Alternative Fuels

SIBCON 2022 Interview: Clyde & Co discusses handling of bunker fuel quality disputes, alt fuels contracts

‘There are some important differences between VLSFO and biofuels, and as a result, parties should consider whether additional changes should be made to biofuel bunker contracts,’ says Paul Collier.

Published

2 years ago

September 28, 2022

Admin

The following interview with Paul Collier, Legal Director, Clyde & Co is part of coverage for the upcoming Singapore International Bunkering Conference and Exhibition (SIBCON) 2022, where Manifold Times is an official media partner.

Collier shares his insights on disputes related to marine fuel quality and bunker contamination, and provides helpful recommendations in handling off-specification bunker claims while touching on alternative fuels:

MT: How have bunker contamination cases at Singapore changed the legal landscape?

Bunker contaminations affecting multiple vessels are not uncommon, and much like the 2018 “Houston” contamination cases, and those originating from the US Gulf Coast in 2013 and 2007, the 2022 Singapore cases have renewed focus on whether basic ISO 8217 tests carried out on bunker samples are sufficient to identify off-specification bunkers. The underlying difficulty is that basic ISO 8217 tests carried out on bunker samples may not be capable of identifying all possible contaminants which could potentially risk causing damage to vessel engines. However, against this, there may be difficulties with parties carrying out more advanced testing (including GC/MS analysis) on bunker samples before their consumption, due to cost and time restraints, meaning that bunker fuel may be consumed before it has been identified as being off-specification. This has caused a significant number of cases of engine damage.

Bunker contamination cases have therefore raised a question as to whether fuel may be off-specification under clause 5 of ISO 8217, even if the fuel has been identified as being in compliance with ISO 8217 Table 1 or 2 parameters. In this regard, clause 5 of ISO 8217:2017 offers some protection to buyers, in that it provides that “the fuel shall be free from any material at a concentration that causes the fuel to be unacceptable for use” and “is not at a concentration that is harmful to personnel, jeopardises the safety of the ship, or adversely affects the performance of the machinery”, and buyers have relied on this to advance quality claims against bunker suppliers where tests have identified contaminants which do not form part of the Table 1 and Table 2 tests.

One interesting question will be how the ISO standards develop to deal with recent bunker contamination cases, and whether further parameters will be added to Table 1 and 2. However, it may not be straightforward for consensus to be reached as to the content of new ISO 8217 standards, given that there is a lack of technical consensus as to when the level of some compounds become “unsafe”, in circumstances where bunker supplies are non-standardised and typically contain hydrocarbons from several points of origin.

MT: What are the key factors determining legal success of a plaintiff and defendant in a marine fuel quality / bunker contamination suit? Are there any simple operational steps players can include to protect themselves?

In general, the most important factor affecting the legal outcome in off-specification bunker claims is the quality of the evidence. If a party has good evidence supporting their position, then this significantly increases their prospect of success in any legal proceedings. In addition, good evidence will improve their settlement prospects (which may also increase the chance of a claim being settled at an early stage).

For this reason, it is worth all parties involved with a bunker supply collating and retaining evidence which could support their position.

The most important evidence is the collection of samples, with it being widely accepted that the most accurate samples are taken by drip sample at the receiving vessel’s manifold (ideally, witnessed by surveyor). However, parties should also consider whether they can retain any other contemporaneous evidence that supports their position. In the case of vessel owners, it is worth the Master and the crew ensuring that good records of engine maintenance and fuel management are kept, to assist in responding to any argument that engine damage was caused by another bunker stem or by poor management of the vessel’s engines.

MT: What is the first action a shipowner / bunker supplier / bunker trader should take when finding out contaminated bunker fuel has been involved in their delivery operation?

The first step that parties should take where there are suspected bunker contamination cases is to arrange for tests to be carried out on the fuel supplied. Whilst test results are awaited, the fuel should not be consumed, to avoid the risk of engine damage taking place in the interim. In addition, any bunker supplies which may be suspected as being off-specification should be kept segregated from other fuel.

If the test results are off-specification, the parties will then need to consider whether the fuel can be safely consumed or not, and whether any other steps need to be taken to mitigate their position. In this circumstance, parties should obtain both technical and legal advice on how to proceed.

MT: Alternative fuels such as methanol, biofuels, LNG, ammonia, hydrogen are expected to be within the marine fuels mix moving into IMO 2030/2050. Do you think current ISO 8217 standards need to be further developed to cover acceptable parameters for use of these material as bunker fuels? If not, what potential issues may arise when trading these materials with current ISO 8217 specs?

