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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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Tuesday, 15 October 19
INDIA READIES POLICY TO ATTRACT FOREIGN INVESTMENT IN COAL MINING - REUTERS
India expects to have formulated a policy within the next two weeks to attract foreign investment to its coal mining industry, the country's Co ...
Monday, 14 October 19
WINTER OIL MARKET OUTLOOK - OPEC
Product markets in the last two months have benefitted from seasonal maintenance which have led to a tighter product market environment, providing ...
Sunday, 13 October 19
INDONESIA: PANAMAX VESSELS OPEN SOUTH CHINA WERE REPORTEDLY FIXED AT $14,000 LEVEL, WITH REDELIVERY BACK IN CHINA - BALTIC BRIEFING
Capesize
The Capesize market managed to find a floor and rally a little this week after several weeks of declines. While the West Australia to ...
Friday, 11 October 19
INDIAN MINERS REJECT PLAN TO LINK NATIONAL COAL INDEX TO FOREIGN PRICES - REUTERS
India’s miners are rejecting a government proposal to establish a national coal index that would be linked to international prices, documents ...
Friday, 11 October 19
THE OCTOBER BENCHMARK PRICE OF INDONESIAN THERMAL COAL DECLINES TO LOWEST SINCE OCTOBER 2016
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down the benchmark price of Indonesian thermal ...
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- Merrill Lynch Commodities Europe
- Metalloyd Limited - United Kingdom
- Banpu Public Company Limited - Thailand
- Tamil Nadu electricity Board
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- ASAPP Information Group - India
- Agrawal Coal Company - India
- Neyveli Lignite Corporation Ltd, - India
- Lanco Infratech Ltd - India
- New Zealand Coal & Carbon
- Ceylon Electricity Board - Sri Lanka
- Global Coal Blending Company Limited - Australia
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Xindia Steels Limited - India
- Oldendorff Carriers - Singapore
- Indian Oil Corporation Limited
- Altura Mining Limited, Indonesia
- London Commodity Brokers - England
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- AsiaOL BioFuels Corp., Philippines
- ICICI Bank Limited - India
- Thiess Contractors Indonesia
- Pendopo Energi Batubara - Indonesia
- Mercator Lines Limited - India
- Electricity Generating Authority of Thailand
- Star Paper Mills Limited - India
- Latin American Coal - Colombia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Alfred C Toepfer International GmbH - Germany
- Kartika Selabumi Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Independent Power Producers Association of India
- Chettinad Cement Corporation Ltd - India
- McConnell Dowell - Australia
- GN Power Mariveles Coal Plant, Philippines
- Ambuja Cements Ltd - India
- Central Electricity Authority - India
- Posco Energy - South Korea
- Gujarat Mineral Development Corp Ltd - India
- Kideco Jaya Agung - Indonesia
- Simpson Spence & Young - Indonesia
- Heidelberg Cement - Germany
- Planning Commission, India
- Trasteel International SA, Italy
- Manunggal Multi Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Sarangani Energy Corporation, Philippines
- Economic Council, Georgia
- Electricity Authority, New Zealand
- Parry Sugars Refinery, India
- SMG Consultants - Indonesia
- Borneo Indobara - Indonesia
- LBH Netherlands Bv - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Antam Resourcindo - Indonesia
- Carbofer General Trading SA - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- Petron Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Globalindo Alam Lestari - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Meenaskhi Energy Private Limited - India
- Medco Energi Mining Internasional
- Krishnapatnam Port Company Ltd. - India
- Grasim Industreis Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- CIMB Investment Bank - Malaysia
- Anglo American - United Kingdom
- Marubeni Corporation - India
- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Sakthi Sugars Limited - India
- Australian Coal Association
- The Treasury - Australian Government
- Energy Link Ltd, New Zealand
- Bulk Trading Sa - Switzerland
- Coalindo Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- VISA Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Mercuria Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Cement Manufacturers Association - India
- Bharathi Cement Corporation - India
- Bahari Cakrawala Sebuku - Indonesia
- Parliament of New Zealand
- Sinarmas Energy and Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Madhucon Powers Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Eastern Coal Council - USA
- White Energy Company Limited
- Bhoruka Overseas - Indonesia
- Binh Thuan Hamico - Vietnam
- GVK Power & Infra Limited - India
- Savvy Resources Ltd - HongKong
- Semirara Mining Corp, Philippines
- GAC Shipping (India) Pvt Ltd
- Kumho Petrochemical, South Korea
- Karaikal Port Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Sree Jayajothi Cements Limited - India
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Georgia Ports Authority, United States
- PTC India Limited - India
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- Bhatia International Limited - India
- Sindya Power Generating Company Private Ltd
- Coastal Gujarat Power Limited - India
- Directorate Of Revenue Intelligence - India
- Sical Logistics Limited - India
- Aditya Birla Group - India
- Indogreen Group - Indonesia
- Bangladesh Power Developement Board
- Standard Chartered Bank - UAE
- Siam City Cement - Thailand
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Kepco SPC Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Essar Steel Hazira Ltd - India
- Energy Development Corp, Philippines
- Rio Tinto Coal - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Mines - Canada
- GMR Energy Limited - India
- Sojitz Corporation - Japan
- Tata Chemicals Ltd - India
- Intertek Mineral Services - Indonesia
- Global Green Power PLC Corporation, Philippines
- Makarim & Taira - Indonesia
- Port Waratah Coal Services - Australia
- Baramulti Group, Indonesia
- Malabar Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- MS Steel International - UAE
- TeaM Sual Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Wilmar Investment Holdings
- Uttam Galva Steels Limited - India
- IHS Mccloskey Coal Group - USA
- Videocon Industries ltd - India
- Leighton Contractors Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Aboitiz Power Corporation - Philippines
- IEA Clean Coal Centre - UK
- Mintek Dendrill Indonesia
- Dalmia Cement Bharat India
- Vijayanagar Sugar Pvt Ltd - India
- Commonwealth Bank - Australia
- Vedanta Resources Plc - India
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- European Bulk Services B.V. - Netherlands
- International Coal Ventures Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Riau Bara Harum - Indonesia
- Thai Mozambique Logistica
- Petrochimia International Co. Ltd.- Taiwan
- Renaissance Capital - South Africa
- Australian Commodity Traders Exchange
- Eastern Energy - Thailand
- Therma Luzon, Inc, Philippines
- Jaiprakash Power Ventures ltd
- The State Trading Corporation of India Ltd
- Larsen & Toubro Limited - India
- Deloitte Consulting - India
- PowerSource Philippines DevCo
- Meralco Power Generation, Philippines
- Indonesian Coal Mining Association
- Global Business Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Coal and Oil Company - UAE
- Mjunction Services Limited - India
- Orica Australia Pty. Ltd.
- Gujarat Electricity Regulatory Commission - India
- Romanian Commodities Exchange
- The University of Queensland
- Jindal Steel & Power Ltd - India
- Attock Cement Pakistan Limited
- Goldman Sachs - Singapore
- Timah Investasi Mineral - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- SMC Global Power, Philippines
- Iligan Light & Power Inc, Philippines
- Bhushan Steel Limited - India
- Salva Resources Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Singapore Mercantile Exchange
- Gujarat Sidhee Cement - India
- Pipit Mutiara Jaya. PT, Indonesia
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- Maheswari Brothers Coal Limited - India
- Minerals Council of Australia
- Africa Commodities Group - South Africa
- Vizag Seaport Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Samtan Co., Ltd - South Korea
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