LNG Chartering and Charter Party Analysi

Cardiff University - Cardiff Business School
MSc in Marine Policy 2014-2015

BST302 - Dissertation
Supervisor: Dr. Kyriaki Mitroussi
Student: Ioannis Mavrokefalos 1473023
Thesis:
“LNG Chartering Policy and Charter - Party Analysis”.
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DECLARATION/STATEMENTS PAGE
DECLARATION
This work has not previously been accepted in substance for any degree and is not being
currently submitted in candidature for any degree.
Signed: Ioannis Mavrokefalos
Date…………………………
30/08/2015
STATEMENT 1
This work is the result of my own investigations, except where otherwise stated. Where
correction services have been used, the extent and nature of the correction is clearly
marked in a footnote(s).
Other sources are acknowledged by footnotes giving explicit references. A bibliography

is appended.
30/08/2015
Date:…………………………
STATEMENT 2
I hereby give consent for my work, if accepted, to be available for photocopying and for
inter-library loan, and for the title and summary to be made available to outside
organizations.
1
30/08/2015
Date………………………..…
Please tick to confirm that the required Ethics Forms have been completed,
stamped and are included in your submission.
2
ABSTRACT
Most LNG carriers function with time charters and the LNG industry complies
with very stringent transportation protocols. The market is predominated by long-term
contracts. "ShellLNGTime1" form fits well into to this market environment.
Nevertheless, parties tend to amend and use it in voyage charters, since their frequency
has been increasing rapidly in the last decade. To cover this need, GIIGNL, the
International Group of LNG Importers, launched a new LNG voyage charter form in
May 2012, the “VCP,” in order to facilitate spot chartering and ensure quicker
transactions.
This dissertation argues that there is a necessity for the transition from the time to
the spot LNG chartering market. It investigates this possibility by examining the market
dynamics with reference to the LNG market and the legal background. Particularly, it
assesses the effectiveness of the tools, namely, the existing Charter-Party Forms, by
means of which the aforementioned transition will be implemented. It also considers the
necessity for the creation of a new Charter-Party Form that would cater for the omissions
of the already existing ones.
This hypothesis is researched and proved using content analysis derived from
secondary data sources such as pre-existing data sets, annual market energy reports,
company reports, web-resources, graphs and statistics in order to critically compare and
analyze the most significant LNG Charter Forms.
The study concludes that the spot market will boost, due to the forthcoming
augmentation of the LNG volume produced. On the other hand, “ShellLNGTime1” and
“VCP” have served their purpose efficiently. Nevertheless, the omissions found in them,
are a sound reason either for their revision or for their substitution by a new form, more
charter-friendly.
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ACKNOWLEDGEMENTS
First of all, I would like to express deepest gratitude to my supervisor Dr. Kyriaki
Mitroussi for her full support, expert guidance, constructive suggestions understanding
and encouragement throughout my study and research. Without her timely wisdom and
counsel, my thesis work would have been an overwhelming pursuit.
I would also like to thank all my professors for helping me with my coursework
and academic research during my studies at Cardiff University. Of course I would like to
thank the faculty staff and students of Cardiff Business School who really made my stay
in Cardiff one I’ll always remember. Thanks also go to my fellow post graduate students
and numerous friends who helped me throughout this academic exploration.
Finally, I would like to thank my family and Lydia for their unconditional love
and support during this year.
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TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION
1.1 Background of the Research Topic……………………………………….…………..9
1.1.1 Technical Background Analysis………………………………………….…......9
1.1.2 Legal Background Analysis........................................................................…...12
1.2 Research Aim and Objectives……………………………………….…………........14
1.3 Research Questions...…………………………………………….………………….14
1.4 Rationale for the Research…………………………………………………………...14
1.5 Proposed Methodology………………………………………………………………15
1.6 Thesis Lay-Out…………........………………………………………………………15
CHAPTER 2: LNG MARKET DYNAMICS

2.1 Overview of the Chapter…………………………………………………………….17
2.2 The LNG Market Overview………………………………………………………....17
2.2.1 LNG Supply Overview………………………………………………………...17
2.2.2 LNG Demand Overview……………………………………………………….19
2.2.3 LNG Fleet Overview…………………………………………………………..20
2.3 The Trading of Vessels under LNG Time Charters…………………………………23
2.4 The Contemporary Transition to the Spot Market – Oil and Gas Price De-linking....24
2.5 Factors to Boost the Augmentation of the LNG Spot Market……….………………26
2.6 Factors to Impede the Growth of the LNG Spot Market….........................................27
CHAPTER 3: COMPARATIVE ANALYSIS OF LNG CHARTER FORMS

3.2 A Historical Evolution and Categorization of the LNG Charter-Parties…….………31
3.3 The ShellLNGTime1 Time Charter-Party Form….....................................................33
3.4 The GIIGNL Voyage Charter-Party Form...………………………………………...36
CHAPTER 4: CRITICAL EVALUATION OF THE EXISTING FORMS

4.2 Omissions over the Existing Clauses and Proposal of New…………………………43
4.3 The Necessity for the Creation of a New Form……………………………………...47
4.4 Future Challenges and Developments ………………………………………….…...49
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CHAPTER 5: CONCLUSION
5.1 Summary of Main Findings and Conclusions……………………………………….50
5.2 Limitations of the research…………………………………………………………..51
5.3 Recommendations for Further Research..…………………………………………...51
REFERENCES………………………………………………………………………....53
APPENDICES…………………………………………………………………..............59
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LIST OF ABBREVIATIONS
C/P Charter – Party
EIA U.S Energy Information Administration
FSRU Floating and regasification Unit
GIIGNL International Group of Liquefied Natural Gas Importers
IGU International Gas Union
IMO International Maritime Organization
ISPS International Ship and Port Facility Security Code
LNG Liquefied Natural Gas
LNGC Liquefied Natural Gas Carrier
MTSA Maritime Transportation Security Act of 2002
MTPA Million Tonnes per Annum
QCLNG Queensland Curtis LNG
SPA’s Sale and Purchase Agreements
SIGTO Society of International Gas Tanker and Terminal Operators
T/C Time Charter – Party
USCG US Coast Guard
VCP Voyage Charter – Party
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LIST OF FIGURES
Figure 2.1 The LNG supply chain……………………………………………………….11

Figure 2.2 Total LNG Fleet Development....................................................................... 21
Figure 2.3 LNG Orderbook Number.................................................................................22
Figure 2.4 Spot & Time Charter Rates 2005-2015………………………………………22
Figure 2.5 Fleet composition in terms of vessel’s commitment under contracts………..23
Figure 2.6 The Upward Trend of the Spot Market………………………………………25
Figure 2.7 Receiving Terminal Berthing Capacity per Region..................................…...28
Figure 2.8 Spot Charter Rates 2010-2015……………………………………………….29
LIST OF TABLES
Table 1. Total LNG Fleet Development for Years 2000-2010………………………….21
LIST OF IMAGES
Image 1. Natural Gas Pipelines…………………………………………………….……11

Image 2. LNG Vessel……………………………………………………………………11
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CHAPTER 1: INTRODUCTION
1.1 Background of the Research Topic
The initial part of this thesis provides, through carefully selected reference to
some of the literature, a clearer understanding of what Liquefied Natural Gas (LNG
hereinafter) is and how its transportation system works from the production plants to
consumers all over the world. The aforementioned analysis will constitute the basis of
understanding the main international technical and geostrategic changes taking place in
the LNG industry and the factors which lead to the contemporary augmentation of the
spot market.
In particular, this chapter includes an analysis of the technical characteristics of
LNG and its transportation process on the one hand, and an analysis of the legal
background focusing on chartering. More specifically, it provides a brief analysis of the
definitions and the main characteristics of the Time Charter Parties (T/C hereinafter), and
Voyage Charter Parties (VCP hereinafter). The remainder of the chapter is devoted to the
presentation and discussion of the main chartering routines followed when trading a
vessel under different charter-parties (C/P hereinafter) and special C/P forms.
1.1.1 Technical Background Analysis
Definition and basic properties of LNG
This introductory subsection offers a brief synopsis of the LNG basic properties,
a pre-requisite for accurately assessing potential LNG safety hazards and risks. Before
proceeding to examine LNG properties, it will be necessary to underline, that in order to
accurately understand and predict LNG behaviour, one must clearly distinguish its
properties as a liquid from its properties as a gas or vapour. As defined by the
International Group of Liquefied Natural Gas Importers (GIIGNL hereinafter), the key
liquid and gas properties for LNG are: its chemical composition, its boiling point, its
density and specific gravity, its flammability, and its ignition and flame temperatures
(GIIGNL, 2014)
In particular, LNG is natural gas that gets liquefied and cooled until it is cooled
down to -163o C, a temperature where the gas is reduced to 1/600th of its initial volume.
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This process makes it technically and practically possible to transfer and store large
volumes of gas by ship (Curt, 2004). Depending upon its exact composition, natural gas
becomes a liquid at approximately -162°C (-259°F) at atmospheric pressure. Its
extremely low temperature makes it a cryogenic liquid which involves special
technologies for handling. This means that it will freeze any living tissue upon contact; it
can also cause other things to become brittle and lose their functionality. In order to
maintain its liquidity, LNG must be stored in appropriately insulated containers. As long
as it is contained within storage tanks designed for use at LNG cryogenic conditions it
poses little danger. However, vapours resulting from LNG as a result of an uncontrolled
release can be hazardous, within the limits of the key properties of LNG – flammability
range and in contact with a source of ignition. Moreover, LNG is odourless, colourless,
non-corrosive, non-flammable, and non-toxic.
Having presented the basic properties of LNG, in the following subsection of this
chapter we will present a discussion on the safety of the LNG transportation system.
The LNG transportation system
LNG is often considered as extremely dangerous and toxic and LNG vessels are
usually called “floating bombs” (Fay, 2003). He argues that those in the LNG industry
overestimate the possible destruction because LNG Carriers (LNGCs hereinafter) are
double-hulled and have other protections around the tanks. LNG is also considered to be
a valuable resource — but one with risks (Havens and Venart, 2008). Another proponent
of this view supports that LNG is inherently hazardous and potentially attractive to
terrorists (Parfomak, 2003).
On the other hand, other commentators claim that LNG transportation by sea is
safe. This view can be taken for granted, for various reasons.
First of all, LNG has the best safety record of all common fuel types and is
completely non-toxic. It is true that natural gas vapours are flammable and include safety
hazards that must be controlled, but these hazards are obviously less than for gasoline
and other liquid fuels (New York Energy Planning Board, 1998). Moreover, LNG
transportation is very harmless in terms of “environmental” and “life at sea” safety
despite the fact that it constitutes an expensive and inflexible way of energy
transportation (Stopford, 2009). Specifically, natural gas is transported either in its
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physical form through pipelines (Image 1), or as Liquefied Natural Gas into the tanks of
LNG vessels (Image 2).
Image 1. Natural Gas Pipelines. Image 2. LNG Vessel.
Secondly, as historical reality reveals, LNG has been safely loaded onto and
carried by ships for more than fifty years due to strict transportation measures. For
instance, the Maritime Transportation Security Act of 2002 (MTSA) and the
International Ship and Port Facility Security (ISPS hereinafter) codes recommend
additional security measures relating to ship and port facilities, personnel and operational
requirements. Furthermore, the Society of International Gas Tanker and Terminal
Operators (SIGTTO) estimates that more than 80,000 LNG cargoes have been safely
delivered so far, with no loss of cargo tank containment and no fatalities because of
unsuccessful cargo operations.
Moving on to the basic concern of this thesis, we will present the identification of
the main market and legal issues ruling the seaborne transportation of LNG. In
fulfillment of this purpose, it would be useful, at this point, to refer to the basic stages
followed in the LNG transportation system.
This description is considered useful because it contributes to the construction of
the reasoning path upon which the boosting and the impeding factors, which have an
impact on the growth of the LNG Spot market, will be explained. Figure 2.1 below
illustrates the five stages of the LNG supply chain.
Figure 2.1. The LNG supply chain (King and Spalding: Energy Newsletter, 2014).
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Commencing with the stage of production, it is then transported through pipelines
from the gas field to the plant where the liquefaction process takes place. Here, once the
methane gas, which is separated from other types of gas like LPG is liquefied, it gets
loaded on LNG carriers for sea transportation. Following this, the LNG is shipped in
LNGCs special tanks, so that its natural condition and pressure can be kept at the
desirable levels. During the next stage, that of regasification, the LNG is unloaded at
terminals and converted into a gaseous form again, ready to be stored. Eventually, during
the storage and consumption stage, the natural gas is led through pipelines to the
consumption fields.
In summary, the basic properties and behaviours of LNG warrant that it be
considered as a desirable and safely managed option when evaluating the mix of energy
sources. The next section of this chapter introduces the legal background of LNG sea
transport. It defines chartering and presents two different types of it; voyage chartering
and time chartering.
1.1.2 Legal Background Analysis
Chartering
Chartering can be defined as an activity that is exclusive to the maritime industry

and refers to an array of ship owning arrangements with the charterers. For instance, a
charterer may own a cargo and employ a broker to deliver cargo against a negotiated
freight rate. He may also hire a vessel from its actual owner and earn extra profits by
delivering cargo through it (Cufley, 1962) and (Lewis, 1941). In this thesis, the market
and legal aspects of LNG chartering will be based on a comparative consideration
between Voyage Charter Parties (VCPs hereinafter) and Time Charter Parties (T/Cs
hereinafter), as these two forms domain the share of the LNG chartering. What follows
is a description of the two significant types of chartering namely, VCPs and T/Cs.
Voyage chartering:
As regards VCPs, this type of chartering takes place when the use of non-
controlled vessels is restricted to a single trip or perhaps two or three consecutive
voyages. The prevalent practice in voyage chartering is that the charterer will hire a ship
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and its crew between a loading port and destination port in exchange of a fee called
freight, that is calculated either on the lump sum basis or on per tonne weight of cargo
(Stott and Douglas, 1981). The owner is responsible for the operating expenses of the
vessel, while the charterer is responsible for costs related to the cargo. The counterparties
agree that the charterer will have a certain period of time to load and unload the ship, the
so-called “laytime”. If he fails to do so in the pre-determined time, he pays the owner the
so-called “demurrage”. On the other hand, if he manages to complete the loading and
unloading in earlier than agreed, he is entitled to claim a compensation called “despatch”.
Time chartering
The time chartering system features various types. The main idea is the hiring of
ships for a fixed time period. However, the ownership right of the ship for this period
remains with the owner and charterer enjoys the privilege to select the loading and
destination ports. The owner is responsible for the nautical operation, maintenance and
supervision of the vessel, whereas, the charterer takes all the action needed for the
commercial operation of the vessel (Gorton et al., 2009). In addition, the charterer is
supposed to pay the fuel and port charges daily hire rates and the commissions. Hire is
calculated as a daily amount and payable in advance, often payable monthly or semi-
monthly (Hill, 1998). On the other hand, the ship owner pays for all charges pertaining to
the officers and crew.
A slight variation to this arrangement is the “trip time charter”, where the time of
hiring is short spanned and applicable for specific trading routes, which is different from
time charter where the vessels can travel with trading areas that have been identified by
the charterer (Stott and Douglas, 1981).
Lastly, in a “demise” type of charter, no agreement is made in between the
charterer and the ship owner regarding the administration and technical maintenance
charges. The operational expenses of the ship are paid by the charterer including fuel
charges, insurance and port expenses. The charterer is also provided with the right to
possess the ship and take charge of its legal and fiscal issues under this chartering system
(Gebb, 1974), (Harper, 1974).
Comparing the two forms, VCP and T/C, of engaging the vessel in the trade, it
can be seen that there are significant differences, especially as regards the way the owner
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gets paid. Moreover, in case the contract comprises either a T/C or a VCP, the ship
remains in the possession of the owner.
1.2 Research Aim and Objectives
Research aim:
The aim of this thesis is to explain the market and legal framework, under which
the necessity for the transition from the time to the spot LNG chartering market rises, and
the identification of the factors under which this transition is performed.
Research objectives:
In particular, the objectives of this thesis are:
1. To investigate the necessity and the potentials of the rising LNG spot market.
2. To critically compare and analyse the most significant LNG standard charter-
party forms.
1.3 Research Questions
This dissertation is motivated by three research questions:
1. Is it possible for the spot market to dominate the LNG sector in the years to
come?
2. Are the existing charter-party forms sufficient?
3. Is there a necessity for the creation of a new charter-party form?
1.4 Rationale for the Research
In previous research a presentation and analysis of charter-parties has taken place,

