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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, 20 November 19
FOREIGN DIRECT INVESTMENTS IN COMMERCIAL COAL MINING IN INDIA? - DIPESH DIPU
In August 2019, Government of India announced its approval for Foreign Direct Investment (FDI) for coal mining, processing and sale. Not that FDI i ...
Wednesday, 20 November 19
AUSTRALIA'S NEW HOPE POSTS 66% SURGE IN Q1 SALEABLE COAL OUTPUT - REUTERS
Australian coal producer New Hope Corp Ltd reported on Tuesday a 66% jump in saleable coal production in the first quarter, as output ramped up at ...
Wednesday, 20 November 19
THE IMO AND THE PRICE OF GAS OR THE IMPACT OF THE INTERNATIONAL MARITIME ORGANISATION'S SULPHUR 2020 LIMIT FOR MARINE FUEL OIL ON THE PRICE OF GAS - KING & SPALDING
The main bunker fuel for ships is High Sulphur Fuel Oil (HSFO, with sulphur up to 3.5% m/m (mass by mass)). This will all change on 1 January 2020 ...
Wednesday, 20 November 19
SHIPPING MARKET INSIGHT - INTERMODAL
While the market expects the next OPEC meeting, there are still no clear signs indicating that the organization will keep supporting oil prices, wh ...
Monday, 18 November 19
CHINA RECORDS STABLE COAL PRODUCTION IN JAN-OCT: XINHUA
China’s raw coal output registered stable growth in the first 10 months, while its imports remained robust, official data showed.
...
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- Renaissance Capital - South Africa
- Australian Commodity Traders Exchange
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Meralco Power Generation, Philippines
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- Bhushan Steel Limited - India
- GMR Energy Limited - India
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- Indogreen Group - Indonesia
- Gujarat Electricity Regulatory Commission - India
- AsiaOL BioFuels Corp., Philippines
- Directorate General of MIneral and Coal - Indonesia
- Chamber of Mines of South Africa
- Mintek Dendrill Indonesia
- Banpu Public Company Limited - Thailand
- LBH Netherlands Bv - Netherlands
- Orica Mining Services - Indonesia
- Deloitte Consulting - India
- Goldman Sachs - Singapore
- The Treasury - Australian Government
- Commonwealth Bank - Australia
- Bangladesh Power Developement Board
- Salva Resources Pvt Ltd - India
- Makarim & Taira - Indonesia
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Siam City Cement - Thailand
- Global Business Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Formosa Plastics Group - Taiwan
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
- Singapore Mercantile Exchange
- Larsen & Toubro Limited - India
- Semirara Mining Corp, Philippines
- Uttam Galva Steels Limited - India
- Carbofer General Trading SA - India
- Bayan Resources Tbk. - Indonesia
- Aditya Birla Group - India
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Binh Thuan Hamico - Vietnam
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- PetroVietnam Power Coal Import and Supply Company
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Marubeni Corporation - India
- Barasentosa Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Heidelberg Cement - Germany
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Petron Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Straits Asia Resources Limited - Singapore
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- ICICI Bank Limited - India
- Rio Tinto Coal - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- McConnell Dowell - Australia
- IEA Clean Coal Centre - UK
- Grasim Industreis Ltd - India
- Global Coal Blending Company Limited - Australia
- Miang Besar Coal Terminal - Indonesia
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Holcim Trading Pte Ltd - Singapore
- Standard Chartered Bank - UAE
- Vizag Seaport Private Limited - India
- Kobexindo Tractors - Indoneisa
- Electricity Generating Authority of Thailand
- The University of Queensland
- Africa Commodities Group - South Africa
- Price Waterhouse Coopers - Russia
- Mercator Lines Limited - India
- Sarangani Energy Corporation, Philippines
- Sical Logistics Limited - India
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- Timah Investasi Mineral - Indoneisa
- Kohat Cement Company Ltd. - Pakistan
- Antam Resourcindo - Indonesia
- Madhucon Powers Ltd - India
- GAC Shipping (India) Pvt Ltd
- Ambuja Cements Ltd - India
- Australian Coal Association
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- MS Steel International - UAE
- Star Paper Mills Limited - India
- Coastal Gujarat Power Limited - India
- India Bulls Power Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- South Luzon Thermal Energy Corporation
- Minerals Council of Australia
- Energy Link Ltd, New Zealand
- Indian Energy Exchange, India
- Bhatia International Limited - India
- CNBM International Corporation - China
- PNOC Exploration Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- Indika Energy - Indonesia
- Siam City Cement PLC, Thailand
- Central Java Power - Indonesia
- Cement Manufacturers Association - India
- Agrawal Coal Company - India
- San Jose City I Power Corp, Philippines
- Thai Mozambique Logistica
- Savvy Resources Ltd - HongKong
- Orica Australia Pty. Ltd.
- Essar Steel Hazira Ltd - India
- Gujarat Sidhee Cement - India
- Alfred C Toepfer International GmbH - Germany
- Mercuria Energy - Indonesia
- Lanco Infratech Ltd - India
- Meenaskhi Energy Private Limited - India
- Manunggal Multi Energi - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Merrill Lynch Commodities Europe
- Ministry of Finance - Indonesia
- GVK Power & Infra Limited - India
- Ministry of Transport, Egypt
- Pipit Mutiara Jaya. PT, Indonesia
- Jindal Steel & Power Ltd - India
- Semirara Mining and Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Attock Cement Pakistan Limited
- Videocon Industries ltd - India
- Krishnapatnam Port Company Ltd. - India
- Jorong Barutama Greston.PT - Indonesia
- Planning Commission, India
- Georgia Ports Authority, United States
- Globalindo Alam Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Bhoruka Overseas - Indonesia
- Kumho Petrochemical, South Korea
- Interocean Group of Companies - India
- Kaltim Prima Coal - Indonesia
- Parliament of New Zealand
- Anglo American - United Kingdom
- PTC India Limited - India
- Tamil Nadu electricity Board
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Xindia Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Parry Sugars Refinery, India
- Indian Oil Corporation Limited
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate Of Revenue Intelligence - India
- Mjunction Services Limited - India
- Wilmar Investment Holdings
- Vijayanagar Sugar Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Thiess Contractors Indonesia
- Kapuas Tunggal Persada - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Malabar Cements Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vedanta Resources Plc - India
- Ind-Barath Power Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Tata Chemicals Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Altura Mining Limited, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- Simpson Spence & Young - Indonesia
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- VISA Power Limited - India
- The State Trading Corporation of India Ltd
- OPG Power Generation Pvt Ltd - India
- Borneo Indobara - Indonesia
- Jaiprakash Power Ventures ltd
- PowerSource Philippines DevCo
- Sindya Power Generating Company Private Ltd
- Therma Luzon, Inc, Philippines
- Latin American Coal - Colombia
- Karaikal Port Pvt Ltd - India
- Wood Mackenzie - Singapore
- Economic Council, Georgia
- Kalimantan Lumbung Energi - Indonesia
- Energy Development Corp, Philippines
- Bharathi Cement Corporation - India
- Kepco SPC Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Oldendorff Carriers - Singapore
- International Coal Ventures Pvt Ltd - India
- Electricity Authority, New Zealand
- CIMB Investment Bank - Malaysia
- Power Finance Corporation Ltd., India
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