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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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- Heidelberg Cement - Germany
- Salva Resources Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Medco Energi Mining Internasional
- Indonesian Coal Mining Association
- Gujarat Mineral Development Corp Ltd - India
- San Jose City I Power Corp, Philippines
- Sakthi Sugars Limited - India
- Ambuja Cements Ltd - India
- Kepco SPC Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- SN Aboitiz Power Inc, Philippines
- Savvy Resources Ltd - HongKong
- Iligan Light & Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Billiton Holdings Pty Ltd - Australia
- Meralco Power Generation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Cement Manufacturers Association - India
- PNOC Exploration Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- Vizag Seaport Private Limited - India
- Straits Asia Resources Limited - Singapore
- Deloitte Consulting - India
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Grasim Industreis Ltd - India
- Port Waratah Coal Services - Australia
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- Jaiprakash Power Ventures ltd
- Aditya Birla Group - India
- Samtan Co., Ltd - South Korea
- Power Finance Corporation Ltd., India
- Indogreen Group - Indonesia
- Uttam Galva Steels Limited - India
- Bulk Trading Sa - Switzerland
- Mintek Dendrill Indonesia
- Goldman Sachs - Singapore
- Directorate Of Revenue Intelligence - India
- Electricity Authority, New Zealand
- Meenaskhi Energy Private Limited - India
- Petron Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- Anglo American - United Kingdom
- Semirara Mining Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Romanian Commodities Exchange
- Metalloyd Limited - United Kingdom
- Videocon Industries ltd - India
- Xindia Steels Limited - India
- Kobexindo Tractors - Indoneisa
- Ministry of Finance - Indonesia
- International Coal Ventures Pvt Ltd - India
- Tata Chemicals Ltd - India
- Dalmia Cement Bharat India
- Kalimantan Lumbung Energi - Indonesia
- Minerals Council of Australia
- Energy Link Ltd, New Zealand
- Sree Jayajothi Cements Limited - India
- Attock Cement Pakistan Limited
- Lanco Infratech Ltd - India
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- Semirara Mining and Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Rashtriya Ispat Nigam Limited - India
- Interocean Group of Companies - India
- Economic Council, Georgia
- Orica Mining Services - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- South Luzon Thermal Energy Corporation
- OPG Power Generation Pvt Ltd - India
- Madhucon Powers Ltd - India
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- Therma Luzon, Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Africa Commodities Group - South Africa
- Global Business Power Corporation, Philippines
- PowerSource Philippines DevCo
- Pendopo Energi Batubara - Indonesia
- Georgia Ports Authority, United States
- Parliament of New Zealand
- Energy Development Corp, Philippines
- New Zealand Coal & Carbon
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Price Waterhouse Coopers - Russia
- Indian Energy Exchange, India
- Bayan Resources Tbk. - Indonesia
- Bangladesh Power Developement Board
- Agrawal Coal Company - India
- LBH Netherlands Bv - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Eastern Energy - Thailand
- Coal and Oil Company - UAE
- Larsen & Toubro Limited - India
- Posco Energy - South Korea
- Borneo Indobara - Indonesia
- Karaikal Port Pvt Ltd - India
- ICICI Bank Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- Mjunction Services Limited - India
- Trasteel International SA, Italy
- Indian Oil Corporation Limited
- Essar Steel Hazira Ltd - India
- Central Electricity Authority - India
- Sical Logistics Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Tamil Nadu electricity Board
- The State Trading Corporation of India Ltd
- European Bulk Services B.V. - Netherlands
- Indo Tambangraya Megah - Indonesia
- India Bulls Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Baramulti Group, Indonesia
- Eastern Coal Council - USA
- Vedanta Resources Plc - India
- White Energy Company Limited
- Cigading International Bulk Terminal - Indonesia
- VISA Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Coastal Gujarat Power Limited - India
- Mercator Lines Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Rio Tinto Coal - Australia
- McConnell Dowell - Australia
- Edison Trading Spa - Italy
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- PTC India Limited - India
- Thai Mozambique Logistica
- Holcim Trading Pte Ltd - Singapore
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- Riau Bara Harum - Indonesia
- Bukit Makmur.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Pipit Mutiara Jaya. PT, Indonesia
- Bhushan Steel Limited - India
- CIMB Investment Bank - Malaysia
- IHS Mccloskey Coal Group - USA
- Independent Power Producers Association of India
- Makarim & Taira - Indonesia
- Bhatia International Limited - India
- Gujarat Sidhee Cement - India
- Aboitiz Power Corporation - Philippines
- MS Steel International - UAE
- Commonwealth Bank - Australia
- Altura Mining Limited, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Jindal Steel & Power Ltd - India
- Bhoruka Overseas - Indonesia
- Star Paper Mills Limited - India
- Electricity Generating Authority of Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Merrill Lynch Commodities Europe
- Global Green Power PLC Corporation, Philippines
- Coalindo Energy - Indonesia
- Orica Australia Pty. Ltd.
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- London Commodity Brokers - England
- Malabar Cements Ltd - India
- Australian Coal Association
- Timah Investasi Mineral - Indoneisa
- Toyota Tsusho Corporation, Japan
- Marubeni Corporation - India
- Ministry of Transport, Egypt
- SMC Global Power, Philippines
- Central Java Power - Indonesia
- Thiess Contractors Indonesia
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Chamber of Mines of South Africa
- Renaissance Capital - South Africa
- Sarangani Energy Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Mercuria Energy - Indonesia
- Carbofer General Trading SA - India
- The Treasury - Australian Government
- Banpu Public Company Limited - Thailand
- Wilmar Investment Holdings
- GMR Energy Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Standard Chartered Bank - UAE
- Jorong Barutama Greston.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Parry Sugars Refinery, India
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