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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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Saturday, 15 June 19
SUPRAMAX: A 58,000-TONNER, OPEN QINGDAO, WAS BOOKED TO REDELIVER IN EAST COAST INDIA AT $6,500 - BALTIC BRIEFING
Capesize
The market closed on a quiet Friday last week after a few hectic days of mid-week trading. Trade routes from Brazil to the Far East we ...
Friday, 14 June 19
PANAMAX: OUTLOOK IS MIXED - FERNLEYS
Capesize
Sentiment changed to a more nervous tone as pacific cargo volumes failed to deliver as expected, however latest activity indicates res ...
Friday, 14 June 19
ELECTRONIC (PAPERLESS) TRADING - SKULD
KNOWLEDGE TO ELEVATE
Electronic Shipping Solutions: Bolero International Ltd, E-Title Authority Pte Ltd, Global Share S.A. (edoxOnline platfor ...
Wednesday, 12 June 19
KOSPO INVITES BIDS FOR 140,000 MT OF 4,600 NCV COAL FOR SEP. 2019 LOADING
COALspot.com: South Korea state-owned utility Korea Southern Power Co. Ltd (KOSPO) issued a tender for 140,000 MT of minimum 4,600 kcal/kg NCV coal ...
Wednesday, 12 June 19
IMO 2020 - COUNTDOWN TO 1 JANUARY 2020 -HOW WILL THE CHANGES AFFECT REFINING AND SHIPPING? - WOOD MACKENZIE
We know that the IMO’s regulations represent the biggest step change the shipping industry has ever seen and the implications will be felt th ...
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PTC India Limited - India
- Formosa Plastics Group - Taiwan
- Bharathi Cement Corporation - India
- Manunggal Multi Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- India Bulls Power Limited - India
- Eastern Coal Council - USA
- Attock Cement Pakistan Limited
- Posco Energy - South Korea
- Indonesian Coal Mining Association
- New Zealand Coal & Carbon
- Krishnapatnam Port Company Ltd. - India
- GVK Power & Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Energy Development Corp, Philippines
- Indian Oil Corporation Limited
- ASAPP Information Group - India
- Commonwealth Bank - Australia
- Larsen & Toubro Limited - India
- Jaiprakash Power Ventures ltd
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
- Rio Tinto Coal - Australia
- Borneo Indobara - Indonesia
- The Treasury - Australian Government
- SMC Global Power, Philippines
- Savvy Resources Ltd - HongKong
- Simpson Spence & Young - Indonesia
- Xindia Steels Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Edison Trading Spa - Italy
- Antam Resourcindo - Indonesia
- Timah Investasi Mineral - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Riau Bara Harum - Indonesia
- Kaltim Prima Coal - Indonesia
- Lanco Infratech Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Economic Council, Georgia
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- Aditya Birla Group - India
- Power Finance Corporation Ltd., India
- Global Coal Blending Company Limited - Australia
- Neyveli Lignite Corporation Ltd, - India
- Oldendorff Carriers - Singapore
- Alfred C Toepfer International GmbH - Germany
- Eastern Energy - Thailand
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- TeaM Sual Corporation - Philippines
- PNOC Exploration Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Siam City Cement - Thailand
- European Bulk Services B.V. - Netherlands
- AsiaOL BioFuels Corp., Philippines
- Kartika Selabumi Mining - Indonesia
- Sojitz Corporation - Japan
- Chettinad Cement Corporation Ltd - India
- McConnell Dowell - Australia
- Altura Mining Limited, Indonesia
- Kobexindo Tractors - Indoneisa
- The State Trading Corporation of India Ltd
- Kumho Petrochemical, South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Sree Jayajothi Cements Limited - India
- SMG Consultants - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Star Paper Mills Limited - India
- Makarim & Taira - Indonesia
- Bukit Baiduri Energy - Indonesia
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Karbindo Abesyapradhi - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Ambuja Cements Ltd - India
- Tamil Nadu electricity Board
- Merrill Lynch Commodities Europe
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Straits Asia Resources Limited - Singapore
- Kapuas Tunggal Persada - Indonesia
- Samtan Co., Ltd - South Korea
- CNBM International Corporation - China
- Directorate General of MIneral and Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Singapore Mercantile Exchange
- Standard Chartered Bank - UAE
- London Commodity Brokers - England
- Mintek Dendrill Indonesia
- Directorate Of Revenue Intelligence - India
- Leighton Contractors Pty Ltd - Australia
- IEA Clean Coal Centre - UK
- Kepco SPC Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Metalloyd Limited - United Kingdom
- CIMB Investment Bank - Malaysia
- Indika Energy - Indonesia
- Coalindo Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Port Waratah Coal Services - Australia
- Kalimantan Lumbung Energi - Indonesia
- Siam City Cement PLC, Thailand
- Semirara Mining and Power Corporation, Philippines
- Heidelberg Cement - Germany
- Global Green Power PLC Corporation, Philippines
- Australian Coal Association
- Karaikal Port Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- San Jose City I Power Corp, Philippines
- Orica Mining Services - Indonesia
- Coastal Gujarat Power Limited - India
- ICICI Bank Limited - India
- Mercuria Energy - Indonesia
- Bangladesh Power Developement Board
- Latin American Coal - Colombia
- Renaissance Capital - South Africa
- Bulk Trading Sa - Switzerland
- Bhatia International Limited - India
- Wilmar Investment Holdings
- Sarangani Energy Corporation, Philippines
- Interocean Group of Companies - India
- Marubeni Corporation - India
- Deloitte Consulting - India
- White Energy Company Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Goldman Sachs - Singapore
- Sinarmas Energy and Mining - Indonesia
- Essar Steel Hazira Ltd - India
- Wood Mackenzie - Singapore
- Indogreen Group - Indonesia
- Price Waterhouse Coopers - Russia
- OPG Power Generation Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- PetroVietnam Power Coal Import and Supply Company
- Globalindo Alam Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- Semirara Mining Corp, Philippines
- Georgia Ports Authority, United States
- Gujarat Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- Coal and Oil Company - UAE
- Therma Luzon, Inc, Philippines
- Parliament of New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Ministry of Transport, Egypt
- Malabar Cements Ltd - India
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Sical Logistics Limited - India
- Billiton Holdings Pty Ltd - Australia
- GMR Energy Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cement Manufacturers Association - India
- Romanian Commodities Exchange
- Anglo American - United Kingdom
- Pipit Mutiara Jaya. PT, Indonesia
- Global Business Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Thiess Contractors Indonesia
- Meralco Power Generation, Philippines
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- The University of Queensland
- Petron Corporation, Philippines
- Planning Commission, India
- Medco Energi Mining Internasional
- Dalmia Cement Bharat India
- Electricity Authority, New Zealand
- Grasim Industreis Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Cigading International Bulk Terminal - Indonesia
- Carbofer General Trading SA - India
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Salva Resources Pvt Ltd - India
- Mjunction Services Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Vedanta Resources Plc - India
- Madhucon Powers Ltd - India
- Agrawal Coal Company - India
- IHS Mccloskey Coal Group - USA
- Iligan Light & Power Inc, Philippines
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Energy Link Ltd, New Zealand
- Central Electricity Authority - India
- Jorong Barutama Greston.PT - Indonesia
- PowerSource Philippines DevCo
- Baramulti Group, Indonesia
- Trasteel International SA, Italy
- VISA Power Limited - India
- Australian Commodity Traders Exchange
- Meenaskhi Energy Private Limited - India
- Electricity Generating Authority of Thailand
- Maheswari Brothers Coal Limited - India
- Minerals Council of Australia
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