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North P&I Club: Beware the in-transit cargo loss clause

David Patterson and Simon Clarke of North P&I Club explain why it is in the shipowner’s best interests to avoid in-transit cargo loss clauses.
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It is common for charterers to make claims or apply deductions based on ‘in-transit loss clauses’ in the crude oil trade. North P&I Club’s David Patterson, Loss Prevention Executive, and Simon Clarke, Senior Claims Executive, explain why it is in the shipowner’s best interests to avoid this type of clause.

In-transit cargo loss clauses generally define an in-transit loss as the difference between the vessel’s gross observed volume (GOV) on completion of loading and before unloading at the discharge port. While this may seem a simple comparison, it is a fundamentally flawed measurement, reflecting a ‘paper shortage’ rather than any physical loss.

One of the main problems with these clauses is that Owners may not have the defences that would otherwise be available for an alleged shortage if the claim had been assessed with reference to, for instance, the Hague/Hague-Visby Rules. In addition to putting owners in a difficult position when trying to defend claims made by charterers referencing these clauses, this may adversely impact upon the scope of club cover available in respect of the claim.

Paper shortages

During measurement, the GOV is established by subtracting any free water and sediment from the total volume of fluids in the tank, providing the quantity of oil at the given temperature upon loading.

On the voyage to the discharge port, two factors can result in changes to the gross observed volume: a decrease in cargo temperature and an increase in free water.

Cargo temperature decrease

Cargo is likely to cool during the voyage, increasing in density and therefore reducing in volume while its mass remains the same. Even when cargo heating is employed, it is unlikely that tank temperatures at the discharge port will be same as they were at the load port during the tank survey. When the two gross volumes are compared – as required by in-transit loss clauses – this reduction in cargo volume will indicate a paper shortage.

Free water increase

The crude oil production process consists of separating fluids from an oil well into crude oil, gas and water/sediment. While this can be a highly efficient process, crude oil cargoes usually contain a small amount of water and some solids –known as the cargo’s ‘base sediment and water content’ (BS&W).

To put this into context, if a vessel loads 1 million barrels of crude oil with a BS&W of 0.3%, 997,000 barrels of the cargo will be crude oil while 3,000 barrels will contain water and some sediment. Free water is the term used to describe any water that has separated from the crude oil at the bottom of the cargo tank.

This can result in a difference in the reported amount of free water detected upon completion of loading and arrival at the discharge port. Typically, the tank survey at the load port will commence as soon as is practicable after the completion of loading. There is therefore minimal time for any water in the cargo to separate out, and the survey may detect only trace amounts of free water. Consequently, the GOV will be calculated as the entire volume of the cargo tank contents, including any water and sediment.

During the voyage, water and sediment contained in the cargo will have time to separate out, meaning that free water can be detected more readily in the discharge survey. This is done by establishing the interface between the water and oil. While the amount of sediment is not accounted for directly, it is included in the free water figure as the sediment will settle below the water.

When the GOV is re-calculated, free water and sediment is subtracted from the total contents of the tank, with the difference between the volume of free water and sediment detected at the load and discharge ports indicating a paper shortage.

Performing correct calculations

To account for variations in cargo temperature at the load and discharge ports, the cargo must be compared at a standard temperature. This is achieved by applying a volume correction factor to calculate the quantity of cargo at 15o C or 60o F. The term ‘gross standard volume’ (GSV) is used when the GOV is calculated at a standard temperature.

To ensure that any free water and sediment is accurately accounted for during the tank surveys, the total calculated volume of the cargo should be established. This is achieved by adding free water and sediment calculations to the GSV.

Checking cargo documents

The cargo documentation should provide details of the total volume of water and sediment for the cargo. This can be established by subtracting the gross and net quantities listed on the bill of lading or by the BS&W as stated on the Certificate of Quality.

Loss prevention

For Owners, it is better to avoid any in-transit loss clauses that may override clauses incorporating the Hague/Hague-Visby Rules, such as a Clause Paramount.

The standard pre-printed charterparty clauses are preferable from an Owner’s perspective. For example, the widely used Asbatankvoy voyage charterparty has a Clause Paramount (clause 20(b)(i)) that incorporates the Hague/Hague-Visby Rules, as does BIMCO.

Find out more

Recommended clauses can be found on our website: North – Recommended Clauses (2021-2022)

North Members enjoy free access to our loss prevention guide: Shipboard Petroleum Surveys: A Guide to Good Practice

 

Published: 1 March, 2022

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China: Chimbusco and BJEC enter green methanol cooperation agreement

Document was signed between Ding Lihai, deputy general manager of Chimbusco, and Li Jianjun, deputy general manager of BJEC.
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July 8, 2025

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Chimbusco x BJEC MT

China Marine Bunker (PetroChina) Co.,Ltd. (Chimbusco) and POWERCHINA Beijing Engineering Corporation Limited (BJEC) on Thursday (3 July) formally entered into a green methanol strategic cooperation framework agreement.

The document was signed between Ding Lihai, deputy general manager of Chimbusco, and Li Jianjun, deputy general manager of BJEC.

BJEC, a subsidiary of China Power Engineering Group, is experienced in the survey, design, construction and technology research and development of large-scale renewable energy projects.

Moving forward, the two parties said they will respectively focus on their core advantages and work together to promote the production, supply, storage and refuelling of green methanol as an energy source to help support the low-carbon transformation of the shipping industry.

