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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, 24 October 19
AUSTRALIA'S HOPES TO EXPAND COAL EXPORTS IN SOUTH-EAST ASIA 'DELUSIONAL', EXPERTS SAY - THE GUARDIAN
The number of new coal-fired power plants starting construction across south-east Asia has fallen markedly over the past two years as Australia has ...
Thursday, 24 October 19
PANAMAX: NEGATIVE SENTIMENT IN THE MARKET AS IT CONTINUES TO WEAKEN - FEARNLEYS
Capesize
The market has continued to slide the last week, as lack of fresh requirements and a slight oversupply of tonnage heading towards Sout ...
Wednesday, 23 October 19
CHINA'S 2019 COAL IMPORTS SET TO RISE MORE THAN 10%: ANALYSTS - REUTERS
China, the world’s top coal buyer, is on track to boost imports of the fuel by more than 10% this year, traders and analysts said on Tuesday, ...
Wednesday, 23 October 19
SHIPPING MARKET INSIGHT - INTERMODAL
Moving closer to the end of the year, we are facing what the market was expecting for quite a while, the ship repair sector booming with the shipya ...
Tuesday, 22 October 19
DRY BULK: DESPITE THE DOWNWARD CORRECTION NOTED OVER THE PAST MONTH, RATES ARE STILL HOLDING OFF AT FAVORABLE LEVELS - ALLIED SHIPPING
Despite the downward correction that has been noted in the dry bulk market over the past month, rates are still holding off at favorable levels. Ev ...
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- Uttam Galva Steels Limited - India
- Ministry of Finance - Indonesia
- MS Steel International - UAE
- Vizag Seaport Private Limited - India
- Sical Logistics Limited - India
- Bharathi Cement Corporation - India
- Planning Commission, India
- Bhoruka Overseas - Indonesia
- Port Waratah Coal Services - Australia
- Medco Energi Mining Internasional
- Anglo American - United Kingdom
- Latin American Coal - Colombia
- Offshore Bulk Terminal Pte Ltd, Singapore
- The University of Queensland
- Formosa Plastics Group - Taiwan
- India Bulls Power Limited - India
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- Global Coal Blending Company Limited - Australia
- Kaltim Prima Coal - Indonesia
- Australian Coal Association
- Price Waterhouse Coopers - Russia
- Cement Manufacturers Association - India
- Sojitz Corporation - Japan
- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Eastern Coal Council - USA
- Trasteel International SA, Italy
- Globalindo Alam Lestari - Indonesia
- Goldman Sachs - Singapore
- Lanco Infratech Ltd - India
- Tamil Nadu electricity Board
- Mintek Dendrill Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Therma Luzon, Inc, Philippines
- Sinarmas Energy and Mining - Indonesia
- Minerals Council of Australia
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Dalmia Cement Bharat India
- Petrochimia International Co. Ltd.- Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Energy Link Ltd, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Posco Energy - South Korea
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- Sindya Power Generating Company Private Ltd
- Vedanta Resources Plc - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Rio Tinto Coal - Australia
- Samtan Co., Ltd - South Korea
- Leighton Contractors Pty Ltd - Australia
- Deloitte Consulting - India
- Videocon Industries ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Authority, New Zealand
- ICICI Bank Limited - India
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- Ind-Barath Power Infra Limited - India
- Chettinad Cement Corporation Ltd - India
- Parry Sugars Refinery, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ministry of Transport, Egypt
- Holcim Trading Pte Ltd - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- Oldendorff Carriers - Singapore
- Renaissance Capital - South Africa
- Kalimantan Lumbung Energi - Indonesia
- Kumho Petrochemical, South Korea
- Straits Asia Resources Limited - Singapore
- Aditya Birla Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coastal Gujarat Power Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Metalloyd Limited - United Kingdom
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Thiess Contractors Indonesia
- Wood Mackenzie - Singapore
- Romanian Commodities Exchange
- International Coal Ventures Pvt Ltd - India
- McConnell Dowell - Australia
- Barasentosa Lestari - Indonesia
- Sakthi Sugars Limited - India
- Gujarat Sidhee Cement - India
- PTC India Limited - India
- AsiaOL BioFuels Corp., Philippines
- Central Java Power - Indonesia
- San Jose City I Power Corp, Philippines
- TeaM Sual Corporation - Philippines
- Petron Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- Star Paper Mills Limited - India
- Riau Bara Harum - Indonesia
- London Commodity Brokers - England
- Semirara Mining and Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Karaikal Port Pvt Ltd - India
- Xindia Steels Limited - India
- Orica Australia Pty. Ltd.
