Marine Fuels: Preventing Claims and Disputes

This guide highlights what can go wrong when purchasing, bunkering and using marine fuels and the steps that can be taken to avoid disputes and mitigate their impact.

It examines each stage of the supply chain, including the production and characteristics of fuel oil, contracts, transfer and handling operations, quantity and quality assessment, onboard storage and environmental compliance. It considers the impact of the 2020 global sulphur cap, with a particular focus on the increasing use of LNG as a marine fuel.

The guide also discusses collection of evidence relating to quality and quantity disputes and advises on claims management.

The appendices set out recommended BIMCO clauses, standard letters and no lien provisions.

The deterioration in quality of marine fuel oils over recent decades, coupled with increasingly stringent environmental legislation, presents a real challenge for shipowners and operators. Disputes relating to marine fuel oils – commonly referred to as ‘bunker fuel’ or simply ‘bunkers’ – show no sign of abating and are increasingly complex.

Shipowners, vessel managers and seafarers must remain alert to the problems associated with the supply of marine fuel oils. Identifying and understanding the issues will allow steps to be taken to ensure their vessels are provided with fuel oil suitable for use by their vessels’ power plants and, if any problems do arise, the impact is minimised.

The consequences of burning unsuitable fuel can be very serious. In addition to potentially costly damage to the vessel’s engines, a disabled vessel in a congested waterway, in poor weather, carrying an expensive or environmentally sensitive cargo can cause catastrophic damage to life, property and the environment. As refineries develop their processes to capture more of the higher value light grades of oil, the quality of the residual grades has deteriorated. Combined with blending problems, this has resulted in an increased frequency of vessels being supplied with residual marine fuel oil unsuitable for use.

PURPOSE OF THIS GUIDE

This loss prevention guide tackles fuel quality, quantity and contractual issues at source by giving those involved in the purchase and use of marine fuel oils a thorough understanding of the problems that they may face.

Bunker disputes can be approached from two distinct viewpoints. There is the viewpoint of those actually operating the vessel — for example, the crew who manage bunkering and are at risk if the vessel is supplied with unsuitable fuel oil. There is also the viewpoint of those ashore, who manage the vessel and may be involved in purchasing the fuel oil. They must know what action should be taken by the crew when dealing with unsuitable fuel oil on board and which parties should be held responsible.

The guide is for everyone who comes across bunker quality and quantity disputes in their working day. It is neither a legal text book nor an engineer’s manual, but it does aim to give a basic understanding of the technical and legal implications.

The guide takes each stage in order. It first deals with the nature of fuel oil, its production and resulting characteristics. Consideration is then given to the contracts under which fuel oil may be ordered and its ownership. Chapters on the loading and handling of fuel oil on board and the ever-increasing environmental legislation are followed by details on evidence collection and the handling of claims.

At the end of the guide are appendices, which include a number of specimen texts and various recommended standard letters.

1. INTRODUCTION

Purpose of this guide

2020 – a new era

Resolving disputes

2. PRODUCTION AND REFINING OF MARINE FUELS

Characteristics of crude oils

Refinery process

Marine fuel products

Biofuels

LNG as a marine fuel

3. TYPES AND CHARACTERISTICS OF MARINE FUELS

Grades

Quality characteristics

Standards for marine fuels

LNG as a marine fuel

4. PURCHASING MARINE FUELS

Specifying the right fuel

Delivery contracts

Confirmation of stem

Supplier’s standard terms and conditions

Terms implied by law

Bunkers supplied by charterer

LNG as a marine fuel

5. BUNKERING

Safe handling

General procedures and standards

Bunker checklist

Bunker delivery note

Letter of protest

LNG as a marine fuel

6. QUANTITY MEASUREMENT

Methods of determining quantity

Mass flow meters

Bunker surveys

Fuel foul play

LNG as a marine fuel

7. FUEL SAMPLING AND TESTING

Sampling

Testing

LNG as a marine fuel

8. ONBOARD STORAGE AND TREATMENT

Fuel storage and transfer systems

Fuel treatment systems

LNG as a marine fuel

9. ENVIRONMENTAL COMPLIANCE

MARPOL Annex VI

Regional and national regulations

Fuel oil non-availability

Alternative technologies

Other emission-related pollutants

LNG as a marine fuel

10. CLAIMS MANAGEMENT AND COLLECTING EVIDENCE

Action in the event of a quality dispute

Action in the event of a quantity dispute

Impact on insurance

APPENDICES

Recommended clauses

Draft letters

No lien provisions

NorthStandard is one of the leading providers of global marine insurance products and services across the maritime industries. Established through the merger of North P&I Club and the Standard Club in February 2023, NorthStandard brings together over 300 years of marine insurance heritage.

From headquarters in the UK and with offices throughout Europe, Asia and the Americas, NorthStandard offers a unique blend of worldwide presence and class-leading expertise across multiple specialist areas, including P&I, FD&D, War Risks, Strike & Delay, Hull and Machinery and ancillary insurance. Its Sunderland Marine and Coastal & Inland divisions also provide cover for owners’ fixed premium P&I, fishing vessels, inland waterway and coastal trading vessels and aquaculture. NorthStandard’s comprehensive local market and sector knowledge is underpinned by continuous investments in market-leading digital technologies.

NorthStandard is a leading member of the International Group of P&I Clubs (IG) and is fully committed to upholding the shared objectives of its 12 independent member clubs, which provide liability cover for approximately 90% of the world’s ocean-going tonnage.