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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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Monday, 23 September 19
CHINA RECORDS SLOWER GROWTH IN COAL PRODUCTION - XINHUA
The growth of China’s raw coal production slowed down in August, data from the National Bureau of Statistics (NBS) showed.
Aro ...
Friday, 20 September 19
INDIA TO INVITE BIDS FOR COMMERCIAL COAL MINING IN DECEMBER - MINISTER FOR COAL
India aims to begin the process of holding the first round of commercial coal mining auctions December end, Minister for Coal, Mines and Parliament ...
Friday, 20 September 19
INDIA: ECONOMIC SLOWDOWN IMPACTS COAL IMPORT CARGO IN H1 FY20 - PTI
Economic slowdown has impacted coal import cargo in the first half of this fiscal, as overall cargo growth at major ports registered a marginal gro ...
Wednesday, 18 September 19
SHIPPING MARKET INSIGHT - INTERMODAL
During the first week of September, I had the privilege of attending the Donsö Shipping Meet 2019, in Donsö, a small island of around 1,& ...
Tuesday, 17 September 19
PANAMA SHIP REGISTRY MODERNIZES SHIP REGISTRATION
The Panama Ship Registry has announced it will integrate in a single platform “Electronic Ship Registration System (ESRS)” the present ...
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- Mercuria Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Alfred C Toepfer International GmbH - Germany
- Goldman Sachs - Singapore
- AsiaOL BioFuels Corp., Philippines
- Indonesian Coal Mining Association
- GMR Energy Limited - India
- Coal and Oil Company - UAE
- Chettinad Cement Corporation Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Georgia Ports Authority, United States
- Barasentosa Lestari - Indonesia
- Videocon Industries ltd - India
- Petron Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Posco Energy - South Korea
- CNBM International Corporation - China
- Vedanta Resources Plc - India
- Tata Chemicals Ltd - India
- VISA Power Limited - India
- Gujarat Sidhee Cement - India
- Gujarat Mineral Development Corp Ltd - India
- Sojitz Corporation - Japan
- Oldendorff Carriers - Singapore
- Bangladesh Power Developement Board
- Planning Commission, India
- Uttam Galva Steels Limited - India
- White Energy Company Limited
- Singapore Mercantile Exchange
- Kepco SPC Power Corporation, Philippines
- Indogreen Group - Indonesia
- Toyota Tsusho Corporation, Japan
- TeaM Sual Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kobexindo Tractors - Indoneisa
- Asmin Koalindo Tuhup - Indonesia
- Thai Mozambique Logistica
- Altura Mining Limited, Indonesia
- Ind-Barath Power Infra Limited - India
- GAC Shipping (India) Pvt Ltd
- Essar Steel Hazira Ltd - India
- McConnell Dowell - Australia
- Sree Jayajothi Cements Limited - India
- Metalloyd Limited - United Kingdom
- Siam City Cement - Thailand
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Savvy Resources Ltd - HongKong
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- ICICI Bank Limited - India
- Siam City Cement PLC, Thailand
- Mjunction Services Limited - India
- Directorate Of Revenue Intelligence - India
- Billiton Holdings Pty Ltd - Australia
- India Bulls Power Limited - India
- Global Coal Blending Company Limited - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Therma Luzon, Inc, Philippines
- Africa Commodities Group - South Africa
- South Luzon Thermal Energy Corporation
- Maharashtra Electricity Regulatory Commission - India
- Bhushan Steel Limited - India
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Ambuja Cements Ltd - India
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Economic Council, Georgia
- Bukit Baiduri Energy - Indonesia
- Medco Energi Mining Internasional
- PowerSource Philippines DevCo
- Bank of Tokyo Mitsubishi UFJ Ltd
- Indian Energy Exchange, India
- Merrill Lynch Commodities Europe
- Salva Resources Pvt Ltd - India
- Meralco Power Generation, Philippines
- Makarim & Taira - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Lanco Infratech Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Baramulti Group, Indonesia
- Attock Cement Pakistan Limited
- Iligan Light & Power Inc, Philippines
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Jorong Barutama Greston.PT - Indonesia
- SMC Global Power, Philippines
- Grasim Industreis Ltd - India
- GVK Power & Infra Limited - India
- Star Paper Mills Limited - India
- Indian Oil Corporation Limited
- Bharathi Cement Corporation - India
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bahari Cakrawala Sebuku - Indonesia
- Orica Mining Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Bukit Makmur.PT - Indonesia
- Deloitte Consulting - India
- Renaissance Capital - South Africa
- Intertek Mineral Services - Indonesia
- Formosa Plastics Group - Taiwan
- Cement Manufacturers Association - India
- Thiess Contractors Indonesia
- Price Waterhouse Coopers - Russia
- Chamber of Mines of South Africa
- Bhoruka Overseas - Indonesia
- Sakthi Sugars Limited - India
- Australian Commodity Traders Exchange
- Commonwealth Bank - Australia
- Standard Chartered Bank - UAE
- Tamil Nadu electricity Board
- European Bulk Services B.V. - Netherlands
- Semirara Mining Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Australian Coal Association
- Electricity Authority, New Zealand
- Trasteel International SA, Italy
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Parliament of New Zealand
- Aboitiz Power Corporation - Philippines
- Orica Australia Pty. Ltd.
- Indo Tambangraya Megah - Indonesia
- Wilmar Investment Holdings
- Borneo Indobara - Indonesia
- Straits Asia Resources Limited - Singapore
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Electricity Generating Authority of Thailand
- Mercator Lines Limited - India
- Marubeni Corporation - India
- Karaikal Port Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- PNOC Exploration Corporation - Philippines
- Antam Resourcindo - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- New Zealand Coal & Carbon
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- Central Electricity Authority - India
- LBH Netherlands Bv - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- Ministry of Finance - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Madhucon Powers Ltd - India
- Bulk Trading Sa - Switzerland
- Banpu Public Company Limited - Thailand
- Global Green Power PLC Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Coastal Gujarat Power Limited - India
- Cigading International Bulk Terminal - Indonesia
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Interocean Group of Companies - India
- Coalindo Energy - Indonesia
- Ministry of Transport, Egypt
- Sarangani Energy Corporation, Philippines
- Dalmia Cement Bharat India
- Larsen & Toubro Limited - India
- Malabar Cements Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- OPG Power Generation Pvt Ltd - India
- The State Trading Corporation of India Ltd
- Holcim Trading Pte Ltd - Singapore
- Simpson Spence & Young - Indonesia
- Bhatia International Limited - India
- Xindia Steels Limited - India
- Anglo American - United Kingdom
- Semirara Mining and Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- Wood Mackenzie - Singapore
- Jaiprakash Power Ventures ltd
- Eastern Coal Council - USA
- Sical Logistics Limited - India
- Eastern Energy - Thailand
- Riau Bara Harum - Indonesia
- PTC India Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Rio Tinto Coal - Australia
- The Treasury - Australian Government
- Port Waratah Coal Services - Australia
- The University of Queensland
- Independent Power Producers Association of India
- Samtan Co., Ltd - South Korea
- Energy Link Ltd, New Zealand
- Central Java Power - Indonesia
- Aditya Birla Group - India
- London Commodity Brokers - England
- Karbindo Abesyapradhi - Indoneisa
- Energy Development Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Leighton Contractors Pty Ltd - Australia
- Indika Energy - Indonesia
- ASAPP Information Group - India
- Kapuas Tunggal Persada - Indonesia
- Global Business Power Corporation, Philippines
- Minerals Council of Australia
- Kartika Selabumi Mining - Indonesia
- Mintek Dendrill Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
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