Global menu

Our global pages


Shipping: BIMCO launch new LNG voyage charterparty

  • United Kingdom
  • International trade
  • Litigation and dispute management
  • Shipping
  • Shipping, Ports and Logistics
  • Transport - Shipping


On 6 April 2016, BIMCO and the International Group of Liquified Natural Gas (“LNG”) Importers (“GIIGNL”) jointly issued a standard form voyage charterparty designed for use in the LNG trade. Its introduction is said to be specifically aimed spot market trades, due to the increasing frequency in recent years of shorter-term LNG supply contracts and FOB sales. This article considers the key provisions of the LNGVOY form, and whether or not its introduction is likely to result in a move away from the more traditional use of trip time charter terms in respect of LNG voyage charters, and in particular the use of “ShellLNGTime 1”.

To date, the overwhelming preference in the LNG market has been to charter ships on ShellLNGTime 1 form. The charterparty’s roots are in the Shelltime 4 tanker charterparty, which was originally published in 1984, and has since been updated. The benefit of modelling the charterparty so closely on this form is that its use in industry for so long means that it is a familiar form, its provisions have been considered and interpreted by the Courts and in arbitration, and it has been well “tried and tested” by owners and charterers alike. This is perhaps why, even as the spot market has grown, the preference has been for the charter of ships on trip time charter with the adaption of the ShellLNGTime 1 terms.

Some LNGVOY provisions are similar to those of ShellLNGTime 1, but in many respects the new charter form differs significantly. The benefit of the LNGVOY form is that its typical BIMCO layout will be familiar to parties and should be straightforward to use. In addition, having standard voyage charter terms introduces laytime and demurrage provisions and payment of freight, thus giving the parties more flexibility around the terms of their commercial agreement. However, with a new form of charterparty there is inevitably the introduction of new terms and mechanisms, with which the industry may not yet be familiar. Some of the more significant issues that arise in LNGVOY are considered in the remainder of this article.

Terminal Acceptability

Further to Clause 2 (a), Owners warrant that the vessel will be compatible with the terminals named in Part I. This is reflective of Owners’ warranty in ShellLNGTime 1. However LNGVOY takes Owners’ obligations further, and at clause 2(b)(v) provides that they shall ensure that the vessel will also be “acceptable” to the terminals named in the charterparty. This is distinct from the warranty that the vessel is technically compatible with the terminal. The requirement to ensure terminal acceptability is difficult for an owner, as this is a matter that is beyond their control. All terminals have different standards and requirements, and will take their own view regarding what is “acceptable”. This could change without notice depending on the terminal’s requirements at the time.

The obligation is qualified, so is limited to an obligation to exercise due diligence to ensure terminal acceptance, however it is nonetheless much more onerous than limiting the requirement to one of technical compatibility.

There is no charterparty regime dealing with the consequences of the terminal not accepting the vessel. This would potentially be dealt with by way of a claim from charterers for damages in respect of a breach of this clause which, given the high value of the cargo and the importance of complying with sales contract delivery windows, could expose Owners to a significant claim. If Owners accept this clause 2(b)(v) as drafted then they are potentially opening themselves up to a significant risk, in circumstances that are potentially somewhat beyond their control.

Allocation of Time and Cost of Tank Preparation

Clause 5 of LNGVOY, (Presentation and Conditioning of Cargo Tanks at the Loading Port), is drafted with the purpose of allocating the risk of time and expense of preparing the ship’s cargo tanks for loading. The clause recognises that the ship may arrive with her tanks in one of three conditions: cold and ready to load; warm and under natural gas vapours, or warm and inerted. 

The purpose of the clause is to allocate time lost for loading additional LNG and cooling down, if the ship arrives without her tanks cool and ready to load. The idea is that the parties will agree the condition in which the ship will arrive and will delete the irrelevant charterparty provisions accordingly. This is a sensible approach, which recognises the practical reality of LNG operations. However, when the clause is read alongside the LNGVOY charterparty as a whole, it becomes apparent that the provisions regarding allocation of time and risk, and in particular tender of notice of readiness (“NOR”), could lead to confusion and the potential for disputes as to the interpretation of the wording.

The main difficulty relates to the circumstance where the parties agree that the ship shall arrive at the loading port with cool tanks and ready to receive LNG, with sufficient heel on board to maintain that condition for a specified number of hours (i.e. that clause 5(a)(i) will apply). Clause 5(b) in essence gives a “get-out” for Owners, in that it provides a regime in circumstances where the vessel does not arrive in the agreed condition, with her tanks cooled down and ready to receive cargo. Ordinarily, in that situation, it would be assumed that this would amount to a breach of clause 5 (a)(i), however clause 5 (b) effectively permits the vessel to arrive in a state where she is not ready to load, despite owners agreeing that she would be. In those circumstances, clause 5 (b) allows Owners to tender NOR, despite the vessel not being in all respects ready and in a fit condition to receive cargo, and time will count with the exception time spent cooling the tanks. This is contrary to the established principles of tendering NOR and the running of laytime and demurrage, and is owner friendly.

