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COMMODITIES IN FOCUS

11

lost in cooling down the tanks would not count as

laytime or time on demurrage, unless cooling down is

required owing to a delay in loading (see 5(b)(iii)).

Any additional LNG required to cool down the tanks

would be paid for by owners (although supplied by

charterers), unless the delay had been caused by

charterers' breach or where clause 5(b)(iii) applies.

Under ShellLNGTime1, if cooling down is required

because some or all of the heel has boiled-off before

reaching the loading port, the default position would

be that the time spent cooling down would be for

charterers' account, unless time had been lost as a

result of an off-hire event under clause 22 or as a

result of owners' breach.

There is also a wider range of circumstances in which

charterers would be required to pay for the LNG used

in cooling down. For example, under clause 16(b)(ii)

of ShellLNGTime1, charterers would be required to

pay for the LNG if it was required by reason of a

strike or act of God, whereas under LNGVoy, the

default position would be that owners pay in these

circumstances, unless they had been caused by

something for which charterers were responsible.

Despite the precise consequences of the vessel not

being ready to load differing according to which form

is used, it may seem that such differences are due to

the nature of voyage charters compared to time

charters, whilst the underlying allocation of risk and

liability is the same.

Boil-off during the voyage

Under ShellLNGTime1, the general position is that

boil-off caused by a delay which was not caused by

owners' breach or an off-hire event would be for

charterers' account. So owners may be liable where

the delay did not result from their breach, such as

where time is lost due to an off-hire event (see

clause 22(g)).

Under LNGVoy, owners warrant that the daily natural

boil-off shall not exceed a certain rate, which is set

out in the charterparty at the time of fixing (see

clause 23(a)). Any boil-off up to the level of this cap

can be used as fuel for propulsion without cost to the

owners. But how would charterers be compensated

for additional boil-off if, for example, due to a delay

on the sea passage, the voyage took a day longer

than it should have taken? Would charterers not be

entitled to compensation for the boil-off which

occurred during that extra day, even though the daily

limit had not been exceeded?

This problem is addressed by the inclusion of a limit

for the total amount of boil-off that may occur during

the sea passage. This is set out in box 27 of the

LNGVoy form and is defined as the "Boil-off Cap".

This will be calculated in advance, and will depend

upon factors such as the length of the voyage, the

specification of the vessel, charterers' requirements

as to how quickly the vessel should proceed and

whether owners are entitled to "force boil-off" so as

to speed up on the voyage.

Where the Boil-off Cap is exceeded, LNGVoy takes a

strict approach in favour of charterers, as owners will

be liable for any excess boil-off above the Boil-off Cap

unless the delay is caused by charterers' breach or

one of the limited range of circumstances in clause

23(b). Owners cannot rely upon the clause

paramount or the general exceptions to escape

liability. Given the importance in the LNG trade of

maintaining a tight schedule, this arguably strikes the

right balance in allocating the risk between the

parties, and mirrors the allocation of liability found in

ShellLNGtime. In any event, owners can mitigate the

effect of this, when using LNGVoy, by ensuring that

they are conservative when determining the Boil-Off

Cap and that sufficient margin is built into their

calculations to account for the exigencies of the

typical voyage.

Adjusting to LNGVoy

Given the significant differences between the two

forms, some reluctance to start doing business on the

new form is understandable. However, as

demonstrated above, many terms, such as the safe

port provisions, are largely indistinguishable, and the

differences are largely a consequence of chartering

on voyage rather than time charterparty terms.

“Differences are largely a

consequence of chartering on

voyage rather than time

charterparty terms”

This article was originally published in our LNG

publication 'Well Heeled' in November 2016.

Owen Fry

Associate, London

T:

+44 20 7809 2262

E:

owen.fry@shlegal.com