LNG Carriers Face Heightened Risks from Boil-Off Gas During Delays

LNG carriers are encountering escalating operational, commercial, and contractual risks when normal boil-off gas (BOG) management is disrupted by prolonged congestion or standby conditions. This situation can lead to greater BOG exposure, limited mitigation options, and potential disputes concerning costs, time, and cargo allocation, a recent risk alert from Hellenic Shipping News Worldwide indicates.

Maintaining precise operational data and comprehensive records of instructions is crucial for supporting causation analysis and defending against claims related to incremental BOG. Mitigation may involve reliquefaction or controlled combustion, both of which have cost and emissions implications. Extended delays increase the likelihood of non-standard operating conditions and disputes, particularly when charter party provisions lack clarity.

Industry Drivers and Common Disputes

In markets experiencing congestion, terminals may operate near their storage limits, leading to short-notice changes in nominations and vessels remaining on standby for extended periods. Where ship-to-ship (STS) alternatives are restricted, operators may have limited options beyond waiting offshore or adjusting speed to align with revised cargo operating windows. These circumstances increase the duration of natural boil-off and can push cumulative BOG beyond contractual allowances, even if the vessel is well-managed.

A key challenge arises from charter party wording, which is often optimised for 'normal' trading conditions rather than prolonged harbour-mode operations. If contracts do not explicitly address incremental BOG generated during ordered waiting, disputes can become data-intensive exercises to determine responsibility for delays, feasible mitigation, and BOG calculation methods.

Hellenic Shipping News Worldwide highlights several common claims:

• Cargo Short Delivery Allegations: Claims may cite short delivery by volume, mass, or energy content, alleging breaches of boil-off warranties, improper cargo handling, or failure to mitigate. Disputes often hinge on calculation methodology and whether the vessel operated under abnormal instructions or terminal restrictions outside the owner's control.
• Performance and Consumption Disputes: As BOG can be used as fuel, disputes can blur the lines between cargo loss and fuel consumption. Charterers may allege underperformance, while owners may argue increased BOG use was driven by charterers' instructions, suggesting any economic benefit from BOG replacing conventional bunkers should be fairly allocated.
• Off-Hire Allegations: Extended standby can impose non-standard duty cycles on cargo systems like compressors and reliquefaction equipment. Malfunctions, derating, or inability to maintain cargo parameters can lead to off-hire arguments, especially with broadly drafted off-hire clauses.
• Interface and Compatibility Disputes: Issues with emergency shutdown (ESD) links, vapour return arrangements, or terminal-specific procedures can delay berthing or constrain operations, amplifying BOG exposure and becoming central to delay attribution disputes. ESD activation may occur if BOG-related conditions create an unsafe situation.
• Emissions and Compliance Cost Allocation: If excess BOG cannot be used as useful energy, it might be liquefied (increasing power demand and fuel use) or burned without propulsion benefits. These actions can increase reported emissions and compliance costs. If contracts are silent, parties may try to shift incremental costs.

Operational Controls and Best Practice

To manage these risks, Hellenic Shipping News Worldwide recommends that shipowners and operators implement a written standby BOG management plan. This plan should be activated when delays, drifting, or speed restrictions are foreseeable, defining the operational hierarchy for BOG handling while considering safety, equipment limitations, and anticipated duration. It should also establish internal escalation triggers and daily reporting formats for chartering and operations teams.

During standby, logs should detail not only actions taken for BOG management but also their rationale, including charterers' instructions, terminal constraints, power demand limitations, and safety considerations. This contemporaneous narrative with supporting evidence can significantly improve the defensibility of claims and reduce retrospective arguments.

Furthermore, when instructions for drifting, slow steaming, or waiting offshore are received, shipowners should issue prompt written notices confirming the instruction, expected schedule impact, and foreseeable BOG consequences. These notices should be factual and aim to establish a shared understanding of the operating context and data to be used if figures are later challenged.

If STS operations are considered for mitigation, their feasibility should be assessed against vessel approvals, state/terminal constraints, and industry guidance. If STS is not viable, detailed documentation of inquiries and encountered constraints is advised to demonstrate that reasonable mitigation options were explored.