The ISO 8217 standards are primarily intended to be used for petroleum products, and additional standards will need to be developed to cover the full range of alternative fuels which are likely to be subject to increasing use by vessels. Whilst there are some standards in place for some alternative fuels, including ISO 23306 for LNG, further development of standards is needed, particularly in relation to “new” technologies such as hydrogen.

Parties should carefully consider whether it is appropriate to trade alternative fuels using ISO 8217, given that it is primarily intended to be used for petroleum products, and consider whether express reference should also be made to other standards (for example, EN14214 / ASTM D6751 in relation to biodiesel). If inappropriate specifications are used in a bunker supply contract, this will likely complicate the legal position and make it more difficult for buyers to contend that fuel supplied is off-specification.

MT: Biofuels, a popular option, seem to be the easiest route for shipowners to meet the IMO 2030 target. What are the contractual differences between a VLSFO and biofuel bunker contract and are there any specific clauses buyers and suppliers of biofuel bunkers should include to protect themselves during operations?

There are some important differences between VLSFO and biofuels, and as a result, parties should consider whether additional changes should be made to biofuel bunker contracts.

As a starting point, if buyers are seeking to use biofuels as a “green” energy source, the buyers may wish to consider pressing for sustainability warranties to be included in the contract. In this regard, there are concerns that the production of biofuels may have a negative impact on food security or have been produced by otherwise clearing lands beneficial to the environment. If this is a concern to the buyers, they may wish to place the supplier under contractual obligations to provide sustainable biofuels.

In addition, parties should consider the provisions regarding both the specifications and testing requirements, given the differences between VLSFO and biofuels. For example, parties may wish to consider whether joint testing should take place at a laboratory specifically accredited for testing biofuels.

Given that biofuels deteriorate faster than traditional hydrocarbon fuels, the supplier may also wish to press for short time bars and an exclusion of liability for any damage suffered by the vessel engines if the fuel is not promptly consumed.

A list of other interviews conducted by Singapore bunkering publication Manifold Times on occasion of SIBCON 2022 are as follows:

Photo credit: Clyde & Co
Published: 28 September, 2022

Alternative Fuels

DNV: LNG dominates alternative-fuel vessel orderbook for 2024

According to DNV, LNG was the industry’s alternative fuel of choice by year-end; 264 LNG vessel orders were placed in 2024, over double that of 2023 which was 130 orders.

Published

14 hours ago

January 13, 2025

Admin

The maritime industry’s exceptional newbuilding year 2024 drove a significant rise in orders for alternative-fuelled vessels, according to the latest data from DNV’s Alternative Fuels Insights (AFI) platform.

A total of 515 such ships were ordered, representing a 38% year-on-year increase compared to 2023, underscoring the industry's growing commitment to decarbonization.

The growth in alternative-fuelled vessel orders has been heavily driven by the container and car carrier newbuild boom over the last three years. In 2024, 69% of all container ship orders were for ships capable of being powered by alternative fuels, driven by cargo owners responding to consumer demands for more sustainable practices and liner companies preparing to replace older tonnage. The preferred fuel choice for this segment was LNG (67%). In total the container and car carrier segments made up 62% of all alternative fuel orders in 2024.

Knut Ørbeck-Nilssen, CEO Maritime at DNV, said: “As we work towards decarbonizing the industry, we are encouraged by the growth in alternative fuel vessels over the past few years. While recent figures are promising, we must keep pushing forward.”

“The technological transition is underway, but supply of alternative fuel is still low. As an industry we need to work with fuel suppliers and other stakeholders to ensure that shipping has access to its share of alternative fuels in the future. It is also important that the safety of seafarers is ensured as we make this transition. This will require investment in upskilling and training.”

LNG was not the only fuel on shipowners’ minds as 2024 saw them betting on multiple alternative fuels. 166 methanol orders were added (32% of the AFI orderbook), reflecting shipping’s growing interest in a diverse fuel pool as it strives to reduce greenhouse gas emissions. Most of these methanol orders (85) were in the container segment.

While methanol drove newbuilding orders for alternative-fuelled vessels at the beginning of the year, LNG was the industry’s alternative fuel of choice by year-end. The number of LNG vessel orders placed in 2024 was 264, over double that of 2023 (130).

Ammonia saw promising momentum in the earliest months of the year and continued to grow throughout 2024. A total of 27 orders were placed for ammonia-fueled vessels. The first non-gas carrier ammonia-fuelled vessels orders were placed in 2024 (10), mainly in the bulk carrier segment (5). While still in its early stages, this provides further evidence of ammonia's emergence in the alternative fuel market.

Deliveries and bunkering

The number of LNG-fuelled ships in operation doubled between 2021 and 2024, with a record number of deliveries (169) in 2024. By the end of 2024, 641 LNG-powered ships were in operation. According to the AFI orderbook, this number is expected to double by the end of the decade.

