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