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COMMODITIES IN FOCUS

10

LNGVoy and ShellLNGtime compared

In this article,

Owen Fry

considers the allocation of risks between shipowners and charterers as found in the new

LNGVOY form, compared to ShellLNGTime1. Stephenson Harwood partners, Stuart Beadnall and Ingolf Kaiser were

involved in BIMCO's documentary committee that advised on the terms for the new LNG charter form (LNGVOY),

endorsed by GIIGNL and published in April 2016.

In 2015, 29% of the world's LNG was traded under agreements with terms of less than two

years. Many of these cargoes are carried on spot terms, often as a trip-time charter based

upon a heavily amended ShellLNGTime form. A new alternative is provided by the publication

of LNGVoy, a standard form charterparty designed specifically for this purpose.

There will inevitably be some nervousness in

switching to a new, unfamiliar form, even one

tailored to the needs of this growing market. This

article considers some of the main terms of LNGVoy

and contrasts them with ShellLNGTime1.

The purpose is to demonstrate that, other than the

conventional differences between contracting on time

charter or voyage charter terms, the allocation of

risks between shipowner and charterers in these two

forms of LNG charter, when applied to spot voyages,

is essentially the same.

“The allocation of risks between

shipowner and charterers in these

two forms of LNG charter is

essentially the same”

Comparison Table

We set out below terms of the two charters of

particular importance. The comparison is made

against ShellLNGTime 2005. A second ShellLNGTime

is now being published but it does not materially alter

the allocation of risk. A comprehensive table

comparing all LNGVoy and ShellLNGTime terms is

available on request - contact:

joanne.champkins@shlegal.com.

Safe port warranty

Clause 4(c) of the ShellLNGTime1 form provides that

"Charterers shall use due diligence to ensure that the

Vessel is only employed between and at safe places".

In voyage charters, generally, charterers do not give

a safe port warranty, as the loading and discharge

ports are identified in advance, and so owners can

check for themselves whether the port is safe.

However, under LNGVoy, the definition of Loading

Port and Discharging Port requires that they be a

"safe place", and clause 7(b) provides that

"Charterers warrant that they have exercised due

diligence to ensure that the Loading and Discharging

Ports are safe." Therefore, unless amended,

charterers are under similar obligations as those

imposed under ShellLNGTime1.

Voyage charterers may be surprised that LNG owners

should take only a passive role in vetting the safety

of terminals. However, owners are required under

both forms to ensure the compatibility of the vessel

to load at the nominated terminals. Also the key

point in the drafting of LNGVoy on this issue was to

mirror the allocation of risk found in a trip-time

charter, even though this departs from normal

voyage chartering practice.

Arrival at the loading port and condition of

the vessel

For longer term charterparties, owners generally

have more information about the vessel's schedule

and are therefore in a better position to plan for

periods between cargoes, to ensure that the vessel's

tanks are kept cool and ready to load without delay.

Vessels employed in the spot market are often unable

to do this. LNGVoy therefore provides flexibility as to

how the vessel would be presented. Clause 5 offers

three options for the condition of the vessel upon

arrival at the loading port; (i) with tanks cooled down

and ready to load, (ii) with tanks warm, either under

natural gas vapours, or (iii) inerted.

If the vessel is required to arrive with tanks cooled

and ready to load and there is a delay in reaching the

loading port, charterers' position would differ

depending upon whether the vessel had been

chartered under LNGVoy or ShellLNGTime1.

Under clause 5(b) of LNGVoy, owners would be

entitled to tender Notice of Readiness, but any time