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