Agenda

MODULE 1

LNG SHIPPING & CHARTERING

WHY IS CHARTERING AN LNG CARRIER DIFFERENT TO CHARTERING AN OIL TANKER?

• Introduction to carriage of LNG, boil-off and heel
• The principal differences between a short-term charter for an oil tanker vs an LNG carrier
• The absence of voyage chartering in the LNG market

 WHAT DIFFERENCE DOES THE TYPE OF ENGINES MAKE (STEAMSHIPS, DFDE/TFDE, DIESEL, MEGI AND XDF)?

• Efficiency
  • Comparative consumptions
  • Type and mix of fuels that can be consumed
  • Impact of IMO 2020 / scrubbers
  • Use of boil-off, natural and forced
  • Managing excess boil-off: steam-dumping, flaring in gas combustion unit (GCU) and venting
• Reliability
• What is pilot fuel?

WHAT DIFFERENCE DOES THE TYPE OF CONTAINMENT SYSTEM MAKE TO HOW YOU CAN USE THE SHIP?

• Costs wise:
  • Boil-off rates
  • GRT and its effect on port and canal dues
  • Speed and performance
  • Cool down period
• How do filling limits vary and why?
• Which systems have sloshing limits, what are they and how do they effect flexibility?
• How is the capacity of the LNG carrier warranted and where do we get caught out?
• Condition on delivery and redelivery:
  • Gas free, vapours or heel
  • Warm or cooled down

A DETAILED LOOK AT BOIL-OFF IN TIME CHARTERS

• Why and how to warrant the boil-off characteristics of an LNG carrier:
  • The criteria and limits of the cargo containment system designer’s and builder’s warranties vs the charterparty warranties
  • Should there be laden or laden and ballast warranties, and who benefits from either?
  • Reliquefaction plant, how to warrant the performance
• Why speed and performance provisions are different to oil tankers
• The standard approach to calculating fuel consumption (with regards boil-off)
  • Why it is not suitable for chartering modern LNG carriers
  • What alternatives can or are adopted
• The period(s) during which boil-off is warranted

BILLS OF LADING:

• Why are these still rare in the LNG trade and why we should not follow tradition
• What should a bill of lading for LNG include:
  • How do we deal with the inevitable shortage (due to boil-off) on delivery?
  • Argentine and Indian customs issues and switch bills of lading

THE SPECIFICATION OF LNG CARGO AND QUALITY/ QUANTITY ISSUES

• Typical specifications by region
• Contamination risk
  • The use of strainers and the Hilli and LNG Gemini
• Quality issues
  • How does a cargo loaded compliant become too lean or too rich on discharge?
  • Wobbe index and correction
  • City gas
  • Methane Number
• Quantity issues
  • Boil-off on passage
  • Retention of Heel

HOW DO WE MANAGE THE CARGO ON PASSAGE?

• Conditioning of cargo
• Segregation or consolidation of heel
• Roll-over of cargo

MODULE 2

HOW DO WE MANAGE THE TRANSFER OF AN LNG CARGO?

• Loading and discharge performance warranties and their criteria:
  • Cool-down and ramp down
  • Liquid arms
  • Vapour return arm, managing displacement has and heat in-leak
  • Back pressure
• Retention of Heel provisions
  • Typical provisions
  • Early departure from discharge port
  • Early termination
• Ship to ship transfer provisions
  • Historic reasons for limited rights
  • Typical provisions

HOW DO WE MEASURE CARGO?

• The relationship between calorific value (for trading) and volumetric measurement of cargo
• Typical components and variations in their proportions during carriage
• Cargo measurement devices
• The importance of the Custody Transfer Management System (CTMS)

WHAT IS A FUEL OIL EQUIVALENT FACTOR AND WHAT DO WE NEED TO BE WARY OF:

• Appropriateness of fixed ratios for a single fuel oil or multiple fuel oils
• Assessing by comparison to methane or the cargo carried, and which is more appropriate
• Making comparison between Lower Heating Values and Higher Heating Values
• Recognition of nitrogen content (or not)

WHAT ARE INTERNATIONAL STANDARDS AND WHY ARE THEY IMPORTANT?

• The role of SIGTTO and the ambit of its reach

CHARTERING A NEW BUILDING, WHAT MIGHT BE DIFFERENT TO DOING SO FOR AN OIL TANKER?