mainly for different types of market, for instance bulk carriers and tankers but not
sufficient research has been conducted for the LNG. Moreover, the existing comparative
analysis between LNG charter-parties and therefore of proposals for the correction of
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misunderstandings and omissions, needs to be further developed. Finally, there seems to
be a research development as regards the investigation over the interim disposal from
time to spot market. The scope, therefore of this thesis is the contribution to the filling of
the existing gaps concerning the previously stated issues.
1.5 Proposed Methodology
In this thesis, only secondary data sources will be used i.e. pre-existing data sets,
annual market energy reports, company reports, web-resources, graphs and statistics
from Clarkson’s Shipping Intelligence Network and Lloyds List Intelligence. Moreover,
standard charter-party forms used for the chartering of LNGCs for both Time and
Voyage Charters will be used.
1.6 Thesis Lay - Out
The study design consists of three main body chapters. The first chapter provides
a background of the research topic. It analyzes the technical characteristics of LNG in
relation to its transportation process and the legal background of chartering. Particularly,
it provides a presentation and discussion of the main chartering routines followed when
trading a vessel under different charter-parties and standard C/P forms. The remainder of
the chapter describes the research questions, the research rationale and methodology.
The second chapter is devoted to the LNG market overview with reference to the
volume of LNG chartered on vessels under long-term agreements and short - term or spot
market ones. Moreover, it describes the transition from the long-term market to the
“spot” short-term market in the LNG sector. It also analyses the factors contributing to
this transition as well as the impeding factors which lead to the stagnation of this market.
The aim of the third chapter is to provide a qualitative and comparative analysis
of the main clauses of the charter-party forms used for the chartering of LNGCs such as
the “ShellLNGTime1” and the “GIIGNL” VCP form.
Chapter four makes a critical evaluation of the abovementioned forms, by
discussing their omissions with a view to investigate the need for the creation of new
clauses or even charter-party forms which will be more user-friendly.
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Finally, chapter five includes a summary of main findings of the thesis. It also
outlines the limitations of the present research, ending up with recommendations for
future research.
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CHAPTER 2: LNG MARKET DYNAMICS
2.1 Overview of the Chapter
The second chapter of this thesis will be devoted to the identification and
evolution of the market aspects which affect the volume of LNG imported and exported
and consequently, the volume of LNG chartered on vessels under long-term agreements
and short term or spot market ones. More particularly, the current market situation of
LNG is presented along with the background process of rendering the LNG chartering
routine, more accessible.
Moreover, the factors which contribute to the augmentation of the LNG spot
market will be explained, as well as the impeding factors which lead to its stagnation.
2.2 The LNG Market Overview
The period of rapid expansion of the global LNG market is a reality. The volume
of global liquefaction capacity will double over the next decade. The force behind this
expansion is a shift towards gas as a fuel of choice, partly due to its properties explained
in chapter one and partly due to an increase in the import dependence of regions facing
declining domestic reserves. Natural gas is increasingly becoming a global commodity
that is traded between regions. As such, international natural gas markets are undergoing
a substantial change in market structure and organization, as well as in supply and
demand. In subsections 2.2.1 and 2.2.2, the LNG supply and demand sectors will
respectively be examined.
2.2.1 LNG Supply Overview
The on‐going changes described above create challenges for modeling and
forecasting global natural gas supply, demand, and pricing. The supply sector is served
by the LNG chartering sector, which day by day becomes all the more competitive.
LNGCs have become an integral part of the global energy market. Today, important
natural gas discoveries at distance from demand markets, combined with strong natural
gas demand in East Asia, drive the investment in the LNG carriers needed to join supply
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and demand.1 As it can be concluded from the previous report, the LNG supply sector is
interdependent with the number of LNG carriers. The LNG fleet overview and its trends
will be examined in the pages to follow.
Now, as far as the supply sector of the market is concerned, in 2014, a number of
developments in the LNG production area were observed, which under normal and
expected conditions, would augment the volume of LNG cargo transferred. Among those
developments, for instance, were the amelioration of the performance of some existing
plants and the creation of two new projects which started operating in this year.
Notwithstanding these developments, the unexpected decrease in the productivity of
other existing plants, led to a stationary supply similar to 2011 levels (IGU, 2015).
In 2014, 243 mt of LNG were delivered, which is equivalent to 1.5% increase
over 2013. The previously stated reasons leading to the evolution of the supply, were
some new trains which started-up in 2014. For instance, Papua New Guinea started
exporting LNG and became the 19th current exporter. The new plant consisting of two
trains produces at full capacity of 6.9 mtpa. Then, The Queensland Curtis LNG
(QCLNG) project in Eastern Australia also started operating and has become an
appreciable coal-bed methane LNG project which will turn gas from coal seams into
LNG.2 Finally, one new expansion train - the GL3Z project- at Arzew, Algeria started its
production. The previous three trains created a total new capacity of 16 mtpa.
Furthermore, some already existing plants enhanced their performance. Predominantly,
Algeria and Nigeria produced 1.9 and 2.6 million tons respectively more LNG than the
previous year.
On the contrary, the upsurge of the supply was offset by a reduction in exports
from some suppliers. For example, in Egypt where exports where influenced by the
augmentation of LNG volume needed for domestic consumption, exports were
influenced by the augmentation of LNG volume needed for this reason. In addition,
Qatar started additional maintenance in 2014 reducing its exports and LNG produced in
Angola was down from April in order for repairs to be completed. Finally, it is estimated
that by 2020, the total LNG worldwide exports will rise by 40% and the contribution of
Australia and US over the last percentage will be 90% (IEA, 2015).
1
The LNG Carrier Market 2013-2023 Available at: http://www.prnewswire.com/news-releases/the-lng-
carrier-market-2013-2023-188186091.html
2
http://www.qgc.com.au/qclng-project.aspx
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Every shipping market has its specificities. Nevertheless, if the LNG market were
to be correlated with another shipping market in the past decade, this would be the liner
shipping. The strategic planning followed between the terminal operators and the
shipping lines, is similar to that of liner shipping, where a logistics chain is used, to
secure volumes of LNG (Vernimmen et al., 2007). In LNG chartering these are the so-
called Sale and Purchase Agreements (SPAs hereinafter).
Today, buyers of LNG who constitute the demand sector cover their seasonal
needs by contracting in the spot market. In order to achieve this, they hire uncommitted
to SPAs vessels.
2.2.2 LNG Demand Overview
In this section, we will focus on the demand for LNG and the geopolitical aspects
involved in its transportation. As it has already been mentioned, the demand is partially
determined by the importers of LNG. It is also determined by the volume of the cargo
delivered to the importers of LNG. The demand for LNG shipping can be divided into
two main subcases (Timera Energy, 2014). The first one is related to LNG cargo volume.
In this case, higher demand for LNG augments the need for LNG shipping. The second
subcase focuses on travelling time and ballast voyages. In other words, when the number
of voyages increases, the number of ballast voyages increases too, rising the number of
voyages required to transfer the volume of cargo agreed (Lloyd’s List, 2012).
The Asian market:
The Asian Market is the main LNG importer which dominated the demand sector
in 2014 by importing 182 mt. The demand in Asian market has slowed, compared to
previous years, where the Fukushima - Japan nuclear plant disaster had risen the
emergency of alternative types of energy such as, Natural Gas. As regards other
importing activities in the near future, these will feature the Lithuanian importing market,
the twenty-eighth importer of LNG, and five new trains in China, Indonesia, Japan and
South Korea. Only Japan imported 89 mt in 2014, followed by South Korea with 38mt,
China with 20 mt and India with 15 mt of LNG.
The European market:

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Europe will have become a major LNG importer by 2020, as the new LNG
produced and exported by Australia and the USA will be delivered in this region (IEA
annual Medium-Term Report, 2015). Additionally, Europe’s switch away from coal-fired
electricity is underlined, which will lead to more environmental friendly substitutes, as
LNG is.
2.2.3 LNG Fleet Overview
As was mentioned in 2.2.1 above, one of the most important factors that influence
the LNG chartering procedures is the number and composition of the LNGC fleet. The
growth in global liquefaction capacity and the increase of the demand in the Pacific
Basin, led to the revitalization of the LNG shipping market in 1990’s. Today, the
unstoppable ordering of new vessels marked 2014 as the year of a new cycle of the
oversupply of LNG tonnage (IGU, 2015).
The fleet overview can be examined by using both quantitative and qualitative
approaches of analysis. The quantitative approach deals with numeric characteristics
based on the newbuilding market, the demolition market and the orderbook. This
approach influences the supply for LNG chartering as a process. The second approach,
which is of a more qualitative nature, takes into account the composition of vessels
committed to long and short-term agreements influencing each specific aforementioned
market independently.
According to the quantitative approach, Figure 2.2 below demonstrates that the
increase in the number of fleet will keep on rising in the years to come, leading to an
oversupply which can stagnate both the spot and long-term chartering market of LNGCs
(BG Annual Report, 2014-15) and will consequently contribute to the further reduction of the
time and spot charter rates.
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Figure 2.2 Total LNG Fleet Development. Clarksons Research Services Limited.
The previous graph can also be supported by the following data extracted from
Clarksons Reasearch, which clearly demonstrate that in terms of newbuilding vessels, the
growth of the fleet almost tripled between the years 2000-2015.
Total LNG Total LNG

Fleet Fleet
Development Development Year
Number Million DWT
112 6,66 2000
173 11,18 2005
335 25,81 2010
360 28,08 2011
372 28,86 2012
371 28,90 2013
385 30,01 2014
426 33,61 2015
Table 1. Total LNG Fleet Development for Years 2000-2010. Statistics from
Clarksons Shipping Intelligence.
Additionally, the orderbook of new LNGCs clearly shows, that the unstoppable
ordering of vessels will create an even bigger oversupply, making it more difficult for
vessels to be chartered in the three next years and leading to a further decrease in the
already low time and spot charter rates (Clarksons Research Limited, 2015).
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Figure 2.3 LNG Orderbook Number. Clarksons Research Limited.
The influence of the perpetual increase in the LNG fleet is conspicuous as it

appears in Figure 2.4 presented by RS Platou, where it is evident that both spot and time
charter rates fell to 2010-2011 levels, causing fleet idleness (Reuters, 2015).
Figure 2.4 Spot & Time Charter Rates 2005-2015. RS Platou, April 2015.
Taking a quantitative approach of analysis, a factor which influences the

chartering availability of vessels to the spot market to a great extent, is whether they are
committed to long-term contracts (SPAs) or uncommitted i.e. short-term and spot market
contracts. Figure 2.5, presents the uprising trend of uncommitted vessels over the years
2014 and 2015. In 2014, the number of committed and uncommitted vessels was almost
equal, while after 2015 the number of uncommitted LNGCs seems to be declining. This
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is attributed to the need of long-term contracts which will assist the new gas supply from
Papua New Guinea plant.
Figure 2.5 Fleet composition in terms of vessel’s commitment under contracts.

