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