• Warranties and review clauses and rights to liquidated damages
• Sea margins
• Why gas only and fuel only warranties do not necessarily equate when applying FOE

MODULE 3

WHAT WE MEAN BY ‘LONG-TERM’ IN THE LNG BUSINESS AND WHAT DIFFERENCE IT MAKES TO CHARTERPARTY TERMS

• Step-in rights and supplemental construction agreement with shipbuilder
• Rights to modify at any time
• Variable OPEX element to hire rate:
  • Index linked
  • Hardship review
  • Costs passed through
• Additional Costs element to hire rate
• Rights to convert to bareboat or purchase
• Enhanced termination rights

WHAT STANDARD FORMS HAVE BEEN PROPOSED FOR VOYAGE CHARTERING LNG CARRIERS?

• GIIGNL’ form
• BIMCO’s form
• How each attempts to deal with the issue of boil-off between gaugings
• Alternative means of addressing boil-off in voyage chartering

TRADING LIMITS

• Vetting approval
• Compatibility – list of terminals, modifications
• Piracy

WARRANTIES FOR LNG CARRIERS

• Form B (instead of Q88) and how it interacts with the time charter terms

HOW LIABILITY REGIMES DIFFER BETWEEN LNG AND OIL TRADES

• Conditions of Use
  • The variety of liability regimes
  • The International Group of P&I Clubs and the
  • Pooling Limits
  • The premium for market cover
• HNS Convention rather than CLC Convention, and limits of applicability

LNG TRADING SESSION LNG MSPAS

• A ‘typical’ LNG MSPA structure
• How are trades agreed and papered in practice?
• Common problems negotiating LNG MSPAs, and practical ‘workarounds’

MODULE 4

DELIVERY OBLIGATIONS:

• In a ‘typical’ LNG MSPA, when must the LNG ship arrive, when must loading / unloading be completed, and what are the typical consequences for a delivery failure?
• What are the subtle differences to look out for when reviewing delivery obligations
  • How long (if at all) do the parties have to try and reschedule?
  • Are damages calculated on quantity not taken/ delivered or full cargo lot? Are ‘indirect’ damages included in the calculation?
  • In a failure to take, who takes the credit risk on seller’s sub-buyer?
• Why is there a difference between the point at which failure to take/ failure to deliver liability kicks in, and the time at which demurrage starts to accrue?

 QUALITY OBLIGATIONS:

• In a ‘typical’ LNG MSPA, what are the consequences if an ‘off-spec’ issue is identified?
• What are the subtle differences to look out for when reviewing delivery obligations (e.g. are damages calculated on the off-spec quantity or full cargo lot?
  • Are ‘indirect’ damages included in the calculation?
  • Is there a different regime for treatable and untreatable quantities?
• Does the MSPA allow cargo operations to be suspended if an issue is discovered before loading / unloading has been completed?
  • Can the Buyer make a ‘double-recovery’ under the off-spec and failure to deliver regimes?
• What does an obligation to use ‘reasonable endeavours’ to accept LNG mean in reality
  • Can you reject off-spec LNG if you are liable to pay your sub-buyer materially more than you can recover from your supplier)?
  • Are costs estimates helpful or not?

 TITLE

• Passing title in international waters; why are these provisions so common?
• What are the key components of international title transfer?
• Common issues in title transfer clauses
  • Lack of clarity about where title passes
  • How much LNG is being transferred
  • When should title pass back to the seller
  • Treatment of natural gas vapour
  • Part cargo lots
  • Right to use LNG as fuel

 FORCE MAJEURE

• The case for and against fixing the Loading Port/Unloading Port in the Confirmation
• What is (or what should) be included in the Seller’s
• Facilities and the Buyer’s Facilities (and what does this mean for FM)?
• Who are you responsible for and, therefore, what is in your control?
• Different approaches to FM termination (who, what, when?)

 DEMURRAGE AND BOIL-OFF

• What are the usual exceptions to laytime and demurrage?
• Liability for demurrage on other ships at the loading / unloading port;
  • Is this needed and what to look out for
• Boil-off compensation
  • The difference between deemed boil_off and actual boil-off

US EXPORT CONTROLS

• Why do LNG MSPAs sometimes include special provisions for US origin LNG
• Things to think about for Buyer and Seller
• Re-loads

MEASUREMENT AND TESTING

• Which rules are being applied?
• How boil-off and displacement gas are addressed in MSPAs
• Avoiding commitments which cannot be complied with; some common issues to consider
• Expert determination
• Pros and cons
• Rights of appeal
• Practical considerations