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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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Wednesday, 12 June 19
SHIPPING MARKET INSIGHT - INTERMODAL
This year’s tanker S&P activity keeps edging higher compared to the same period in 2018. Year to date we have seen some 143 ships, rangin ...
Tuesday, 11 June 19
INDONESIAN COAL PRICE REFERENCE SET AT $81.48 PER TON IN JUNE, DOWN 15.66 PERCENT YEAR-ON-YEAR
COALspot.com: The Ministry of Energy and Mineral Resources of the Republic of Indonesia has revised down again the benchmark price of Indonesian th ...
Monday, 10 June 19
CONSECUTIVE OWNERS OF CARGO: WHO HOLDS TITLE AND THE RIGHT TO SUE? - COLIN BIGGERS & PAISLEY
KNOWLEDGE TO ELEVATE
In Tritton Resources Pty Ltd v Ever Rock Navigation S.A. [2019] FCA 276, the Federal Court considered the application of ...
Monday, 10 June 19
KOSPO INVITES BIDS FOR 1,305,000 MT OF MIN 5600 KCAL/KG NCV COAL FOR SEPT 2019 TO DEC 2021
COALspot.com: South Korea state-owned utility Korea Southern Power Co. Ltd (KOSPO) issued a tender for 435,000 MT (per year) of max 5,600 kcal/kg N ...
Sunday, 09 June 19
SUPRAMAX: ASIA LOST GROUND; THE INDIAN OCEAN SAW SLOWER ACTIVITY - BALTIC BRIEFING
Capesize
The market continued in an unusually steady ascent last week. With no major news in the market, each day improved on the last, breakin ...
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- Indo Tambangraya Megah - Indonesia
- IHS Mccloskey Coal Group - USA
- Kobexindo Tractors - Indoneisa
- Tata Chemicals Ltd - India
- Energy Link Ltd, New Zealand
- Indika Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Binh Thuan Hamico - Vietnam
- Australian Coal Association
- Petrochimia International Co. Ltd.- Taiwan
- SN Aboitiz Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Pendopo Energi Batubara - Indonesia
- Bukit Baiduri Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Banpu Public Company Limited - Thailand
- Merrill Lynch Commodities Europe
- Chettinad Cement Corporation Ltd - India
- Deloitte Consulting - India
- Simpson Spence & Young - Indonesia
- Therma Luzon, Inc, Philippines
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- MS Steel International - UAE
- Sinarmas Energy and Mining - Indonesia
- Coalindo Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- ASAPP Information Group - India
- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- Xindia Steels Limited - India
- Coastal Gujarat Power Limited - India
- GMR Energy Limited - India
- Parry Sugars Refinery, India
- International Coal Ventures Pvt Ltd - India
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Makarim & Taira - Indonesia
- Standard Chartered Bank - UAE
- Ministry of Mines - Canada
- Mercuria Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Maheswari Brothers Coal Limited - India
- Bhushan Steel Limited - India
- GAC Shipping (India) Pvt Ltd
- Gujarat Sidhee Cement - India
- OPG Power Generation Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Ind-Barath Power Infra Limited - India
- Lanco Infratech Ltd - India
- Bayan Resources Tbk. - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Barasentosa Lestari - Indonesia
- Malabar Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Price Waterhouse Coopers - Russia
- PetroVietnam Power Coal Import and Supply Company
- Medco Energi Mining Internasional
- India Bulls Power Limited - India
- Central Electricity Authority - India
- Karaikal Port Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- Parliament of New Zealand
- Krishnapatnam Port Company Ltd. - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Antam Resourcindo - Indonesia
- McConnell Dowell - Australia
- Global Business Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- The State Trading Corporation of India Ltd
- Independent Power Producers Association of India
- Kalimantan Lumbung Energi - Indonesia
- Australian Commodity Traders Exchange
- Latin American Coal - Colombia
- Heidelberg Cement - Germany
- Africa Commodities Group - South Africa
- Posco Energy - South Korea
- Wilmar Investment Holdings
- Globalindo Alam Lestari - Indonesia
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- South Luzon Thermal Energy Corporation
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Pipit Mutiara Jaya. PT, Indonesia
- Anglo American - United Kingdom
- Aboitiz Power Corporation - Philippines
- Riau Bara Harum - Indonesia
- IEA Clean Coal Centre - UK
- Madhucon Powers Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- Kapuas Tunggal Persada - Indonesia
- Ministry of Finance - Indonesia
- Savvy Resources Ltd - HongKong
- Thiess Contractors Indonesia
- Energy Development Corp, Philippines
- Essar Steel Hazira Ltd - India
- Goldman Sachs - Singapore
- Cement Manufacturers Association - India
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Wood Mackenzie - Singapore
- Power Finance Corporation Ltd., India
- Videocon Industries ltd - India
- Planning Commission, India
- GVK Power & Infra Limited - India
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- PNOC Exploration Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Altura Mining Limited, Indonesia
- Timah Investasi Mineral - Indoneisa
- Sree Jayajothi Cements Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Iligan Light & Power Inc, Philippines
- Marubeni Corporation - India
- Metalloyd Limited - United Kingdom
- Bharathi Cement Corporation - India
- Sakthi Sugars Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- AsiaOL BioFuels Corp., Philippines
- Kumho Petrochemical, South Korea
- Electricity Generating Authority of Thailand
- Eastern Coal Council - USA
- PowerSource Philippines DevCo
- Kohat Cement Company Ltd. - Pakistan
- White Energy Company Limited
- Billiton Holdings Pty Ltd - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sical Logistics Limited - India
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Holcim Trading Pte Ltd - Singapore
- Manunggal Multi Energi - Indonesia
- Commonwealth Bank - Australia
- Borneo Indobara - Indonesia
- Ambuja Cements Ltd - India
- Interocean Group of Companies - India
- GN Power Mariveles Coal Plant, Philippines
- Kartika Selabumi Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Dalmia Cement Bharat India
- Minerals Council of Australia
- Ceylon Electricity Board - Sri Lanka
- Petron Corporation, Philippines
- Chamber of Mines of South Africa
- The University of Queensland
- Aditya Birla Group - India
- Orica Mining Services - Indonesia
- Agrawal Coal Company - India
- Indian Energy Exchange, India
- Thai Mozambique Logistica
- Miang Besar Coal Terminal - Indonesia
- Bhatia International Limited - India
- Meenaskhi Energy Private Limited - India
- Port Waratah Coal Services - Australia
- Sarangani Energy Corporation, Philippines
- New Zealand Coal & Carbon
- ICICI Bank Limited - India
- Central Java Power - Indonesia
- Siam City Cement - Thailand
- London Commodity Brokers - England
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indonesian Coal Mining Association
- CNBM International Corporation - China
- Gujarat Mineral Development Corp Ltd - India
- Ministry of Transport, Egypt
- Romanian Commodities Exchange
- Siam City Cement PLC, Thailand
- Trasteel International SA, Italy
- Sindya Power Generating Company Private Ltd
- Vijayanagar Sugar Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Mjunction Services Limited - India
- Global Green Power PLC Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Bukit Makmur.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Intertek Mineral Services - Indonesia
- Global Coal Blending Company Limited - Australia
- Karbindo Abesyapradhi - Indoneisa
- The Treasury - Australian Government
- Samtan Co., Ltd - South Korea
- Mintek Dendrill Indonesia
- Star Paper Mills Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Carbofer General Trading SA - India
- Sojitz Corporation - Japan
- PTC India Limited - India
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