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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, 06 August 19
SHIPPING MARKET INSIGHT - INTERMODAL
On the 12th of May four tankers were attacked near the coast of Fujairah. The tankers hit were waiving international flags such as that of No ...
Monday, 05 August 19
SUPRAMAX: COAL FROM INDONESIA TO CHINA PAID AT MID $8,000S ON A 57,000-TONNER DELIVERY SOUTH CHINA - BALTIC BRIEFING
Capesize
Having hit a high of $32,963 early last week, the Capesize 5TC now stands at $25,749. This is over 20% of its value lost in 10 days. C ...
Thursday, 01 August 19
PANAMAX: THE SENTIMENT IN THE MARKET IS STILL POSITIVE FOR THE LONGER TERM - FEARNLEYS
Capesize
Two weeks ago the 5TC index was at 33,000 USD pd. Since then it has fallen off a bit and has stayed around 27,000 USD pd the last week ...
Thursday, 01 August 19
INDIKA ENERGY REVENUES DECLINE DUE TO LOW COAL PRICES
One of the largest Indonesian integrated energy companies PT Indika Energy Tbk posted revenues of US $ 1,380.4 million, down 4.6% compared to US $ ...
Wednesday, 31 July 19
INDIA'S 2019 THERMAL COAL IMPORTS SEEN AT 180-185 MLN T - WOODMAC
India is expected to import 180-185 million tonnes of thermal coal in 2019, said Dale Hazelton, head of thermal coal at consultancy Wood Mackenzie. ...
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- Sarangani Energy Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Aditya Birla Group - India
- Kumho Petrochemical, South Korea
- MS Steel International - UAE
- Electricity Generating Authority of Thailand
- Semirara Mining and Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Bhoruka Overseas - Indonesia
- Australian Coal Association
- Pipit Mutiara Jaya. PT, Indonesia
- Straits Asia Resources Limited - Singapore
- Timah Investasi Mineral - Indoneisa
- Coalindo Energy - Indonesia
- Siam City Cement - Thailand
- Sindya Power Generating Company Private Ltd
- Ministry of Mines - Canada
- Africa Commodities Group - South Africa
- Iligan Light & Power Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Medco Energi Mining Internasional
- IEA Clean Coal Centre - UK
- Global Business Power Corporation, Philippines
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Borneo Indobara - Indonesia
- Edison Trading Spa - Italy
- SN Aboitiz Power Inc, Philippines
- GMR Energy Limited - India
- SMC Global Power, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Uttam Galva Steels Limited - India
- GAC Shipping (India) Pvt Ltd
- Holcim Trading Pte Ltd - Singapore
- Indonesian Coal Mining Association
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Manunggal Multi Energi - Indonesia
- Port Waratah Coal Services - Australia
- Antam Resourcindo - Indonesia
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- Meenaskhi Energy Private Limited - India
- SMG Consultants - Indonesia
- International Coal Ventures Pvt Ltd - India
- Meralco Power Generation, Philippines
- Indogreen Group - Indonesia
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- Binh Thuan Hamico - Vietnam
- Carbofer General Trading SA - India
- Vedanta Resources Plc - India
- Therma Luzon, Inc, Philippines
- Essar Steel Hazira Ltd - India
- Xindia Steels Limited - India
- Economic Council, Georgia
- Maheswari Brothers Coal Limited - India
- Global Green Power PLC Corporation, Philippines
- CNBM International Corporation - China
- GN Power Mariveles Coal Plant, Philippines
- Latin American Coal - Colombia
- Banpu Public Company Limited - Thailand
- Independent Power Producers Association of India
- Billiton Holdings Pty Ltd - Australia
- Planning Commission, India
- TNB Fuel Sdn Bhd - Malaysia
- Orica Mining Services - Indonesia
- Formosa Plastics Group - Taiwan
- Standard Chartered Bank - UAE
- PNOC Exploration Corporation - Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Larsen & Toubro Limited - India
- Madhucon Powers Ltd - India
- London Commodity Brokers - England
- Indika Energy - Indonesia
- Indian Oil Corporation Limited
- Coastal Gujarat Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- Bharathi Cement Corporation - India
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Thai Mozambique Logistica
- Heidelberg Cement - Germany
- TeaM Sual Corporation - Philippines
- Deloitte Consulting - India
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- San Jose City I Power Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Sakthi Sugars Limited - India
- Power Finance Corporation Ltd., India
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Mineral Development Corp Ltd - India
- Trasteel International SA, Italy
- Miang Besar Coal Terminal - Indonesia
- Parliament of New Zealand
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- Georgia Ports Authority, United States
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- Kaltim Prima Coal - Indonesia
- Petron Corporation, Philippines
- Orica Australia Pty. Ltd.
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- ASAPP Information Group - India
- Chamber of Mines of South Africa
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Parry Sugars Refinery, India
- LBH Netherlands Bv - Netherlands
- Sical Logistics Limited - India
- Samtan Co., Ltd - South Korea
- Metalloyd Limited - United Kingdom
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Riau Bara Harum - Indonesia
- Posco Energy - South Korea
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Ministry of Transport, Egypt
- Ambuja Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Bangladesh Power Developement Board
- Global Coal Blending Company Limited - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The State Trading Corporation of India Ltd
- Kobexindo Tractors - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Coal and Oil Company - UAE
- Directorate Of Revenue Intelligence - India
- Maharashtra Electricity Regulatory Commission - India
- GVK Power & Infra Limited - India
- Globalindo Alam Lestari - Indonesia
- Salva Resources Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Cement Manufacturers Association - India
- Malabar Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- Marubeni Corporation - India
- Vizag Seaport Private Limited - India
- Bhushan Steel Limited - India
- Ceylon Electricity Board - Sri Lanka
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Barasentosa Lestari - Indonesia
- Mintek Dendrill Indonesia
- Kohat Cement Company Ltd. - Pakistan
- The University of Queensland
- Jindal Steel & Power Ltd - India
- VISA Power Limited - India
- Indo Tambangraya Megah - Indonesia
- Semirara Mining Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Wilmar Investment Holdings
- Gujarat Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Energy - Thailand
- European Bulk Services B.V. - Netherlands
- CIMB Investment Bank - Malaysia
- Romanian Commodities Exchange
- Bhatia International Limited - India
- Goldman Sachs - Singapore
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bukit Makmur.PT - Indonesia
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Attock Cement Pakistan Limited
- PowerSource Philippines DevCo
- Alfred C Toepfer International GmbH - Germany
- South Luzon Thermal Energy Corporation
- Krishnapatnam Port Company Ltd. - India
- Price Waterhouse Coopers - Russia
- Baramulti Group, Indonesia
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Central Electricity Authority - India
- Ind-Barath Power Infra Limited - India
- Kepco SPC Power Corporation, Philippines
- Interocean Group of Companies - India
- Toyota Tsusho Corporation, Japan
- Commonwealth Bank - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Altura Mining Limited, Indonesia
- PTC India Limited - India
- New Zealand Coal & Carbon
- Mercuria Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- McConnell Dowell - Australia
- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- Star Paper Mills Limited - India
- Dalmia Cement Bharat India
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