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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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Sunday, 23 June 19
SUPRAMAX: A 56,000-DWT WAS FIXED FROM INDONESIA TO VIETNAM AT $10,000 - BALTIC BRIEFING
Capesize
The story over the past week has been largely Atlantic dominated as the basin’s uniquely volatile characteristics came into play ...
Saturday, 22 June 19
OPEC'S BATTLE FOR CONTROL OF THE OIL MARKET - WOOD MACKENZIE
Oil supply is confounding expectations. We have just raised our forecasts for non-OPEC production, the latest in a series of incremental increases. ...
Friday, 21 June 19
INDONESIA'S BAYAN RESOURCES SIGNED A COAL SUPPLY AGREEMENT WITH THE BANGLADESH BCPCL TO SUPPLY 23 MILLION TONS OF COAL FOR 10 YEARS
On Monday, 17th June 2019, PT. Bayan Resources signed a Coal supply Agreement with the Bangladesh- China Power Company (Pvt.) Limited. BCPCL is a j ...
Thursday, 20 June 19
BUMI RESOURCES EXPECTS TO SELL 42 MILLION TONS OF COAL IN FIRST HALF - JAKARTA POST
PT Bumi Resources (BUMI), Indonesia's largest thermal coal miner, expects to close the first half of this year with coal sales of 42 million to ...
Tuesday, 18 June 19
TANKER SHIPPING: WHILE WE WAIT FOR 2020 TO KICK IN, IT'S ALL ABOUT POLITICS - BIMCO
Demand drivers and freight rates
Iran, Libya and Venezuela face export limitations because of sanctions and internal political troubles. At the s ...
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- Indian Oil Corporation Limited
- Semirara Mining and Power Corporation, Philippines
- Bhatia International Limited - India
- Energy Development Corp, Philippines
- Standard Chartered Bank - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Ind-Barath Power Infra Limited - India
- PTC India Limited - India
- ASAPP Information Group - India
- Mercator Lines Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Wilmar Investment Holdings
- Port Waratah Coal Services - Australia
- Simpson Spence & Young - Indonesia
- IEA Clean Coal Centre - UK
- International Coal Ventures Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Romanian Commodities Exchange
- Iligan Light & Power Inc, Philippines
- Minerals Council of Australia
- Goldman Sachs - Singapore
- Parliament of New Zealand
- Bulk Trading Sa - Switzerland
- TNB Fuel Sdn Bhd - Malaysia
- Orica Australia Pty. Ltd.
- Leighton Contractors Pty Ltd - Australia
- Interocean Group of Companies - India
- San Jose City I Power Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Sojitz Corporation - Japan
- The Treasury - Australian Government
- Globalindo Alam Lestari - Indonesia
- Bharathi Cement Corporation - India
- Energy Link Ltd, New Zealand
- Merrill Lynch Commodities Europe
- Salva Resources Pvt Ltd - India
- Altura Mining Limited, Indonesia
- GMR Energy Limited - India
- CNBM International Corporation - China
- Kumho Petrochemical, South Korea
- Bangladesh Power Developement Board
- Parry Sugars Refinery, India
- Gujarat Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Anglo American - United Kingdom
- Agrawal Coal Company - India
- Jaiprakash Power Ventures ltd
- Coastal Gujarat Power Limited - India
- Manunggal Multi Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Global Green Power PLC Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Coalindo Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Independent Power Producers Association of India
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mintek Dendrill Indonesia
- Sarangani Energy Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Lanco Infratech Ltd - India
- Therma Luzon, Inc, Philippines
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- Antam Resourcindo - Indonesia
- Kepco SPC Power Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Planning Commission, India
- Alfred C Toepfer International GmbH - Germany
- Sree Jayajothi Cements Limited - India
- Karaikal Port Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Barasentosa Lestari - Indonesia
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- Ministry of Finance - Indonesia
- Meralco Power Generation, Philippines
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- Siam City Cement - Thailand
- Central Electricity Authority - India