Source: Clarksons Research Limited.
Apart from the issue of vessel commitment, what also characterizes the LNG
shipping is the size of LNGCs. This factor has a critical impact on the economies of
scale. As GIIGNL (2013) stated, the LNGC average size, is that of 155000 m3.
Nevertheless, companies such as Qatargas have established the development of LNGCs
of 266000 m3 in the last two years. By using larger vessels, improved economies of scale
are observed, as the quantity agreed under the contracts can be carried with fewer
vessels, minimizing the cost of transportation.
2.3 The Trading of Vessels under LNG Time Charters
Although the LNG can be sold at any part of the supply chain, it is habitually sold
under liquefaction plants and gas agents or power plants. The existence and the drafting
of SPAs is absolutely necessary for the building and the expansion of the productive
capability of the liquefaction plants (Total, 2014). The SPA agreements determine the
prosperity of the aforementioned plants, as the planning, designing and building of them
is capital intensive.
23
The long-term agreements, which technically and legally come into existence
under the so-called T/Cs, support the sharing of the risk between the LNG producers, as
far as the price risk is concerned, and the buyers whose interest of risk is the volume of
the LNG. In the last decade, the transit from the existing oligopolistic market, consisted
of a small number of sellers and buyers, to a more competitive market form, generated
the need of the creation of more flexible contracts (Engelen and Dullaert, 2010).
Since its appearance, the LNG trade was assisted by the ownership of vessels by
sellers and buyers of LNG, in other words importers and exporters. Shipowners, who
constitute a third-party between buyers and sellers of LNG, started taking advantage of
some factors which were uncovering the disadvantages and the jeopardies of chartering a
vessel under a T/C during the last decade and started developing their own uncommitted
fleet to serve the short-term or spot trade needs. These factors were (a) the absence of
uncommitted and immediately-accessible LNG vessels, an analysis of which was
presented in the previous sub-chapter of the fleet overview, (b) the long-term orientation
of LNG trade which is used to share the risk between buyers and sellers but created
inflexibility in demand changes and (c) the exclusive and unique nature of the cargo
transported (Weems, 2001).
2.4 The Contemporary Transition to the Spot Market – Oil and Gas Price De-linking
This analysis will start with the presentation of the Figure 2.6. which contains
statistics from Clarksons Research and shows the upward trend of the spot market during
the last 20 years. The vertical axis represents the percentage of LNG cargos chartered in
the spot market.
24
Figure 2.6. The Upward Trend of the Spot Market. Source: Clarksons Research
Limited.
The percentage of LNG transported under spot contracts is ~ 28% in 2015, while
back in 2000 it was ~6%. But what is the main reason behind the previous growth and
the respective decrease in the long-term contracts? It is the de-linking between the oil and
gas price which started taking place at Henry Hub of USA and at the National Balancing
Point of the United Kingdom.
Oil and gas prices used to be negatively correlated in many hubs like the North
American hub and the gas price was fixed accordingly to the price of oil. According to
the “Fifty Years of Global LNG” report of Trafigura Group price de-linking in long-term
contracts led to two new pricing mechanisms which affected the market form (Trafigura,
2014). The first mechanism has to do with many contract renegotiations that took place
especially in the Henry Hub. These renegotiations contributed to the reduction of the
misalignments created between value and price of cargo and let buyers deal with the
derivative markets in order to hedge their risk under SPAs. The second one relates to spot
LNG trade which became viable and thus augmented. For instance, a new pricing
mechanism was generated especially in the Asian market after 2009 which helped the
participants buy and sell spot cargo to a new- oil independent- benchmark price.
In this thesis, we deal with the transition from long-term contracts to short-term
“spot” contracts i.e. the second pricing mechanism created due to the de-linking of
prices. This thesis will also link the market changes presented in Chapter 1 with the
changes over the most significant LNG Charter forms in Chapters 2 and 3.
25
2.5 Factors to Boost the Augmentation of the LNG Spot Market
Additional cargo capacity will be offered in the years to come by shipowners
This factor will enable cargo to be transported in spot market. Although the
LNGC orders hit a peak in the previous three years and someone would expect that
investors and shipowners lessened the ordering of new ones, their sentiment about a
further increase of the demand and the creation of new export LNG projects and plants
creates bigger expectations (Natural Gas Europe, 2014). Moreover, as it was previously
analysed, a factor which influences the sea carriage of LNG is the commitment or not of
the new vessels to long term contracts. Although uncertain to assume whether these new
vessels will be finally used to cover the SPA needs or whether they will serve the needs
of the spot LNG market, a risk-aversive charterer i.e. the exporter will definitely decide
to charter vessels in the spot market in order to avoid operational risks.
Additional regasification volume due to the Floating Storage and Regasification Units
Moreover, during the last years, a new technological development, the so-called
Floating and Regasification Unit (FSRU hereinafter) made its appearance. The flexibility
offered to the market, gives buyers and marketers the opportunity to buy LNG certainly
in lower prices, increasing the need for spot cargo. This happens because FSRU’s
flexibility can boost the market where the demand for LNG regasification is higher
because of higher domestic demand.
These floating units offer flexibility and agility as they are intended to be loaded
with LNG cargoes from other carriers, store it, and regasify and pump the gas into the
consumption part of the LNG supply chain. FSRUs are more capital intensive
investments than LNGCs but their comparative advantage against the existing
transportation system is that the time needed for their construction and delivery is 2-3
years while a regasification project takes 5-7 years to be constructed (Schaefer, 2012).
Growth of the LNG supply
Last but not least, the growth of the LNG supply is another determinant
contributing to the augmentation of the LNG spot market. Gaslog, a major LNGC owner,
26
acknowledges the need for the ordering of 100 new LNGCs (Lloyd’s List, 2015). These
new vessels will be used to cover the uprising needs of the growing LNG supply, which
will consequently lead to an increase in the spot market. Additionally, new LNG
liquefaction trains raised the supply by 1.5% last year and there is an increasing number
of regional gas markets which keep on growing their export rates, some of which will
govern the natural gas supply sector in the following years. Europe for instance,
constitutes one of the world’s major LNG importers. Because of low CO 2 emissions of
natural gas, LNG imports remain a high priority for European energy policy (Eurogas,
2013).
Say’s Law or the Law of Markets, introduced in 1803 through Jean-Baptiste
Say’s work called “A Treatise on Political Economy (Traité d'économie politique)”,
states that additional supply creates additional demand (Investopedia.com). In the case of
Europe, this demand will be the result of the additional supply from Australia and United
States. Another market is that of North America which seems to contribute to the
augmentation of the LNG consumption, due to the development of shale gas technology.
North America’s low prices caused by the increase of domestic gas production can turn
this region to self-sufficient.
Consequently, North America is expected to become a major LNG supplier.
Finally, Australia, within the market of Oceania, is expected to become the world’s
largest LNG exporter within four years. The gas boom will lead to an increase of 70% in
years 2015-2016 and to a moreover 42% in 2018 (CNBC, 2014). The gas will be
exported to countries like China, Japan, Korea, Taiwan and India.
2.6 Factors to Impede the Growth of the LNG Spot Market
Receiving Terminal Berthing Capacity
Not all vessels are adaptable to use all ports and facilities, something which
definitely influences the tonnage which can serve the needs for spot cargo transportation.
This is a consequence caused mainly due to the differentiation in the size of LNGCs.
LNGCs are separated in three categories in terms of “size”, namely, the conventional
vessels, the Q-flex and the Q-max series. The following figure presents the fleet share of
the aforementioned categorization.
27
Figure 2.7. Receiving Terminal Berthing Capacity per Region. Source: IGU Annual
Report, 2014.
Qatargas, Q-max and Q-flex vessels, for instance, are not flexible due to their
tonnage with 266.000 cbm and 210.000-216.000 cbm, respectively. Consequently,
although the Q-max and Q-flex type of LNGC offer a great tonnage capacity to the
market, this capacity is considered as inflexible because it eliminates the number of ports
and terminals of berth. A 38% of the LNG importing countries is not capable of receiving
Q-Series vessels (IGU, 2014). Also, from the 62% which is able to serve the loading
needs of Q-series, only half of these are said to be able to receive Q-max vessels (i.e.
266.000 m3).
Collapse in LNG charter rates
After 2010, a number of new liquefaction plants and projects raised the
shipowners’ sentiment for a market boom and made them invest in the newbuilding
market by ordering uncommitted SPA vessels. Although independent shipowners added
new tonnage in the market and managed to temporarily equate the demand and the
supply, their expectations about further advance of the demand sector led to oversupply
which consequently led to a collapse in the LNG spot charter rates (Lloyd’s List, 2013).
Low charter rates lead to decreased income for the shipowners and increased risk
as far as the financing of new vessels is concerned. The rates today have not reached a
desirable level, something which leads to the adoption of a risk-aversive point of view by
the shipowners. This strategy leads to a stagnation in the spot LNG market as shipowners
28
do not seem to be willing to invest in capital intensive investments (i.e. impact on
orderbook) since they cannot secure cash flows and revenues (Timera Energy, 2015).
As shown in figure 2.8 below, LNG spot charter rates suffered a downturn in
2015, being at the level of 25.000 USD per day. The same happened to term charter rates
which are the agreements of less than 12 months falling below 40.000 USD per day.
Figure 2.8. Spot Charter Rates 2010-2015. Source: Clarksons Research Limited.
Fleet overcapacity and additional ordering of 150+ vessels (i.e. rise ~35%) will
press more the spot charter rates, as the majority of these vessel orders which are placed
in the market during 2015, were made to serve the augmentation of Asian spot cargo
demand needs caused at 2011 by the Fukushima nuclear disaster in Japan (Masatsugu
and Hughes, 2012).
Technical difficulties leading to shut down of trains and projects
In many cases, trains and projects have been shut down due to technical reasons.
For instance, Angola’s LNG plant closure which had costed 10 bn USD, led to a sudden
and unexpected reduction of the LNG supply volume of 5.2 mtpa. This plant was a
venture of common effort in the sub-Saharan area between national and independent
private oil and gas companies. Due to technical problems, the plant was forced to
interrupt its operation many times in the past years, resulting to its temporary closure for
reconstruction (Gastechnews.com). Another example is that of Yemen’s LNG plant,
which shut down in 2015, because of conflicts in the area, which led to worsening of
security measures (Lloyd’s List, 2015). Russia’s Sakhalin is another case of plant, which
29
had technical difficulties and was forced to halve its LNG production for maintenance
reasons (lngworldnews.com).
This chapter has explained the procedure followed when LNG is chartered on
vessels under long-term agreements and short term or spot market ones. The
contemporary transition from the LNG time charters to voyage charters has also been
examined with reference to the factors contributing to the boost and to the stagnation of
this market. The following chapter moves on to consider how the transition to the spot
market is depicted in terms of charter-party forms.
30
CHAPTER 3: IDENTIFICATION AND COMPARATIVE ANALYSIS OF LNG
CHARTER FORMS
The previous chapter included an analysis concerning the transition from long-
term to short-term charter market for LNG. This chapter provides more analytical
information regarding the legal side of a long or short-term agreement to transport LNG.
The aim of this chapter is to provide answers to questions such as: the main issues
governing a contract of LNG carriage, the main clauses contained in the most widespread
C/P forms, if there are any similar or opposite clauses in other charter-party forms, and if
there are, which they are. These questions will be answered after a historical evolution
reference has taken place. At this point, it should be underlined that the contribution of
this chapter to the evaluation of the existing LNG C/P forms that will take place in the
next chapter is considered quite significant.
As already mentioned in the previous chapter, the counterparties were the buyer
and the seller, in other words the importer and exporter of LNG respectively. In the
present chapter but also in the chapter to follow, our analysis will be based on the
technical and legal aspects governing solely the counterparties of the transition of the
cargo, namely, the shipowner and the charterer of the LNGC. The main research tools
that will be used in this chapter are the technical analysis of chapter one and the LNG
charter-party forms attached to the appendix of the thesis but also the book “A guide to
tanker charters” by Williams H.3, which contains the drafts of the standard charter-party
forms before the introduction of ShellLNTime1.
3.2 A Historical Evolution and Categorization of the LNG Charter-Parties
As it is already extracted from the hitherto market analysis which took place in
chapter two, the chartering of LNG from the decade of 1970’s when this type of cargo
was first transported, was being performed under long-term agreements (Stopford, 2009).
This transportation takes flesh and bones under the time charter-party forms used for the
chartering of LNGCs. Characteristic examples of the most common forms are those of
3
Williams, Harvey (2001) A guide to tanker charters, 3rd edn., Oslo: International Association of
Independent Tanker Owners.
31
STBTIME, VELATIME2, ShellLNGTime1, BPTIME 3, ExxonMobil 2000 and
ShellTime 4 (BIMCO website). All the aforementioned forms are typical of those used
for the chartering of Liquefied Petroleum Gas (LPG) and oil tanker vessels. Their main
disadvantage, though, is that they lack those LNG provisions that will make it possible
for the basic counterparties of a contract to avoid possible conflicts raised by
misunderstandings due to failures in the drafting of the charter-party.
Our analysis, as far as LNG T/C forms are concerned, will be focused on the
ShellLNGTime1 time C/P form, which was introduced by Shell in November 2005.
Despite the fact that it does not contain clauses which are essential for long term charters
for new build LNGCs, ShellLNGTime1 is broadly recognised as the standard form for
short to medium term charters (London Shipping Law Centre Forum, 2012). Moreover, it
was based on the already existing tanker charter form of Shelltime 4, adding some new
provisions exclusively for the seaborne carriage of LNG cargo. Although ShellTime 4 is
partially used today for LNG chartering, it has so many additions and changes that,
eventually became non-friendly for the user and especially the charterer. Nonetheless, the
contribution of this form was determinant, as it set the ground for the allocation of risk
sharing between shipowners and charterers through a number of clauses (Dodds, 2013).
Furthermore, a number of important oil and gas companies have occasionally
attempted to create T/C forms which would properly serve the needs and the concerns of
the LNG transportation counterparties. Such an effort was the adoption of the
ExxonMobil2000 TCP in order to assist the Qatar expansion, while BP also tried to adapt
its BPTime3 LNG chartering.
However, as years went by, both market changes and the transition from long-
term to short-term agreements led to the necessity of the creation of charter-party forms
which could assist the spot market needs. Although some TCPs were initially adopted to
cover the spot needs, their lack in specific commercial, operational and technical terms
led to the adoption by the GIIGNL of the so-called “GIIGNL” VCP, in May 2012. This
C/P was created from scratch, in contrast to ShellLNGTime1 TCP, so as to permit
counterparties to arrange transactions faster.
The next two subdivisions of this chapter, the two most important and innovative
clauses, ShellLNGTime1 TCP and GIIGNL VCP will be identified. These two forms,
although different as per type of charter, that is, time or voyage chartering, compete each
other when the necessity of drafting a charter-party arises. Quite often, they interact as
substitutes.
32
3.3 The ShellLNGTime1 Time Charter-Party Form
Introductory notes to the charter-party
As it was previously stated, the ShellLNGTime1 standard charter-party form was

mainly based on the previous time charter-party form of Shell, used for the chartering of
tanker vessels, the so-called ShellTime 4. Nonetheless, due to the specificity of the LNG
trade, some specific regulations and a more technical terminology are applied when
drafting the clauses of an LNG charter-party, which are presented below.
Description and Condition of the Vessel
As supported by (Coghlin et al., 2008), “It is the owners’ responsibility to deliver

