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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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Wednesday, 10 July 19
KOREA SOUTH-EAST POWER INVITES BIDS FOR HCV AND LCV COAL FOR AUGUST 2019 LOADING
COALspot.com: South Korea’s Korea South-East Power Co., Ltd. (KOEN) has issued an international tender for total 460,000 to 500,000 Metric To ...
Wednesday, 10 July 19
SHIPPING MARKET INSIGHT - INTERMODAL
In contrast with the general expectations for the dry bulk market, the sector was not positive or even stable during the past 6 months. The warning ...
Monday, 08 July 19
INDONESIAN COAL PRICE REFERENCE POSTS BIGGEST MONTHLY LOSS SINCE JANUARY 2017
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down again the benchmark price of Indonesian th ...
Monday, 08 July 19
ULTRAMAX: A 52,000-TONNER OPEN CJK FIXED FOR A TRIP VIA INDONESIA WITH RE-DELIVERY CHINA AT $6,100 - BALTIC BRIEFING
Capesize
The Capesize market surged over the past week, reaching highs not seen since August last year. Widespread activity in both basins saw ...
Wednesday, 03 July 19
SHIPPING MARKET INSIGHT - INTERMODAL
The global shipping industry is facing numerous challenges at a time when geopolitical turmoil has escalated in view of the recent tension in the M ...
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- Tata Chemicals Ltd - India
- Kapuas Tunggal Persada - Indonesia
- SN Aboitiz Power Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Orica Mining Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Global Green Power PLC Corporation, Philippines
- Metalloyd Limited - United Kingdom
- Jaiprakash Power Ventures ltd
- Indo Tambangraya Megah - Indonesia
- Mjunction Services Limited - India
- Energy Link Ltd, New Zealand
- Australian Commodity Traders Exchange
- ICICI Bank Limited - India
- Oldendorff Carriers - Singapore
- Sindya Power Generating Company Private Ltd
- White Energy Company Limited
- Sakthi Sugars Limited - India
- Thai Mozambique Logistica
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- Jindal Steel & Power Ltd - India
- Electricity Authority, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Gujarat Sidhee Cement - India
- Chettinad Cement Corporation Ltd - India
- Aboitiz Power Corporation - Philippines
- Goldman Sachs - Singapore
- Power Finance Corporation Ltd., India
- Barasentosa Lestari - Indonesia
- Mercator Lines Limited - India
- Trasteel International SA, Italy
- Cigading International Bulk Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Planning Commission, India
- SMG Consultants - Indonesia
- Eastern Coal Council - USA
- Sinarmas Energy and Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Eastern Energy - Thailand
- VISA Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Marubeni Corporation - India
- Sarangani Energy Corporation, Philippines
- Chamber of Mines of South Africa
- TeaM Sual Corporation - Philippines
- Thiess Contractors Indonesia
- Posco Energy - South Korea
- Iligan Light & Power Inc, Philippines
- Sojitz Corporation - Japan
- Samtan Co., Ltd - South Korea
- Independent Power Producers Association of India
- Energy Development Corp, Philippines
- Carbofer General Trading SA - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meenaskhi Energy Private Limited - India
- Renaissance Capital - South Africa
- Kumho Petrochemical, South Korea
- Coastal Gujarat Power Limited - India
- Bulk Trading Sa - Switzerland
- Bukit Asam (Persero) Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Banpu Public Company Limited - Thailand
- Billiton Holdings Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- LBH Netherlands Bv - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Indian Oil Corporation Limited
- GN Power Mariveles Coal Plant, Philippines
- New Zealand Coal & Carbon
- Georgia Ports Authority, United States
- London Commodity Brokers - England
- PNOC Exploration Corporation - Philippines
- Sical Logistics Limited - India
- Larsen & Toubro Limited - India
- Baramulti Group, Indonesia
- Essar Steel Hazira Ltd - India
- Videocon Industries ltd - India
- Bhatia International Limited - India
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Mercuria Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- Attock Cement Pakistan Limited
- Neyveli Lignite Corporation Ltd, - India
- San Jose City I Power Corp, Philippines
- Africa Commodities Group - South Africa
- European Bulk Services B.V. - Netherlands
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- Romanian Commodities Exchange
- Bukit Baiduri Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Maheswari Brothers Coal Limited - India
- MS Steel International - UAE
- Parliament of New Zealand
- CIMB Investment Bank - Malaysia
- Straits Asia Resources Limited - Singapore
- Jorong Barutama Greston.PT - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Global Coal Blending Company Limited - Australia
- Binh Thuan Hamico - Vietnam
- Wood Mackenzie - Singapore
- Meralco Power Generation, Philippines
- Timah Investasi Mineral - Indoneisa
- Indogreen Group - Indonesia
- Bhushan Steel Limited - India
- Miang Besar Coal Terminal - Indonesia
- Edison Trading Spa - Italy
- PowerSource Philippines DevCo
- Aditya Birla Group - India
- Port Waratah Coal Services - Australia
- Cement Manufacturers Association - India
- GVK Power & Infra Limited - India
- Xindia Steels Limited - India
- Semirara Mining Corp, Philippines
- PTC India Limited - India
- Australian Coal Association
- The State Trading Corporation of India Ltd
- Uttam Galva Steels Limited - India
- Riau Bara Harum - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Indian Energy Exchange, India
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- Agrawal Coal Company - India
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Price Waterhouse Coopers - Russia
- Makarim & Taira - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Anglo American - United Kingdom
- Mintek Dendrill Indonesia
- Bayan Resources Tbk. - Indonesia
- Electricity Generating Authority of Thailand
- Siam City Cement - Thailand
- Global Business Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Economic Council, Georgia
- Asmin Koalindo Tuhup - Indonesia
- Bhoruka Overseas - Indonesia
- The University of Queensland
- SMC Global Power, Philippines
- Merrill Lynch Commodities Europe
- Indonesian Coal Mining Association
- Pendopo Energi Batubara - Indonesia
- Bharathi Cement Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Medco Energi Mining Internasional
- Latin American Coal - Colombia
- Interocean Group of Companies - India
- Holcim Trading Pte Ltd - Singapore
- Toyota Tsusho Corporation, Japan
- Kohat Cement Company Ltd. - Pakistan
- Petrochimia International Co. Ltd.- Taiwan
- Ambuja Cements Ltd - India
- Ministry of Finance - Indonesia
- ASAPP Information Group - India
- Borneo Indobara - Indonesia
- Malabar Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- Maharashtra Electricity Regulatory Commission - India
- India Bulls Power Limited - India
- Commonwealth Bank - Australia
- Ceylon Electricity Board - Sri Lanka
- Vizag Seaport Private Limited - India
- Simpson Spence & Young - Indonesia
- McConnell Dowell - Australia
- Standard Chartered Bank - UAE
- Parry Sugars Refinery, India
- Ministry of Mines - Canada
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Krishnapatnam Port Company Ltd. - India
- Manunggal Multi Energi - Indonesia
- Lanco Infratech Ltd - India
- Singapore Mercantile Exchange
- Orica Australia Pty. Ltd.
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
- The Treasury - Australian Government
- Wilmar Investment Holdings
- Tamil Nadu electricity Board
- Minerals Council of Australia
- Directorate General of MIneral and Coal - Indonesia
- GMR Energy Limited - India
- Grasim Industreis Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Antam Resourcindo - Indonesia
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