Dual-Fuel Vessels Must Carefully Manage VLSFO to Avoid Deterioration: Gard

Gard says that dual-fuel vessels risk VLSFO degradation if left unused too long, raising operational and legal challenges. Image Credit: Wärtsilä

With more dual-fuel LNG vessels entering the global fleet, the bunker industry faces a unique challenge.

These vessels have the flexibility to operate on both LNG and conventional marine fuels. Still, this very flexibility can lead to VLSFO remaining unused onboard for extended periods, increasing the risk of fuel deterioration, insurance provider Gard said.

Unlike HSFO, which has a longer shelf life of nearly two years, VLSFO has a shorter shelf life and should be ideally consumed within six months as per CIMAC 2024 guidelines. 

When stored for extended periods, especially on LNG dual-fuel vessels that usually burn LNG, VLSFO can become unusable, leading to operational risks, increased maintenance costs and potential disputes between owners and charterers over fuel quality and liability.

Dual-fuel ships typically operate under charterparties that give charterers the right to determine fuel usage, Stuart Michael Kempson, senior lawyer at GARD and author of the report, said.

In many cases, economic incentives encourage the use of LNG over VLSFO, leaving the latter sitting in tanks for extended periods.

If left unchecked, the fuel can become unstable, forming sludge or failing to meet combustion specifications, which can damage engine components or require costly disposal. 

Who is Responsible for Ensuring Stored Fuel Remains Fit for Use?

Owners may argue that charterers, who typically decide the bunker fuel, have an ongoing duty to supply fuel that remains usable. Charterers, on the other hand, may contend that their responsibility ends at the point of delivery, leaving fuel management to the vessel's crew.

While there is no definitive case law addressing fuel deterioration caused by prolonged storage, past disputes over fuel quality and performance provide some legal guidance, Kempson notes.

The Hill Harmony case established that charterers cannot issue orders that compromise the vessel's safety or seaworthiness. Similarly, the Sale of Goods Act 1979 implies that if fuel is supplied for use over an extended period, it should remain fit for that purpose.

In practice, owners may have little choice but to burn the fuel before it degrades, even if this contradicts charterers' orders. This could lead to further disputes, particularly if charterers refuse to reimburse owners for fuel consumed against their instructions. If degraded fuel leads to engine damage or downtime, the financial stakes could be even higher.

"The best way to address this issue is to include express wording in the contract that entitles Owners / Master to have the final decision over which fuel is consumed if the Master has valid and reasonable concerns over the stability of the bunkers," Kempson said.

"This is something Gard can assist members with.

"Clear contractual terms, regular fuel testing, and cooperative decision-making between owners and charterers are essential to navigating this complex landscape."