LNG Boil-Off Risk Focus of London Meeting
- Business & Finance
The allocation of responsibilities in respect of heel and boil-off of cargo were among the key topics discussed during the third meeting of the sub-committee tasked with the development of a new standard voyage charter party for the transportation of LNG held on July 15th in London.
In time charters, the consequence of delay for an LNG vessel, using boil-off for propulsion, is that cargo will inevitably be lost, as it will be used as fuel.
If the cause of delay falls within the off-hire provisions for which the ship owner has accepted responsibility, the charterer will be compensated for the loss of time and reimbursement of additional boil-off, applying the usual time charter off-hire provisions.
In the event of delay caused by reasons not falling within the off-hire provisions, the charterer agrees to accept this risk, including additional fuel costs for the period of such delay.
However, in voyage charter terms, there is no similar provision entitling the charterer to compensation for additional boil-off during a period of delay for which the ship owner is responsible, and indeed no method of calculating such delay or such loss.
Therefore, the challenge in drafting an LNG voyage charter is how adequately to compensate the charterer for lost boil-off during a period of delay for which the ship owner is responsible.
Although LNG cargoes are not currently traded during the voyage in the same way as oil cargoes, the sub-committee is contemplating what would need to be put in place in a voyage charter and bill of lading to allow for such trading.
The sub-committee benefits from a broad input from industry representatives from Exmar, Mitsui O.S.K. Lines, Platou, Vitol, Shell and GIIGNL.
Work on this project will continue later on after the summer. It is expected that a first draft will be ready to present to the Documentary Committee at its meeting in November in Copenhagen.
Press Release; July 31, 2014; Image: GIIGNL