Explanatory notes

LNG Bunker Terms (Annex B to the BIMCO Bunker Terms 2018)

Background

The intention and purpose of the LNG Bunker Terms (the “Annex”) is to cater for the nature of LNG bunkering operations whilst trying to keep the provisions in line with the existing BIMCO standard contract for the purchase and supply of marine fuels to ships i.e. the BIMCO Bunker Terms 2018.

Drafting team

The Annex is the result of a collaborative and consensual process between experts. BIMCO is grateful to the drafting team for their considerable time, effort and commitment in producing the Annex:

Robert Crees and Mark Tamsitt                         World Fuel Services

Marcus Dodds                                                      Capital Maritime

Meng Hsien                                                           Pavilion Gas

Naoya Takahashi                                                  NYK Line

Li Yan                                                                      COSCO Shipping

Steve Simms                                                          SEA LNG

Gerben Dijkstra                                                    Anthony Veder

BIMCO representatives:

Stinne Taiger Ivø

Carl Lindahl

Natalie Wong

Explanatory Notes

The following notes are intended to provide some background to the thinking behind the Annex. These notes explain the scope of the key provisions and clarify how the Annex is intended to operate. The following are (non-exhaustive) comments made in respect of key provisions in the Annex.  Please note that we have not provided commentary on every single sub-clause as some of these appear to be self-explanatory.  If you have any questions about the Annex, please contact us at contracts@bimco.org and we will be happy to assist.

Further, please note that this Annex cannot operate as a stand-alone contract and must be incorporated as an Annex to the BIMCO Bunker Terms 2018 (it is intended to replace Clauses 2, 3, 4, 6, 7, 9, 10 and 18 of the BIMCO Bunker Terms 2018).  The drafting team kept the “Marine Fuels” terminology but for the purposes of this Annex, please note that “Marine Fuels” is a reference to LNG.  The existing Election Sheet (Annex A) to the BIMCO Bunker Terms has also been updated accordingly.

Subclause 2(c)

This subclause refers to “the recommendations of the SGMF or such other transfer and emergency procedures as may be agreed in the Election Sheet”.  This is intended to give the parties a degree of flexibility so that if they believe the recommendations of SGMF are not appropriate, then they can easily agree to insert another set of transfer and emergency procedures by referring to them into the Election Sheet.  It is also expected that in the normal course of negotiations, the parties will generally discuss any compatibility issues to the extent that they need to be considered and agreed upon prior to signing the Annex. 

Where parties wish to undertake simultaneous LNG bunkering and cargo operations, they should assess whether the simultaneous operations contemplated are permitted and safe having regard to any applicable laws, regulations, Owner’s Safety Management System etc.

Subclause 3(a)

During the drafting process, the subcommittee observed that the nature of LNG as a fuel is quite different to traditional bunker oil (where a reading can be taken from a gauge).  With LNG, one must perform calculations to convert to energy units from volume and mass.   The parties therefore have an interest in knowing how the conversions/calculations will be performed.  This subclause refers to “the GIIGNL Custody Transfer Handbook, or such other quantity determination methodology as may be agreed in the Election Sheet”.  The GIIGNL Custody Transfer Handbook was chosen as a default as it is one of the well-known industry standards. The subclause is intended to give the parties a degree of flexibility so that if they prefer another quantity determination methodology as opposed to the GIIGNL Custody Transfer Handbook (e.g. IGF, SGMF etc.), they may insert  it in the Election Sheet.

Clause 4

This clause gives the parties two options to choose from in respect of sampling. If no choice is indicated in the Election Sheet, then the default is that subclause (a) shall apply meaning no samples of the Marine Fuels shall be taken.

Subclause 9(c)

It is intended that the exclusions and limitations of liability set out in Clause 15 of the BIMCO Bunker Terms 2018 shall apply to this entire Annex including any delay claims under this subclause.  This means that the cap on liability of USD 500,000 or the value of the Marine Fuels (whichever is higher) as stated in the BIMCO Bunker Terms 2018 applies. There is also a limitation on the class of loss permitted to be claimed i.e. not loss of profit or production, not indirect or consequential losses which are expressly excluded by Clause 15 of the BIMCO Bunker Terms 2018.

The subcommittee observed that the LNG bunker market is currently a less liquid market than the oil bunker market but did not consider it necessary to introduce a new and separate liability regime under this Annex.

Clause 10

This clause gives the parties two options to choose from in respect of passing of title to the Marine Fuels.  If no choice is indicated in the Election Sheet, then the default is that subclause (b) shall apply meaning that title will not pass at the same point in time that risk passes to the Buyers.  Title shall pass to the Buyers only upon payment to the Sellers of all sums due.

Clause 18

This clause has been amended to cater for the nature of LNG.  The definition of “leakage” in subclause 18(a) has been expanded to include “any leakage, escape, spillage, overflow, release or venting”. 

The subcommittee observed that venting may not be covered under oil pollution regulations but that it could indeed fall within the scope of air pollution regulations or within the realm of noxious gases restrictions.  The word “oil” in subclause 18(c) has been deleted but the rest of the subclause therefore remains.