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