While the bunkering infrastructure for some alternative fuels remains underdeveloped, LNG bunkering is maturing. The number of LNG bunker vessels in operation grew from 52 to 64 over the last year, with continued growth expected in 2025. The significant gap between LNG bunkering supply and demand is expected to widen over the next five years based on the AFI orderbook.

Addressing this challenge by developing the appropriate infrastructure for alternative fuels – both for vessels and bunkering - can create demand signals to stimulate long-term fuel production. With the EU regulatory package, Fit for 55, setting requirements on a large network of ports to have LNG bunkering infrastructure, it is expected that the availability of LNG in ports will increase.

Jason Stefanatos, Global Decarbonization Director at DNV, said: “Market conditions, infrastructure development, fuel production updates, and cargo owners' needs are all shaping the demand for different fuels, both in the short and long term.”

“The shifting trends in LNG and methanol orders this year might be due to the slow development of green methanol production. In the long run, green methanol has potential to be part of the energy mix along with ammonia.”

“In parallel, LNG offers a vital bridging fuel option benefiting from existing infrastructure and short-term emissions reductions while being capable of acting as a long-term solution as well, assuming RNG (Renewable Natural Gas) will be available and provided at a competitive price.”

Photo credit: DNV
Published: 13 January, 2024

LNG Bunkering

China: Ningbo Zhoushan Port completes first LNG bunkering operation for 2025

Bunkering vessel “Hai Yang Shi You 302” supplied more than 10,000 cubic metres of LNG bunker fuel to containership “MSC Adya” at the Ningbo-Zhoushan Port port on 5 January.

Published

4 days ago

January 10, 2025

Admin

China: Ningbo Zhoushan Port completes first LNG bunkering operation for 2025

Zhejiang Pilot Free Trade Zone Zhoushan Area on Wednesday (8 January) said Ningbo-Zhoushan Port successfully completed its first LNG bunkering operation for the year.

Bunkering vessel Hai Yang Shi You 302 supplied more than 10,000 cubic metres (m3) of LNG bunker fuel to containership MSC Adya at the port on 5 January.

Zhejiang Seaport International Trading, the bunker supplier for the operation, successfully obtained the Zhoushan Anchorage LNG bunkering licence in June 2024, extending refuelling services from dock to sea.

The company’s services cover Meishan, Chuanshan, Daxie and other port areas.

As China's first river-sea LNG transport and bunkering ship, Hai Yang Shi You is currently placed permanently at Ningbo Zhoushan Port, providing a variety of bunkering methods such as ship-to-ship and ship-to-shore.

Zhejiang Seaport International Trading will continue to expand the scope of bonded LNG bunkering operations and new alternative fuels such as green methanol, ammonia and biofuels in the Zhoushan Area.

Photo credit: Zhejiang Pilot Free Trade Zone Zhoushan Area
Published: 10 January, 2025

Nuclear

VARD and partners team up to explore nuclear propulsion for shipping

Project, which involves Knutsen Tankers and DNV, will evaluate fourth-generation nuclear reactor technologies for their viability in commercial shipping applications.

Published

4 days ago

January 10, 2025

Admin

VARD and partners team up in project to explore nuclear propulsion for shipping

Norway-based shipbuilder VARD on Friday (3 January) said it has partnered with the Norwegian University of Science and Technology in Ålesund, Norway and other key stakeholders in the NuProShip I project, which explores nuclear propulsion for the maritime sector.

NuProShip, short for "Nuclear Propulsion in Shipping," will evaluate fourth-generation nuclear reactor technologies for their viability in commercial shipping applications.

In this project, an extensive assessment of 99 companies developing advanced reactor technologies led to the selection of three promising reactor types:

Kairos Power (USA): Fluoride high-temperature molten salt reactor using Tri-structural Isotropic (TRISO) fuel particles, designed for robust and efficient operation.
Ultrasafe (USA): Helium-cooled gas reactor, also employing TRISO fuel particles, known for their resilience and safety in extreme conditions.
Blykalla (Sweden): Lead-cooled reactor concept utilizing uranium oxide as fuel, offering high efficiency with advanced cooling mechanisms.

VARD said TRISO fuel particles, noted for their durability and containment properties, play a crucial role in two of these reactor types.

“TRISO technology in fact, is renowned as one of the most resilient nuclear fuel types available today,” it added.

Alongside VARD, the NuProShip project is supported by other partners, including DNV, the Norwegian Maritime Administration, ship owner Knutsen Tankers, and the Spanish nuclear consultancy IDOM.

VARD’s primary contribution involves integrating these reactor systems into various vessel types, assessing the technical challenges to enable the future commercial use of nuclear-powered ships.

Photo credit: VARD
Published: 10 January, 2025