Bunkers on Delivery and Redelivery

What it does

A bunkers on delivery and redelivery clause governs how fuel on board is treated at the two ends of a time charter. On delivery the charterer takes over and pays the owner for the bunkers remaining on board, and on redelivery the owner pays the charterer for the bunkers then on board, so that each party pays for the fuel it receives. The clause fixes the quantities expected and the prices to be applied.

It typically states approximate, or minimum and maximum, quantities of each fuel grade to be on board at delivery and redelivery, and the basis for pricing them, whether at an agreed figure or by reference to a market price. By defining these, the clause avoids disputes over how much fuel changes hands and at what value when the ship passes between the parties.

Commercial effect

Because bunkers are a large cost, the quantities and prices set by this clause can involve significant sums changing hands at delivery and redelivery. The pricing basis matters when fuel prices move between fixing and performance, since paying for delivery bunkers at one price and being repaid for redelivery bunkers at another can advantage one party, making the agreed basis a real commercial point.

The quantity provisions also matter operationally, since the charterer needs enough fuel on delivery to begin trading and the owner expects a reasonable quantity back on redelivery. The clause interacts with the hire and redelivery provisions, since the bunker settlement is part of the overall accounting when the ship is delivered and redelivered.

Owner's perspective

The owner wants to be paid a fair price for the bunkers it provides on delivery and to receive a reasonable quantity of fuel back on redelivery at a price that reflects the market. It is conscious that the pricing basis can expose it to loss if fuel prices move, so it wants the basis defined to protect against being underpaid for delivery bunkers or overpaying on redelivery.

The owner also wants sensible quantity provisions so that it is not left with the ship short of fuel on redelivery or holding more than it needs. It treats the bunker settlement as part of the overall delivery and redelivery accounting, and it negotiates the quantities and pricing alongside the hire and redelivery terms so the fuel changing hands is valued fairly.

Charterer's perspective

The charterer wants enough fuel on delivery to commence trading without immediately bunkering, and a fair price for the bunkers it pays the owner for at that point. It wants the redelivery quantity and price set so that it recovers reasonable value for the fuel it leaves on board, and it is alert to the pricing basis where fuel prices have moved.

The charterer therefore focuses on the quantities and the pricing mechanism, since an unfavourable basis can cost it materially over the bunker volumes involved. It negotiates these provisions together with the redelivery and hire terms so that the bunker accounting at both ends of the charter is fair and predictable.

Negotiation points

• The quantities of each fuel grade expected on delivery and redelivery.
• The pricing basis for delivery and redelivery bunkers (fixed figure or market reference).
• How the bunker settlement fits within the delivery and redelivery accounting.
• The treatment of fuel price movements between fixing and performance.

Common variations

• A clause pricing delivery and redelivery bunkers at the same agreed figure.
• A clause pricing each at the prevailing market price at the relevant port.
• A provision stating minimum and maximum quantities on delivery and redelivery.
• A clause requiring like-for-like quantities and grades at each end.