- PowerSource Philippines DevCo
- Deloitte Consulting - India
- Thiess Contractors Indonesia
- Global Business Power Corporation, Philippines
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Edison Trading Spa - Italy
- Bukit Asam (Persero) Tbk - Indonesia
- Larsen & Toubro Limited - India
- Maheswari Brothers Coal Limited - India
- GAC Shipping (India) Pvt Ltd
- Mjunction Services Limited - India
- CIMB Investment Bank - Malaysia
- Chettinad Cement Corporation Ltd - India
- Singapore Mercantile Exchange
- Essar Steel Hazira Ltd - India
- Bukit Makmur.PT - Indonesia
- Pendopo Energi Batubara - Indonesia
- Price Waterhouse Coopers - Russia
- Holcim Trading Pte Ltd - Singapore
- Global Coal Blending Company Limited - Australia
- Oldendorff Carriers - Singapore
- Kobexindo Tractors - Indoneisa
- Ministry of Transport, Egypt
- Georgia Ports Authority, United States
- Bhushan Steel Limited - India
- Ministry of Mines - Canada
- Rio Tinto Coal - Australia
- Grasim Industreis Ltd - India
- McConnell Dowell - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMC Global Power, Philippines
- Africa Commodities Group - South Africa
- Ceylon Electricity Board - Sri Lanka
- Thai Mozambique Logistica
- Indika Energy - Indonesia
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Commonwealth Bank - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The University of Queensland
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Economic Council, Georgia
- Neyveli Lignite Corporation Ltd, - India
- TeaM Sual Corporation - Philippines
- New Zealand Coal & Carbon
- Directorate Of Revenue Intelligence - India
- PNOC Exploration Corporation - Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Metalloyd Limited - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Dalmia Cement Bharat India
- India Bulls Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Riau Bara Harum - Indonesia
- Mercuria Energy - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Eastern Coal Council - USA
- Indian Energy Exchange, India
- Aboitiz Power Corporation - Philippines
- Siam City Cement PLC, Thailand
- London Commodity Brokers - England
- GN Power Mariveles Coal Plant, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Malabar Cements Ltd - India
- Electricity Authority, New Zealand
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Sakthi Sugars Limited - India
- Bhoruka Overseas - Indonesia
- Semirara Mining Corp, Philippines
- ICICI Bank Limited - India
- Kapuas Tunggal Persada - Indonesia
- Trasteel International SA, Italy
- Indogreen Group - Indonesia
- Baramulti Group, Indonesia
- Bayan Resources Tbk. - Indonesia
- Sindya Power Generating Company Private Ltd
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- PetroVietnam Power Coal Import and Supply Company
- Cement Manufacturers Association - India
- Jindal Steel & Power Ltd - India
- VISA Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- SN Aboitiz Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Toyota Tsusho Corporation, Japan
- Makarim & Taira - Indonesia
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Aditya Birla Group - India
- Marubeni Corporation - India
- Formosa Plastics Group - Taiwan
- Sical Logistics Limited - India
- Straits Asia Resources Limited - Singapore
- Borneo Indobara - Indonesia
- Indonesian Coal Mining Association
- The State Trading Corporation of India Ltd
- Electricity Generating Authority of Thailand
- Gujarat Sidhee Cement - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Uttam Galva Steels Limited - India
- Posco Energy - South Korea
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Carbofer General Trading SA - India
- Medco Energi Mining Internasional
- Bukit Baiduri Energy - Indonesia
- SMG Consultants - Indonesia
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- Coal and Oil Company - UAE
- Madhucon Powers Ltd - India
- Australian Coal Association
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- Savvy Resources Ltd - HongKong
- White Energy Company Limited
- Intertek Mineral Services - Indonesia
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- Videocon Industries ltd - India
- Xindia Steels Limited - India
- Tata Chemicals Ltd - India
- Heidelberg Cement - Germany
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