the vessel to the charterers by setting it at the disposal of the former at a prearranged
time, place and condition”.
The previous responsibility is drafted as a typical charter-party clause,
characteristic examples of which are clause 1.2 (Q) of BP3, Clause 4 of ShellTime 4 and
clause 4 of STBTIME form. This multipurpose clause is referred to classification and
vessel age matters, machinery hull and tanks’ condition, cargoworthiness and
seaworthiness issues, while it is clearly stated that the only cargo permitted is the LNG.
Safety Management
This part of clause 1 clearly states the shipowner’s obligation to comply with the
International Safety Management Code (ISM Code) and provide the vessel with all the
required documentation which will facilitate the audit procedures, while Health Safety
Environmental records must be kept.
Shipboard Personnel
This is another typical clause which regulates issues concerning the manning of
vessels. This clause can be found as clause 10 of BP3, clause 2 and 14 of ShellTime 4
and clause 14 of STBTIME standard time charter-party forms. Its main innovation but
also its difference from the previously stated clauses and the Shipboard Personnel clause
33
of ShellLNGTime1 is that in the former, owners are at any given time responsible for the
proper stowage of LNG and shall keep additional records concerning the amount of
cargo which is boiled-off.
Safe Places
Part (c) of this clause clearly shows that charterers have the obligation to conform
to the commonplace provision of charter-parties, which is that the master of the vessel
must proceed only “between” and “at” safe places (Astle, 1986). This clause is similar to
clauses 17.1 of BP3, clause 4 of ShellTime 4 and clause 32 of VELATIME2.
Despite the fact that this is the case in clause c of the GIIGNL VCP, the “safe
places” clause of ShellLNGTime1 seems to be more specific and clarifies to a greater
extent the range of places to which the ship can proceed. Additionally, the term of safety
seems to be more in line with the definition of a safe port, given in The Eastern City
rather than the respective clause of the GIIGNL VCP4 which is vaguer and needs an
amendment.
Due diligence by the side of the charterers seems to be the key for them, so as to
avoid any liabilities for potential losses or damages, while part (d) of this clause clarifies
that the risk and responsibility of the vessel’s compatibility with the loading and
unloading terminal is with the shipowners.
Bunkers and LNG Heel at Delivery and Redelivery
This clause is one of those which can generate the greatest disputes between the
counterparties within an LNG contract. The main point of this clause is that the tanks
upon the delivery and redelivery of the vessel must contain not less than a certain amount
of LNG Heel counted in m3 units. On the contrary, the GIIGNL VCP and its respective
clause (clause F) give a more spherical view and a number of different choices to the
charterer.
As far as the bunkers are concerned, an innovative requirement contained in this
clause, which is absent from any other charter-party form, is that a minimum amount of
bunkers is required in order for the vessel to be ready to steam for three days in its
4
See subtitle 3.4.2 of the thesis for the definition of safe port given by Sellers LJ in The Eastern City.
34
maximum speed. The possibility that the vessel’s tanks contain less than the agreed
bunkers’ quantity cannot under regular circumstances give the charterers the right to
refuse the vessel’s delivery, although in the case of The Pantanassa5 the owners were
liable for breach of contract for the this reason (Wilford, 2003).
Moreover, there are specific details for the type and the quality of bunkers that
the charterers have to use for the supply of the vessel. In case that owners want to use a
different type of bunker, they then have to undertake the additional cost.
Bills of Lading
Clause 14 of ShellLNGTime1 states that the master of the vessel, regarding the
employment, the agency and other issues of the vessel, is under the orders and the
responsibility of the charterer. The signing of a B/L is a case where the master is at the
disposal of the charterer, while the former has to indemnify the shipowner in case that
any unexpected consequences or liabilities arise. Additionally, when owners draft this
clause, they agree to the master’s obligations to comply with the charterers’ orders
concerning the B/L-based carriage, loading and unloading of the LNG cargo.
LNG Retention
Clause 16 of ShellLNGTime1 defines abundantly the liabilities of charterers and

shipowners concerning the provision and payment of LNG needed to be retained on
board after the discharge of the cargo. This is a clause which allocates the expenses
required for the readiness of the vessel’s tanks after the unloading, between the
counterparties of a contract of carriage.
On the other hand, a charterer could express the opinion that this clause is owner-
friendly and thus, in case of a trip chartering, it would undoubtedly be unprofitable for
him as the amendments of the delivery/redelivery clauses is time wasting (Dodds, 2013).
Off - Hire
5
[1958] 2 Lloyd’s Rep. 449.
35
As regards Clause 22 of ShellLNGTime1, it is obvious that it is the standard “off-
hire” clause which defines the stoppage of compensation for the hiring of the vessel due
to delays caused by operational, equipment, stores, hull or machinery difficulties, but
also routine maintenance work, breakdown or accidental damages for which the risk is
with the owner. Similar clauses can be found in clause 19 of BP3, clause 21 of
ShellTime4, clause 11 of STBTIME and clause 9 of VELATIME2.
What is innovative and worth-mentioning about this clause is the occurrence of
some special LNG technical issues which can lead to an off-hire situation. So, for
instance, in case that any time is lost and loading is prevented as a consequence of a
delay (more than half an hour) caused by non-readiness of vessel’s tanks, then the
owners have to pay for it. Moreover, the LNG needed to additionally cool down the tanks
is an expense which is with the owners, as it is the case with boiled-off LNG during an
off-hire period, where the owners compensate the charterers for the LNG lost at the LNG
price.
3.4 The GIIGNL Voyage Charter-Party Form
Loading and Discharging Port Issues
It is expected that the VCP will be used for single voyages between loading and
discharging ports. The first issue rising then, is whether the vessels will be able to
operate within all the nominated ports both in terms of vessels’ and terminals’
compatibility. Although in the trading of oil, the majority of vessels can load and
discharge in almost all ports, this does not happen in the trading of LNG.
In particular, clause C of the VCP is referred to optional loading and discharging
ports. Under this clause, the contract names a port or a list of ports where the vessels
must arrive within the laycan, while clause D names a port or a list of ports for
discharging.
Nonetheless, these clauses are insufficient as the absence of the term “safe” from
the heading of them, as it is conversely the case in clause 3 of Shelltime 3 and clause 4 of
Shelltime 4 but also in clause 5 of NYPE and clauses 1 and 9 of Asbatankvoy, is an
omission which hinders the efficiency of clauses C and D of the VCP.
Cargo
36
The cargo of the LNGCs is described in Clause D and must exclusively be LNG.
The bunkers can either be a mix of natural with forced boil-off in order for the vessel to
steam at the agreed speed, or alternatively the regular bunker. The use of forced boil-off
is usually performed by the charterers only when the price of LNG does not exceed the
bunker price.
Tanks’ Condition
This clause F is referred to the condition of the tanks of the vessel before loading
(subsection F1) and after discharging (subsection F2). It is a unique clause created
exclusively for the transportation of LPG and LNG cargos, as there was no need for the
implementation of such a clause in previous tanker charter forms, once oil does not need
cooling. The only similar clause is that of clause 5 in ShellLNGTime1, which in no case
can be compared to the ‘Tanks’ Condition’ of the GIIGNL VCP, which is more
descriptive detailed and classified.
More specifically, F1 offers two different options concerning the condition of the
tanks once the vessel arrives. If the counterparties approve the first option, then the
vessel’s tanks must be cooled down when the ship berths. If this arrangement fails, then
the burden of tanks’ cooling is with the charterer. The second option states that the
vessel’s tanks must be “warm”. Now, the charterer has the obligation to pay for the
cooling of the LNG tanks.
On the other hand, subsection F2 arranges the heel amount that has to be left in
the tanks after the discharging of the tanks is completed.
Charterers would prefer upon the vessel’s arrival to face “cold” tanks, but here
rises an issue which is the estimation of the amount of heel needed to be left in the tanks
between two voyages. The differentiation lies between voyage and time charters. Under
the former, the estimation is simple because the trips are consecutive and pre-arranged.
On the contrary, as far as the voyage charters are concerned, it is more complicated as the
chartering of the vessel depends on the spot market and the availability of spot cargoes
which need transportation in the given time period. Moreover, in case that the charterer is
a different one than the previous, then his preference on the condition of the vessel’s
tanks might be different and consequently it is difficult to know if any heel is needed to
be left in the tanks or not.
37
LNG Compensation
Clause G is a very innovative clause and gives the charterer the opportunity to get
compensated by the owner, in case the former has consumed any LNG cargo. This clause
regulates the price of the LNG. The clause is referred to LNG used as heel or as it was
previously mentioned, for boil-off which exceeded the price agreed.
Freight
When counterparties draft the clause H of VCP, they have two options regarding
the freight payment. The first option defines that the parties “must insert the lump sum
freight”. This option is a clause used to a great extent in both VCs and T/Cs and thus it
does not offer something new as a clause. According to the second option, the owner is
protected against the charterer’s order to send the ship for berthing in a port were the
bunker price with which the owns supplies the vessel are high.This clause can also be
proven efficient for the cash flows of the owner, as it may protect him against the
charterer’s order to the master of the vessel, to direct the former into an area where some
acts of God may cause extra fuel consumption.
The following subsection deals with the analysis of the second part of the GIGGNL
charter-party form, that is, Part II (sections 1-25).
Description and Condition of Vessel
As mentioned above, this section will discuss all the standards that have to be
followed by the owner during the delivery of the vessel to the charterer at the port of
loading. This clause is frequently contained in almost all the charter-parties. Such
examples are; the clause 1 of ShellLNGTime 1, the clause 1 of Shelltime 4, the clause 1
of GasVoy 2005 and the line 10 of ShellVoy 6. The purpose of these clauses is to
guarantee for safety related to manning of vessels, environment and of course cargo
issues.
The drafting of this clause contributes to the determination of the ship’s
classification and insurance issues but also to the maintenance of a Condition Assessment
38
Program for ships over twenty years old. It also contains information on whether this
vessel is Panamax and Suezmax or not but also certificates concerning the International
Safety Management code.
Warranty – Voyage – Cargo
Turning now to section 2 of part II, we notice that this clause refers to a number
of different issues, namely seaworthiness, cargoworthiness and warranty matters such as
the proceeding of the vessel to the ports of loading and unloading “with all reasonable
dispatch”. In this clause, matters of due diligence of the master and the owner are also
regulated. Such an issue is the maintenance of the LNG cargo temperature and
compression.
What is also regulated under this clause is the boil-off rate. This issue is risen by
the fact that owners use boiled-off LNG as fuel instead of bunkers. The clause engages
the owner to daily make use of only a specific volume of LNG as fuel. In opposite
situation, the owner compensates the charterer according to the LNG compensation
clause that was analysed in subtitle 3.4.5.
Notice of Readiness and Laytime
This is the third section of part II. The first lines of this clause offer to the
counterparties a presentation of the definitions of the Notice of Arrival (NOA) and the
Notice of Readiness (NOR). The form also sets that the laytime begins six hours either
after the issuing of the NOA or when the NOR is issued, depending on which of the
preceding documents is first issued.
However, this clause may vary in other charter-parties in terms of laytime. For
instance, clause 7 of GasVoy 2005, which determines that the laytime starts either after
the six hours or when the vessel has moored. On the other hand, clause 6 of
AsbatankVoy mentions that NOR shall be given at “arrival to customary anchorage”,
whereas the clause of ShellVoy 6 sets that “Time at each loading and discharging port
shall commence to run six hours after the vessel is in all respects ready to load or
discharge”.
Demurrage
39
This clause constitutes the fourth section of part II by means of which the
compensation that the charterer must pay to the owner is stipulated in case he surpasses
the time that he has at his disposal in order to load or/and unload the vessel (Edkins and
Dunkley, 1998). The clause defines that the charterer has to pay demurrage per running
day and pro rata.
The fourth clause of part II presents a number of cases under the occurrence of
which, the charterer escapes liability in case of delay. Such cases are, for example, storm,
explosion, breakdown of the machinery, and all these events which do not take place
because of negligence.
Identical clauses are also included in other charter-parties. Such clauses are the
9,10 and 11 of GasVoy 2005, but also the line 254 of ShellVoy 6, clauses 8.2 and 18.3 of
BPVOY 4, clause 29 (b) of EMV2000 and finally, clause 15 (1) of ShellVoy 5.
A negative aspect - omission of this clause, which is notable, is that although the
LNG SPA’s define that laytime ends when the loading arms are disconnected, here in the
GIIGNL VCP there is no such provision and therefore, a number of disputes between the
counterparties of the transport may arise.
Loading and Discharging
This clause could be characterised as an innovative one in the sector of LNG, as it

clearly defines the sharing of the risk between the charterer and the shipowner, as far as
the loading and discharging of the LNG cargo is concerned. Particularly, the charterer
has under his own expense, risk and peril the “pumping” of the cargo into the LNGC’s
tanks concerning the loading and discharging of terminal’s permanent ship-shore
connections, while, when it comes to the vessel’s permanent ship-shore connection, it is
the owner’s responsibility.
Marine Surveyor
This clause refers to the charterer’s right to hire external contractors, in order to
inspect the vessel in terms of Oil Companies International Marine Forum (OCIMF)
standards. In order for the inspection to take place, the charterer has to take care of the
audit expenses, while it is the shipowner’s duty to provide the inspectors with all the
40
documentation needed. In case the result of the audit is not sufficient and satisfying, the
charterer has the right to claim for the so far freight paid and can sue the shipowner for
breach of contract, terminating the charter-party.
Although this clause seems innovative for LNGCs compared to the chartering of
other types of vessels, it can be simultaneously considered as confusing. When a
charterer sues an owner and asks for the termination of the contract of carriage and/or
refund of freight, it has to be proved that the breach is that serious in order to be
considered as a “breach of contract” and not only as a “breach of warranty” (Baatz,
2014).
In order for the type of breach to be specified, some standards should be followed
which will determine the potential rights and liabilities of the counterparties. This clause,
compared to clause 25 of ShellLNGTime1, where in case of negative recommendation
the charterer does not have the right to terminate the contract, provides the claimant with
more rights without initially clarifying a specific routine which has to be followed by the
charterer-hired Marine Surveyors. Another issue arising is the lacking of a standard
vetting protocol which would provide the charterers with the opportunity to inspect the
ship under a specific and effective routine.
General Exceptions Clause
This is the characteristic clause concerning the shipowner’s escaping from

liability in case that he is not liable for a series of facts caused by crew’s negligence or
factors such Act of God. Similar clauses can be found in almost all the conventional,
non-LNG charter-party forms. For instance, clause 29 of ShellLNGTime 1, clause 27 of
ShellTime 4, clause 24 of GasVoy 2005 along with the General Exceptions Clause can
eliminate the danger of the owner’s liability in cases of safety reasons, piracy, weather
conditions, collisions, pilotage faults, unseaworthiness and so on.
Bills of Lading
This clause is drafted in order to relate the master of the vessel with the charterer,
as the first obeys the orders of the shipowner when it is for the signing of the Bill of
Lading (B/L hereinafter). If the charterer fails to comply with the agreements upon
drafted on the B/L, he then has to indemnify the owner.
41
This is the standard B/L clause used in other standard charter-party forms. B/Ls
are not used in all types of contracts when chartering an LNGC. More specifically, under
an LNG T/C, the master does not have to sign a B/L for the cargo transported, as the
amount of LNG is predetermined under the SPAs between the seller (exporter) and the
buyer (importer). Indeed, bills of lading usually impose greater liability on the
shipowners than the liability that they have agreed to bear to the time charterers under the
time charter. On the other hand, when it comes to a VCP and spot cargo transportation,
the potential buyer needs satisfactory evidence as for the quantity and the quality of the
cargo and hence detailed proof is provided by the B/L.
Clause Paramount – New Jason Clause
Clause Paramount is drafted in order to state that the C/P will be governed by the
Hague – Visby or the Hague Rules and has to be included in all B/Ls.
As far as the New Jason Clause is concerned, it is included in the C/P in order to
protect the carrier’s interests in case of General Average. In such case, the consignees,
shippers or cargo owners, are obliged to contribute to the indemnification of the carrier.
Lien
This clause offers to the shipowner the right of lien on the cargo transported to
protect him in cases of dead freight, demurrage, freight and additional costs linked with
claims against the charterer.
On the other hand, an enormous omission can be noted which is that the charterer
does not have the right of lien on the ship in case that any freight paid in advance by him
is not earned as it is for example the case in clause 15 of GasVoy 2005 or clause 28 of
ShellLNGTime1. This omission makes the form less charterer-friendly and creates
injustice.
42
CHAPTER 4: CRITICAL EVALUATION OF THE EXISTING FORMS
This is the final chapter of this thesis, where a critical evaluation of

