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