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Monday, 16 September 19
SCRUBBERS AND FUEL PROFIT SHARE CLAUSES - CLYDE&CO
 From 1 January 2020, Regulation 14 of MARPOL Annex VI provides that the sulphur content in fuel oil used on board ships shall be reduced from a maximum limit of 3.5% to a maximum limit of 0.5% (the limit in emission control areas remains at 0.1%). Regulation 4 of MARPOL Annex VI permits equivalent methods of compliance provided such methods are at least as effective in terms of emissions reductions.
Whilst it is up to individual port state control and flag states to implement and enforce MARPOL Annex VI, the use of Exhaust Gas Cleaning Systems (“Scrubbers”) is widely expected to be a legitimate option as an equivalent method of compliance.
The anticipated key financial benefit for Owners that have invested or are considering in investing in Scrubber-fitted vessels, is that there will be substantial savings in the cost of trading the vessels due to the expected price differential between fuels with a high sulphur content and ‘compliant’ fuels with a low sulphur content. For example, this week press reports suggest that the fuels currently being traded result in a price differential of about $150-$250 per mt between 0.5% sulphur fuels and high sulphur fuels and predict a price differential of over $400 per mt in 2020 (the differential between high sulphur fuels and 0.1% sulphur fuels is greater).1
Owners have various options available to them in terms of benefitting from the expected fuel differential for Scrubber-fitted vessels.
For example, if Owners are spot trading their Scrubber-fitted vessels, typically it is Owners that pay for the fuel so Owners will therefore benefit from the lower costs of burning high sulphur fuels. If Owners are time chartering their vessel, typically under a time charterparty Charterers will pay for the fuel so Charterers will therefore benefit from the lower costs of burning high sulphur fuel. In consideration for providing this benefit under a time charter, Owners may simply demand a higher charter rate or a ‘scrubber premium’ on the market charter rate.
Alternatively, there are a number of creative ways in which Owners and Charterers can share the benefit of the expected or actual fuel savings for Scrubber-fitted vessels. One of these ways is through implementing a fuel profit-sharing scrubber clause (“FPS Scrubber Clause”) into the time charterparty. It has been reported in the press recently that these are being used with good effect by some owners to keep charter rates competitive.2
There are a number of different legal, operational and commercial factors which will have to be considered in negotiating and drafting FPS Scrubber Clauses and so it is unlikely there is a one-size fits all FPS Scrubber Clause that can be applied across the market. By way of example, the ongoing delay to an intended Bimco industry-standard scrubber clause is illustrative of the complexity and competing interests at play. For example, if owners are bearing the majority of the capital risk and operational risk of the Scrubber, then should owners be entitled to the majority of the benefit of the fuel differential? In the event that the Scrubber is not operational for technical or regulatory reasons, who is responsible for providing compliant low sulphur fuel?
An FPS Scrubber Clause is an innovative way for Owners and Charterers to allocate the anticipated risks and benefits of complying with the implementation of MARPOL Annex VI from 1 January 2020 through the use of Scrubbers. James Kennedy and Fanos Theophani have been involved in the negotiation and drafting of FPS Scrubber Clauses and are well placed to advise and assist the market on these issues.
1 “Songa Container pioneers profit-sharing scrubber clause” Tradewinds 30 August 2019
2 “IMO2020: RAI 2020 Marine Fuel Availability Study Re-Boot” Ship and Bunker 3 September 2019, and “IMO2020: Rollercoaster HSFO Prices Send Singapore VLSFO Premiums Under $85/mt” Ship and Bunker 30 August 2019
Source: Clyde&Co
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Sunday, 22 December 19
NMDC DIVERSIFIES INTO COAL MINING - THE HINDU
Iron ore mining major NMDC has been allocated two coal blocks in Jharkhand for commercial mining by the Union Ministry of Coal.
Both ...
Sunday, 22 December 19
TRADING PLACES FOR 2020 - BALTIC EXCHANGE
In the sea of 2020 predictions, Saxo Bank’s Outrageous Predictions sail their own very unique course. For nearly 20 years the Danish investme ...
Saturday, 21 December 19
SUPRAMAX: A 63,000 DWT VESSEL, OPEN CIGADING, FIXED A TRIP VIA INDONESIA, REDELIVERY WEST COAST INDIA, AT $8,500 - BALTIC BRIEFING
Capesize
The Capesize market this past week has been attempting to recalibrate itself in consideration of weakening freight levels and increasi ...
Saturday, 21 December 19
SHIPPING'S SUPPLY AND DEMAND TRENDING OFF BALANCE - BIMCO
One of the most worrying trends that has developed recently – which will affect shipping demand in the years to come – is the falling t ...
Friday, 20 December 19
CHINA'S BENCHMARK POWER COAL PRICE REMAINS FLAT - XINHUA
China’s benchmark power coal price remained flat during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge of ...
