LNG industry representatives have discussed the development of a standard voyage charter party for the LNG trade.
LNG voyage charter
In this small but highly specialised sector of the industry, the first signs of a growing spot market are appearing. LNG has traditionally been shipped under long-term time charter arrangements lasting between 15 and 20 years, however recent changes in market conditions have seen an increased demand for cargoes to be shipped on short-term charter basis. This in turn has opened the door to the prospect of LNG cargoes being carried on a voyage charter basis.
Asia accounts for more than 70% of global demand for LNG, with Japan and South Korea importing three-quarters of that amount. While demand for LNG in Asia continues to rise, the level of demand in Europe is in decline. The result is that these specialised ships operate in a market with very limited backhaul opportunities. This is something that owners will have to reflect in their freight rates when considering offering business on a voyage charter basis.
BIMCO, together with GIIGNL (International Group of LNG Importers), has put together a group of LNG experts representing owners, charterers, traders, brokers and P&I Clubs. This group has started to consider the complexities of applying voyage charter party principles to this unique trade, where natural boil-off from the cargo is used to fuel the ship’s propulsion system, and where idling in port while waiting for a berth is not a viable option.
At present, the majority of LNG cargoes are delivered ex-ship, so the receiver only takes over and pays for whatever cargo is pumped off the ship. This largely avoids complex arguments over any cargo discrepancies due to boil off and retention. However, with potential changes in market practices and the possibility of cargoes being traded en route, the proposed voyage charter will have to accept a degree of flexibility to address a variety of possible carriage terms and conditions.
Although drafting work is at an early stage, it is hoped that the group can produce a first draft for the Documentary Committee to review at their meeting in Dubai at the end of April. Project completion is estimated to be towards the end of 2014/in early 2015.
Adapted from press release by Katie Woodward
Read the article online at: https://www.lngindustry.com/lng-shipping/10032014/experts_consider_voyage_charter_for_lng_trade_261/