COMMODITIES IN FOCUS
LNGVoy and ShellLNGtime compared
In this article,
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”
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:firstname.lastname@example.org.
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
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