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