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Clyde & Co: Specification and certification ‘key issues’ of alternative bunker fuels in both supply and charterparty contracts

‘It is clear there are significant benefits from the use of alternative marine fuels, but there are also significant risks,” highlights Paul Collier, Partner at Clyde & Co.

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Clyde & Co: Specification and certification ‘key issues’ of alternative bunker fuels in both supply and charterparty contracts

Specification and certification are “key issues” relating to alternative bunker fuels which should be considered at the outset when drafting the terms of bunker supply contracts and charterparties, according to a Partner at the Singapore arm of global legal firm Clyde & Co.

Paul Collier was giving a presentation at the firm’s Asia Pacific Marine Conference 2024 on Wednesday (29 May) when he pointed out the potential legal issues of alternative marine fuels.

Lack of clear specifications

“Firstly, specifications. Leaving aside LNG where there are already ISO standards, there is currently a lack of clear specifications covering alternative bunker fuels. This is because alternative fuels are a developing technology,” stated Collier.

He recommended bunker buyers to clearly state the specification of the fuel required when purchasing alternative fuels such as biofuel, methanol, ammonia, and hydrogen to know what product they are getting.

When no clear international standard is available, bunker buyers may refer to national standards – for example, the WA 2: 2022 standard for biofuels (developed by Singapore) – or alternatively agree to bespoke terms setting out the specification of the alternative marine fuel to be supplied.

Certification important for shipowners

Collier, meanwhile, highlighted alternative bunker fuels to be only as green as the production process and this is where obtaining proper certification for procured material will be important.

“There are two parts to consider. Firstly, what the emissions are when the alternative marine fuel is consumed by a vessel, and secondly what the emissions are to produce and then transport the fuel into the vessel’s tank,” he explained.

“There is a question as to whether buyers should be able to claim damages if there is an alternative fuel which has produced with high carbon intensity.

“A bunker supplier may contend that their obligation is simply to provide fuel meeting specification, and there is no warranty as to its carbon footprint, whereas a purchaser may say that they expected carbon neutral fuel.

“This will boil down to the terms and conditions of supply that are agreed and in particular whether there is a warranty as to the well-to-wake emissions of the fuel.”

Collier noted the above factors to be important as certification will be key to Owners obtaining favourable treatment under the Carbon Intensity Indicator (CII) and European Union (EU) regimes.

“Without certification, alternative marine fuels may be treated as producing emissions equivalent to fossil fuel consumption,” he informed while adding “this would place Owners in no better position compared to if they had consumed traditional oil-based bunker fuel.”

Charterparty issues arising from specification and certification gaps

Moving forward, Collier noted all points regarding specification and certification to be highly relevant in the Charterparty context.

“Where Owners are time chartering their vessels, and their time charterers are acquiring bunkers, it is sensible for Owners to include provisions in their time charters which set out firstly, the specification and  secondly, certification requirements for any alternative fuels,” he stated.

“As mentioned, certification is key to the vessel obtaining favourable treatment under the CII and EU regimes. Without it, vessels may face unexpected penalties under these regimes.”

Further, Collier recommended it may be worthwhile for Owners and Charterers under long term charters to consider allocating costs and benefits of any modifications required to consume alternative bunker fuels.

“Here, the potential benefits of allowing a vessel to consume alternative fuels are high, but so are the costs of any retrofits. Owners and Charterers may wish to consider agreeing cost allocation clauses which share both the benefits and costs,” he advised.

“There are also potential risks for consuming alternative fuels. Who is to bear the risks of problems? It may be worthwhile Owners considering including in their charterparties express terms which provide that any alternative fuel bunkers supplied by their time charterers will be fit for purpose and capable of being consumed by the Vessel’s engines.

“By contrast, Charterers should be aware that there is a risk that the cause of engine problems may not be the fuel itself. Issues could, for example, be due to the handling of fuel, or problems with vessel maintenance, which are typically the responsibility of Owners.

“There may therefore be disputes as to whether the vessels are off-hire following engine problems and who will bear the repair costs.

“In summary, it is clear there are significant benefits from the use of alternative fuels, but there are also significant risks. It is worth considering the legal and contractual implications early given their potential ramifications.”

 

Photo credit: Clyde & Co
Published: 31 May 2024

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Ammonia

Singapore: EMA, MPA shortlist two consortia for ammonia power generation and bunkering

Chosen consortia are Keppel’s Infrastructure Division and Sembcorp-SLNG, and the bunkering players in these consortia are Itochu Corporation, NYK Line and Sumitomo Corporation.

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RESIZED bunker tanker singapore

The Energy Market Authority (EMA) and the Maritime and Port Authority of Singapore (MPA) on Thursday (25 July) said they have shortlisted two consortia that will proceed to the next round of evaluations of proposals to provide a low- or zero-carbon ammonia solution on Jurong Island for power generation and bunkering. 

