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