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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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Thursday, 19 December 19
COAL POWER GENERATION CONTINUES TO DECLINE IN GERMANY: DESTATIS, XINHUA REPORTED
The volume of electricity generated in coal-fired power plants in Germany decreased “markedly” by 37 percent to 34 billion kilowatt-hou ...
Thursday, 19 December 19
BANGLADESH'S NBR CUTS VAT ON COAL IMPORT FOR POWER PLANTS - THE DAILY STAR
The National Board of Revenue (NBR) reduced value added tax on the import of coal for power plants to 5 percent from present 15 percent for five ye ...
Wednesday, 18 December 19
AVERAGE PRICES OF COAL IN 2018 WERE MORE THAN 60% HIGHER THAN IN 2016 - IEA
Coal use grew again in 2018.
Global coal demand increased by 1.1%, continuing the rebound that began in 2017 after three years of decline ...
Wednesday, 18 December 19
ASIA IS SET TO SUPPORT GLOBAL COAL DEMAND FOR THE NEXT FIVE YEARS - IEA
Press Release: Global coal demand is expected to decline in 2019 but remain broadly stable over the next five years, supported by robust growth in ...
Wednesday, 18 December 19
SHIPPING MARKET INSIGHT - INTERMODAL
As we all know very well by now, the reduction in the maximum allowable sulphur content of marine fuels in 2020 is likely to have a massive impact ...
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- Riau Bara Harum - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- Attock Cement Pakistan Limited
- Toyota Tsusho Corporation, Japan
- AsiaOL BioFuels Corp., Philippines
- European Bulk Services B.V. - Netherlands
- Latin American Coal - Colombia
- Indo Tambangraya Megah - Indonesia
- Orica Australia Pty. Ltd.
- CNBM International Corporation - China
- Thiess Contractors Indonesia
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
- Australian Commodity Traders Exchange
- Coal and Oil Company - UAE
- ICICI Bank Limited - India
- Chamber of Mines of South Africa
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- The Treasury - Australian Government
- CIMB Investment Bank - Malaysia
- Bayan Resources Tbk. - Indonesia
- Straits Asia Resources Limited - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Samtan Co., Ltd - South Korea
- Pipit Mutiara Jaya. PT, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- Barasentosa Lestari - Indonesia
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- GVK Power & Infra Limited - India
- Marubeni Corporation - India
- Bhatia International Limited - India
- Borneo Indobara - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Energy Development Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- Bulk Trading Sa - Switzerland
- Wood Mackenzie - Singapore
- PTC India Limited - India
- Aditya Birla Group - India
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Energy Link Ltd, New Zealand
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Iligan Light & Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Ambuja Cements Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Power Finance Corporation Ltd., India
- ASAPP Information Group - India
- Cement Manufacturers Association - India
- Grasim Industreis Ltd - India
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Kobexindo Tractors - Indoneisa
- Ministry of Mines - Canada
- Krishnapatnam Port Company Ltd. - India
- Bharathi Cement Corporation - India
- Aboitiz Power Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Parliament of New Zealand
- Siam City Cement - Thailand
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Goldman Sachs - Singapore
- Minerals Council of Australia
- Maharashtra Electricity Regulatory Commission - India
- Lanco Infratech Ltd - India
- Simpson Spence & Young - Indonesia
- Tamil Nadu electricity Board
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Globalindo Alam Lestari - Indonesia
- Baramulti Group, Indonesia
- Central Java Power - Indonesia
- OPG Power Generation Pvt Ltd - India
- Medco Energi Mining Internasional
- Vizag Seaport Private Limited - India
- Essar Steel Hazira Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Jindal Steel & Power Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Vedanta Resources Plc - India
- PNOC Exploration Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- Deloitte Consulting - India
- Africa Commodities Group - South Africa
- Kideco Jaya Agung - Indonesia
- Global Green Power PLC Corporation, Philippines
- Dalmia Cement Bharat India
- Economic Council, Georgia
- SMG Consultants - Indonesia
- Parry Sugars Refinery, India
- Sical Logistics Limited - India
- Xindia Steels Limited - India
- Eastern Coal Council - USA
- Cigading International Bulk Terminal - Indonesia
- Commonwealth Bank - Australia
- VISA Power Limited - India
- LBH Netherlands Bv - Netherlands
- Sindya Power Generating Company Private Ltd
- Petron Corporation, Philippines
- Gujarat Sidhee Cement - India
- Georgia Ports Authority, United States
- South Luzon Thermal Energy Corporation
- SMC Global Power, Philippines
- Larsen & Toubro Limited - India
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- Price Waterhouse Coopers - Russia
- Malabar Cements Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- San Jose City I Power Corp, Philippines
- Carbofer General Trading SA - India
- Manunggal Multi Energi - Indonesia
- Electricity Authority, New Zealand
- Ministry of Transport, Egypt
- Timah Investasi Mineral - Indoneisa
- Mjunction Services Limited - India
- Bukit Makmur.PT - Indonesia
- The State Trading Corporation of India Ltd
- Australian Coal Association
- Savvy Resources Ltd - HongKong
- Independent Power Producers Association of India
- International Coal Ventures Pvt Ltd - India
- Central Electricity Authority - India
- Thai Mozambique Logistica
- TNB Fuel Sdn Bhd - Malaysia
- TeaM Sual Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Kalimantan Lumbung Energi - Indonesia
- The University of Queensland
- Ceylon Electricity Board - Sri Lanka
- Coastal Gujarat Power Limited - India
- Anglo American - United Kingdom
- Kepco SPC Power Corporation, Philippines
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sree Jayajothi Cements Limited - India
- IEA Clean Coal Centre - UK
- Salva Resources Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Posco Energy - South Korea
- Siam City Cement PLC, Thailand
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- Ind-Barath Power Infra Limited - India
- Agrawal Coal Company - India
- GAC Shipping (India) Pvt Ltd
- GMR Energy Limited - India
- Kartika Selabumi Mining - Indonesia
- Directorate Of Revenue Intelligence - India
- Indika Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Meenaskhi Energy Private Limited - India
- Altura Mining Limited, Indonesia
- Mintek Dendrill Indonesia
- Bukit Baiduri Energy - Indonesia
- Formosa Plastics Group - Taiwan
- SN Aboitiz Power Inc, Philippines
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Mercator Lines Limited - India
- Bhoruka Overseas - Indonesia
- Wilmar Investment Holdings
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Pendopo Energi Batubara - Indonesia
- Singapore Mercantile Exchange
- Vijayanagar Sugar Pvt Ltd - India
- New Zealand Coal & Carbon
- Merrill Lynch Commodities Europe
- White Energy Company Limited
- Mercuria Energy - Indonesia
- Coalindo Energy - Indonesia
- Indonesian Coal Mining Association
- GN Power Mariveles Coal Plant, Philippines
- PowerSource Philippines DevCo
- Interocean Group of Companies - India
- Therma Luzon, Inc, Philippines
- Electricity Generating Authority of Thailand
- Orica Mining Services - Indonesia
- Leighton Contractors Pty Ltd - Australia
- MS Steel International - UAE
- Uttam Galva Steels Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- IHS Mccloskey Coal Group - USA
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Kaltim Prima Coal - Indonesia
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Romanian Commodities Exchange
- Renaissance Capital - South Africa
- Oldendorff Carriers - Singapore
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