Alternative Fuels

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.

Published

8 months ago

May 31, 2024

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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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Japan: MOL’s third LNG-fuelled ferry “Sunflower Kamuy” starts operation in Oarai

“Sunflower Kamuy” will serve the Oarai-Tomakomai route between Ibaraki Prefecture and Hokkaido as a replacement for the Sunflower Daisetsu, says MOL.

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January 24, 2025

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Japan: MOL third LNG-fuelled ferry “Sunflower Kamuy” starts operation in Oarai

Mitsui O.S.K. Lines (MOL) on Thursday (23 January) announced that the LNG-fuelled ferry Sunflower Kamuy, owned by MOL and operated by its group company MOL Sunflower, entered service in Oarai.

The vessel will be the third LNG-fuelled ferry operated by MOL Sunflower, following the Sunflower Kurenai and Sunflower Murasaki, which have been in service on the Osaka-Beppu route from 2023.

Sunflower Kamuy will serve the Oarai-Tomakomai route between Ibaraki Prefecture and Hokkaido as a replacement for the Sunflower Daisetsu.

Along with the sister vessel Sunflower Pirka, scheduled to enter service in early summer 2025, MOL Sunflower will operate a fleet of four LNG-fuelled ferries on the Oarai-Tomakomai route and the Osaka-Beppu route within 2025.

MOL Sunflower operates 10 ferries and 4 RoRo vessels on six routes throughout Japan, from Hokkaido to Kyushu, providing service for both logistics and passengers in Japan.

Photo credit: Mitsui O.S.K. Lines
Published: 24 January, 2025

LNG Bunkering

SEA-LNG report: Number of LNG-fuelled vessels in operation up by over 33% in 2024

Based on its latest ‘View from the Bridge’ report, SEA-LNG reported an annual vessel growth of over 33% to 638 LNG-fuelled vessels in operation worldwide in 2024.

Published

1 day ago

January 24, 2025

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SEA-LNG report: Number of LNG-fuelled vessels in operation up by over 33% in 2024

Industry coalition SEA-LNG on Thursday (24 January) reported an annual vessel growth of over 33% to 638 LNG-fuelled vessels in operation worldwide in 2024.

This was one of the findings of SEA-LNG’s annual ‘View from the Bridge’ report, highlighting 2024 as another year of growth for the LNG pathway.

Analysing data from SEA-LNG members, the report found that global market adoption and growth reached record heights in 2024.

Looking forward, over 1,200 vessels are expected to be operating by the end of 2028. In 2024, LNG dual-fuelled vessels accounted for 70% of alternative fuelled tonnage ordered, excluding LNG Carriers, up from 43% in 2023.

This record expansion follows the growing availability of LNG bunker fuel beyond the traditional bunkering hubs. Currently, LNG bunkers are accessible in approximately 198 ports worldwide, and plans are underway for bunkering facilities in an additional 78 ports. This comes as over 60 LNG bunkering vessels are operating today, marking a 22% increase from 2023.

The ‘View from the Bridge’ report also highlights how the LNG pathway took a significant step in 2024, with liquified biomethane delivering on decarbonisation and regular renewable e-methane supplies expected in 2026.

SEA-LNG members are prepared to offer biomethane bunkers in some 70 ports globally, with multiple bunkering operations already taking place.

A highlight was the successful biomethane bunkering pilot as part of the Methane Track within the Rotterdam-Singapore Green and Digital Shipping Corridor (GDSC). This was the first practical delivery of any international Green Corridor since they were announced as part of the Clydebank Declaration at COP 26 in Glasgow.

Peter Keller, chairman of SEA-LNG, said: “Our latest View from the Bridge reaffirms the importance of the LNG pathway as a practical and realistic route to shipping’s decarbonisation now. We continue to believe that the shipping industry is heading towards a successful multi-fuel future where LNG will always play a critical role.”

“To deliver net zero by 2050 across the global shipping fleet, a basket of fuels is required and the LNG pathway will continue to lead the way. This is not a case of my fuel versus your fuel but rather which fuel best allows the industry to reach its stated goals. The LNG pathway provides the path to net zero.”

