The advent of the decarbonisation era is far from fiction and a variety of regulations, as well as economic considerations, call for the use of non-conventional fuel sources with less CO2 emissions.
In this context, the use of Liquified Natural Gas (LNG) as a ship’s fuel has increased over the past decade. Even though LNG is essentially a fossil fuel, meaning that it still emits CO2 into the atmosphere, it is effectively used as a transitional energy source to reduce emissions. It is projected that until sustainably produced renewable and low-carbon fuels become largely available, LNG will serve as a means of reducing CO2 emissions.
During the past five years, the number of merchant ships capable of using LNG as their fuel has gone up by an impressive 137%, indicating the industry's strong interest in the LNG bunker market. Currently, 1,031 vessels capable of using LNG for propulsion are being built, accounting for 15% of the global orderbook. Not to mention that existing ships may be converted to run on the fuel. What is more, Bio-LNG (liquefied biomethane), an advanced biofuel that has the same chemical composition as conventional LNG, can be used by the same engines, on its own or mixed with conventional LNG.
The newly-adopted FuelEU Maritime regulation aims at promoting the use of sustainably produced renewable and low-carbon fuels in maritime transport and will require from all vessel operators to develop a compliance strategy by which to meet the greenhouse gas (GHG) targets set by the regulation.
To assist industry players using LNG contractually, BIMCO has prepared the below clauses and annexes to provide clarity and legal certainty.
BIMCO LNG Fuel Delivery and Redelivery Clause for Time Charter Parties 2022
This clause gives parties the opportunity to agree on the condition of the LNG fuel tanks prior to delivery/redelivery as well as on issues relating to the payment of LNG fuel loaded either prior to delivery or during the term of the charter party. Naturally, it is intended to be used in tandem with the existing delivery and redelivery provisions for conventional fuel under the charter party.
BIMCO LNG Fuel Gas-freeing and Cool-down Clause for Time Charter Parties 2022
If the vessel is required to gas-free its LNG fuel tanks for any purpose, then this clause comes into play and provides a clear allocation of responsibilities regarding the specific requirements and expenses that are related to gas-freeing, gassing up and cooling down operations.
BIMCO LNG Fuel Operational Clause for Time Charter Parties 2022
This clause deals with issues related to the compatibility of the vessel with the LNG bunkering facilities for the purposes of receiving LNG as fuel, whether via ship-to-ship transfer or directly from terminals. If modifications need to be made or additional equipment is necessary, then this clause sets out in a clear manner the parties' respective rights and obligations.
BIMCO LNG Fuel Quality Clause for Time Charter Parties 2022
This clause looks at setting out the specifications that the LNG fuel must meet in order to be used as fuel as well as issues related to the issuance of a Bunker Delivery Note. In addition, the important issue of which party bears liability and to what extent regarding loss or damage caused by the supply of non-compliant LNG fuel is explicitly spelled out.
BIMCO Bunker Terms 2018 - Annex B (LNG Bunker Terms)
The BIMCO LNG Bunker Terms are not a stand-alone contract but rather an annex to the already existing BIMCO Bunker Terms 2018. These terms are intended to allocate rights and liabilities between buyers and sellers of LNG fuel. In particular, questions such as what specification the fuel should meet, how is the quantity of the fuel calculated, what method of sampling will be used, when do risk and title pass, and what happens when claims arise, are dealt with under the terms.
BIMCO will continue to support the industry in the transition towards low carbon fuels and is currently developing supply terms for other fuels as well. In particular, a Methanol Annex to BIMCO’s Bunker Terms 2018 is being developed at the moment, to be followed by an Ammonia Annex. Furthermore, BIMCO is in the process of establishing a subcommittee to develop a clause for biofuels.
