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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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Wednesday, 04 December 19
FITCH RATINGS: CASH FLOW GENERATION TO SLOW DOWN FOR INDONESIAN COAL MINERS
Fitch Ratings' negative outlook on the Indonesian coal-mining sector reflects our view of weaker cash flow generation on account of declining c ...
Wednesday, 04 December 19
SHIPPING MARKET INSIGHT - INTERMODAL
Dry bulk freight rates rebounded last week, a development that came as a relief following the recent negative sentiment that prevailed in the marke ...
Wednesday, 04 December 19
INDONESIA REVIEWING RULES MANDATING COAL SALES TO LOCAL BUYERS: OFFICIAL - REUTERS
Indonesia is reviewing rules that require coal miners to sell a portion of their coal to local buyers, a government official said on Monday, as sup ...
Tuesday, 03 December 19
STABILITY AND COMPATIBILITY OF VERY LOW SULPHUR FUEL OILS - GARD
In order to meet increasing restrictions on the sulphur content in marine fuel as defined by MARPOL Annex VI Regulation 14.1.3, the characteristics ...
Monday, 02 December 19
COAL PRODUCTION IN INDIA UP BY 164.58 MT IN 5 YEARS - BUSINESS LINE
Raw coal production in the country has increased from 567.77 million tons (MT) in 2013-14 to 730.35 MT in 2018-19, Union Coal and Parliamentary Aff ...
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- Wilmar Investment Holdings
- VISA Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- Medco Energi Mining Internasional
- Indonesian Coal Mining Association
- Sakthi Sugars Limited - India
- Georgia Ports Authority, United States
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- Manunggal Multi Energi - Indonesia
- Antam Resourcindo - Indonesia
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- McConnell Dowell - Australia
- Tata Chemicals Ltd - India
- Altura Mining Limited, Indonesia
- Attock Cement Pakistan Limited
- European Bulk Services B.V. - Netherlands
- Jaiprakash Power Ventures ltd
- Iligan Light & Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Vijayanagar Sugar Pvt Ltd - India
- Vedanta Resources Plc - India
- Bhoruka Overseas - Indonesia
- Samtan Co., Ltd - South Korea
- Savvy Resources Ltd - HongKong
- Binh Thuan Hamico - Vietnam
- Price Waterhouse Coopers - Russia
- Electricity Authority, New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Semirara Mining Corp, Philippines
- Independent Power Producers Association of India
- IHS Mccloskey Coal Group - USA
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- Planning Commission, India
- Grasim Industreis Ltd - India
- Bayan Resources Tbk. - Indonesia
- Tamil Nadu electricity Board
- Renaissance Capital - South Africa
- AsiaOL BioFuels Corp., Philippines
- OPG Power Generation Pvt Ltd - India
- Baramulti Group, Indonesia
- Siam City Cement - Thailand
- IEA Clean Coal Centre - UK
- Indian Energy Exchange, India
- Bukit Asam (Persero) Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Eastern Energy - Thailand
- Mercuria Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- SMC Global Power, Philippines
- Bukit Makmur.PT - Indonesia
- Mercator Lines Limited - India
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Cement Manufacturers Association - India
- Gujarat Mineral Development Corp Ltd - India
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- CNBM International Corporation - China
- GAC Shipping (India) Pvt Ltd
- Heidelberg Cement - Germany
- Sical Logistics Limited - India
- Kideco Jaya Agung - Indonesia
- Mintek Dendrill Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Globalindo Alam Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Ambuja Cements Ltd - India
- Bharathi Cement Corporation - India
- Indogreen Group - Indonesia
- Sojitz Corporation - Japan
- PTC India Limited - India
- Salva Resources Pvt Ltd - India
- Coal and Oil Company - UAE
- Directorate Of Revenue Intelligence - India
- Gujarat Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Xindia Steels Limited - India
- Latin American Coal - Colombia
- Star Paper Mills Limited - India
- Coastal Gujarat Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Deloitte Consulting - India
- New Zealand Coal & Carbon
- Energy Link Ltd, New Zealand
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- Timah Investasi Mineral - Indoneisa
- Central Java Power - Indonesia
- Power Finance Corporation Ltd., India
- Bahari Cakrawala Sebuku - Indonesia
- MS Steel International - UAE
- Orica Australia Pty. Ltd.
- Chamber of Mines of South Africa
- Merrill Lynch Commodities Europe
- Trasteel International SA, Italy
- Sree Jayajothi Cements Limited - India
- Larsen & Toubro Limited - India
- Rio Tinto Coal - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Makarim & Taira - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Uttam Galva Steels Limited - India
- Edison Trading Spa - Italy
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Economic Council, Georgia
- Eastern Coal Council - USA
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Miang Besar Coal Terminal - Indonesia
- Riau Bara Harum - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Romanian Commodities Exchange
- Kobexindo Tractors - Indoneisa
- Karaikal Port Pvt Ltd - India
- Bhatia International Limited - India
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Cigading International Bulk Terminal - Indonesia
- Metalloyd Limited - United Kingdom
- San Jose City I Power Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Commonwealth Bank - Australia
- London Commodity Brokers - England
- Bangladesh Power Developement Board
- Intertek Mineral Services - Indonesia
- Carbofer General Trading SA - India
- Ceylon Electricity Board - Sri Lanka
- Energy Development Corp, Philippines
- Ministry of Transport, Egypt
- Bank of Tokyo Mitsubishi UFJ Ltd
- The University of Queensland
- Vizag Seaport Private Limited - India
- Indika Energy - Indonesia
- Petron Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- Australian Commodity Traders Exchange
- Ministry of Finance - Indonesia
- Bulk Trading Sa - Switzerland
- Kapuas Tunggal Persada - Indonesia
- Bhushan Steel Limited - India
- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Orica Mining Services - Indonesia
- Australian Coal Association
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Madhucon Powers Ltd - India
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMG Consultants - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- LBH Netherlands Bv - Netherlands
- PowerSource Philippines DevCo
- Goldman Sachs - Singapore
- CIMB Investment Bank - Malaysia
- Lanco Infratech Ltd - India
- Thiess Contractors Indonesia
- Billiton Holdings Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Borneo Indobara - Indonesia
- Agrawal Coal Company - India
- Central Electricity Authority - India
- Toyota Tsusho Corporation, Japan
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Karbindo Abesyapradhi - Indoneisa
- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- Aboitiz Power Corporation - Philippines
- Parry Sugars Refinery, India
- Anglo American - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- GMR Energy Limited - India
- Global Business Power Corporation, Philippines
- Wood Mackenzie - Singapore
- White Energy Company Limited
- Formosa Plastics Group - Taiwan
- Mjunction Services Limited - India
- Simpson Spence & Young - Indonesia
- Essar Steel Hazira Ltd - India
- Siam City Cement PLC, Thailand
- GVK Power & Infra Limited - India
- ICICI Bank Limited - India
- Parliament of New Zealand
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