The two consortia were selected from a total of six that were earlier shortlisted in 2023 to participate in a restricted Request for Proposal (RFP), following an Expression of Interest (EOI) called in 2022. The bids were assessed based on the technical, safety and commercial aspects of their proposals. 

The two consortium leads are Keppel’s Infrastructure Division and Sembcorp-SLNG, and the bunkering players in these consortia are Itochu Corporation, Nippon Yusen Kabushiki Kaisha (NYK Line) and Sumitomo Corporation. The two consortia will proceed to conduct engineering, safety and emergency response studies for the proposed Project.

At the next phase, we will select one of the two bidders as the lead developer of the project. The lead developer will develop the end-to-end ammonia solution comprising (i) generating 55 to 65 MW of electricity from imported low- or zero-carbon ammonia via direct combustion in a Combined Cycle Gas Turbine; and (ii) facilitating ammonia bunkering at a capacity of at least 0.1 million tons per annum (MTPA), starting with shore-to-ship bunkering followed by ship-to-ship bunkering. 

Given the nascency of the technology and global supply chains, the Government will work closely with the appointed lead developer to implement the Project. We aim to announce the lead developer by Q1 2025.

The project is part of Singapore’s National Hydrogen Strategy launched in 2022, which outlines Singapore’s approach to develop low-carbon hydrogen as a major decarbonisation pathway as part of the nation’s commitment to achieve net zero emissions by 2050.

A key thrust of this strategy is to experiment with the use of advanced hydrogen technologies that are on the cusp of commercial readiness. Ammonia is currently one of the most technologically-ready hydrogen carriers with an established international supply chain for industrial use.

“If successful, the project will position Singapore as one of the first countries in the world to deploy a direct ammonia combustion power plant and support the development of ammonia bunkering for international shipping, EMA and MPA said.

“This will help to unlock the potential of low-carbon ammonia as a low-carbon fuel.”

 

Photo credit: Manifold Times
Published: 25 July 2024

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LNG Bunkering

China: River-sea LNG bunkering vessel named and delivered in Shanghai

The 14,000 cubic metre ship, “Huaihe Nengyuan Qihang”, was independently developed, designed and built by Hudong-Zhonghua Shipbuilding (Group) for Huaihe Energy Holding Group.

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China: River-sea LNG bunkering vessel named and delivered in Shanghai

China’s river-to-sea LNG bunkering vessel, which was built locally, was named and delivered in Shanghai on Monday (19 July), according to the Shanghai Association of Shipbuilding Industry (SASIC). 

The 14,000 cubic metre (cbm) ship, Huaihe Nengyuan Qihang, was independently developed, designed and built by Hudong-Zhonghua Shipbuilding (Group) Co., Ltd for Huaihe Energy Holding Group as part of China’s "Gasification of the Yangtze River” project.

The ship is capable of travelling through the Nanjing Yangtze River Bridge all year round and has been dubbed a “Customised Yangtze River” LNG refuelling and transportation ship.

The ship is equipped with the B-type LNG containment system independently developed by Hudong-Zhonghua and authorised by a national patent.

According to SASIC, this was the first time such a system has been applied to a domestic LNG  refuelling and transportation ship, marking a major breakthrough in the B-type LNG containment system developed by China with independent intellectual property rights.

Related: China’s first river-sea LNG bunkering ship completes inaugural bunkering operation

Disclaimer: The above article published by Manifold Times was sourced from China’s domestic market through a local correspondent. While considerable efforts have been taken to verify its accuracy through a professional translator and processed from sources believed to be reliable, no warranty is made regarding the accuracy, completeness and reliability of any information.

 

Photo credit: Shanghai Shipbuilding Industry Association
Published: 25 July 2024

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Newbuilding

Singapore: EPS takes delivery of LNG dual-fuel bulker “Mount Ossa”

Firm said said the last vessel in its series of six 210,000 dwt DF LNG Newcastlemaxes chartered to Rio Tinto, was successfully delivered by New Times Shipbuilding.

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Singapore: EPS takes delivery of LNG dual-fuel bulker “Mount Ossa”

Singapore-based shipping firm Eastern Pacific Shipping (EPS) on Wednesday (24 July) said the last vessel in its series of six 210,000 dwt dual-fuel LNG Newcastlemaxes chartered to Rio Tinto, was successfully delivered.

The delivery of Mount Ossa marked the 21st vessel being delivered by New Times Shipbuilding to EPS.

“Despite global challenges, Rio Tinto and EPS have shown unparalleled resilience and a strong commitment to decarbonize shipping,” it said in a social media post.

“Over the past three years, these LNG-powered vessels have proven to be a sustainable choice, emitting 30% less than their conventional counterparts. We have successfully completed over 200 LNG bunkering operations, significantly reducing emissions across our fleet.”

“We celebrate our strong partnership with New Times Shipbuilding on this 21st milestone delivery to the EPS fleet, grateful to have 43 world-class vessels built and delivered, including those on order from New Times, which means we are only halfway through our esteemed collaboration.”

 

Photo credit: Eastern Pacific Shipping
Published: 25 July 2024

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