BIMCO and the International Group of Liquefied Natural Gas Importers (GIIGNL) have today (Wednesday) jointly issued the first definitive voyage charter party – LNGVOY – designed for the expanding LNG spot market.
During the development process, BIMCO and GIIGNL consulted with the industry globally to gather a clear picture of how an LNG voyage charter party should work in practice. Careful account was taken of the interests of both owners and charterers to create a balanced and clearly worded agreement.
One of the main goals of LNGVOY is to provide a charter party whereby the charterer can assess, with a greater degree of accuracy, the cost of transporting LNG from A to B and/or C.
Four main issues inherent in LNG shipping have been addressed for voyage charters:
A “boil-off” cap whereby both owner and charterer agree on a negotiated maximum quantity of boil-off over the voyage. In case the cap is exceeded, a compensation structure, agreed during negotiations, is applied, subject to a few limited exceptions;
LNG Heel at the commencement and completion of the voyage – it was considered that legal title (ie ownership) to the heel should remain with the owner throughout the charter and that there would be a balancing payment between the quantities remaining on board, again, at the commencement and completion of the voyage. This arrangement helps avoid potential issues with administration and bills of lading etc.
Presentation – condition of the cargo tanks on arrival at the loading port is now covered. The costs involved can be handled adequately under a voyage charter as opposed to a time charter trip covering the three potential conditions: cooled down ready to load; warm under natural gas vapours; warm and inerted; Arrival at discharge port – given the inherent nature of the cargo, scheduling of arrival times at discharge carries great importance and delays can be very costly. As a result, most voyages have a specific delivery window and risks of delay and ensuing boil-off have been allocated.
Chairman of the LNGVOY drafting group, Rodney Hyne-Jones, formerly of Exmar, said: “LNGVOY is equitable to both owners and charterers and provides a solid contractual platform for the transportation of LNG in an ever-growing spot market. It enables all parties to handle the costs involved in a more precise way.”
According to Vincent Demoury, General Delegate, International Group of Liquefied Natural Gas Importers: “GIIGNL hopes that a pro forma voyage charter dedicated to carriage of LNG will assist the LNG industry in maximising opportunities for the sale of spot cargoes and the carriage of LNG on simple, predictable terms.”
Grant Hunter, BIMCO Chief Officer Legal and Contractual Affairs added: “BIMCO is delighted to have had the opportunity to work together with GIIGNL on this project to develop a viable standard voyage charter party for the LNG trade.
“LNGVOY is the product of several years’ worth of thorough discussion. It’s something completely new for the LNG sector which has, until now, relied primarily on trip time charters for spot market opportunities.
“This new charter party gives owners and charterers another alternative when deciding on the most appropriate terms for their LNG transportation needs.”