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