- Krishnapatnam Port Company Ltd. - India
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kepco SPC Power Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Marubeni Corporation - India
- Global Green Power PLC Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Bukit Makmur.PT - Indonesia
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Siam City Cement - Thailand
- Directorate General of MIneral and Coal - Indonesia
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- SMG Consultants - Indonesia
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Africa Commodities Group - South Africa
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Global Business Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Singapore Mercantile Exchange
- Economic Council, Georgia
- CIMB Investment Bank - Malaysia
- VISA Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Wilmar Investment Holdings
- Semirara Mining Corp, Philippines
- Borneo Indobara - Indonesia
- Toyota Tsusho Corporation, Japan
- Bayan Resources Tbk. - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Carbofer General Trading SA - India
- GMR Energy Limited - India
- Energy Development Corp, Philippines
- Larsen & Toubro Limited - India
- Karbindo Abesyapradhi - Indoneisa
- LBH Netherlands Bv - Netherlands
- Chamber of Mines of South Africa
- Commonwealth Bank - Australia
- Gujarat Electricity Regulatory Commission - India
- Iligan Light & Power Inc, Philippines
- Bangladesh Power Developement Board
- Directorate Of Revenue Intelligence - India
- SN Aboitiz Power Inc, Philippines
- New Zealand Coal & Carbon
- Agrawal Coal Company - India
- Sree Jayajothi Cements Limited - India
- Jaiprakash Power Ventures ltd
- Thai Mozambique Logistica
- IEA Clean Coal Centre - UK
- Bukit Baiduri Energy - Indonesia
- Electricity Generating Authority of Thailand
- South Luzon Thermal Energy Corporation
- Independent Power Producers Association of India
- Billiton Holdings Pty Ltd - Australia
- Kartika Selabumi Mining - Indonesia
- Bhushan Steel Limited - India
- Bulk Trading Sa - Switzerland
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Jorong Barutama Greston.PT - Indonesia
- Georgia Ports Authority, United States
- Ambuja Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Kobexindo Tractors - Indoneisa
- Banpu Public Company Limited - Thailand
- Mjunction Services Limited - India
- The Treasury - Australian Government
- Essar Steel Hazira Ltd - India
- Indo Tambangraya Megah - Indonesia
- Interocean Group of Companies - India
- Ministry of Mines - Canada
- Bhatia International Limited - India
- GVK Power & Infra Limited - India
- Siam City Cement PLC, Thailand
- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
- Altura Mining Limited, Indonesia
- PowerSource Philippines DevCo
- Tata Chemicals Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Central Electricity Authority - India
- Orica Mining Services - Indonesia
- OPG Power Generation Pvt Ltd - India
- Baramulti Group, Indonesia
- Savvy Resources Ltd - HongKong
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- Malabar Cements Ltd - India
- ASAPP Information Group - India
- European Bulk Services B.V. - Netherlands
- Meenaskhi Energy Private Limited - India
- Manunggal Multi Energi - Indonesia
- Meralco Power Generation, Philippines
- Pendopo Energi Batubara - Indonesia
- Indian Oil Corporation Limited
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Standard Chartered Bank - UAE
- Merrill Lynch Commodities Europe
- Grasim Industreis Ltd - India
- Kideco Jaya Agung - Indonesia
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