Bunker Claims. How an Engine Works. How an Engine Works. Alex Macinnes Sept 2018

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1 Bunker Claims Alex Macinnes Sept 2018 How an Engine Works 2 How an Engine Works 3 1

2 How an Engine Works 4 How an Engine Works 5 How an Engine Works 6 2

3 What are bunkers? bunkers Comes from coal bunkers Essentially 2 types: Residual fuel The rubbish Has to be blended IFO Intermediate fuel oil Only large engines IFO 380 typically USD 300/MT Distillate Fuel diesel / gasoil Very little treatment required Much wider range of engines / auxiliary engines More important as sulphur becomes an issue MDO Marine Diesel Oil MGO typically USD 500/MT 7 Treatment Process Treatment Bunker Tank Heater Cold Filter Purifier Booster pump Day Tank Heater Transfer pump Hot Filter Settling Tank Supply Pump ENGINE 8 Choices / Types of Engine and Fuel Slow speed - 2 stroke: Huge cathedral builders Residual Fuel rpm Allows residual fuel to burn Directly connected to prop Medium Speed - 4 stroke Smaller Residual Fuel rpm High Speed - 4 stroke Small rpm Distillate fuel 9 3

4 Properties of Fuel Oil Natural elements from crude oil: Hydrogen Carbon Sulphur Vanadium Sodium Nickel Calcium Contaminants Water (salt water can cause severe fouling) Aluminum and Silicon (from the refinery catalyst - very hard and abrasive causing mechanical damage) Sodium (from salt water during refining) Iron (rust from storage) Waste products 10 MARPOL Annex VI Regulations for the Prevention of Air Pollution from ships Regulation 14 Sulphur content of fuel max 3.5% (0.5% from ) Within SOx Emission Control Area (ECA) sulphur content max 0.1% ECAs Baltic/North Sea/North America/US Caribbean Regulation 18 Bunker Delivery Note to state sulphur content Bunker Delivery Note retained for three years Record date, time and position of change-over 11 Bunker Sampling and Testing Samples must be representative Drip sample taken during entire period Invite supplier to witness sampling Witness supplier s sampling and selling Three samples sealed and labelled MARPOL sample taken at manifold by supplier MARPOL sample retained for 12 months Details in Oil Record Book One sample sent to lab test as per ISO 8217 Do not use fuel until analysis received 12 4

5 d a a b c d e f e ² ² 3 3 c f b b b, c c Testing Density - at a stated temperature Viscosity measured in centistokes (cst); at a stated temperature Water maximum 0.5%; all water should have been removed during refining Ash indication of the metals and insolubles present Carbon residue indication of the amount of asphaltenes present Sulphur Aluminum and silicon Vanadium- cannot be removed Total sediment potential (TSP) Stability when a fuel is blended it must remain homogenous not separating out Sodium - can cause hot corrosion Iron Nickel Asphaltenes can effect the ignition performance Pour point the temperature at which the oil stops flowing most about 0 C Flashpoint Hydrogen sulphide Compatibility Microbial contamination Spectroscopy 13 ISO ISO MARINE DISTILLATE FUELS Parameter Unit Limit DMX DMA DMZ DMB Viscosity at 40 C mm /s Max Viscosity at 40 C mm /s Min Micro Carbon Residue % m/m Max at 10% Residue Density at 15 C kg/m Max Micro Carbon Residue % m/m Max Sulphur % m/m Max Water % V/V Max Total sediment by hot % m/m Max filtration Ash % m/m Max Flash point 0 C Min Pour point, Summer 0 C Max Pour point, Winter C Max Cloud point C Max Calculated Cetane Index Min Acid Number mgkoh/g Max Oxidation stability g/m Max Lubricity, corrected wear scar diameter (wsd 1.4 at um Max C Hydrogen sulphide mg/kg Max Appearance Clear & Bright A sulphur limit of 1.00% m/m applies in the Emission Control Areas designated by the International Maritime Organization. As there may be local variations, the purchaser shall define the maximum sulphur content according to the relevant statutory requirements, notwithstanding the limits given in this table. If the sample is not clear and bright, total sediment by hot filtration and water test shall be required. Oxidation stability and lubricity tests are not applicable if the sample is not clear and bright. Applicable if sulphur is less than 0.050% m/m. Effective only from 1 July If the sample is dyed and not transparent, water test shall be required. The water content shall not exceed 200 mg/kg (0.02% m/m). MARINE RESIDUAL FUELS 15 5

6 Bunkering Procedures Barge Normally under supply contract sampling on barge Crew attend barge and measure barge tanks before and after Ullage tanks; temperatures; trim; calibration tables; photographic evidence of any irregularities Drip sampling Advisable to use a bunker testing company test ship s receiving manifold Avoid mixing fuels from different supplies (especially 50-50) put into empty tanks Measure own bunker tanks prior to and after receiving bunkers Ensure the Bunker Delivery Receipt is issued properly will inform the invoice Issue notes of protest for all unsatisfactory matters 16 Samples 17 Samples At least 3 In practice 5 One sample should be sent for testing immediately Marpol Sample Supplier must supply this to the ship; recorded on the BDN Seals 18 6