The subsequent clauses of LNGVOY relating to tender of NOR (clause 9) and the running laytime and demurrage (clauses 16 and 17) are confusing when read together with clauses 5(a)(i) and 5(b). For example, Clause 9 provides that the Vessel shall tender written notice that the vessel is “ready at the Loading Port to load Cargo”. If she has arrived without cool tanks then she is not ready to load cargo. This contradicts clause 5 and could give Charterers an argument that NOR has been tendered invalidly.

Further, Clause 17 (a)(v) states that “if, after tendering Notice of Readiness, the Vessel is nevertheless found not to be in all respects ready to load… time shall not count as laytime or, if the Vessel is on demurrage, as time on demurrage, from when the Vessel was found not to be ready until the Vessel is in fact ready to load…” Again, if the vessel has arrived without cool tanks then she will not be ready to load. The wording of this clause could lend support to any argument by Charterers that it is clear that the parties did not intend that time should count until the Vessel had cool tanks and was in all respects ready to load. Clause 17 (b) does go on to cover the scenarios in clause 5, by expressly stating that time used for purging of tanks, gassing up and cooling down will be allocated in accordance with clause 5, however these operations are distinct from any time spent waiting between tender of NOR and the vessel’s arrival at berth.

The options and allocation of risk set out by clause 5 are a good idea given the practical implication of the condition of the tanks at the loadport, however there is room for disputes, or at least confusion, when considering clause 5 against the operation of the remainder of the charterparty, particularly in respect of any waiting time that is incurred between tendering NOR and the vessel’s tank cooling operations. Depending upon the agreed condition of the tanks on arrival at the loadport, the parties may wish to give careful consideration as to whether or not amendment to these clauses may be appropriate.

Delivery Window

Clause 18 of LNGVOY sets out a “Delivery Window” within which the ship must arrive at the Discharge Port. This places the risk on Owners, who must ensure that they have properly calculated the speed, boil off and the cost of any additional fuel that may be required in order to comply with their obligation to meet the delivery window, and have negotiated the charter terms accordingly. This seems fair given the importance of the delivery dates that will be in LNG sale contracts, and the potential losses that will be faced by charterers if they are missed.

Owners are permitted to force boil-off in order to achieve the speed, up to the Boil-Off Cap (the warranty relating to natural boil-off). If the Boil-Off Cap will be exceeded, then boil-off will be supplemented with fuel.  There is also the option for Charterers to agree to force boil-off. However, this option is problematic from an Owners’ perspective in respect of cargo management, in that whilst the clause permits forced boil-off in these circumstances, it remains silent on the effect of this on the Boil-Off Cap. In effect, Owners would be permitted to force boil-off but would still be held to the Boil-Off Cap, as opposed to the default position in the standard time charter forms, which allow the boil-off warranties to be waived if boil-off is forced.


Boil-off guarantees are important, as Owners need to ensure that they are protected from claims brought by charterers relating to excess boil-off, or mismanagement of the cargo. Clause 23 sets out a relatively straightforward regime for dealing with boil-off, which requires that the daily rate for natural boil-off must not exceed the rate stated in Annex A to the agreement. This is very simple when compared to the boil-off regime set out in ShellLNGTime 1, which has detailed performance criteria set out at Appendix C.

Whilst a much more simple regime, such as that set out in LNGVOY, may well have its place within a voyage charter, the difficulty with taking this approach is that most ships do not have an issue with thermal efficiency (i.e. the ability to prevent natural boil-off as a result of improper insulation of the cargo), which is usually a given. Instead, they have issues with engine efficiency and cargo management. The ShellLNGTime 1 form’s detailed performance criteria is calculated on the basis of boil-off, thermal efficiency, fuel efficiency and speed (speed being linked to the amount of fuel consumption) and accordingly should result in a much more accurate reflection of the ship’s overall performance and in ensuring that this is as efficient as possible.

In contrast, the limitation in having a cap on boil-off is that it could result in excess quantities of LNG being released as boil-off, over and above the amount that the ship actually needs in order to perform (albeit this could be within the Boil-Off cap). This would have a detrimental impact upon charterers, who could find themselves agreeing to sacrifice more cargo (and thus shouldering the attendant cost of that) than should in fact be required. The regime in ShellLNGTime 1 gives a much greater degree of control.

LNG Price

A further observation is that the calculation for payment of LNG is drafted on the basis of the LNG Fuel Price, which is included at Box 11 in Part I of LNGVOY. There may be confidentiality issues with this, as traditionally the sales contract price of LNG trades is protected and highly confidential. It is for this reason that price for calculating LNG in ShellLNGTime 1 tends to be based on fuel oil equivalent price, in order to protect market confidentiality. It will of course be open to the parties to agree a similar alternative pricing mechanism, should they have concerns over the commercial sensitivity of this information.


It remains to be seen whether or not LNGVOY will become adopted by the LNG voyage charter market in preference to the traditional preference for use of ShellLNGTime 1. The LNGVOY form has some difficulties, as outlined above, and in particular the limited boil-off provisions and onerous terms relating to terminal acceptability may be off-putting for Owners in particular.

The greatest challenge that will face LNGVOY is the industry preference for using ShellLNGVoy 1, which has over time been proven to work well. Given the industry’s familiarity with its terms, and its proven adaptability in respect of trip time charters for the spot market, it will be interesting to see if there is a shift towards using this new form.

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings