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Gard: Bunker disputes involving VLSFO in the dual-fuel era

Gard published an insight on new bunker management challenges for VLSFO that has been brought on by the shift towards dual-fuel vessels due to regulatory and economic considerations.

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Maritime protection and indemnity (P&I) club Gard recently published an insight on new bunker management challenges for Very Low Sulfur Fuel Oil (VLSFO) that has been brought on by the shift towards dual-fuel vessels due to regulatory and economic considerations.

The article was written by Stuart Michael Kempson, with assistance by Oliver Goossens:

The short shelf life of VLSFO has been a widely recognized challenge within the industry, and it has sparked some complex disputes between owners and charterers over consumption choices and responsibilities. 

The latest CIMAC 2024 guidelines reiterate that VLSFO may degrade faster than traditional High Sulfur Fuel Oil (HSFO),and recommends that consumption should happen ideally within six months – possibly even sooner for biofuels – in other words, a period significantly shorter than the two-year storage lifespan traditionally associated with HSFO.

Typical challenges

Dual-fuel vessels typically operate with a choice between VLSFO and Liquefied Natural Gas (LNG), with charterers often opting for LNG due to economic incentives. This creates a scenario where VLSFO bunkers remain stored for extended periods, increasing the risk of deterioration. The fundamental questions that arise include:

  • Are charterers entitled to dictate fuel consumption preferences?
  • Who is responsible for monitoring and maintaining bunker quality?
  • Can owners override charterers’ fuel orders if the stored bunkers are at risk of becoming unusable?
  • Who bears the cost if fuel degradation leads to engine damage or off-hire periods?

Charterers’ right to dictate fuel usage

Charterparties, particularly in LNG carrier operations, often grant charterers the right to direct which fuel type should be used and when. Standard clauses such as those found in ShellLNGTime 1 and 2 affirm this right:

“Charterers shall provide and pay for all fuel… which in accordance with charterers’ instructions is to be used as fuel.” (ShellLNGTime1, Clause 9a)

A similar right is often found in dual-fuel vessel contracts, where owners must comply with charterers’ directives on fuel selection unless overridden by safety concerns. This raises a contentious issue—if charterers consistently instruct owners to use LNG, thereby preventing the consumption of VLSFO, is it reasonable to hold owners responsible for fuel deterioration? The issue grows more contentious when using bunkers in the EU may attract penalties.

Responsibility for bunker management

Owners may argue that charterers’ obligation to supply on-specification fuel is a continuing duty, extending beyond the point of delivery. This interpretation is particularly relevant in dual-fuel vessels, where charterers effectively control the duration for which VLSFO remains unused. Owners may also invoke an implied indemnity, asserting that charterers’ employment orders directly caused the fuel to degrade and any resulting damage.

Conversely, charterers may contend that their obligation is limited to supplying compliant fuel at the time of delivery. They argue that bunker care falls under the vessel’s operational management, making it the owners’ duty to monitor fuel stability and take preventive measures such as fuel testing, additive treatments, and circulation.

Legal and practical considerations

From a legal standpoint, there is no settled case law directly addressing fuel deterioration due to prolonged storage. However, established principles from charter party disputes provide guidance:

In The Hill Harmony case the court emphasized that charterers’ orders must not encroach upon the master’s responsibility for vessel safety and seaworthiness.

The Sale of Goods Act 1979 suggests that if fuel is supplied for a known purpose (e.g., to be used over an extended period), it should remain fit for that purpose.

Owners could claim implied indemnity, arguing that they should not bear financial losses from following charterers’ instructions for risks they had not agreed to take on.

In practice, owners may have no option but to burn the bunkers before they become unusable, even if this contradicts charterers’ fuel consumption orders. While this could lead to disputes, it may ultimately be the lesser of two financial risks compared to fuel removal, disposal, or engine damage.

Owners therefore may find themselves in a difficult position – they must follow charterers’ bunker use instructions, but doing so could lead to additional costs from having to ensure that other bunkers stored on board remain usable. 

The best way to address this issue is to include express wording in the contract that entitles Owners / Master to have the final decision over which fuel is consumed if the Master has valid and reasonable concerns over the stability of the bunkers. This is something Gard can assist members with. 

Given that calling in the EU may also raise further issues arising from choice of fuel, careful consideration should be given to the drafting of charter party Fuel EU and bunkers clauses.

Bunkers on delivery and redelivery

Another complexity arises upon vessel redelivery. Most charter parties include clauses requiring charterers to accept and pay for all remaining onboard bunkers (ROBs) upon delivery, with owners doing the same at redelivery. However, in short-term charters, this may lead to situations where deteriorated bunkers are returned in a worse condition than when received, raising further disputes over liability.

A reconciliation mechanism or specific clause addressing fuel stability at redelivery could mitigate potential conflicts, ensuring that owners are not burdened with unusable bunkers while charterers are protected from excessive liabilities.

Conclusion

The issue of bunker deterioration in dual-fuel vessels is a growing challenge with no simple solution. While charterers often have the right to dictate fuel usage, they must recognize the practical implications of prolonged VLSFO storage and they may need to make concessions on their right to give instructions on the use of their bunkers. Owners, on the other hand, should actively monitor fuel quality and take preventive measures to mitigate losses. Clear contractual terms, regular fuel testing, and cooperative decision-making between owners and charterers are essential to navigating this complex landscape. 

 

Photo credit: william william on Unsplash
Published: 11 April, 2025

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Alternative Fuels

Yang Ming orders six LNG dual-fuel, ammonia-ready containerships from Hanwha Ocean

Each of the six new vessels will have a capacity of up to 13,650 TEU and feature LNG dual-fuel propulsion and Ammonia Fuel Ready specifications.

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Yang Ming orders six LNG dual-fuel, ammonia-ready containerships from Hanwha Ocean

Taiwanese shipping firm Yang Ming Marine Transport Corporation (Yang Ming) and South Korean shipbuilder Hanwha Ocean on Wednesday (2 September) signed a shipbuilding contract for six 13,000 TEU class LNG dual-fuel container vessels. 

The contract was signed by Dr. Chuck Tsai, Chairman of Yang Ming, and Mr. Charles Kim, CEO of Hanwha Ocean. The vessels are scheduled for delivery between 2028 and 2029. 

They will complement Yang Ming’s existing fleet of 10,000+ TEU vessels and serve as key vessels on East-West services, with deployment flexibility across trade lanes connecting Asia with the East and West Coasts of North America, South America, and the Mediterranean. 

Each of the six new vessels will have a capacity of up to 13,650 TEU and feature LNG dual-fuel propulsion and Ammonia Fuel Ready specifications.

“As Yang Ming transitions toward net-zero emissions, LNG provides a relatively mature and economically viable alternative fuel solution, capable of reducing greenhouse gas emissions by approximately 20%,” the company said. 

“At the same time, ammonia can serve as a carbon-free fuel by utilising converted LNG storage facilities, while offering relatively lower conversion costs and comparatively well-developed supply chains and infrastructure. The Ammonia Fuel Ready design will therefore provide Yang Ming with greater flexibility in responding to increasingly stringent international regulations on greenhouse gas emissions.”

In addition, the vessels will be equipped with Type B LNG fuel tanks with a design pressure of 1.0 bar to enhance the safety and efficiency of LNG operations, together with a range of energy-saving technologies, including Wind Shields, Rudder Bulbs, Pre-Swirl Stators, and Shore Power Systems. Smart ship technologies and cybersecurity protection features will also be incorporated to enhance operational efficiency, safety, and reliability while effectively reducing fuel consumption and greenhouse gas emissions.

Deliveries under Yang Ming’s next-generation fleet optimization plan commenced earlier this year. By 2030, a total of 24 new vessels are expected to enter service. 

This includes 18 LNG dual-fuel vessels—comprising five 15,500 TEU, seven 16,000 TEU, and the six 13,000 TEU vessels under this contract—alongside six 8,000 TEU methanol dual-fuel-ready ships. 

 

Photo credit: Yang Ming Marine Transport
Published: 4 September, 2026

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Alternative Fuels

LR, China’s MARIC unveil tanker concept ready for three future bunker fuels

Both secured AiP for a new 114,000 DWT product and crude oil tanker designed to accommodate future conversion to LNG, methanol or ammonia.

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LR, China’s MARIC unveil tanker concept ready for three future bunker fuels

Lloyd’s Register (LR) and the Marine Design and Research Institute of China (MARIC) on Thursday (3 September) have secured Approval in Principle (AiP) for a new 114,000 DWT product and crude oil tanker designed to accommodate future conversion to LNG, methanol or ammonia.

Announced at SMM 2026, the concept addresses one of the biggest investment challenges facing shipping today: the need to develop vessels and capabilities that can support a range of alternative fuel options and pathways as technologies, infrastructure and regulations evolve.

While LNG is already a mature fuel pathway, methanol and ammonia remain at an earlier stage of development, with questions around global fuel availability, infrastructure development, economics and long-term adoption.

The 114,000 DWT tanker concept has been designed as a product and crude oil carrier that can accommodate future conversion to LNG, methanol or ammonia as technologies, regulations and fuel supply chains mature. By incorporating conversion readiness at the design stage, the concept aims to reduce future retrofit complexity and provide owners with greater confidence when planning long-term fleet investments.

The design concept was reviewed against LR’s July 2026 class rules and regulations, including requirements relating to ships using gases and other low-flashpoint fuels, alongside relevant IACS Common Structural Rules for oil tankers. Final classification and statutory approval remain subject to full compliance with all applicable rules and regulations.

Theo Kourmpelis, Global Business Director for Tankers, Lloyd’s Register, said: “Shipowners are being asked to make major investment decisions today despite continued uncertainty around which fuels will dominate in the decades ahead. Alternative fuel solutions each offer potential pathways to compliance, but fuel infrastructure, regulation and economics continue to evolve at different speeds around the world.

“Designs that preserve flexibility will be critical in helping owners manage risk while preparing for multiple future scenarios.”

Si Nan, Marine & Offshore Marketing Department Vice Director, MARIC, said: “As the industry explores different decarbonisation pathways, shipowners need vessel designs that can adapt alongside technological and regulatory developments. This concept was developed specifically to provide greater fuel flexibility and long-term resilience, allowing owners to respond to changing market requirements without being locked into a single fuel strategy.

“Receiving Approval in Principle from Lloyd’s Register is an important milestone that validates the design concept and supports its future development.”

 

Photo credit: Lloyd’s Register
Published: 4 September, 2026

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Alternative Fuels

DNV: Alternative-fuelled vessel orders hit highest monthly level since October 2024

LNG-fuelled vessels accounted for the vast majority of August activity while the strong summer performance marked a significant acceleration in ordering activity after a relatively slow start to the year.

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DNV: Alternative-fuelled vessel orders hit highest monthly level since October 2024

Latest data from classification society DNV’s Alternative Fuels Insight (AFI) platform alternative-fuelled vessel ordering was strong in August, with 52 new vessels added to the platform.

This is the highest monthly total since October 2024 and follows another active month in July, when 47 vessels were added to the database.

LNG-fuelled vessels accounted for the vast majority of August activity, with 46 orders recorded. The container segment led the way with 30 orders, while the car carrier segment contributed a further 12 LNG-fuelled vessels. In addition, four ethanol-fuelled bulk carriers and two hydrogen-powered bulk carriers were added during the month, as well as one LNG bunker vessel.

The strong summer performance marked a significant acceleration in ordering activity after a relatively slow start to the year. In total, 242 alternative-fuelled vessel orders have been placed in the first eight months of 2026, representing a 27% increase compared with the same period in 2025.

LNG remains the dominant fuel choice, accounting for 63% of all alternative-fuelled vessel orders registered so far this year. Container vessels represent the largest share of these LNG orders (59%), followed by car carriers (30%).

Jason Stefanatos, Global Decarbonization Director at DNV Maritime, said: “The past two months have been particularly strong for alternative-fuelled vessel ordering, with August recording the highest monthly total we’ve seen since October 2024. This has helped lift year-to-date orders to a level well above the same period last year.

“LNG remains the leading fuel choice, driven largely by activity in the container and car carrier segments. These sectors have been among the earliest adopters of alternative fuels, supported by predictable liner operations and increasing demand from cargo owners to reduce emissions across supply chains. 

“For many owners, LNG offers a combination of emissions reductions, fuel availability and future flexibility while the longer-term fuel landscape continues to evolve. 

“At the same time, the latest figures include orders for ethanol- and hydrogen-fuelled vessels, highlighting that owners continue to explore a range of decarbonization pathways. Different segments are making different fuel choices, but the overall level of activity demonstrates continued investment in lower-emission shipping.”

Screenshot 2026 09 04 at 12.29.26 PM Screenshot 2026 09 04 at 12.29.36 PM

 

Photo credit: DNV
Published: 4 September, 2026

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