7 The Various Parties / Claims 19 The Various Parties / Claims 20 The Various Parties / Claims 21 7

8 The Various Parties / Claims 22 The Various Parties / Claims 23 The Supply Contract Law and Jurisdiction The terms Set contracts The Bimco Standard form Time Limits 7 days not unusual Limitation of liability Importance of considering these in advance IBIA Best practice note High water mark 24 8

9 Charterparties The duty to provide bunkers: Clause 2 NYPE: That the Charterers shall provide and pay for all the fuel oil Clause 4 Baltime: The Charterers shall provide and pay for all the fuel oil Absolute Duty? Nippon Yusen Kaisha v. Alltrans (20 February 1984, unreported) Arbitrators held: was an absolute duty on charterers under Clause 2 NYPE to provide proper bunkers Given leave to appeal, but further finding: failed to exercise due diligence in any event 25 Charterparties The duty to provide bunkers: Clause 2 NYPE: That the Charterers shall provide and pay for all the fuel oil Clause 4 Baltime: The Charterers shall provide and pay for all the fuel oil Absolute Duty? Nippon Yusen Kaisha v. Alltrans (20 February 1984, unreported) Arbitrators held: was an absolute duty on charterers under Clause 2 NYPE to provide proper bunkers Given leave to appeal, but further finding: failed to exercise due diligence in any event 26 Charterparties Express stipulation of a standard E.g.: ISO 8217 Is that all that is required? No bunkers must still be of reasonable quality and suitable for the engines fitted London arbitration 1/88 (1998 LMLN 214 3) Fuel had an unacceptably high level of chlor compounds The relevant British Standard - no mention of the applicable level of chlor compounds. "Nobody expects to find more than a trace of chlor in marine fuel, hence nobody has considered setting a limit. However, everyone would agree that anything more than a trace of Chlor is highly undesirable. In the words of the Owners' petroleum expert, he would not legislate for 'old socks' simply because this is not something you would expect to find. 27 9

10 Charterparties Express stipulation of a standard Old Sock 28 Charterparties Bimco Clauses BIMCO Bunker Quality Control Clause for Time Chartering (4) The fuel samples shall be retained by the Vessel for 90 (ninety) and any dispute as to whether the bunker fuels conform to the agreed specification(s) shall be settled by analysis of the sample(s) by (...) or by another mutually agreed fuels analyst whose findings shall be conclusive evidence as to conformity or otherwise with the bunker fuels specification(s). 29 Charterparties NYPE 2015 New bunkers clause (clause 9) Bunker quantities and prices; Bunkering prior to delivery/redelivery; Bunkering operations and sampling; Bunker quality and liability; Fuel testing programme and bunker fuel sulphur content; Grades and quantities of bunkers on redelivery

11 Interaction: Charterers and Owners obligations Charterers Owners Obligation to provide fuel of suitable quality Duty to Maintain / Mitigation e.g. NYPE Cl 1 - "...maintain her class and keep the vessel in a thoroughly efficient state in hull, machinery and equipment for and during the service." Causation 31 Documentation Vital Consider at least: Log books (deck, engine, and scrap) Oil record books Maintenance records Pre-arrival checklist Bunker tank measurements Consumption records BDN Photographs (and preserve damaged parts) Survey reports 32 Dispute Management The Stages The Stages Pre-incident stage Incident stage Post-incident stage Assessment Dispute resolution - Contractual negotiations - Onboard practices - Training - Contingency planning - Bunkering procedures - Documentary procedures - Decisions taken on how to proceed - Investigation / Collection - Negotiation - Mediation - Arbitration - Court 33 11

12 Claims Practical Aspects GCMS% Testing Not%all%GCMS%is%equal Direct%injection Solid%phase%extraction Bisphenol%F% Tall%Oil%(presence%of%Rosin%acid) Good%Expert So%important! Types:%Marine%Engineer% Chemist% Metallurgist% Approach scientific%paper balance%of%probabilities % 34 Claims Practical Aspects Additives A)Real)Problem 35 Time bar Time%bar%) Options? BIMCO Clause%9(b): "Any%claim%as%to%the%quality%or%specification...must%be%notified...promptly%after%the% circumstances%giving%rise%to%such%claims%have%been%discovered.%if%the%buyers%do%not% notify...within%30%days%of#the#date#of#delivery,%such%claim%shall%be...barred." Tort Other%jurisdictions? Other%defendants?%("balance%of%probabilities%approach")% 36 12

13 Houston Problems Houston' Problems GCMS Approach finds'issue But'not'all' equal Balance'of' probabilities 37 Any questions? Alex Macinnes T +44 (0) M +44(0) alex.macinnes@tatham-macinnes.com Tatham Macinnes Holland House, 4 Bury Street, London. EC3A 5AW T +44 (0)