ShellLNGTime1 and GIIGNL VCP will take place. The charter-party forms available to
the LNG market, although recently drafted, they seem to present a number of issues that
have to be revised and changed. The analysis to follow will be based on the presentation
of the most significant LNG clauses which were analysed in the previous chapter of the
thesis.
As mentioned again in this thesis, the basis of the ShellLNGTime1 TCP was the
ShellTime4 form. Its usefulness has always been very widespread for both short and
long-term LNG chartering, and still remains. This happens because in terms of being
charterer-friendly, the charter-party form in question seems to adequately serve its
purpose.
On the other hand, the GIIGNL VCP was created in order to meet the gaps and
the omissions that the hitherto forms used to have. Although the effectiveness and the
profitability of this form to the chartering of LNGCs was obvious concerning special
LNG provisions, the case concerning the standard charter-party clauses like demurrage
and laytime provisions could have been more beneficial for the charterers instead of
owners.
To sum up, the main purpose of this chapter will be the identification of the most
important issues resulted from clauses’ omissions that may create conflicts between
charterers and shipowners and may have an impact on the safe navigation and operation
of the vessel.
4.2 Omissions over the Existing Clauses and Proposal of New
As mentioned before, this section of the chapter examines the omissions in

clauses that lead to conflicts between charterers and shipowners. Particularly, it examines
omissions regarding boil-off, LNG price, port safety and compatibility, maritime security
and piracy, and eventually demurrage and laytime.
Boil-off
43
On the one hand, the drafting of ShellLNTime1 offered a differentiation in the
treatment of the cargo transported, as by the time this charter form was drafted, the need
for crude oil transportation had not created the need for heel and boil-off provisions. The
special provision-clause of the ShellLNGTime 1 over the heel and the boil-off of the
cargo, allocated the risk between the charterer and the shipowner and determined the
situation at which the tanks of the vessel should be upon her delivery.
On the other hand, concerning the GIIGNL VCP, the process of addressing the
boil-off in a voyage charter seems to be very challenging as the crew needs to be gauging
the cargo in the tanks when the vessel is in seaways. This gauging is considered to be
necessary, as the calculation of the freight is influenced by the allowed amount of boiled-
off cargo.
A remarkable note is that the owner can use the amount of boil-off agreed in the
“boil-off rate” clause of the GIIGNL VCP, in order to steam the engines of the vessel.
However, as the shipowner escapes bunker costs, the charterer simultaneously loses
cargo volume. Some would be of the view that once the boil-off is lost in any case, why
not give the shipowner the chance to use it. Furthermore, in case that LNG price is higher
than the respective bunker price, it could be supported that it would not be fair for the
owner to use the boiled-off LNG and pay an extraordinary price for it.
Another obvious omission concerns the way under which the actual boil-off rate
can be measured and the time of measurement. With this in mind, it could be argued that
there should exist a predetermined period of time where the boil-off would be defined.
Such a period could be for example, the time from the loading to the unloading port.
In ShellTime 4, there is a clause which permits the charterer to escape liability of
late arrival time and consequently a number of boil-off issues, if the wind counted in
Beaufort scale is above force 8. This clause was amended in favour of the shipowner in
ShellLNGTime1, setting the respective force of wind at 5, making the charter-party less
charterer-friendly.
In contrast, as far as the GIIGNL VCP is concerned, a new, similar to the
previous stated, clause specifying that windy passages constitute an exemption from
calculations could be put at the disposal of the charterer.
LNG price review
44
The issue of LNG price could be characterized as one of critical importance
within the LNG market. The long and short term agreements for the trading of LNG are
met, via standard charter-party forms. These agreements render the introduction of a
clause which will protect the counterparties in case of LNG price differentiations
necessary, over the period of contract.
Although some contracts contain a clause which links the LNG price with that of
crude oil, when a contract lasts for a great period of time, the risk connected to the LNG
price due to unforeseen market situations increases (McNAIR Chambers, 2013). Such an
unforeseen market phenomenon was the decoupling of gas and oil prices which occurred
due to the increase in exports and the technological developments. Thus, it can be
concluded that this risk can be hedged with an LNG Price Review clause.
The aforementioned clause is about the “LNG Compensation” and protects the
charterers when owners use cargo of boiled-off LNG as bunker and is linked to LNG
price changes. It will affect both indirectly and directly the parts of the contract. It will
affect indirectly a number of aspects and clauses connected to the existing charter party
forms like for example clause G of the GIIGNL VCP and, directly as a response to
market changes over the price of the cargo when it comes to long-term agreements
between LNG importers and exporters.
There would therefore seem to be a definite need for the introduction of a risk-
aversive LNG price review clause, which would obviously protect the charterers, in case
an unforeseen factor impacts on the price of LNG. This means that they may get secured,
not only for the change of LNG price, but also of its impact on other clauses of the
contract. It should be underlined at this point that the absence of this clause from
ShellLNGTime1 but also from GIIGNL VCP is a critical omission which has to be
considered by the competent drafting committees.
Port safety and compatibility
The GIIGNL VCP, constituting the only standard form for LNG voyage
chartering, was drafted according to the existing tanker charter-parties. Nonetheless, it
would be expected that the VCP contained a clause for safe port berthing. Sellers LJ gave
the definition of what constitutes a safe port in The Eastern City6 where it was stated that
6
[1958] 2 Lloyd’s Rep 127.
45
“A port will not be safe unless, in the relevant period of time, a particular ship can reach it, use it
and return from it without, in the absence of some abnormal occurrence, being exposed to danger
which cannot be avoided by good navigation and seamanship".
Although the word “safe” is included in the notes under the heading of the clause,
this word cannot guarantee that the vessel will safely approach the port. This happened in
The Lucille7 where the vessel could not enter the port because of congestion and thus it
became unsafe. Similar clauses can be found in ShellLNGTime1 and ShellTime4 where
charterers are obliged to exercise due diligence.
Apart from the port safety issue, what is also not defined in the VCP is the
compatibility of the ports with LNGCs. Although the ship-to-ship (STS) and the FSRUs
activities increased during the last years and the terminal activities may be reduced, the
introduction of a clause of port compatibility would appear as imperative.
These two issues must be revised unconditionally, as they can prevent possible
disputes between charterers and shipowners. They can also save time and consequently,
cash flows for the owners in the case of voyage charters.
Maritime security and piracy
The International Ship and Port Facility Security Code (ISPS Code) sets the
requirements under which governments, vessels, and ports collaborate, so as to
distinguish and prevent acts which can affect the security of the maritime transportations
(IMO website)8.
Under this concept, a modern and recently drafted standard charter-party form
would be supposed to contain a clause which would provide the framework of a risk
hedging procedure, in case of a potential threat of negative externalities. This clause is
absent from the GIIGNL VCP while, on the other hand, clause 45 of ShellLNGTime1
clearly and sufficiently defines the duties of the owners and charterers of an LNGC.
The situation is reverse when it comes to piracy clauses, where the GIIGNL VCP
clearly defines what piracy is in clause 18 of Part II and then gives a number of liberties
to the owner to act in collaboration with underwriters, governments, nations and the
Security Council of the United Nations in such case. Additionally, the lack of GIIGNL
7
82 U.S. 676 (1872).
8
Fully accessible at: http://www.imo.org/en/OurWork/Security/Instruments/Pages/ISPSCode.aspx
46
VCP in the OCIMF "Guidelines for the Control of Drugs and Alcohol on board Ship" is
evident and significant, as older charter-party forms contain such clauses. Such example
is clause 12 of BP3, clause 51 of VELATIME2, clause 10 of BP4 and clause 34 of
ExxonMobil2000 between others. Reversely, ShellLNGTime1 lacks in a piracy clause.
Maritime security constitutes nowadays a core subject to the shipping industry
and thus the drafting committees have to revise the standard charter-party forms as per
their security clauses, because without safety and prevention transportation is set into
jeopardy.
Demurrage and laytime
GIIGNL VCP approaches the demurrage and laytime clauses in an

unconventional way. Clause 4 of Part II defines that Charterer must not pay demurrage
where delay is caused by reasons such as strike, fire, explosion etc., whereas clause 3
does not refer to those circumstances which can postpone the laytime’s commencement.
This omission may lead to the case that laytime continues to run in cases that the
Charterer should be exempted from paying demurrage.
4.3 The Necessity for the Creation of a New Form
First of all, after a careful consideration of the presentation and analysis of the
clauses in chapter 3 pertaining to ShellLNGTime1, it can be safely concluded that this
standard charter-party form contains to an extended degree common clauses with
ShellTime 4. The non-LNG clauses are nearly the same in the previous two forms. The
success of ShellLNGTime1 was such that this form was used for both voyage charters
and long term contracts which served the needs of SPAs (London Shipping Law Centre -
Maritime Business Forum, 2012).
As the UK Protection and Indemnity Club (UK P&I Club) reported, the fact that
ShellLNGTime1’s provisions were the result of the decisions of many courts and
arbitrations, but also the fact that a twenty-year practical experience and case law come
along its clauses, made this form the most widespread throughout the LNG chartering
market (Feeney, 2012). ShellLNGTime1 does not contain clauses related to demurrage
and laytime and thus it is insufficient, ineffective and time-consuming when a spot cargo
arises.
47
The recent transition from the long-term to the spot market, analyzed in more
detail in Chapter 2, and the necessity for the facilitation of contracting between
shipowners and charterers, led in 2012 to the creation of the GIIGNL standard charter-
party form.
As for the GIIGNL VCP, it is considered to be a short, simple and concise form
which incorporated a number of modifications previously included in other standard
tanker voyage forms. Innovative was also the introduction of the new LNG charter terms,
like for example the LNG heel, and the distribution of responsibility for gassing up and
cooling down (Vermeire, 2013).
Nonetheless, as was mentioned in the previous subsection of the thesis, where the
most important omissions over the existing clauses were identified, the GIIGNL VCP
does not seem to absolutely serve the initial expectations of the drafting committee and
of the GIIGNL members. Someone would expect it to be a hundred-per-cent charterer-
friendly one, as in voyage chartering the risk is transferred from the charterer to the
shipowner (Stopford, 2009). The port safety issue and the charterer’s warranties that
were successfully included in other most recent forms like SHELLVOY6 and BPVOY4
where the former is asked to act with due diligence, are absent (Feeney, 2012).
Furthermore, asking from the charterer to guarantee for the vessel’s safety at port is an
owner-friendly approach and does not serve the purpose of the form’s creation.
Similar is the case concerning the demurrage and laytime provisions of the VCP
where the shortage of a charterer-friendly exemption list makes the contracting under this
form unprofitable.
Both standard charter-party forms namely, ShellLNGTime1 and GIIGNL VCP
have a number of advantages. They have also simultaneously offered to the LNG
shipping industry a new era for easier and more predictable chartering to the
counterparties. This has been achieved through a number of clauses which specify issues
and liabilities that previous standard tanker forms like ShellTime4 or BP3 used for the
chartering of LNGCs, could not define.
These forms however, seem to present a number of disadvantages and thus have
created the necessity for the introduction of a new one. These concerns seem to be
stronger in the case of GIIGNL VCP rather than the ShellLNGTime1, as the first is the
only existing form drafted for voyage chartering purposes but nonetheless contains a
number of owner-friendly approaches over critical and disputing issues.
48
Another reason which strengthens the dynamic of a new VCP form is that many
voyage charters even today, successfully take flesh and bones under the ShellLNGTime1
form. In any case, steps have started to be taken in the direction of drafting a new VCP
form, while ShellLNGTime1 remains a reliable and preferable TCP solution.
4.4 Future Challenges and Developments
As revealed in chapter 2, the LNG market seems to be changing day by day with
the uprising trend of spot market being a reality. Baltic and International Maritime
Council (BIMCO) along with GIIGNL, took action and composed a working group
which will draft a new more flexible form in order to give the counterparties more
options to hedge their risks and reduce costs (LNG Journal Shipping Review, 2014). This
form will be called LNGVOY and the main issues that the new form will try to regulate
are the heel and the boil-off.
When in voyage charter, the shipowner pays for the fuel and bears the risk of
delay to the voyage. Unlikely, in time charter the risk is with the charterer. A solution
which will probably be achieved via the clauses of the new LNGVOY, is that the vessel
will make use of the boil-off as bunker for free during the voyage, but up to a
predetermined limit. In case of delays, the fuel loss arising, will be shared by the
counterparties. Under the LNGVOY, the risk will be with the owners except for the case
where the delay is caused by charterers’ fault or by any other unexpected incident, such
as piracy or seizure of the vessel (BIMCO website, 2015).
49
CHAPTER 5: CONCLUSION
5.1 Summary of Main Findings and Conclusions
The present dissertation has explained the market and legal framework, under
which the necessity for the transition from the time to the spot LNG chartering market
rises, and the identification of the factors under which this transition is being performed.
More specifically the study investigated the necessity and the potentials of rising
the LNG spot market by analysing and comparing significant LNG charter forms.
The technical and legal background of LNG chartering presented in the
introduction and the LNG market dynamics presented afterwards, gave an overview of
the current market situation by focusing on those quantitative and qualitative variances
which promote the current transition from the long-term to the spot LNG market.
More specifically, the analysis demonstrated that the supply and demand for LNG
along with the supply for LNG cargo transportation, i.e. LNGGs, managed to answer to
the respective research objective referring to the potentials of the rising LNG spot
market. Moreover, it can be concluded that although an oversupply of fleet is observed
due to the shipowners’ sense about the upcoming spot market growth and as both long-
term and spot charter rates are low, the forthcoming augmentation of the LNG volume
produced by LNG terminals gives the spot market a new capacity.
As mentioned above, the second main objective of this research was to critically
compare and analyse the most significant LNG charter forms. So, with the presentation
of the most significant LNG-linked and not clauses of the ShellLNGTime1 TCP and the
GIIGNL VCP, an identification of similar clauses found on other standard tanker charter-
party forms took place. A remarkable note is that although these two standard charter-
party forms created a new era for the drafting of LNG contracts by providing the
counterparties with time, money-saving and risk allocating clauses, in some cases
omissions were found which did not use to exist in previous oil tanker standard forms.
Finally, in respect of answering the research questions, of whether there is a
necessity for the creation of a new charter-party form, this thesis presented the most
critical existing omissions of ShellLNGTime1 and GIIGNL and illustrated that although
they are two reliable forms, both are characterised by some degree of deficiency in terms
of usefulness. For instance, ShellLNGTime1, being a TPC, lacks demurrage and laytime
provisions and thus the counterparties may prefer to draft their contract upon another less
50
time-consuming form. On the other hand, the GIIGNL VCP has structural errors, as
someone would expect from a VC to be absolutely charterer-friendly.
Nonetheless, both of them can and must be used unless either a revision of them
or a totally new form comes up, as these two standard forms are the only to provide the
LNG industry with heel and boil-off clauses and provisions.
5.2 Limitations of the Research
This research achieved the goals that it aimed to cover. However, there were a
number of limitations in it, and future work in this area may look to improve on these
areas.
First of all, it should be noted that there is considerable lack of prior research
studies on this topic. This means that it was difficult to use a literature review as a guide.
For this reason the researcher in many cases used data from extremely recent (2014-
2015), papers in companies’ databases.
Second, access to online sources was also limited due to rights of use or
membership reasons. This made the data collection phase a time-consuming process.
Information was mainly retrieved from the websites of organizations, companies and
journals. This is why the methodological process was based on content analysis of
already existing charter parties.
Finally, it should be underlined that the spot market is a new concept and
therefore, its involvement in LNG chartering has not been adequately investigated so far.
In summary, the above limitations did not hinder the effort to answer the research
questions because the methodological process of the content analysis of the charter
parties was substantially supported by useful quantitative data from BIMCO and other
sources. Therefore the qualitative and explanatory process followed throughout this study
was extended in scope, so as to answer the research questions and to ensure that valid
results could be achieved. The study did achieve that.
5.3 Recommendations for Further Research
This research in general has focused primarily on the explanation of the transition
from the time to the spot LNG chartering market and the identification of the factors
under which this transition can be performed. Particularly, we examined the necessity
51
and the potentials of the rising LNG Spot Market by critically comparing and analyzing
the most significant LNG charter forms.
Taking into account the research conclusions presented in this dissertation and on
the fact that there is considerable lack of previous research on this topic, it is our
contention that future research needs to adopt a broader and in-depth analysis of the
potentials of the rising LNG Spot Market.
Specifically, future research could focus on various legal or economic aspects of
an effective transition from the time to the spot LNG chartering market. For instance,
BIMCO and GIINLG are currently planning to introduce the LNGVOY charter-party,
which could be compared to the already existing ones, with a view to explaining if its
clauses serve the reasons it was created focusing on its being “charter-friendly” aspect.
Based on our analysis, we foresee continuing evolution of world LNG markets
toward a higher percentage of volumes being traded under short-term contracts or sold as
spot cargoes. Moreover, it could be supported that volumes of LNG moved under long-
term contracts can be expected to decline in the years ahead. An increase in the liquidity
of spot market could motivate additional spot market activity in market equilibrium.
Simultaneously, the surplus created by trading in long-term contracting would decline,
thereby reducing the liquidity of the long-term bilateral contract market. These changes
could make developers of new projects more content to leave more of their capacity
exposed to spot market trading. Therefore, future research could equally focus on the
examination of trends toward more spot and short-term trading LNG contracts, since
such contracts, in turn, may reinforce the increase in spot market liquidity.
Finally, future research could shed some light on the question of the shipowners’
trend to augment the number of their ships, in order to be able to serve the respective
expected augmentation of LNG supply.
52
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Chartering Practice, 7th edn., London: Informa Law.
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[Accessed: 20/07/2015].
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58
APPENDICES
The GIIGNL VCP……………………………………………………………………….60

