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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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Saturday, 07 December 19
CHINA'S BENCHMARK POWER COAL PRICE DROPS SLIGHTLY - XINHUA
China’s benchmark power coal price dropped slightly during the past week.
The Bohai-Rim Steam-Coal Price Index (BSPI), a gauge ...
Saturday, 07 December 19
SOUTH AFRICAN COAL PRICE SURGE, WHILE OTHERS LANGUISH, IS TROUBLING - REUTERS
Coal prices around the world are gently sliding as demand from top importers such as China, India and even Europe remains subdued amid a so far mil ...
Saturday, 07 December 19
SUPRAMAX: OVERALL, THE BALTIC SUPRAMAX INDEX REMAINED IN POSITIVE MODE, DESPITE SOME AREAS LACKING FRESH ACTIVITY - BALTIC BRIEFING
Capesize
This week the Capesize market maintained healthy earnings, as an end of year surge took the Capesize 5TC back up to $25,202 by mid-wee ...
Friday, 06 December 19
INDONESIA COAL BENCHMARK PRICE FOR DECEMBER INCREASES BY US 3 CENTS MOM
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised up the benchmark price of Indonesian thermal co ...
Thursday, 05 December 19
IMO 2020 IS ABOUT TO GET REAL - GAVIN THOMPSON
As I write this edition of the APAC Energy Buzz from my desk in Singapore I can see ships. Lots of ships. No surprise given that Singapore is among ...
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- Formosa Plastics Group - Taiwan
- The Treasury - Australian Government
- Chamber of Mines of South Africa
- PowerSource Philippines DevCo
- Maharashtra Electricity Regulatory Commission - India
- Krishnapatnam Port Company Ltd. - India
- Attock Cement Pakistan Limited
- CNBM International Corporation - China
- Cement Manufacturers Association - India
- Lanco Infratech Ltd - India
- SMC Global Power, Philippines
- Thiess Contractors Indonesia
- Sindya Power Generating Company Private Ltd
- Orica Australia Pty. Ltd.
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Madhucon Powers Ltd - India
- Global Green Power PLC Corporation, Philippines
- Malabar Cements Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Posco Energy - South Korea
- Carbofer General Trading SA - India
- Coalindo Energy - Indonesia
- Banpu Public Company Limited - Thailand
- Pendopo Energi Batubara - Indonesia
- Therma Luzon, Inc, Philippines
- CIMB Investment Bank - Malaysia
- Romanian Commodities Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Latin American Coal - Colombia
- Billiton Holdings Pty Ltd - Australia
- Bahari Cakrawala Sebuku - Indonesia
- MS Steel International - UAE
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- Manunggal Multi Energi - Indonesia
- Oldendorff Carriers - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Offshore Bulk Terminal Pte Ltd, Singapore
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Anglo American - United Kingdom
- Ministry of Transport, Egypt
- Standard Chartered Bank - UAE
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- Globalindo Alam Lestari - Indonesia
- Bangladesh Power Developement Board
- Indian Energy Exchange, India
- Meralco Power Generation, Philippines
- Essar Steel Hazira Ltd - India
- Vedanta Resources Plc - India
- Sinarmas Energy and Mining - Indonesia
- Australian Commodity Traders Exchange
- The State Trading Corporation of India Ltd
- Semirara Mining Corp, Philippines
- Grasim Industreis Ltd - India
- Ind-Barath Power Infra Limited - India
- Wood Mackenzie - Singapore
- Sakthi Sugars Limited - India
- Africa Commodities Group - South Africa
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- Medco Energi Mining Internasional
- Sree Jayajothi Cements Limited - India
- ASAPP Information Group - India
- Indika Energy - Indonesia
- Energy Link Ltd, New Zealand
- Kideco Jaya Agung - Indonesia
- GAC Shipping (India) Pvt Ltd
- Tamil Nadu electricity Board
- Holcim Trading Pte Ltd - Singapore
- Bukit Makmur.PT - Indonesia
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Leighton Contractors Pty Ltd - Australia
- White Energy Company Limited
- Directorate Of Revenue Intelligence - India
- Rio Tinto Coal - Australia
- Ministry of Finance - Indonesia
- Sarangani Energy Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Antam Resourcindo - Indonesia
- TeaM Sual Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- San Jose City I Power Corp, Philippines
- Siam City Cement PLC, Thailand
- Parliament of New Zealand
- Central Java Power - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Interocean Group of Companies - India
- Bhushan Steel Limited - India
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Kaltim Prima Coal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Jaiprakash Power Ventures ltd
- AsiaOL BioFuels Corp., Philippines
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- Electricity Generating Authority of Thailand
- Wilmar Investment Holdings
- Karaikal Port Pvt Ltd - India
- Planning Commission, India
- Indogreen Group - Indonesia
- Riau Bara Harum - Indonesia
- SMG Consultants - Indonesia
- Ministry of Mines - Canada
- Independent Power Producers Association of India
- Georgia Ports Authority, United States
- VISA Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Rashtriya Ispat Nigam Limited - India
- Deloitte Consulting - India
- PTC India Limited - India
- Mintek Dendrill Indonesia
- Indo Tambangraya Megah - Indonesia
- Global Coal Blending Company Limited - Australia
- PNOC Exploration Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Minerals Council of Australia
- Xindia Steels Limited - India
- ICICI Bank Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Commonwealth Bank - Australia
- Borneo Indobara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Meenaskhi Energy Private Limited - India
- Videocon Industries ltd - India
- Indian Oil Corporation Limited
- Aboitiz Power Corporation - Philippines
- Semirara Mining and Power Corporation, Philippines
- GMR Energy Limited - India
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- London Commodity Brokers - England
- Miang Besar Coal Terminal - Indonesia
- Coal and Oil Company - UAE
- Marubeni Corporation - India
- Metalloyd Limited - United Kingdom
- Coastal Gujarat Power Limited - India
- OPG Power Generation Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- LBH Netherlands Bv - Netherlands
- IEA Clean Coal Centre - UK
- Binh Thuan Hamico - Vietnam
- Savvy Resources Ltd - HongKong
- Kohat Cement Company Ltd. - Pakistan
- Iligan Light & Power Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Larsen & Toubro Limited - India
- Alfred C Toepfer International GmbH - Germany
- Kapuas Tunggal Persada - Indonesia
- Petron Corporation, Philippines
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Altura Mining Limited, Indonesia
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Singapore Mercantile Exchange
- Thai Mozambique Logistica
- International Coal Ventures Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- McConnell Dowell - Australia
- Kobexindo Tractors - Indoneisa
- Ambuja Cements Ltd - India
- Trasteel International SA, Italy
- Vizag Seaport Private Limited - India
- Bharathi Cement Corporation - India
- Mercuria Energy - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Simpson Spence & Young - Indonesia
- Makarim & Taira - Indonesia
- Bhoruka Overseas - Indonesia
- South Luzon Thermal Energy Corporation
- Australian Coal Association
- GVK Power & Infra Limited - India
- Goldman Sachs - Singapore
- Bayan Resources Tbk. - Indonesia
- India Bulls Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Parry Sugars Refinery, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sojitz Corporation - Japan
- Energy Development Corp, Philippines
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- Mjunction Services Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Sical Logistics Limited - India
- Dalmia Cement Bharat India
- Pipit Mutiara Jaya. PT, Indonesia
- Kumho Petrochemical, South Korea
- Mercator Lines Limited - India
- European Bulk Services B.V. - Netherlands
- New Zealand Coal & Carbon
- Siam City Cement - Thailand
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