of LNG Importers), has put together a group of LNG experts representing owners, charterers, traders, brokers and P&I Clubs. This group has begun looking in to the complexities of applying voyage charter party principles to this unique trade where natural boil-off from the cargo is used to fuel the ship’s propulsion system and where idling in port awaiting a berth is simply not a viable proposition> Currently, the majority of LNG cargoes are delivered ex-ship, so the receiver is only taking over and paying for whatever cargo is pumped off the ship. This largely avoids complex arguments over any cargo discrepancies due to boil off and retention. However, with prospective changes in market practices and the possibility of cargoes being traded en route, the proposed voyage charter will have to embrace a degree of flexibility to address a variety of possible carriage terms and conditions.

Although drafting work is at a very preliminary stage, it is hoped that the group can produce a first draft for the Documentary Committee to review at their meeting in Dubai at the end of April. It is perhaps too early to tell at this stage when the project may be completed – but the drafting group is currently working towards end 2014/early 2015.


Source: BIMCO, March 07, 2014


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