LNG CONDITIONS OF USE

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1 LNG CONDITIONS OF USE BRIDGING THE GAP Alec Kyrle-Pope, Senior Claims Executive 1 Leadership in Action 1

2 The Issues 1. Terminal Conditions - The Good, The Bad & The Ugly 2. Insurance - P&I Club Rules & The IG Pooling Agreement 3. The Gap 4. Bridging the Gap 5. Long Term Outlook Leadership in action 2

3 Terminal Conditions The Good, The Bad & The Ugly Leadership in action 3

4 Terminal Conditions - The Good The use of the terminal, its premises, facilities and equipment is subject to the express understanding and condition that the terminal and its personnel shall be held harmless from all liability, loss, damage or claim which have arisen in connection with the operation of the vessels whilst it is in the terminal, save to the extent that any liability, loss or claim has arisen as a consequence of the terminal or its servants or agents' negligence. Leadership in action 4

5 Terminal Conditions The Bad Removal of Wrecks If the Ship or any object on board becomes, or is likely to become, an obstruction, threat, or danger to navigation, operations, safety, health., environment or security of the Port (a "hazard'), the Master and the Owner shall, at the option of the Port Management, take immediate action to clear, remove or rectify the hazard as the Port Management may direct, or the Port Management shall be entitled to take such measures as it may deem appropriate to clear, remove or rectify the hazard and the Master and Owner shall be responsible for all costs and expenses associated therewith. Leadership in action 5

6 Terminal Conditions The Bad The Vessel Interests shall, in all circumstances, defend, hold harmless and indemnify the Terminal Interests against any and all losses, claims, costs and expenses Terminal Interests may incur or have incurred arising from: any loss or damage to the Vessel or the Vessel s cargo, including consequential losses and all claims, damages and costs arising therefrom, regardless of any act, omission, breach of duty (statutory or otherwise), fault or neglect on the part of the Terminal Interests Leadership in action 6

7 Terminal Conditions The Ugly Port Services Notwithstanding the presence of a Pilot, the Master always remains in command of the LNG Carrier and is responsible for its safe navigation and operation. Whilst the terminal shall exercise reasonable care, skill and diligence to ensure the proper rendering of Port Services and provision of Port Facilities to the Vessel, the terminal shall not be responsible for any loss or damage to the Vessel actual or consequential which is related to the use of the Port Services and Facilities by the Vessel regardless of any act omission fault or neglect on the part of the terminal.the terminal shall not be responsible for the acts, omissions and neglect of its servants or agents relating to any loss or damage to the Vessel or any loss or injury suffered by the Master, Officers or Crew. The Master and the Owner shall hold harmless and indemnify the terminal against any claim, cost or expense arising from.. (i) Any loss of or damage to the LNG Facility, the Port Facility, or any property of the Company or injury to any Company Representative related to the Vessel's use of the LNG Facility or the Port Facility; (ii) Any loss suffered by third parties with respect to damage to their property or injury to their personnel related to the Vessel's use of the LNG Facility or the Port Facility; (iii) Any loss of or damage to the Vessel while in the Port and all Claims arising therefrom; and (iv) Any personal injury or property loss suffered by any of the Vessel Interests while in the Port and all Claims arising therefrom. Leadership in action 7

8 Terminal Conditions The Ugly. [What could be missing? Any reference to limitation whatsoever at all, be it statutory or contractual?] Leadership in action 8

9 Insurance P&I Club Rules & The IG Pooling Agreement Leadership in action 9

10 Rule 2, Section 14 Liability arising under certain indemnities and contracts Liability for loss of life, personal injury or illness, or for loss of or damage to property, arising under the terms of an indemnity or contract given or made by or on behalf of the Owner relating to facilities or services provided or to be provided to or in connection with an entered ship, but only if and to the extent that: i.the terms have previously been approved by the Managers and cover for the liability has been agreed between the Owner and the Managers on such terms as the Managers may require, or ii.the Directors in their discretion decide that the Owner should be reimbursed. Note: Any oil pollution element in a claim under this Section 14 will be subject to the limitation set out in Rule 5(B) and in the corresponding note. Leadership in action 10

11 The IG Pooling Agreement What is poolable? LNG terminal use Pooling guidelines IG pooling guidelines require that an LNG COU contain the following: a)an exception to sole negligence, or b)knock-for-knock (K4K) indemnity regime, or c)a statutory limit, or d)a contractual limit (presently USD150million requirement) Best endeavours? Leadership in action 11

12 H&M? Leadership in action 12

13 The Gap Leadership in action 13

14 Non mutual risks Strict Liability regimes Assumption of contractual liabilities that contravene and exceed existing limits & scope of P&I Club cover and/or terms of the International Group ( IG ) Pooling Agreement Any shortfall in insurance = possible direct exposure to Owner Added costs exposure to rectify this by purchase of additional cover via commercial insurance markets Leadership in action 14

15 Bridging the Gap Leadership in action 15

16 1. Additional Cover Ship Owners Liability ( SOL ) from commercial providers, approx. USD$10-15k Club Facility N.B. what is objectionable in the terms? Identify the issues, narrow the risk, tailor the cover, reduce the price. 2. Commercial Agreement 3. Negotiation of Terms Leadership in action 16

17 Negotiation Example 1.any loss suffered by the terminal with respect to damage to the Port Facilities or injury to its personnel which is related to the use of the Port by the Ship. + AND WHICH INVOLVES THE FAULT, WHOLLY OR PARTIALLY, OF THE MASTER, OFFICERS OR CREW, INCLUDING NEGLIGENT NAVIGATION + CONTRACTUAL LIMIT Leadership in action 17

18 Negotiation Example 2 Port Qasim Statutory or Contractual Limit? USD200million contractual limit negotiated acceptable or not? BUT Pakistan 1996 Protocol Common sense solution Leadership in action 18

19 Long Term Outlook Leadership in action 19

20 Long Term Outlook Project Spot Collective Bargaining e.g. The Cool Pool FSRU & FLNG units, COUs? Offshore Oil & Gas sector - K4K tried & tested One-sided liability: a concern for safety? BIMCO sub committee & LNGVOY Leadership in action 20

21 UK Club: LNG Market Share World LNG Fleet (Clarkson Research Services, 2015) 396 vessels 72.6m GT UK Club LNG Fleet 115 vessels (29% of world fleet) 12.1m GT (17% of world fleet GT) Leadership in action 21

22 Thank you Any questions? Leadership in action 22