The ShellLNGTime1 TCP…………………………………………………………...….86
59
LNG CARRIER VOYAGE CHARTER PARTY
BETWEEN
__________________________________
AS OWNER
AND
_________________________________
AS CHARTERER
DISCLAIMER
This document was drafted only for the purpose of serving as a reference and the user is
required to use it at its sole discretion and responsibility. GIIGNL and all of its
members hereby disclaim any direct or indirect liability as to information contained in
this document for any industrial, commercial or other use whatsoever. GIIGNL and all
of its members recommend that any entity considering the use of this document first
consult with such entity’s legal counsel. This document does not contain any offer, any
solicitation of an offer, or any intention to offer or solicit an offer by any member of
GIIGNL. No GIIGNL member is required to enter into an agreement based on this
document.
60
Table of Contents
PART I 63
A. VESSEL DESCRIPTION 63
B. DELIVERY OF VESSEL WITHIN THE LAYCAN 63
C. LOADING PORT 64
D. DISCHARGING PORT 64
E. CARGO 65
F. TANKS' CONDITION 65
G. LNG COMPENSATION 66
H. FREIGHT 66
I. BILLING 66
J. LAYTIME 66
K. DEMURRAGE 67
L. CARGO MEASUREMENT 67
M. BOIL-OFF 67
N. LOADING AND UNLOADING RATES 68
PART II 69
1. DESCRIPTION AND CONDITION OF VESSEL 69
2. WARRANTY - VOYAGE – CARGO 72
3. NOTICE OF READINESS AND LAYTIME 72
4. DEMURRAGE 73
5. SAFE BERTHING – SHIFTING 73
6. LOADING AND DISCHARGING 74
7. MARINE SURVEYOR 74
8. DUES AND OTHER CHARGES 75
9. CARGOES EXCLUDED 75
10. GENERAL EXCEPTIONS CLAUSE 75
11. BILLS OF LADING 76
12. CLAUSE PARAMOUNT 76
13. NEW JASON CLAUSE 77
14. GENERAL AVERAGE 77
15. BOTH TO BLAME 78
16. LIMITATION OF LIABILITY 78
17. WAR RISKS 79
18. PIRACY 80
19. DEVIATION CLAUSE 82
20. LIEN 82
21. AGENTS 82
22. BREACH 82
61
23. LAW AND ARBITRATION 82
24. SUBLETTING / ASSIGNING 83
25. OIL POLLUTION 83
62
LNG CARRIER VOYAGE CHARTER PARTY
DATE: [Insert date]
It is this day agreed between [Insert company name, address and number of
registration] ("Owner"), being the [disponent] owner(s) of the LNG vessel called
[Insert the name of the Vessel ("Vessel") and [Insert company name, address and
number of registration] ("Charterer") that the transportation herein provided for will
be performed subject to the terms and conditions of this Charter, which includes this
Preamble, Part I, Part II and Appendix A. In the event of a conflict, the provisions of
Part I will prevail over those contained in Part II, both of which will prevail over
Appendix A.
PART I
A. VESSEL DESCRIPTION
Refer to Form C attached hereafter as Appendix A.
B. DELIVERY OF VESSEL WITHIN THE LAYCAN
The Vessel's current position is [Insert current location].
The Owner expects the Vessel to arrive at the Loading Port at [Insert time] on [Insert
date] (the "Expected Arrival Date").
The laycan (the “Laycan”) shall be as follows:

Commencing: [Insert the date] at [Insert the hour] hours Local Time (the
"Commencing Date")
Cancelling: [Insert the date] at [Insert the hour] hours Local Time (the "Cancelling
Date").
The Vessel shall be deemed arrived at the Loading Port when the Owner has issued the
NOR in conformity with the requirements of Section 3 Part II.
Should the Vessel not be ready to load by the Cancelling Date, Charterer shall have the
option (but not the obligation) immediately to cancel this Charter unless the Vessel has
63
been delayed due to Charterer's change of orders in which case the Laycan shall be
extended by the period of such delay.
Should Owner become aware of any change to the Expected Arrival Date in excess of
[Insert number of [x] hours], Owner shall immediately notify the Charterer of such
change.
Should the Owner become aware that the Vessel will not arrive by the Cancelling Date,
Owner will immediately give notice to Charterer declaring a new Expected Arrival Date
and ask Charterer to elect whether or not to cancel this Charter.
Within [Insert number of days] days of receipt of such notice, Charterer shall either:
(i) cancel this Charter;
(ii) confirm a revised Laycan which shall be amended such that the new Expected
Arrival Date and hour stated by Owner shall be the Commencing Date and the
second day thereafter, at the same hour, shall be the Cancelling Date; or (iii)
agree a new Laycan or an extension to the Laycan.
If Charterer fails respond to such notice within [Insert number of days] days, Charterer
shall be deemed to have irrevocably elected option (ii) above.
Cancellation or failure to cancel shall be entirely without prejudice to any claim for
damages Charterer may have for the Vessel not being ready to load by the original
Cancelling Date stated in this Clause.
C. LOADING PORT
One safe port [Insert the port or the optional ports where the Vessel must be
delivered]
For information only, the estimated date/time of departure from the Loading Port is:
[Insert date(s) and time]
D. DISCHARGING PORT
One safe port [Insert the port or the optional ports]
For information only, the unloading window for arrival at the Discharging Port shall be:
[Insert date(s) and time]
64
E. CARGO
Liquefied Natural Gas (“LNG”) not exceeding a specific gravity of 0.50.
The Vessel [shall / shall not ] complement natural boil-off with forced boil-off to steam
at the required Service Speed as set out in Appendix A.
F. TANKS' CONDITION
Owner and Charterer shall agree that in Clauses F1 and F2, either paragraphs (a) or
paragraphs (b) shall apply. The non-applicable paragraph shall be struck-through and the
change initialed at the time of execution of this Charter. F.1. Before loading
(a) The Vessel shall arrive at the Loading Port with her cargo spaces in a cold and ready
to load condition. The Vessel shall be capable of maintaining such condition for
[Insert number of hours] hours from service of NOR. Should the Vessel fail to
arrive or maintain her cargo tank condition as specified herein, Charterer shall make
additional LNG cargo available to the Vessel to purge and/or cool down as
necessary to permit loading; however, the cost and time used to load any such
additional LNG and to cool the Vessel's cargo tanks to loading temperature shall be
for Owner’s account.
(b) The Vessel shall arrive at the Loading Port with her cargo spaces under an
atmosphere of [inert gas / natural gas]. Charterer shall make available to the
Vessel any LNG as may be required to purge (gas-up) the cargo spaces with natural
gas and/or to cool down the Vessel’s tanks in preparation for loading. The cost of
such LNG for purging (gassing-up) and cooling down shall be for Charterer’s
account. The time required for purging (gassing up) or cooling down shall be for
[Owner’s / Charterer’s] account, [except for delays caused by the terminal
which shall be for Charterer's account].
F.2. After unloading
Option 1: The Vessel shall be entitled to retain up to [Insert the number of cubic
meters] cubic meters of LNG cargo as “heel” upon completion of discharge for the
purposes of tank temperature maintenance in the following ballast passage.
65
Option 2: The Vessel shall not be entitled to retain any pumpable liquid heel upon
completion of discharge. If non-pumpable LNG is remaining in tanks, Owner shall pay
this non-pumpable LNG as per LNG Compensation hereafter.
G. LNG COMPENSATION
Wherever pursuant to this Charter any LNG Compensation is due by Owner to Charterer,
it shall be calculated in accordance with the following LNG price: [Insert the
price]/MMBTU).
H. FREIGHT
Option 1: [Insert the lump sum freight, all inclusive] Option 2: [Insert an amount,
not including fuel costs which will be calculated and duly documented by Owner at
the end of the voyage and paid by Charterer in addition to the amount above]
Freight shall be deemed earned upon loading.
I. BILLING
Freight, demurrage and any other monies payable to Owner pursuant to this Charter shall
be payable in [Insert currency] and invoiced to Charterer at:
[Insert address for billing] and paid to
Owner's designated bank account:
Bank: [Insert]
Account No.: [Insert]
Other Information: [Insert]
An advance partial payment of the Freight, in the amount of [Insert a percentage of the
lump sum freight] shall be paid to Owner without deduction or set off upon the Vessel's
arrival at the Loading Port in the Laycan Period. The balance of the Freight shall be
payable without deduction or set off, subject to any freight/fuel calculation set out at
Clause H, above, upon completion of discharge as evidenced by the unloading certificate.
J. LAYTIME
The total laytime for loading and unloading the cargo shall be: [Insert the number of
running hours]
66
See furthermore Section 3, Part II
K. DEMURRAGE
Charterer shall pay to Owner for each day exceeding the total laytime a demurrage rate of
[Insert the demurrage rate] per day and pro rata for any portion of a day.
L. CARGO MEASUREMENT
All cargo measurement hereunder for the calculation of Freight or any warranties,
hereunder, related to cargo or heel volumes shall be determined from the final custody
transfer documentation, certifying measurements taken on board the Vessel immediately
before and after cargo transfer at the Loading and Discharging Ports, as applicable. Such
measurements shall be witnessed (signed) by both the Vessel and the terminal providing
or receiving the cargo. Charterer may provide its own representatives to be present at any
custody transfer measurement applicable to cargo carried hereunder. Custody transfer
measurements shall be carried out following the recommendation of GIIGNL custody
transfer handbook and in accordance with standard industry practice.
M. BOIL-OFF
The Vessel shall be entitled to use all natural boil-off from the LNG cargo as fuel under
the Vessel’s boilers. Such boil-off shall be provided by Charterer without cost to Owner
subject to the following warranties:
(i) Owner warrants that any boil-off (whether natural or otherwise) shall not exceed
[Insert total boil-off cap] during the period from dropping last outward pilot at the
Loading Port and service of NOR at the Discharging Port (such period hereinafter
referred to as the "Sea Passage" and
(ii)Owner warrants that at all times other than during the Sea Passage, the natural boil-off
shall not exceed [Insert the boil-off rate] percent ([Insert the boil-off rate]%) of the
Vessel’s gross capacity per day.
Any boil-off in excess of the above warranties shall be paid for by Owner as LNG
Compensation in accordance with Section G, Part I hereof save where Charterer has
instructed Owner to force boil-off in which case the amount of such forced boil-off shall
be provided by Charterer without cost to Owner.
67
The actual amount of boil off during Sea Passage shall be calculated by subtracting the
volume of LNG contained in the Vessel’s tanks at gauging after Sea Passage at the
Discharging Port from the volume therein at gauging before Sea Passage at the Loading
Port.
N. LOADING AND UNLOADING RATES
Owner warrants that the Vessel shall be capable of loading and discharging the cargo as
follows:
(i) a full cargo may be loaded within [Insert the number of hours] if the Vessel's
cargo tanks are at or below the tank design temperature for commencement of
loading, excluding the time for connecting; disconnecting; cooling down; topping up
and custody transfer measurement, and provided that the loading terminal is capable
of pumping at least [Insert the number of cubic meters] cubic meters of LNG per
hour to the Vessel at not less than [3.0 bar] (gauge) pressure at the flange
connection between ship and terminal utilizing a minimum of two liquid loading
arms, and provided that the terminal is capable of receiving all return vapour from
the Vessel that may be generated when loading the Vessel at the above specified
flow rate of LNG;
(ii) a full cargo may be discharged within [Insert the number of hours], excluding the
time for connecting; disconnecting; cooling down; starting up pumps; ramping up;
ramping down for stripping at end of discharge and custody transfer measurement,
and provided that the discharge terminal is capable of receiving LNG at a rate of at
least [Insert the number of cubic meters] cubic meters of LNG per hour with a
back pressure at the flange connection between ship and terminal not exceeding [100
meters] of liquid LNG of specific gravity of 0.5 utilizing a minimum of two liquid
unloading arms. The terminal must also be capable of providing sufficient return
vapour to the Vessel to compensate for the displacement of the LNG being
discharged from the Vessel.
68
PART II
1. DESCRIPTION AND CONDITION OF VESSEL
1.1 Owner warrants that at the time that Owner is obliged to proceed to the Loading
Port:
(i) the Vessel shall be classed by a Classification Society, which is a member

