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