During the 2023 GREEN4SEA Athens Forum, Mr. Ross Millar, Loss Prevention Associate, Steamship Mutual, presented the evolution of alternative fuels from the P&I Club perspective. The maritime sector is currently evaluating a range of alternative fuels to replace conventional fuels, each with their own set of advantages—and drawbacks. In this regard, industry stakeholders need assistance and information to make wise decisions on their path to decarbonization and steer clear of any claims that could materially affect their P&I coverage.
n particular, 90% of World Trade is transported by the shipping industry and as a result of this dominance, they are responsible for around 3% of global emissions. Now to put that figure into perspective, China presently accounts for 26%. The Unite States 12% and the European Union 9%.
Regardless of these other figures, it is necessary to take action, to ensure that we operate responsibly and work to reduce our total emissions as an industry. But make no mistake about it, if you change the type of fuel used, there must be the expectation that the risks hazards and claims associated with the carriage of the fuel will change. When casualties occur, this will alter the existing claims and legal landscape.
Two types of claims
- Pollution claims: Are certainly one of the biggest concerns for an operator. Moreover, they are very complex challenging and costly to deal with and do negatively affect operators’ reputations. Liability also extends to losses suffered by shoreside and we see claims coming from a variety of third parties as tourism group, fisheries, and ports.
- Bunker claims: Are another type of dispute that we see frequently. They can form either disputes, involving physical spills into the sea or more frequently disputes between the charter and owner with regards to ownership quality or quantity of fuels.
A number of quantity disputes arise during the redelivery of the vessel from charterers to owners following the end of time Charters, whereas quality disputes arise during the normal course of the charter. With the fuels of the future, we need to think, what kind of environmental damage, qualitative and quantitative issues that we are going to face when it comes to either pollution or bunker disputes.
- LNG: Liquefied Natural Gas is seen as a transition fuel. It’s odorless, colorless and non-toxic in its liquid form.
- Methanol: Is highly flammable having a low flash point of around 11 degrees Celsius. It is toxic if ingested or inhaled and can even be absorbed through somebody’s skin.
- Ammonia: Is flammable and highly toxic. It can be very harmful to humans and marine life excessive exposure can lead to respiratory problems blindness and even death.
Whilst they all could produce lower emissions, there are safety, health and environmental concerns associated with their use. LNG industry has an impeccable safety record. However, handling errors during bunkering could lead to cryogenic burns or frostbite of crew members. It also displaces oxygen and that could create an asphyxiation risk in confined bunker spaces.
Firstly, when the liquid contacts the air some of it will turn back into its original state due to temperature differential. This may become flammable under certain conditions and could lead to a fire or explosive risk. Particularly, if you have metal contact in the aftermath of a collision, this represents a significant risk when using methanol.
Secondly, when LNG contacts with seawater, the temperature difference may cause issues with a vessel ground or ruptures their bunker tanks in coastal or sensitive marine area. We have seen vessels ground in the past and for example was a bulk carrier several years ago according to the Great Barrier Reef, in which if the fuel had been LNG, the organisms on the reef may not have the ability to adapt to the sudden changes in temperature that would result.
The bunker claims may also change but this will be dependent on the type of fuel. For example, we may see LNG having less of an impact on the marine environment when compared like for like with conventional fuel spills conversely. Ammonia spills will have a similar or worse environmental impact and potentially human impact.
We currently at least deploy an oil boom to contain conventional fuels and the same cannot be said for ammonia. However, large-scale discharge of ammonia as well as LNG and methanol need further assessment to make a fully informed decision. A contractual issue that may present itself is that of a quantity dispute after redelivery of an LNG fuel bolt carrier for example. With the nature of LNG boiler situation may present itself whether there is a dispute over the LNG bunkers that have been redelivered after completion of a Time Charter and we may see some parts of the well-established LNG chartering terms creeping into other areas of shipping such as the bulk or car carrier industries.
In types of fuels that are more actively used, we will see a change in the claims landscape, and this will be due in part to the fuel but also due to the number of companies and individuals using them.
We currently have a very sophisticated way of dealing with pollution incidents through the civil liabilities’ convention. Pollution is precisely defined and persistent oil as well. The bunker convention doesn’t currently deal with alternative fuels.
At present there are no other comprehensive legal structures and deal with the liability associated with pollution and bunker claims in the same way as the mechanisms that have just mentioned. Although the HNS convention is in the pipeline, it’s not been adopted. In certain regions in the world, we have seen a desire to introduce their own framework and legislation surrounding pollution and this represents a risk of who claims are looked at and dealt with in individual states.
We are in the largest period of transition in modern times. The examples detailed earlier are a broad interpretation of what may happen and as claims develop, we will have a greater understanding of the risks involved and the disputes that may lie under the surface.
Lastly, any fuel must also meet a few criteria to ensure that the best option takes account of all aspects and to help us achieve the target set by the IMO. This will involve compromise, leaving aside the actual physical characteristics of a fuel.
Above article has been edited from Mr. Ross Millar presentation during the 2023 GREEN4SEA Athens Forum.
Explore more by watching his video presentation here below
The views presented are only those of the author and do not necessarily reflect those of SAFETY4SEA and are for information sharing and discussion purposes only.
Above article is a transcript from Mr. Ross Millars’ presentation during the 2023 GREEN4SEA Athens Forum with minor edits for clarification purposes.