of the International Association of Classification Societies;
(ii) she shall be insured with reputable insurance underwriters to a level and
extent which is not less than would generally be taken out on vessels of
her type, including hull and machinery, protection and indemnity,
pollution and such other coverage as is customary in the LNG industry.
The Vessel shall be entered in the P&I Club, being a member of the
International Group of P&I Clubs.
(iii) if she is twenty years old or over she shall have and maintain a LNG
Condition Assessment Program (“CAP”) of not less than 2 (two);
(iv) she shall be in every way fit to load, carry, discharge and measure LNG in
international trade;
(v) she shall be tight, staunch, strong, in good order and condition, and in
every way fit for the service, with her machinery, boilers, hull and other
equipment (including but not limited to hull stress calculator, radar,
computers and computer systems) in a good and efficient state;
(vi) all her tanks, valves and pipelines shall be liquid and gas tight;
(vii) she shall have all her cargo measuring equipment and instrumentation
calibrated and certified in accordance with the requirements of the
Vessel’s Classification Society;
(viii) she shall have her insulation spaces prepared as per her containment
system design conditions;
(ix) she shall comply with the regulations in force so as to enable her, if her
size permits, to pass through the Suez Canal and Panama Canal;
(x) she shall have on board all certificates, documents and equipment required
from time to time by any applicable law to enable her to perform the
69
charter service without delay. For the avoidance of doubt this will include,
but will not be limited to, the Vessel’s Certificate of Financial
Responsibility;
(xi) she shall comply with the description appended hereto as Appendix A;
(xii) her ownership structure, flag, registry, classification society and

management company shall not be changed during the execution of this
charter-party;
1.2 Owner warrants that it shall exercise due diligence to ensure that the
requirements of Clause 1.1 remain satisfied for the duration of the Charter
period.
1.3 Owner guarantees that it will operate:
(i) a safety management system certified to comply with the International

Safety Management Code (“ISM Code”) for the Safe Operation of Ships
and for Pollution Prevention;
(ii) a documented safe working procedures system (including procedures for

the identification and mitigation of risks);
(iii) a documented environmental management system;
(iv) a documented accident/incident reporting system compliant with flag state

requirements;
1.4 Owner shall maintain Health Safety Environmental (“HSE”) records

sufficient to demonstrate compliance with the requirements of their HSE
system and of this charter.
1.5 Owner warrants that at the time that Owner is obliged to proceed to the
Loading Port:
(i) the Vessel shall have a full and efficient complement of master, officers
and crew for a vessel of her tonnage, who shall in any event be not less
than the number required by the laws of the flag state and who shall be
trained to operate the Vessel and her equipment competently and safely
and in accordance with generally accepted international standards for
LNG vessels;
70
(ii) all shipboard personnel shall hold valid certificates of competence in
accordance with the requirements of the law of the flag state and IMO’s
SOLAS consolidated editions 2004 including later amendments;
(iii) all shipboard personnel shall be trained in accordance with the relevant
provisions of the International Convention on Standards of Training,
Certification and Watchkeeping for Seafarers, 1995 or any additions,
modifications or subsequent versions thereof;
(iv) there shall be on board sufficient personnel with a good working

knowledge of the English language to enable cargo operations at loading
and discharging places to be carried out efficiently and safely and to
enable communications between the Vessel and those loading the Vessel
or accepting discharge therefrom to be carried out quickly and efficiently.
Owner shall ensure that the Vessel’s master and chief officer have
attended a ship handling course acceptable to Charterer and a bridge
resource management course in accordance with the guidelines set by
IMO.;
(v) the terms of employment of the Vessel’s staff and crew will always remain
acceptable to the International Transport Worker’s Federation and the
Vessel will at all times carry a blue card;
(vi) the manning level and nationality of the Vessel’s officers given in the
Appendix A referred to in Clause 1.5 (iv) will not change without
Charterer’s prior agreement which shall not be unreasonably withheld.
1.6 Owner warrants that it shall exercise due diligence to ensure that the
requirements of Clause 1.5 remain satisfied for the duration of the
Charter period.
1.7 Owner shall keep a strict account of all cargo loaded, boil-off, and cargo
discharged.
1.8 Owner warrants that the Vessel has had a SIRE inspection and approval
within the last [six (6) or Insert other number] months.
1.9 Owner warrants that any information provided on any questionnaire(s)

requested by Charterer or any other Vessel information/details provided
71
by Owner to Charterer is always complete and correct as at the date
hereof, and from the time when the obligation to proceed to the Loading
Port attaches and throughout the charter period. This information is an
integral part of this Charter but if there is any conflict between the
contents of the questionnaire(s), or information provided by Owner, and
any other provisions of this Charter then the provisions of this Charter
shall govern.
2. WARRANTY - VOYAGE – CARGO
The Vessel shall with all convenient dispatch, proceed as ordered to Loading
Port(s) named in accordance with Sections C and D in Part I hereof, or so near
thereunto as she may safely get (always afloat), and being sea worthy, and having
all pipes and pumps in good working order, and being in every respect fitted for
the voyage and for calling and handling cargoes at both loading and unloading
ports, shall load (always afloat) from the instructions of Charterer a full and
complete cargo of LNG, not exceeding what she can reasonably stow and carry
over and above her bunker fuel, consumable stores, boiler feed, culinary and
drinking water, and complement and their effects, and being so loaded shall
forthwith proceed, as ordered on signing bills of lading, direct to the Discharging
Port(s), or so near thereunto as she may safely get (always afloat), and deliver
said cargo. If a specific cargo pressure or temperature is requested by Charterer,
Owner shall, within the safe constraints of vessel design and certification,
exercise due diligence to maintain the parameters requested.
3. NOTICE OF READINESS AND LAYTIME
Upon arrival at the pilot boarding station or customary anchorage at each port of loading
or discharge, the master or his agent shall give the terminal and Charterer or his
agent notice by email and/or fax that the Vessel has arrived (“Notice of
Readiness” or “NOR”). By giving NOR, Owner warrants that the Vessel is
ready to load or discharge her cargo and that the Vessel's tanks are in the
condition specified in Part 1 Clause F hereof. Such Notice of Readiness shall not
be given, without Charterer’s sanction, before the Commencement Date in
connection to the loading.
72
Notice of Readiness may not be served at the Discharge Port before commencement of
the unloading window. Any Notice of Readiness served before that date will not
take effect until re-served on or after that date.
Laytime, as provided in Section J Part I (“Laytime”), shall commence upon the

expiration of six (6) hours after proper issuance of such Notice of Readiness.
Laytime shall end at the Loading Port after completion of loading on dropping
outward pilot and at Discharging Port after completion of discharge on
disconnection of cargo hoses.
Any delay due to the Vessel's condition or breakdown or inability of the Vessel's
facilities to cool down, load or discharge cargo shall not count as used Laytime.
4. DEMURRAGE
Charterer shall pay demurrage per running day and pro rata for a part thereof at the rate
specified in Part I for all time that loading and discharging and used Laytime as
elsewhere herein provided exceeds the allowed Laytime elsewhere herein
specified. Charterer shall not be liable for any demurrage for delay caused by
reason of fire, explosion, storm, strike, lockout, stoppage or restraint of labor or
by breakdown of machinery or equipment in or about the plant of Charterer,
supplier, shipper or consignee of the cargo not resulting from negligence on their
part or on the part of their servants or agents, or caused by strike, lockout,
stoppage or restraint of labor
for master, officers and crew of the Vessel or tugboat or pilots or any other cause
whatsoever beyond the control of Charterer. Any demurrage payable by Charterer
shall be paid at the same time and in the same manner as the final Freight
payment hereunder.
5. SAFE BERTHING – SHIFTING
The Vessel shall load and discharge at any safe place or wharf, or alongside vessels,
reachable on her arrival, which shall be designated and procured by Charterer,
provided the Vessel can proceed thereto, lie at, and depart always safely afloat.
Charterer shall have the right of shifting the Vessel at Loading and/or Discharging
Ports from one safe berth to another on payment of all towage and pilotage
73
shifting to next berth, charges for running lines on arrival at and leaving that
berth, additional agency charges and expense, customs overtime and fees, and any
other extra port charges or port expenses incurred by reason of using more than
one berth.
Time consumed on account of shifting shall count as used Laytime.
6. LOADING AND DISCHARGING
The cargo shall be pumped into and out of the Vessel at the expense, risk and peril of
Charterer as far as the loading and/or discharging terminal’s permanent ship/shore
connections are concerned, and shall be pumped into and out of the Vessel at the
expense, risk and peril of Owner as far as the Vessel's permanent ship/shore
connections are concerned. The Vessel shall supply her pumps and the necessary
power for discharging in all ports, as well as necessary hands. All overtime of
officers and crew incurred in loading and/or discharging shall be for account of
Owner.
Charterer shall furnish, or cause to be furnished, the necessary loading arms or

hoses for loading and discharging and such arms or hoses shall be connected and
disconnected under the control of Owner at Charterer's expense.
7. MARINE SURVEYOR
Charterer has the right to appoint a Marine Surveyor(s) in order, notably, to make
a vetting inspection of the Vessel at any time prior to commencement of Loading
including at any previous port according to, notably, the recommendations and
guidelines of the Oil Companies International Marine Forum (OCIMF). All
relevant documentation required by the Marine Surveyor(s) shall be
communicated promptly to the Marine Surveyor. Charterer shall pay all expenses
relating to the work undertake by the Marine Surveyor(s). Provided that Charterer
has provided to Owner prior to the fixture of the Vessel the criteria that shall be
used for vetting purposes, should the survey of the Marine Surveyor(s) lead to a
negative vetting recommendation on the Vessel by the vetting department of
Charterer or any other competent authority, Charterer shall have the option to
cancel this Charter and all Freight paid or advanced by Charterer to Owner, if
any, shall be promptly refunded.
74
8. DUES AND OTHER CHARGES
Dues and other charges levied upon the Vessel, howsoever assessed, shall be paid by
Owner. Dues and other charges upon the cargo shall be paid by Charterer.
9. CARGOES EXCLUDED
Only Liquefied Natural Gas (LNG) cargoes shall be loaded on the Vessel. Such cargo
shall not exceed a specific gravity of 0.50, nor have a temperature lower than -163
o
C.
10. GENERAL EXCEPTIONS CLAUSE
The Vessel, her master and Owner shall not, unless otherwise in this Charter expressly
provided, be responsible for any loss or damage, or delay or failure in performing
hereunder arising or resulting from: - any act, neglect, default or barratry of the
master, pilots, mariners or other servants of Owner in the navigation of the
Vessel; fire, unless caused by the fault of Owner; collision, stranding or peril,
danger or accident of the sea or other navigable waters; saving or attempting to
save
life or property; or any loss or damage arising from inherent defect, quality or
vice of the cargo; any act or omission of Charterer or Owner, shipper or
consignee of the cargo, their agents or representatives; explosion, bursting of
boilers, breakage of shafts, or any latent defect in hull, equipment or machinery,
unless caused by the fault of Owner; unseaworthiness of the Vessel unless caused
by want of due diligence on the part of Owner to make the Vessel seaworthy or to
have her properly manned, equipped and supplied; or from any other cause of
whatsoever kind arising without the actual fault of Owner.
And neither the Vessel nor master or Owner, nor Charterer, shall, unless otherwise in
this Charter expressly provided, be responsible for any loss or damage or delay or
failure in performing hereunder, arising or resulting from: Act of God; act of war;
perils of the sea; act of public enemies, pirates or assailing thieves; arrest or
restraint of princes, rulers or people; or seizure under legal process provided bond
is promptly furnished to release the Vessel or cargo; strike or lockout or stoppage
75
or restraint of labor from whatever cause, either partial or general; or riot or civil
commotion.
11. BILLS OF LADING
The master, although appointed by Owner, shall be under the orders and
directions of Charterer as regards the bills of lading, without prejudice to this
Charter. Charterer hereby indemnifies Owner against all consequences or
liabilities that may arise from signing bills of lading in accordance with the
directions of Charterer or their agents, to the extent that the terms of such bills of
lading fail to conform to the requirements of this Charter.
12. CLAUSE PARAMOUNT
The following Clause shall be included in all bills of lading issued pursuant to
this Charter:
(1) Subject to sub-clause (2) or (3) hereof, this bill of lading shall be governed
by, and have effect subject to, the rules contained in the International
Convention
for the Unification of Certain Rules relating to bills of lading signed at

Brussels on 25th August 1924 (hereafter the "Hague Rules") as amended by
the Protocol signed at Brussels on 23rd February 1968 and by the Protocol
signed at Brussels on 21st December 1979 (hereafter the "Hague-Visby
Rules").
(2) If proceedings are brought before a court or tribunal which adjudges the
Hague Rules or national legislation giving effect to such Rules compulsorily
applicable to this bill of lading, then this bill of lading shall have effect
subject to such Rules or legislation. Nothing herein contained shall be
deemed to be either a surrender by the carrier of any of his rights or
immunities or an increase of any of his responsibilities or liabilities under the
Hague Rules or such legislation.
(3) If proceedings are brought before a court or tribunal which adjudges the
United Nations Convention on the Carriage of Goods by Sea signed at
Hamburg on 31st March 1978 (hereafter the "Hamburg Rules") or national
76
legislation giving effect to such Rules compulsorily applicable to this bill of
lading, then this bill of lading shall have effect subject to such Rules or
legislation. Nothing herein contained shall be deemed to be either a surrender
by the carrier of any of his rights or immunities or an increase of any of his
responsibilities or liabilities under the Hamburg Rules or such legislation.
(4) If any term of this bill of lading is repugnant to the Hague-Visby Rules, or
Hague Rules or Hamburg Rules, or legislation giving effect to such Rules, if
applicable, such term shall be void to that extent but no further.
(5) Nothing in this bill of lading shall be construed as in any way restricting,
excluding or waiving the right of any relevant party or person to limit his
liability under any available legislation and/or law.
13. NEW JASON CLAUSE
In the event of accident, danger, damage or disaster before or after the

commencement of the voyage, resulting from any cause whatsoever, whether due
to negligence or not, for which, or for the consequence of which, the carrier is
not responsible by statute, contract or otherwise, the cargo, shippers, consignees
or owners of the cargo shall contribute with the carrier in general average to the
payment of any sacrifices, losses or expenses of a general average nature that
may be made or incurred and shall pay salvage and special charges incurred in
respect of the cargo.
If a salving ship is owned or operated by the carrier, salvage shall be paid for as
fully as if the said salving ship or ships belonged to strangers. Such deposit as
the carrier or his agents may deem sufficient to cover the estimated contribution
of the cargo and any salvage and special charges thereon shall, if required, be
made by the cargo, shippers, consignees or owners of the cargo to the carrier
before delivery.
14. GENERAL AVERAGE
General Average shall be adjusted, stated and settled according to York/Antwerp