SEA-LNG’s latest report also highlights that 2024 has seen considerable progress in addressing methane slip. “Advances in eliminating methane slip, in combination with biomethane and e-methane, provide a clear, effective, and viable long-term pathway towards net zero emissions. Shipowners and operators can be confident that the vessels ordered today are future-proofed for their lifespan.”

“With a proven track record of technical improvements to reduce methane slip and upstream emissions, coupled with tighter regulations from global and regional authorities, we continue to believe methane slip will be a non-issue by the end of this decade,” Keller continued.

FuelEU Maritime will be a key regulation in advancing shipping industry decarbonisation, heading into 2025. According to analysis from SEA-LNG, FuelEU Maritime creates a favourable environment for the LNG pathway.

With the ability to achieve GHG emissions reductions of up to 23%, LNG-fuelled vessels are compliant until 2039. The use of liquefied biomethane and e-methane can extend compliance through to 2050 and beyond.

Note: The full report is available for download here.

Photo credit: SEA-LNG
Published: 24 January, 2025

Alternative Fuels

DNV, partners to develop new standards for using digital twins to test electric propulsion systems

Collaboration with HD Hyundai Mipo and HD KSOE focuses on developing standards for testing electric powered vessels through the use of digital twin-based criteria and procedures.

Published

1 day ago

January 24, 2025

Admin

DNV, partners to develop new standards for using digital twins to test electric propulsion systems

Classification society DNV on Friday (24 January) signed a Memorandum of Understanding (MoU) with HD Hyundai Mipo (HMD) and HD Korea Shipbuilding & Offshore Engineering (KSOE).

The collaboration focuses on developing standards for testing electric powered vessels through the use of digital twin-based criteria and procedures, to enhance ship safety and efficiency.

The project aims to resolve issues related to the integration of highly complex vessel systems for electric propulsion.

Utilising hardware in the loop (HiL) testing via digital twins of the different systems enables integration tests to be performed both earlier in the process on a much broader and deeper level.

To ensure the accuracy of the tests, however, we need to be confident in the digital assets. Together DNV, HMD and KSOE are working on the verification of these digital assets. Utilising DNV verified digital assets, will facilitate the integration process. In addition, when systems from multiple suppliers are tested together, having the same requirements and HiL test procedures ensures the reliability of the testing.

Kitae Kim, Head of Quality Management, HD Hyundai Mipo, said: “Through this technical collaboration we aim to establish clear and practical digital twin-based testing procedures and standards. These can foster broader industry participation and ensure the reliability of results. In doing so, we hope to safeguard the performance and safety of ship systems and lead in building a digital twin ecosystem for the shipbuilding industry.”

Byoung Hun Kwon, Head of the Electrification Center/Digital Technology Research Lab, at HD KSOE, said: “We have proactively developed and implemented digital twin technology, including HiL, to safeguard the performance and quality of vessels, achieving world-class advancements in virtual commissioning technology. This collaboration marks a pivotal milestone, uniting HD Hyundai Mipo, HD KSOE, and DNV to drive digital innovation in the shipbuilding and marine industry.”

Andreas Kristoffersen, Head of Approval Centre Korea and DNV Maritime, said: "This MoU highlights HMD, KSOE and DNV’s commitment to driving digitalization in the maritime industry. By adopting digital twin-based testing for complex systems, we are working together to shape the future of maritime operations and set new industry standards for safety and performance."

The project will also focus on maintaining the digital assets throughout the life-cycle of the vessel to maximize their value over the long-term. With verified assets, component models could also be used in a “plug-and-play” manner as different systems are introduced into the simulation space or updated over time.

This initiative sets out to build a foundation for leveraging class-verified digital assets to support more comprehensive and earlier HiL testing. It aligns with DNV’s Data-driven Verification (DDV) notation, which has been developed to ensure reliable performance of complex systems.

Photo credit: DNV
Published: 24 January, 2025