LNG Fuel Delivery Clause for Time Charter Parties
Overview
In 2021 BIMCO initiated a project to develop a suite of LNG fuel clauses for time charter parties. The number of LNG fuelled ships in operation is growing steadily and the suite reflects the need to have bespoke clauses in time charters for these ships.
The LNG clauses cover matters related to the LNG quality, delivery/redelivery, gas-freeing and cooling down and an operational clause. For dual-fuel ships the clauses are intended to be used together with the existing BIMCO bunker clauses for conventional fuel oils.
The current suite of LNG fuel clauses for use in time charter parties also consists of:
LNG Bunker Operational Clause for Time Charter Parties
LNG Fuel Gas freeing and Cool down Clause
LNG Fuel Quality ClauseLNG Fuel Delivery Clause for Time Charter Parties
BACKGROUND
BIMCO LNG Fuel Delivery and Redelivery Clause for Time Charter Parties is a bespoke clause for ships using LNG. It is intended to be used together with the existing delivery and redelivery provision for conventional fuel under the charter party. It is important to note that elections must be made because the clause does not provide for default positions.
BIMCO LNG Fuel Delivery and Redelivery Clause for Time Charter Parties
(a) The Vessel shall be delivered by Owners to Charterers with its LNG fuel tank(s):*
(i) containing a volume of LNG fuel of about ____ cubic metres; or
(ii) cooled down ready to load LNG fuel; or
(iii) warm and inerted, ready for gassing-up; or
(iv) warm and under hydrocarbon gas vapour ready for cooling down prior to loading LNG fuel; or
(v) subject to atmospheric conditions.
*Subclauses (i) - (v) are alternatives. Indicate which alternative shall apply;
(b) The Vessel shall be redelivered by Charterers to Owners with its LNG fuel tanks
(i) containing a volume of LNG fuel of about ____ cubic metres; or
(ii) under hydrocarbon gas vapour.
*Subclauses (i) and (ii) are alternatives. Indicate which alternative shall apply; ____________.
(c) The Charterers shall accept and pay for all LNG fuel onboard at the time of delivery.
(d) The Owners shall accept and pay for all LNG fuel onboard at the time of redelivery (whether it occurs at the end of the term of the Charter or on the earlier termination of the Charter).
(e) The price payable for any LNG fuel onboard at delivery shall be the invoiced price paid by Owners (on a first-in first-out basis if applicable) per MMBtu basis the quality cited on the relevant bunker delivery note(s).
(f) The price payable for any LNG fuel onboard at redelivery and (subject to any other provisions of the Charter to the contrary) at any other time during the term of the Charter shall be the last price paid by the Charterers (on a first-in first-out basis if applicable) per MMBtu basis the quality cited on the relevant bunker delivery note(s). If the Vessel is redelivered with a volume of LNG fuel in excess of that agreed at (b) above, the price payable for such excess volume shall be the lowest of the price(s) paid by Charterers for the excess volume.
(g) For the purposes of (e) and (f) above, where quality is expressed in Joules (by mass or volume) the cited lower calorific (heating) value shall be applicable and 1 British thermal unit (Btu) shall be deemed equal to 1055.06 Joules.
Drafting team
The BIMCO suite of LNG Fuel clauses has been developed with the invaluable assistance of owners, charterers, P&I clubs and legal experts. BIMCO is extremely grateful to the following individuals for working with us and their dedication to the project:
Ms Camilla Nyhus-Møller, Höegh LNG (Chairperson)
Gerben Dijkstra, Anthony Veder
Captain Iain Scally, NYK
Mr Chris Meyer, BHP
Ms Sarah Jane Thompson, BHP
Ms Charlotte Vandeville, Affinity
Mr Jonathan Gaylor, Affinity
Mr Michael Bird, Britannia
Mr Marcus Dodds, Watson Farley & Williams
BIMCO secretariat support was provided by Grant Hunter, Head of Contracts & Clauses and Nina Stuhrmann, Manager, Contracts & Clauses.
Explanatory notes
Guidance Notes
The following guidance notes are intended to provide some background to the thinking behind the BIMCO LNG Fuel Quality Clause for Time Charter Parties. These notes explain the scope of each provision and clarify how the clause is intended to operate and the way it allocates risk between the parties. If you have any questions about the clause that we have not answered in these notes, please contact us at contracts@bimco.org and we will be happy to assist.
Subclause (a) – This subclause offers options for the condition of the LNG fuel tanks on delivery of the ship. The parties should decide at the time of negotiating the contract which options are to apply.
Subclause (b) This clause describes the redelivery options which have to be chosen at the time of negotiations.
Subclauses (c) and (d) are self-explanatory.
Subclause (e) – This provision determines how the price of the LNG fuel at the time of delivery should be assessed – which is the invoiced price paid by the owners. Other than in subclause (a) which refers to cubic meters, this clause refers to MMBtu to reflect the bunker delivery note.
Subclause (f) – This clause determines the price payable for the fuel on redelivery. It further deals with the situation when the ship is redelivered with more LNG fuel as agreed under subclause (b). In such a situation, the owners are to pay the lowest of the prices paid by the charterers. The reason for this is that the owners may have no interest in the excess LNG fuel. It could cause problems for owners when the ship is scheduled for dry-docking and needs empty tanks. This is a highly commercial point which can be amended by individual agreement of the parties.
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