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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, 13 November 19
INDONESIAN NOVEMBER COAL PRICE REFERENCE LOGS FIRST GAIN SINCE AUGUST
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised up the benchmark price of Indonesian thermal co ...
Wednesday, 13 November 19
SHIPPING MARKET INSIGHT - INTERMODAL
The improvements seen in the dry bulk market during the unexpectedly strong Q3 brought enthusiasm and optimism for a last quarter rally. Indeed as ...
Tuesday, 12 November 19
COAL IMPORTS AT MAJOR PORTS SLIP 18 PC TO 51 MT IN APRIL-OCTOBER - ECONOMIC TIMES
The Indian Ports Association (IPA), which maintains cargo data handled by these 12 ports, in its recent report, said "percentage variation fro ...
Monday, 11 November 19
EMINENT MARITIME ORGANIZATIONS AND INDIVIDUALS WERE HONORED
SHIPTEK 2019 Anchors in Greece for its 12th edition.
Eminent Maritime Organizations and Individuals were honored
Greec ...
Wednesday, 06 November 19
SHIPPING MARKET INSIGHT - INTERMODAL
With less than two months before the end of the year, the shipping and refining industries have already taken measures and invested to accommodate ...
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- Parliament of New Zealand
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Formosa Plastics Group - Taiwan
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- Ministry of Mines - Canada
- SMG Consultants - Indonesia
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Bharathi Cement Corporation - India
- Georgia Ports Authority, United States
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- Siam City Cement - Thailand
- Kideco Jaya Agung - Indonesia
- Medco Energi Mining Internasional
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- Marubeni Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Price Waterhouse Coopers - Russia
- Economic Council, Georgia
- IHS Mccloskey Coal Group - USA
- Manunggal Multi Energi - Indonesia
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Xindia Steels Limited - India
- Power Finance Corporation Ltd., India
- Bhushan Steel Limited - India
- Kaltim Prima Coal - Indonesia
- London Commodity Brokers - England
- Bhatia International Limited - India
- Kobexindo Tractors - Indoneisa
- Uttam Galva Steels Limited - India
- Meenaskhi Energy Private Limited - India
- Kumho Petrochemical, South Korea
- SN Aboitiz Power Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Sical Logistics Limited - India
- Grasim Industreis Ltd - India
- Thiess Contractors Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Carbofer General Trading SA - India
- Thai Mozambique Logistica
- Africa Commodities Group - South Africa
- Timah Investasi Mineral - Indoneisa
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- Jaiprakash Power Ventures ltd
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Attock Cement Pakistan Limited
- Coal and Oil Company - UAE
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- Wood Mackenzie - Singapore
- Toyota Tsusho Corporation, Japan
- Port Waratah Coal Services - Australia
- Gujarat Mineral Development Corp Ltd - India
- Mintek Dendrill Indonesia
- Renaissance Capital - South Africa
- Coalindo Energy - Indonesia
- Lanco Infratech Ltd - India
- Chettinad Cement Corporation Ltd - India
- Sree Jayajothi Cements Limited - India
- Mjunction Services Limited - India
- Semirara Mining and Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Australian Commodity Traders Exchange
- Videocon Industries ltd - India
- Kartika Selabumi Mining - Indonesia
- Borneo Indobara - Indonesia
- Coastal Gujarat Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Vedanta Resources Plc - India
- Sindya Power Generating Company Private Ltd
- Kepco SPC Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Global Green Power PLC Corporation, Philippines
- The University of Queensland
- Semirara Mining Corp, Philippines
- AsiaOL BioFuels Corp., Philippines
- Iligan Light & Power Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Indian Oil Corporation Limited
- Electricity Authority, New Zealand
- Siam City Cement PLC, Thailand
- PetroVietnam Power Coal Import and Supply Company
- PNOC Exploration Corporation - Philippines
- Madhucon Powers Ltd - India
- Anglo American - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indogreen Group - Indonesia
- SMC Global Power, Philippines
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- CIMB Investment Bank - Malaysia
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Ministry of Transport, Egypt
- Karbindo Abesyapradhi - Indoneisa
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Intertek Mineral Services - Indonesia
- Dalmia Cement Bharat India
- Simpson Spence & Young - Indonesia
- Baramulti Group, Indonesia
- Bhoruka Overseas - Indonesia
- TeaM Sual Corporation - Philippines
- Parry Sugars Refinery, India
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Riau Bara Harum - Indonesia
- Central Java Power - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Energy - Thailand
- Minerals Council of Australia
- Directorate Of Revenue Intelligence - India
- Indo Tambangraya Megah - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Singapore Mercantile Exchange
- Deloitte Consulting - India
- Leighton Contractors Pty Ltd - Australia
- Bayan Resources Tbk. - Indonesia
- Maheswari Brothers Coal Limited - India
- Ind-Barath Power Infra Limited - India
- San Jose City I Power Corp, Philippines
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- Commonwealth Bank - Australia
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- GVK Power & Infra Limited - India
- Planning Commission, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- Latin American Coal - Colombia
- Mercator Lines Limited - India
- Sakthi Sugars Limited - India
- Karaikal Port Pvt Ltd - India
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Ambuja Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Binh Thuan Hamico - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- McConnell Dowell - Australia
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- Gujarat Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- Sarangani Energy Corporation, Philippines
- Star Paper Mills Limited - India
- Oldendorff Carriers - Singapore
- Vizag Seaport Private Limited - India
- Antam Resourcindo - Indonesia
- Trasteel International SA, Italy
- Jorong Barutama Greston.PT - Indonesia
- Posco Energy - South Korea
- Australian Coal Association
- Pendopo Energi Batubara - Indonesia
- Independent Power Producers Association of India
- Malabar Cements Ltd - India
- White Energy Company Limited
- Goldman Sachs - Singapore
- Aboitiz Power Corporation - Philippines
- Central Electricity Authority - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Energy Development Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Krishnapatnam Port Company Ltd. - India
- Interocean Group of Companies - India
- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Globalindo Alam Lestari - Indonesia
- Global Business Power Corporation, Philippines
- Bangladesh Power Developement Board
- Maharashtra Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- Meralco Power Generation, Philippines
- Chamber of Mines of South Africa
- Aditya Birla Group - India
- Gujarat Sidhee Cement - India
- Petrochimia International Co. Ltd.- Taiwan
- Larsen & Toubro Limited - India
- South Luzon Thermal Energy Corporation
- ICICI Bank Limited - India
- Salva Resources Pvt Ltd - India
- Rio Tinto Coal - Australia
- Merrill Lynch Commodities Europe
- Bulk Trading Sa - Switzerland
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Wilmar Investment Holdings
- Jindal Steel & Power Ltd - India
- Samtan Co., Ltd - South Korea
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