Allocation of liabilities between parties involved in shipping LNG from eastern Australia

Abstract

LNG shipping tonnage represents about 400 vessels worldwide and it has high safety records compared with other types of tonnage. Serious attention to the operational safety of LNG vessels is dictated by their high value as assets, substantial time required to build new LNG vessels, limited availability of replacement tonnage on the market, heavy dependence of the LNG supply chain on shipping efficiency and reliability, and high costs of delay in LNG supply.

Notwithstanding the high safety record of LNG vessels, shipping is historically considered a high-risk enterprise. Liability of shipowners is usually limited to accommodate navigational risks to achieve reasonable transport costs. Such limitation of liability is stipulated in various legislative acts within local and international maritime law. Liability regimes in different countries and regions vary; consequently, study must be undertaken for each particular port to understand their individual liability regimes. This extended abstract discusses the liability regime for LNG vessels calling to Port Gladstone.

For the parties involved in the transport of LNG, including sellers, buyers, charterers, shipowners, and port authorities, it is important to understand the liability regime in the LNG loading port to ensure proper risk assessment and management of LNG shipping. There are various tools for such risk management, which may include a combination of insurance arrangements, liability and indemnity agreements, allocation of liabilities and indemnities for shipping and insurance requirements in LNG sale purchase agreements, safety assurance policies and procedures, and the inclusion of special requirements in the port and terminal regulations. This extended abstract provides shipping stakeholders with information on methods of managing risks for potential shipping liabilities.