The adoption of Liquefied Natural Gas (LNG) as a fuel for ships has seen significant growth over the last ten years. Although LNG is a fossil fuel and still emits CO2, it serves as a transitional energy source aimed at decreasing emissions until sustainable renewable and low-carbon alternatives become widely available.
Recent trends indicate that LNG could effectively contribute to lowering CO2 output in the shipping industry. In the last five years, the number of merchant vessels capable of utilizing LNG as fuel has surged by 137%, reflecting a robust interest in the LNG bunker market.
Currently, 1,031 vessels are under construction to run on LNG, making up 15% of the global orderbook. It is also important to highlight that existing vessels can be retrofitted to accommodate LNG.
Additionally, there is the option of using Bio-LNG, which shares the same chemical properties as conventional LNG and can be used alone or in blends. The newly established FuelEU Maritime regulation encourages the use of sustainably produced renewable and low-carbon fuels in maritime transport.
This regulation mandates vessel operators to formulate a compliance strategy to meet the stipulated greenhouse gas (GHG) targets. To provide legal clarity and support to those in the industry, BIMCO has introduced specific clauses and annexes.
The BIMCO LNG Fuel Delivery and Redelivery Clause allows parties to agree on the condition of LNG fuel tanks and payment issues. The LNG Fuel Gas-freeing Clause delineates responsibilities and expenses for gas-freeing operations.
The LNG Fuel Operational Clause addresses compatibility with bunkering facilities, while the LNG Fuel Quality Clause defines specifications that fuel must meet and outlines liability for non-compliant fuel. Lastly, the BIMCO Bunker Terms 2018, particularly Annex B focusing on LNG, delineate the rights and responsibilities of buyers and sellers.
BIMCO continues its support for the transition to low-carbon fuels, with plans to develop additional supply terms for methanol and ammonia, and is working on a biofuels clause as well.