Ding Lihai said: “The shipping industry is one of the important sources of global carbon emissions. Promoting low-carbon fuel is the key to the transformation of the industry. As the main force in the supply of bunker fuel, Chimbusco has been committed to expanding its clean fuel supply capacity. The cooperation with BJEC will integrate the advantages of green energy development and fuel supply, accelerate the large-scale application of green methanol, and meet the needs of shipping companies for clean fuel. We look forward to providing effective solutions for the green transformation of the shipping industry through the joint efforts of both parties.”

Li Jianjun said: “Implementing the ‘dual carbon’ goal is an important responsibility of enterprises. BJEC has accumulated strong technical strength in the field of green energy. This cooperation with Chimbusco will focus on the entire industrial chain of green methanol, from raw materials, production to supply, to provide clean and sustainable fuel solutions for the shipping industry. The complementary advantages of both parties will promote the rapid development of the green methanol industry and inject strong impetus into the low-carbon transformation of the shipping industry.”

 

Photo credit: China Marine Bunker (PetroChina) Co.,Ltd.
Published: 8 July 2025

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Towngas and Royal Vopak collaborate to expand green methanol supply chain network

‘Towngas has recently completed a 6,000-tonne green methanol bunkering project, the largest in Asia,” said its Chief Operating Officer – Green Fuel and Chemicals.
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July 8, 2025

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Towngas x Royal Vopak MT

Hong Kong and China Gas Company Limited (Towngas) and Vopak China Management Co., Ltd. (Royal Vopak) on Tuesday (8 July) said both recently signed a strategic framework cooperation agreement to collaborate in areas such as green methanol production, storage, bunkering, and trading etc.

Focusing on the Chinese mainland, Hong Kong, and Asia-Pacific markets, both parties are joining forces to expand an efficient green methanol supply chain network and support the shipping industry’s low-carbon transition.

The two parties will capitalise on their respective strengths to expand the supply network of green methanol.

Towngas employs proprietary technology to convert agricultural and forestry waste as well as scrap tyres into green methanol, and has obtained multiple international certifications and provides a sufficient supply of green methanol for maritime fuel bunkering.

Royal Vopak provides green methanol storage and terminal services with its comprehensive storage and terminal infrastructure and coastal port network advantages.

Together, the two parties will achieve efficient resource allocation and ship green methanol to the Greater Bay Area, East China, South China, and the broader Asia-Pacific markets, further expanding the green methanol supply chain network.

Towngas and Royal Vopak will further develop multiple areas of regional cooperation, including in the Greater Bay Area. By leveraging the strengths of the ports in Hong Kong, Shenzhen, and Guangzhou, the partnership will focus on “production and storage synergy” as its core to strengthen cooperation around logistics and terminal facility construction, and to build an integrated green methanol storage and transportation network.

In East China, the two parties will centre their collaboration in Shanghai and Ningbo, two major international ports, to further strengthen cooperation in logistics storage and bunkering facility construction to meet the growing demand for green fuels at both ports.

In the Bohai Bay region, with Tianjin as the strategic hub, Towngas will transport green methanol produced at its northern China production base to Royal Vopak’s local storage tank farm, then achieve resource allocation through the Royal Vopak’s distribution network, supporting the supply of green methanol from northern China to the national and Asia-Pacific markets.

The two parties will also target key export markets, such as Singapore, Vietnam, Japan, and South Korea, to accelerate overseas expansion and boost the market competitiveness of clean energy in the Asia-Pacific region.

“Towngas has recently completed a 6,000-tonne green methanol bunkering project, the largest in Asia,” said Sham Man-fai, Towngas Chief Operating Officer – Green Fuel and Chemicals.

“It was completed with the support of Royal Vopak’s Tianjin storage tank farm facilities, laying a solid foundation for this partnership.

“Towngas’s Inner Mongolia green methanol plant is set to increase its annual capacity from 100,000 tonnes to 150,000 tonnes by the end of this year, with plans to further expand to 300,000 tonnes by 2028. Together with Royal Vopak’s storage and terminal services infrastructure and coastal port network, the two parties will build a comprehensive green methanol supply chain network.”

 

Photo credit: Hong Kong and China Gas Company Limited
Published: 8 July 2025

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SEKAVIN starts new physical supply operations in the port of Istanbul and Izmit Bay

Operation is supported by three marine refuelling barges; namely Tarabya-E, Beykoz- E, and Kalamis-E.
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July 8, 2025

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SEKAVIN BARGE

Piraeus-based bunkering firm SEKAVIN on Monday (7 July) said it has recently started new physical supply operations in the port of Istanbul and Izmit Bay.

The operation is supported by three marine refuelling barges; namely Tarabya-E, Beykoz- E, and Kalamis-E. The bunkering vessels have successfully completed numerous deliveries to seagoing vessels.

According to SEKAVIN, Istanbul represents one of the world’s most strategic and challenging maritime environments. The country sees more than 43,000 annual Bosphorus passages and delivers roughly 2 million metric tons per year in bunkers to receiving ships.

In a statement to Manifold Times, John Tsogas, Global Head of Bunkering at SEKAVIN, noted his company intends to offer partners “a very reliable and flexible service” covering the Northeast Med with Istanbul.

The development is in combination with the bunkering firm’s current physical operations in Syros port, together with their traditional Piraeus physical operations which have been carried out for almost 50 years.

Related: SEKAVIN and GCL to strengthen marine fuel supply and logistics in key bunkering hubs

 

Photo credit: SEKAVIN
Published: 8 July 2025

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