DRAFTING OF LNG CARRIERS

My topic today is the drafting of LNG charters. This may seem a bit of a dull topic but I would ask you to bear in mind that the charter hire for a new generation LNG vessel is around US$28 million per annum! Charters are often for 25 years, so it is important to get the drafting right.

This is obviously a big topic and I will therefore concentrate on certain areas - the type of charter used, the relationship between the Owner, the Charterer, the Builder and the Banks, particular points to look for in long term charters, and dispute resolution - always important to a lawyer, but also to the client. First of all a little background. LNG is a rapidly growing market and in the area which I have some particular expertise, Qatar, there are interests in over 75 LNG vessels both built and to be delivered in the next few years. Traditionally, LNG chartering was done on the basis of an individual project, the sale contract was entered into between the Seller and the Buyer, LNG vessels were built to service that particular project and were on long term charter to the Charterer or an Affiliate of the Charterer.

That has now begun to change, although I, personally, think it a little too early to talk about there being a spot market for LNG. There are now Contracts of Affreightment, short term time charters, voyage charters, cargo swaps and single cargo contracts. However, I think that the focus is still on the long term time charter and therefore that is what I am going to talk about today.