LNG bunker contracts face growing complexity, warns legal expert

Floyd Zadkovich partner Damon Thompson highlighted the emergence of a three-tiered contractual framework covering bunkering vessel operations, supply terms and receiving vessel arrangements, creating potential risks for operators.

"The contractual landscape has become significantly more sophisticated compared with traditional marine bunkers," Mr Thompson said, noting standard charter party forms often fail to adequately address modern LNG bunkering operations.

Of particular concern is the growing gap between traditional shipping documents and the specialised requirements of LNG bunkering operations, including vessel compatibility, performance standards and off-hire provisions.

Mr Thompson warned standard time charter forms, typically designed for point-to-point LNG cargo delivery, are increasingly unsuitable for modern bunkering operations involving ship-to-ship transfers and storage.

Long-term LNG bunker supply contracts are evolving to mirror sophisticated LNG trading agreements, incorporating annual delivery programmes and volume flexibility. However, this creates potential complications for container and cruise ships newly entering the LNG-fuelled market.

A separate challenge emerging for conventional LNG carriers is the deterioration of traditional marine bunkers due to increased reliance on boil-off gas as fuel, creating uncertainty over maintenance responsibilities and liability for off-spec fuel.

"Charter parties are typically silent on bunker maintenance obligations when vessels operate primarily on boil-off gas," Mr Thompson noted, highlighting a growing area of potential dispute.

The presentation underscored the need for careful contract review and potential standardisation as the LNG bunkering sector continues to expand beyond traditional shipping patterns.​​​​​​​​​​​​​​​​