Benefits of Transfer Contracts Transporting Liquid Natural Gas
Energy Law- Contracts for carrying Liquid Natural Gas (LNG) by sea have traditionally been Free on Board (FOB) or Delivery Ex Ship (DES). Will this be the case in the future? Critically discuss the benefits of employing such contracts.
– there was a missing style. The coursework will be written in OSCOLA style which is British in law. (Transfer Contracts Transporting Liquid Natural Gas)
– There should be at least 30 sources and minimum 4500 words and maximum 5000 words.
-The result should be 60 per cent which is merit
– The sources should contain cases, at least 15 sources from book academically, academic journals
– Footnotes should be put
Title: Benefits of Transfer Contracts When Transporting Liquid Natural Gas
Benefits of Transfer Contracts When Transporting Liquid Natural Gas
The transportation of Liquid Natural Gas (LNG) by sea can be risky; therefore, there is need for parties involved to take precaution in case of unforeseen loss. As a matter of fact, the seller and the buyer sign contracts that lift responsibilities from one party to another during the process of shipping at a given time. For decades, traders who deal with LNG have used different sales arrangements that protect both the seller and buyer. In many cases, the Free on Board (FOB) and the Delivery Ex Ship (DES) have been used to arrange for the sale and transportation of LNG by sea. Subsequently, these two types of sales agreements have more benefits that protect the buyer and seller than other modes of sales, especially, when transporting LNG (Cheng 2013, p.20).
Free On Board (FOB)
One of the sales contracts used in LNG transportation by sea is FOB, which can be long-term or short-term (Davies 2015, p.31). In this case, the seller fulfills their obligation to carry LNG when the containers containing the gas pass over the ship’s rail at the port named by the buyer. According to FOB contracts, the seller is not obligated to find shipping space for the container with the LNG or provide insurance once the gas is delivered in the named port. In addition, the cost of carriage is covered by the buyer, unless there are specific stipulations in the contract. In fact, the price of the gas is negotiated separately from that of shipping. Therefore, the terms in the FOB largely depend on the size of LNG being shipped (Martin 2012, p.782).
However, before the LNG is delivered at the port named by the buyer, the seller must arrange for the shipping and insurance at the cost of the buyer. For this reason, since there are numerous risks associated with carrying LNG in the sea such as theft, the seller must insurer the carrier to avoid any losses. Such precautions are taken by the seller because the LNG is considered their property until delivered at the port named by the buyer. Emphatically, the fundamental rule in the case of FOB contracts is that, when the LNG is in transit to the venue provided by the buyer, all the risks remain on the seller, but are passed to the buyer the moment it crosses the rails of the ship. Hence, the obligation of the seller under a FOB contract ends when the LNG is delivered for transportation to the carrier and port named by the buyer for shipment. After this is done, the seller is considered to have delivered the LNG to the buyer.