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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, 01 July 19
COAL DEMAND RISES, BUT REMAINS BELOW PEAK LEVELS - FORBES
This article is the third in a series on BP’s recently-released Statistical Review of World Energy 2019. The Review provides a comprehensive ...
Saturday, 29 June 19
ULTRAMAX: FROM SOUTHEAST ASIA MORE COAL WAS ENTERING THE MARKET - BALTIC BRIEFING
Capesize
The market showed variability over the past week, as most routes were active yet sentiment differed from region to region. The Pacific ...
Wednesday, 26 June 19
SHIPPING MARKET INSIGHT - INTERMODAL
As the first half of the year is almost over, it is worth looking back at the sale and purchase activity during these months, focusing on the segme ...
Tuesday, 25 June 19
THERMAL COAL FUTURES ON THE ZHENGSHOU EXCHANGE ROSE - DANIEL HYNES
Coal markets were buoyed by ongoing supply side issues.
According to Daniel Hynes, Senior Commodity Strategist of ANZ, the the ...
Monday, 24 June 19
KOMIPO INVITED BITUMINOUS COAL BIDS FOR BORYEONG & SHIN BORYEONG POWER PLANTS
South Korea state-owned utility Korea Midland Power (KOMIPO) issued a tender for 260,000 MT MT of min. 5700 NAR coal and 240,000 MT of min. 4,600 k ...
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- Banpu Public Company Limited - Thailand
- Rio Tinto Coal - Australia
- Gujarat Electricity Regulatory Commission - India
- Metalloyd Limited - United Kingdom
- ASAPP Information Group - India
- Latin American Coal - Colombia
- Jaiprakash Power Ventures ltd
- Coastal Gujarat Power Limited - India
- Jindal Steel & Power Ltd - India
- Vedanta Resources Plc - India
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- Cement Manufacturers Association - India
- Kapuas Tunggal Persada - Indonesia
- Savvy Resources Ltd - HongKong
- Bharathi Cement Corporation - India
- Alfred C Toepfer International GmbH - Germany
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- South Luzon Thermal Energy Corporation
- European Bulk Services B.V. - Netherlands
- Sical Logistics Limited - India
- Price Waterhouse Coopers - Russia
- Therma Luzon, Inc, Philippines
- Wood Mackenzie - Singapore
- GAC Shipping (India) Pvt Ltd
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Australian Commodity Traders Exchange
- Ambuja Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vizag Seaport Private Limited - India
- Star Paper Mills Limited - India
- Power Finance Corporation Ltd., India
- Ministry of Mines - Canada
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- White Energy Company Limited
- Straits Asia Resources Limited - Singapore
- PTC India Limited - India
- Manunggal Multi Energi - Indonesia
- Thiess Contractors Indonesia
- ICICI Bank Limited - India
- Merrill Lynch Commodities Europe
- Eastern Energy - Thailand
- Agrawal Coal Company - India
- GMR Energy Limited - India
- Romanian Commodities Exchange
- Jorong Barutama Greston.PT - Indonesia
- Electricity Generating Authority of Thailand
- SMC Global Power, Philippines
- Pendopo Energi Batubara - Indonesia
- Carbofer General Trading SA - India
- The Treasury - Australian Government
- Ceylon Electricity Board - Sri Lanka
- Thai Mozambique Logistica
- Globalindo Alam Lestari - Indonesia
- International Coal Ventures Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- IHS Mccloskey Coal Group - USA
- Oldendorff Carriers - Singapore
- Lanco Infratech Ltd - India
- Kobexindo Tractors - Indoneisa
- Samtan Co., Ltd - South Korea
- Borneo Indobara - Indonesia
- Uttam Galva Steels Limited - India
- Sarangani Energy Corporation, Philippines
- Global Business Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Australian Coal Association
- Toyota Tsusho Corporation, Japan
- CNBM International Corporation - China
- IEA Clean Coal Centre - UK
- Essar Steel Hazira Ltd - India
- Dalmia Cement Bharat India
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- Kumho Petrochemical, South Korea
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Madhucon Powers Ltd - India
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Mineral Development Corp Ltd - India
- Eastern Coal Council - USA
- Malabar Cements Ltd - India
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- Kideco Jaya Agung - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- London Commodity Brokers - England
- Coal and Oil Company - UAE
- Bukit Baiduri Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bangladesh Power Developement Board
- Directorate Of Revenue Intelligence - India
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Trasteel International SA, Italy
- Renaissance Capital - South Africa
- SN Aboitiz Power Inc, Philippines
- SMG Consultants - Indonesia
- Indian Oil Corporation Limited
- Pipit Mutiara Jaya. PT, Indonesia
- GVK Power & Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- The University of Queensland
- Kalimantan Lumbung Energi - Indonesia
- Bukit Makmur.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Sindya Power Generating Company Private Ltd
- Maheswari Brothers Coal Limited - India
- TeaM Sual Corporation - Philippines
- Commonwealth Bank - Australia
- Barasentosa Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- Electricity Authority, New Zealand
- Global Green Power PLC Corporation, Philippines
- Heidelberg Cement - Germany
- Bhoruka Overseas - Indonesia
- Semirara Mining Corp, Philippines
- Larsen & Toubro Limited - India
- Intertek Mineral Services - Indonesia
- India Bulls Power Limited - India
- Billiton Holdings Pty Ltd - Australia
- Tamil Nadu electricity Board
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- VISA Power Limited - India
- Chettinad Cement Corporation Ltd - India
- McConnell Dowell - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Mercuria Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Energy Link Ltd, New Zealand
- Central Electricity Authority - India
- Edison Trading Spa - Italy
- Baramulti Group, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Riau Bara Harum - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Karaikal Port Pvt Ltd - India
- Deloitte Consulting - India
- Cigading International Bulk Terminal - Indonesia
- Parliament of New Zealand
- Attock Cement Pakistan Limited
- Kepco SPC Power Corporation, Philippines
- Bulk Trading Sa - Switzerland
- Orica Mining Services - Indonesia
- Chamber of Mines of South Africa
- Bhatia International Limited - India
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Coal Blending Company Limited - Australia
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement - Thailand
- Economic Council, Georgia
- Siam City Cement PLC, Thailand
- PetroVietnam Power Coal Import and Supply Company
- OPG Power Generation Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Holcim Trading Pte Ltd - Singapore
- Mjunction Services Limited - India
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Finance - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Georgia Ports Authority, United States
- Indogreen Group - Indonesia
- Makarim & Taira - Indonesia
- Interocean Group of Companies - India
- Meralco Power Generation, Philippines
- MS Steel International - UAE
- Bayan Resources Tbk. - Indonesia
- Ministry of Transport, Egypt
- Aditya Birla Group - India
- Vijayanagar Sugar Pvt Ltd - India
- New Zealand Coal & Carbon
- Central Java Power - Indonesia
- Sree Jayajothi Cements Limited - India
- Medco Energi Mining Internasional
- Planning Commission, India
- Standard Chartered Bank - UAE
- Iligan Light & Power Inc, Philippines
- Wilmar Investment Holdings
- Indika Energy - Indonesia
- Sakthi Sugars Limited - India
- PNOC Exploration Corporation - Philippines
- Minerals Council of Australia
- Salva Resources Pvt Ltd - India
- Energy Development Corp, Philippines
- San Jose City I Power Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Africa Commodities Group - South Africa
- Xindia Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Petron Corporation, Philippines
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