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- Commonwealth Bank - Australia
- Latin American Coal - Colombia
- Bhushan Steel Limited - India
- Sojitz Corporation - Japan
- Bharathi Cement Corporation - India
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- Aboitiz Power Corporation - Philippines
- Orica Mining Services - Indonesia
- ASAPP Information Group - India
- Thiess Contractors Indonesia
- Pendopo Energi Batubara - Indonesia
- Sree Jayajothi Cements Limited - India
- Barasentosa Lestari - Indonesia
- TeaM Sual Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- SMG Consultants - Indonesia
- London Commodity Brokers - England
- Holcim Trading Pte Ltd - Singapore
- Carbofer General Trading SA - India
- Economic Council, Georgia
- Mjunction Services Limited - India
- Electricity Generating Authority of Thailand
- Goldman Sachs - Singapore
- Miang Besar Coal Terminal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- OPG Power Generation Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Power Finance Corporation Ltd., India
- Minerals Council of Australia
- Tata Chemicals Ltd - India
- Simpson Spence & Young - Indonesia
- GVK Power & Infra Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Kumho Petrochemical, South Korea
- Directorate General of MIneral and Coal - Indonesia
- Ambuja Cements Ltd - India
- Global Green Power PLC Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Uttam Galva Steels Limited - India
- Siam City Cement PLC, Thailand
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- SN Aboitiz Power Inc, Philippines
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- Africa Commodities Group - South Africa
- Maheswari Brothers Coal Limited - India
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- Jindal Steel & Power Ltd - India
- Therma Luzon, Inc, Philippines
- McConnell Dowell - Australia
- Singapore Mercantile Exchange
- Binh Thuan Hamico - Vietnam
- Wood Mackenzie - Singapore
- Gujarat Electricity Regulatory Commission - India
- Manunggal Multi Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- Bukit Makmur.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Georgia Ports Authority, United States
- Makarim & Taira - Indonesia
- Energy Link Ltd, New Zealand
- Marubeni Corporation - India
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- Edison Trading Spa - Italy
- Petrochimia International Co. Ltd.- Taiwan
- Straits Asia Resources Limited - Singapore
- Deloitte Consulting - India
- Trasteel International SA, Italy
- Agrawal Coal Company - India
- Kartika Selabumi Mining - Indonesia
- Lanco Infratech Ltd - India
- Meralco Power Generation, Philippines
- Leighton Contractors Pty Ltd - Australia
- GN Power Mariveles Coal Plant, Philippines
- Mercuria Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Jaiprakash Power Ventures ltd
- SMC Global Power, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Meenaskhi Energy Private Limited - India
- Dalmia Cement Bharat India
- Bahari Cakrawala Sebuku - Indonesia
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- Chamber of Mines of South Africa
- Indian Energy Exchange, India
- The State Trading Corporation of India Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Oil Corporation Limited
- Toyota Tsusho Corporation, Japan
- CIMB Investment Bank - Malaysia
- Parliament of New Zealand
- Coastal Gujarat Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Rio Tinto Coal - Australia
- The University of Queensland
- Riau Bara Harum - Indonesia
- South Luzon Thermal Energy Corporation
- Alfred C Toepfer International GmbH - Germany
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Sical Logistics Limited - India
- Australian Coal Association
- Vizag Seaport Private Limited - India
- Chettinad Cement Corporation Ltd - India
- The Treasury - Australian Government
- Ministry of Mines - Canada
- Posco Energy - South Korea
- New Zealand Coal & Carbon
- Ceylon Electricity Board - Sri Lanka
- Thai Mozambique Logistica
- Planning Commission, India
- Ministry of Finance - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- MS Steel International - UAE
- Petron Corporation, Philippines
- Energy Development Corp, Philippines
- PowerSource Philippines DevCo
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- Coalindo Energy - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Karaikal Port Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Sakthi Sugars Limited - India
- Baramulti Group, Indonesia
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Savvy Resources Ltd - HongKong
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Coal Blending Company Limited - Australia
- Globalindo Alam Lestari - Indonesia
- Larsen & Toubro Limited - India
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Price Waterhouse Coopers - Russia
- Oldendorff Carriers - Singapore
- Semirara Mining Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Mercator Lines Limited - India
- Sindya Power Generating Company Private Ltd
- Bayan Resources Tbk. - Indonesia
- Medco Energi Mining Internasional
- Electricity Authority, New Zealand
- Bangladesh Power Developement Board
- Mintek Dendrill Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Metalloyd Limited - United Kingdom
- Kohat Cement Company Ltd. - Pakistan
- Formosa Plastics Group - Taiwan
- Xindia Steels Limited - India
- Grasim Industreis Ltd - India
- Australian Commodity Traders Exchange
- Bhatia International Limited - India
- Standard Chartered Bank - UAE
- Indo Tambangraya Megah - Indonesia
- Attock Cement Pakistan Limited
- Intertek Mineral Services - Indonesia
- India Bulls Power Limited - India
- Malabar Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Indika Energy - Indonesia
- Wilmar Investment Holdings
- Kapuas Tunggal Persada - Indonesia
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- VISA Power Limited - India
- IHS Mccloskey Coal Group - USA
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- International Coal Ventures Pvt Ltd - India
- Anglo American - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Banpu Public Company Limited - Thailand
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Vedanta Resources Plc - India
- Madhucon Powers Ltd - India
- IEA Clean Coal Centre - UK
- Videocon Industries ltd - India
- Krishnapatnam Port Company Ltd. - India
- Eastern Energy - Thailand
- PNOC Exploration Corporation - Philippines
- Ministry of Transport, Egypt
- Antam Resourcindo - Indonesia
- Parry Sugars Refinery, India
- Aditya Birla Group - India
- Star Paper Mills Limited - India
- Sinarmas Energy and Mining - Indonesia
- Independent Power Producers Association of India
- Cement Manufacturers Association - India
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Heidelberg Cement - Germany
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