- LNG market shifts due to geopolitical tensions and changing demand.
- Key provisions like war risks, piracy, and sanctions clauses are crucial.
- Operational issues such as calorific value differences and fuel oil deterioration need clear contracts.
- BIMCO’s 2020 Sanctions Clause helps manage sanctions risks.
The geopolitical landscape significantly affects LNG contracts. Conflicts, like those in the Middle East, heighten security risks for LNG vessels. Contracts should include provisions like war risks, piracy clauses, and force majeure to mitigate these risks. For example, BIMCO’s Piracy Clause 2013 provides options for performance in high-risk areas, while war risk clauses allow vessel masters discretion in deciding on voyages in affected regions, according to UK P&I.
Operational Considerations
Operational issues in LNG contracts include calorific value discrepancies between LNG and fuel oils. Contracts should include post-delivery review periods to adjust warranties based on actual performance. There’s also the risk of fuel oil deterioration, requiring clear clauses on responsibilities for fuel oil storage, additives, and debunkering.
Sanctions
Constantly evolving global sanctions make it crucial for trade participants to remain compliant. BIMCO’s 2020 Sanctions Clause helps allocate risks between owners and charterers. Regular due diligence on parties involved ensures compliance and avoids triggering sanctions clauses.
Conclusion
Understanding the contractual implications of geopolitical risks, operational issues, and sanctions is vital for navigating the LNG sector’s complexities. Properly prepared contracts can help mitigate risks and ensure smoother operations in the shifting market landscape.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: UK P&I