Rules 1974, as amended 1994, and, as to matters not provided for by those rules,
according to the laws and usages of the jurisdiction specified in Part 2, Clause 23
77
of this Charter. If a General Average statement is required, it shall be prepared
in the jurisdiction specified in Part 2, Clause 23 of this Charter, unless otherwise
mutually agreed, by an Adjuster appointed by Owner and approved by Charterer.
Such Adjuster shall attend to the settlement and the collection of the General
Average, subject to customary charges. General Average Agreements and/or
security shall be furnished by Owner and/or Charterer, and/or Owner and/or
consignee of cargo, if requested. Any cash deposit being made as security to pay
General Average and/or salvage shall be remitted to the Average Adjuster and
shall be held by him at his risk in a special account in a duly authorized and
licensed bank at the place where the General Average statement is prepared.
15. BOTH TO BLAME
If the liability for any collision in which the Vessel is involved while performing
this Charter fails to be determined in accordance with the laws of the United
States of America, the following provision shall apply:
“If the ship comes into collision with another ship as a result of the negligence of
the other ship and any act, neglect or default of the master, mariner, pilot or the
servants of the carrier in the navigation or in the management of the ship, the
owners of the cargo carried hereunder will indemnify the carrier against all loss,
or liability to the other or non-carrying ship or her owners in so far as such loss
or liability represents loss of, or damage to, or any claim whatsoever of the
owners of the said cargo, paid or payable by the other or non carrying ship or her
owners to the owners of the said cargo and set off, recouped or recovered by the
other or non-carrying ship or her owners as part of their claim against the
carrying ship or carrier.
The foregoing provisions shall also apply where the owners, operators or those in
charge of any ship or ships or objects other than, or in addition to, the colliding
ships or objects are at fault in respect of a collision or contact.”
16. LIMITATION OF LIABILITY
Any provision of this Charter to the contrary notwithstanding, Owner shall have
the benefit of all limitation of, and exemptions from, liability accorded to Owner
78
or Chartered Owner of vessels by any statute or rule of law for the time being in
force.
17. WAR RISKS
(a) If, after entering into the charter any port of loading or of discharge named in
this Charter or to which the Vessel may properly be ordered pursuant to the terms
of the bills of lading be blockaded, or (b) If owing to any war, hostilities, warlike
operations, civil war, civil commotions, revolutions or the operation of
international law (i) entry to any such port of loading or of discharge or the
loading or discharge of cargo at any such port be considered by the master or
Owner in his or their discretion, acting reasonably, dangerous or prohibited or (ii)
it be considered by the master or Owner in his or their discretion, acting
reasonably, dangerous or impossible for the Vessel to reach any such port of
loading or discharge - Charterer shall have the right to order the cargo or such
part of it as may be affected to be loaded or discharged at any other safe port of
loading or of discharge within the range of loading or discharging ports
respectively established under the provision of the Charter (provided such other
port is not blockaded or that entry thereto or loading or discharge of cargo thereat
is not in the master's or Owner's discretion dangerous or prohibited). If in respect
of a port of discharge no orders be received from Charterer within [Insert
number of days] days after he or its agents have received from Owner a request
for the nomination of a substitute port, Owner shall then be at liberty to discharge
the cargo at any safe port which they or the master may in their or his discretion
decide on (whether within the range of discharging ports established under the
provisions of the Charter or not) and such discharge shall be deemed to be due
fulfillment of the contract or contracts of chartering so far as cargo so discharged
is concerned. In the event of the cargo being loaded or discharged at any such
other port within the respective range of loading or discharging ports established
under the provisions of the Charter, the Charter shall be read in respect of Freight
and all other conditions whatsoever as if the voyage performed were that
originally designated. In the event, however, that the Vessel discharges the cargo
at a port outside the range of discharging ports established under the provisions
of the Charter, Freight shall be paid as for the voyage originally designated and
79
all extra expenses involved in reaching the actual port of discharge and or
discharging the cargo there at shall be paid by Charterer or cargo owners. In the
latter event Owner shall have a lien on the cargo for all such extra expenses. The
Vessel shall have liberty to comply with any directions or recommendations as to
departure, arrival, routes, ports of call, stoppages, destinations, zones, waters,
delivery or in any otherwise whatsoever given by the government of the nations
under whose flag the Vessel sails (provided the flag is not changed after entering
into the charter) or any other government or local authority including any de
facto government or local authority of any such government or authority or by
any committee or person having under the terms of the war risks insurance on the
Vessel the right to give any such directions or recommendations. If by reason of
or in compliance with any such directions or recommendations, anything is done
or is not done such shall not be deemed a deviation.
If by reason of or in compliance with any such direction or recommendation the

Vessel does not proceed to the port or ports of discharge originally designated or
to which she may have been ordered pursuant to the terms of the bills of lading,
the Vessel may proceed to any safe port of discharge which the master or Owner
in his or their discretion may decide on and there discharge the cargo. Such
discharge shall be deemed to be due fulfillment of the contract or contracts of
chartering and Owner shall be entitled to Freight as if discharge has been
effected at the port or ports originally designated or to which the Vessel may
have been ordered pursuant to the terms of the bills of lading. All extra expenses
involved in reaching and discharging the cargo at any such other port of
discharge shall be paid by Charterer and/or cargo owners and Owner shall have a
lien on the cargo for Freight and all such expenses.
18. PIRACY
(a) If, after entering into this Charter, in the reasonable judgment of the master and/or
Owner, any port, place, area or zone, or any waterway or canal (hereinafter
“Area”) on any part of the route which is normally and customarily used on a
voyage of the nature contracted for becomes dangerous, or the level of danger
increases, to the Vessel, her cargo, crew or other persons on board the Vessel due
to any actual, threatened or reported acts of piracy and/or violent robbery and/or
80
capture/seizure (hereinafter “Piracy”), Owner, acting reasonably, shall be entitled
to take a reasonable alternative route to the Discharging Port and immediately
request consent from Charterer for the alternative route; such consent shall not be
unreasonably withheld. Should the Vessel be within any such place as aforesaid
which only becomes dangerous, or is likely to be or to become dangerous, after
her entry into it, she shall be at liberty to leave it.
(b) In any event, if the Vessel proceeds to or through an Area exposed to the risk of
Piracy Owner shall have the liberty:
(i) to take reasonable preventative measures to protect the Vessel, her crew
and cargo including but not limited to re-routing within the Area,
proceeding in convoy, using escorts, avoiding day or night navigation,
adjusting speed or course, or engaging security personnel or equipment on
or about the Vessel;
(ii) to comply with the orders, directions or recommendations of any

underwriters who have the authority to give the same under the terms of
the insurance;
(iii) to comply with all orders, directions, recommendations or advice given by

the Government of the Nation under whose flag the Vessel sails (provided
flag is not changed after entering into the charter), or other Government to
whose laws Owner is subject, or any other Government, body or group,
including military authorities, whatsoever acting with the power to compel
compliance with their orders or directions; and
(iv) to comply with the terms of any resolution of the Security Council of the
United Nations, the effective orders of any other Supranational body
which has the right to issue and give the same, and with national laws
aimed at enforcing the same to which Owner is subject, and to obey the
orders and directions of those who are charged with their enforcement.
(c) This Clause shall be incorporated into any bill of lading issued pursuant to this
Charter. Charterer shall indemnify Owner against all consequences or liabilities
that may arise from the master signing bills of lading as presented to the extent
that the terms of such bills of lading impose or result in the imposition of more
onerous liabilities upon Owner than those assumed by Owner under this Clause.
81
(d) If in compliance with this Clause anything is done or not done, such shall not be
deemed a deviation, but shall be considered as due fulfillment of this Charter. In
the event of a conflict between the provisions of this Clause and any implied or
express provision of the Charter, this Clause shall prevail to the extent of such
conflict, but no further.
19. DEVIATION CLAUSE
The Vessel shall have liberty to call at any ports in any order, to sail with or
without pilots, to tow or to be towed, to go to the assistance of vessels in distress,
to deviate for the purpose of saving life or property or of landing any ill or
injured person on board, and to call for fuel at any port of ports in or out of the
regular course of the voyage.
Charterer shall be kept fully updated at all times when the Vessel deviates from
the original route and will be provided details of alternate routing and updated
ETA for NOR for any deviations caused by Clauses 17, 18 and 19.
20. LIEN
Owner shall have an absolute lien on the cargo and all subfreights for all amounts due
under this Charter and the cost of recovery thereof including any expenses
whatsoever arising from the exercise of such lien.
21. AGENTS
Owner shall appoint Vessel's agents at all ports.
22. BREACH
Damages for breach of this Charter shall include all provable damages, and all costs of
suit and attorney fees incurred in any action hereunder.
23. LAW AND ARBITRATION
This Charter is subject to the following clauses, which shall also be included in
all bills of lading issued hereunder:
82
(i) This contract and any non-contractual liabilities arising out of or in
connection with the Charter or any bills of lading issued hereunder shall
be construed and the relations between the parties determined in
accordance with the laws of England and Wales.
(ii) All claims, disputes and other matters arising out of or in connection with
this contract which, in the opinion of one of the Parties, the Parties have
been unable to resolve by mutual agreement shall exclusively and finally
be settled by arbitration in [Insert place of arbitration: London], in
accordance with the [Insert rules of arbitration: rules of the LMAA /or/
rules of the Arbitration Act 1996] as from time to time in effect.
(iii) Such arbitration shall be conducted in the English language by three (3)
arbitrators appointed in accordance with the said Rules.
(iv) The award shall be final and binding on the Parties, and judgment upon
the award may be entered in any court or other authority having
jurisdiction or application may be made to said court or other authority for
a judicial acceptance of the award and an order of enforcement, as the
case may be. To the extent any Party is wholly or partly or directly or
indirectly government owned or controlled, such Party agrees not to seek
immunity from claim or suit or enforcement of the award on the ground of
sovereign immunity.
24. SUBLETTING / ASSIGNING
Subject to Owner’s approval, which shall not be unreasonably withheld, Charterer shall
have the right to sublet the Vessel or assign this Charter to any individual or
Company. However, Charterer shall always remain responsible for the
fulfillment of this Charter in all its terms and conditions.
25. OIL POLLUTION
The Vessel shall be entered in a P&I club that is a member of the International Group of
Protection and Indemnity Clubs, and the Vessel shall comply with any port, state
83
or local rules regarding pollution or proof of financial responsibility therefore
which may be applicable to the ports specified in Part I.
APPENDIX A – GAS FORM C
Insert Gas Form C
84
IN WITNESS WHEREOF, the Parties have caused this Charter, consisting of a
Preamble, Parts I, II and Appendix A to be executed in duplicate as of the day and year
first above written.
Witness the signature of:

(for Charterer) By:
Witness the signature of:

(for Owner) By:
85
SHIPPING LAW HANDBOOK - 5th Edition, 2011
Part I Standard Forms
Chapter Part I
Standard Forms
I.23 SHELLLNGTIME 1 CHARTERPARTY

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LNG Chartering and Charter Party Analysi

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Cardiff University - Cardiff Business School

MSc in Marine Policy 2014-2015

“LNG Chartering Policy and Charter - Party Analysis”.

Signed: Ioannis Mavrokefalos

Other sources are acknowledged by footnotes giving explicit references. A bibliography

Signed: Ioannis Mavrokefalos

CHAPTER 2: LNG MARKET DYNAMICS

CHAPTER 3: COMPARATIVE ANALYSIS OF LNG CHARTER FORMS

CHAPTER 4: CRITICAL EVALUATION OF THE EXISTING FORMS

C/P Charter – Party

EIA U.S Energy Information Administration

FSRU Floating and regasification Unit

GIIGNL International Group of Liquefied Natural Gas Importers

IGU International Gas Union

IMO International Maritime Organization

ISPS International Ship and Port Facility Security Code

LNG Liquefied Natural Gas

LNGC Liquefied Natural Gas Carrier

MTSA Maritime Transportation Security Act of 2002

MTPA Million Tonnes per Annum

QCLNG Queensland Curtis LNG

SPA’s Sale and Purchase Agreements

SIGTO Society of International Gas Tanker and Terminal Operators

T/C Time Charter – Party

USCG US Coast Guard

VCP Voyage Charter – Party

Figure 2.1 The LNG supply chain……………………………………………………….11

Table 1. Total LNG Fleet Development for Years 2000-2010………………………….21

Image 1. Natural Gas Pipelines…………………………………………………….……11

1.1 Background of the Research Topic

1.1.1 Technical Background Analysis

Definition and basic properties of LNG

The LNG transportation system

Image 1. Natural Gas Pipelines. Image 2. LNG Vessel.

1.1.2 Legal Background Analysis

Chartering can be defined as an activity that is exclusive to the maritime industry

1.2 Research Aim and Objectives

In particular, the objectives of this thesis are:

1.3 Research Questions

This dissertation is motivated by three research questions:

1.4 Rationale for the Research

In previous research a presentation and analysis of charter-parties has taken place,

1.5 Proposed Methodology

1.6 Thesis Lay - Out

2.1 Overview of the Chapter

2.2 The LNG Market Overview

2.2.1 LNG Supply Overview

2.2.2 LNG Demand Overview

The Asian market:

The European market:

2.2.3 LNG Fleet Overview

Total LNG Total LNG

The influence of the perpetual increase in the LNG fleet is conspicuous as it

Taking a quantitative approach of analysis, a factor which influences the

Figure 2.5 Fleet composition in terms of vessel’s commitment under contracts.

2.3 The Trading of Vessels under LNG Time Charters

Additional cargo capacity will be offered in the years to come by shipowners

Growth of the LNG supply

2.6 Factors to Impede the Growth of the LNG Spot Market

Receiving Terminal Berthing Capacity

Collapse in LNG charter rates

Technical difficulties leading to shut down of trains and projects

3.1 Overview of the Chapter