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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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Friday, 07 June 19
KOEN INVITED BIDS FOR 1.87 MILLION TONS OF COAL FOR JULY - OCTOBER 2019 DELIVERY
COALspot.com: South Korea’s KOREA SOUTH-EAST POWER CO., LTD. (KOEN) has issued an international tender for 1,700,000 to 1,870,000 Metric Tons ...
Wednesday, 05 June 19
SHIPPING MARKET INSIGHT - INTERMODAL
The first semester of 2019 started as a fairly positive semester for the offshore sector whilst there was a recovery on crude prices, as well as a ...
Tuesday, 04 June 19
MARPOL ANNEX VI - SULPHUR CAP 2020 - DEMYSTIFYING THE FONAR - SKULD
KNOWLEDGE TO ELEVATE
Fuel Oil Non-Availability Report (FONAR) is primarily a discretionary tool for a Member State to lessen the breach of MAR ...
Monday, 03 June 19
SUPRAMAX: A 61,000 TONNER OPEN NORTH CHINA, FIXING A TRIP VIA INDONESIA, REDELIVERY SOUTHEAST ASIA AT $7,500 - BALTIC BRIEFING
Capesize
The market continued its steady ascent over the past week to improved levels. The TC average opened the previous week at $12,243 and c ...
Wednesday, 29 May 19
SHIPPING MARKET INSIGHT - INTERMODAL
Reflecting on the first quarter of 2019, the product tanker market was healthy, with average earnings significantly up compared to the first quarte ...
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- Simpson Spence & Young - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Parry Sugars Refinery, India
- McConnell Dowell - Australia
- Sakthi Sugars Limited - India
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Bharathi Cement Corporation - India
- Posco Energy - South Korea
- Indonesian Coal Mining Association
- Aditya Birla Group - India
- Thiess Contractors Indonesia
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Heidelberg Cement - Germany
- Xindia Steels Limited - India
- Agrawal Coal Company - India
- Kumho Petrochemical, South Korea
- Ambuja Cements Ltd - India
- CNBM International Corporation - China
- Savvy Resources Ltd - HongKong
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Economic Council, Georgia
- Petron Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Meralco Power Generation, Philippines
- Neyveli Lignite Corporation Ltd, - India
- Kohat Cement Company Ltd. - Pakistan
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Manunggal Multi Energi - Indonesia
- Makarim & Taira - Indonesia
- PNOC Exploration Corporation - Philippines
- Standard Chartered Bank - UAE
- Bhatia International Limited - India
- Indian Oil Corporation Limited
- Trasteel International SA, Italy
- Indogreen Group - Indonesia
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Star Paper Mills Limited - India
- Orica Mining Services - Indonesia
- Essar Steel Hazira Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Georgia Ports Authority, United States
- Indika Energy - Indonesia
- Tamil Nadu electricity Board
- Electricity Authority, New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Iligan Light & Power Inc, Philippines
- Coalindo Energy - Indonesia
- Mercator Lines Limited - India
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Medco Energi Mining Internasional
- Bayan Resources Tbk. - Indonesia
- Kartika Selabumi Mining - Indonesia
- Formosa Plastics Group - Taiwan
- Central Java Power - Indonesia
- Interocean Group of Companies - India
- Antam Resourcindo - Indonesia
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- Vizag Seaport Private Limited - India
- Larsen & Toubro Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Barasentosa Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Parliament of New Zealand
- MS Steel International - UAE
- Gujarat Mineral Development Corp Ltd - India
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Chettinad Cement Corporation Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Binh Thuan Hamico - Vietnam
- Deloitte Consulting - India
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Eastern Coal Council - USA
- Kobexindo Tractors - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- The University of Queensland
- Merrill Lynch Commodities Europe
- Madhucon Powers Ltd - India
- Bhushan Steel Limited - India
- GVK Power & Infra Limited - India
- Baramulti Group, Indonesia
- PTC India Limited - India
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- Mercuria Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Central Electricity Authority - India
- White Energy Company Limited
- Ind-Barath Power Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Bulk Trading Sa - Switzerland
- Directorate Of Revenue Intelligence - India
- Africa Commodities Group - South Africa
- South Luzon Thermal Energy Corporation
- Videocon Industries ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sindya Power Generating Company Private Ltd
- Vedanta Resources Plc - India
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- Goldman Sachs - Singapore
- Straits Asia Resources Limited - Singapore
- Pendopo Energi Batubara - Indonesia
- LBH Netherlands Bv - Netherlands
- Coastal Gujarat Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- AsiaOL BioFuels Corp., Philippines
- SN Aboitiz Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- Coal and Oil Company - UAE
- Thai Mozambique Logistica
- Sinarmas Energy and Mining - Indonesia
- European Bulk Services B.V. - Netherlands
- Price Waterhouse Coopers - Russia
- Minerals Council of Australia
- Bhoruka Overseas - Indonesia
- Cement Manufacturers Association - India
- Maharashtra Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- Rio Tinto Coal - Australia
- Chamber of Mines of South Africa
- Commonwealth Bank - Australia
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Wood Mackenzie - Singapore
- Global Green Power PLC Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Bangladesh Power Developement Board
- Ministry of Transport, Egypt
- Australian Coal Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Gujarat Electricity Regulatory Commission - India
- Ceylon Electricity Board - Sri Lanka
- Holcim Trading Pte Ltd - Singapore
- Renaissance Capital - South Africa
- Edison Trading Spa - Italy
- Ministry of Finance - Indonesia
- Miang Besar Coal Terminal - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kaltim Prima Coal - Indonesia
- Salva Resources Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Banpu Public Company Limited - Thailand
- Grasim Industreis Ltd - India
- Planning Commission, India
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- Marubeni Corporation - India
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Independent Power Producers Association of India
- Cigading International Bulk Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Latin American Coal - Colombia
- Mjunction Services Limited - India
- Ministry of Mines - Canada
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Siam City Cement - Thailand
- Australian Commodity Traders Exchange
- OPG Power Generation Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Kepco SPC Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Bukit Baiduri Energy - Indonesia
- London Commodity Brokers - England
- Pipit Mutiara Jaya. PT, Indonesia
- Sical Logistics Limited - India
- Siam City Cement PLC, Thailand
- The State Trading Corporation of India Ltd
- Dalmia Cement Bharat India
- Global Business Power Corporation, Philippines
- VISA Power Limited - India
- Electricity Generating Authority of Thailand
- Maheswari Brothers Coal Limited - India
- Indo Tambangraya Megah - Indonesia
- Jaiprakash Power Ventures ltd
- Singapore Mercantile Exchange
- Aboitiz Power Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Sree Jayajothi Cements Limited - India
- Wilmar Investment Holdings
- New Zealand Coal & Carbon
- Kideco Jaya Agung - Indonesia
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