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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, 27 September 19
LOWDOWN ON INCOTERMS 2020 OVERHAUL - BALTIC EXCHANGE
KNOWLEDGE TO ELEVATE
This ninth revision of Incoterms is changed in style and substance. The revisions improve certain aspects of Incoterms 20 ...
Thursday, 26 September 19
INDIA INCREASES ITS ANNUAL COAL PRODUCTION BY 2.7% PER YEAR FROM 850 MILLION SHORT TONS IN 2018 TO 2 BILLION SHORT TONS BY 2050 - EIA
Worldwide coal production holds steady at about 8 billion short tons, or 160 quadrillion British thermal units (Btu), per year through 2040. Inc ...
Wednesday, 25 September 19
SHIPPING MARKET INSIGHT - INTERMODAL
In the past five months there has been significant activity in the asset market with the dry bulk segment being by far the most volatile in terms o ...
Tuesday, 24 September 19
9TH ANNUAL SUPPLY CHAIN INNOVATION SUMMIT 2019 ASIA PACIFIC
Summit: 9th Annual Supply Chain Innovation Summit 2019 Asia Pacific
Host: Ace Events
Website: http: ...
Monday, 23 September 19
SUPRAMAX: THE ASIAN ARENA IT WAS A SLOW START, BUT DEMAND INCREASED AS THE WEEK WENT ON - BALTIC BRIEFING
Capesize
The market trended down over this past week, breaking the market out of its upward trending range. While the market traded sideways at ...
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- Mjunction Services Limited - India
- Vizag Seaport Private Limited - India
- Economic Council, Georgia
- PetroVietnam Power Coal Import and Supply Company
- Jaiprakash Power Ventures ltd
- VISA Power Limited - India
- ASAPP Information Group - India
- San Jose City I Power Corp, Philippines
- Riau Bara Harum - Indonesia
- Alfred C Toepfer International GmbH - Germany
- India Bulls Power Limited - India
- PNOC Exploration Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- GMR Energy Limited - India
- OPG Power Generation Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Lanco Infratech Ltd - India
- Electricity Generating Authority of Thailand
- Neyveli Lignite Corporation Ltd, - India
- Kalimantan Lumbung Energi - Indonesia
- Salva Resources Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
- Simpson Spence & Young - Indonesia
- Minerals Council of Australia
- Bayan Resources Tbk. - Indonesia
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- New Zealand Coal & Carbon
- Central Electricity Authority - India
- Ind-Barath Power Infra Limited - India
- Dalmia Cement Bharat India
- Jorong Barutama Greston.PT - Indonesia
- Wilmar Investment Holdings
- Maheswari Brothers Coal Limited - India
- Larsen & Toubro Limited - India
- Medco Energi Mining Internasional
- Thai Mozambique Logistica
- Bukit Asam (Persero) Tbk - Indonesia
- Mercuria Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Baramulti Group, Indonesia
- Carbofer General Trading SA - India
- South Luzon Thermal Energy Corporation
- Karaikal Port Pvt Ltd - India
- Bhatia International Limited - India
- Deloitte Consulting - India
- MS Steel International - UAE
- Formosa Plastics Group - Taiwan
- Coastal Gujarat Power Limited - India
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Semirara Mining and Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Cigading International Bulk Terminal - Indonesia
- Standard Chartered Bank - UAE
- Star Paper Mills Limited - India
- Madhucon Powers Ltd - India
- GAC Shipping (India) Pvt Ltd
- Kideco Jaya Agung - Indonesia
- Commonwealth Bank - Australia
- Meenaskhi Energy Private Limited - India
- Tamil Nadu electricity Board
- Kohat Cement Company Ltd. - Pakistan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- European Bulk Services B.V. - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- Kumho Petrochemical, South Korea
- TeaM Sual Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Videocon Industries ltd - India
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Iligan Light & Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Anglo American - United Kingdom
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Krishnapatnam Port Company Ltd. - India
- AsiaOL BioFuels Corp., Philippines
- Energy Link Ltd, New Zealand
- Kepco SPC Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- Orica Mining Services - Indonesia
- Coal and Oil Company - UAE
- Toyota Tsusho Corporation, Japan
- Sindya Power Generating Company Private Ltd
- PowerSource Philippines DevCo
- Pendopo Energi Batubara - Indonesia
- Eastern Energy - Thailand
- Rashtriya Ispat Nigam Limited - India
- White Energy Company Limited
- Gujarat Sidhee Cement - India
- Price Waterhouse Coopers - Russia
- Kobexindo Tractors - Indoneisa
- Global Business Power Corporation, Philippines
- Georgia Ports Authority, United States
- Wood Mackenzie - Singapore
- Globalindo Alam Lestari - Indonesia
- Romanian Commodities Exchange
- Indika Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Port Waratah Coal Services - Australia
- Orica Australia Pty. Ltd.
- Chettinad Cement Corporation Ltd - India
- SMC Global Power, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- Uttam Galva Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Aditya Birla Group - India
- Coalindo Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Rio Tinto Coal - Australia
- GN Power Mariveles Coal Plant, Philippines
- Bangladesh Power Developement Board
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Indonesian Coal Mining Association
- Barasentosa Lestari - Indonesia
- Vedanta Resources Plc - India
- Goldman Sachs - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Essar Steel Hazira Ltd - India
- Straits Asia Resources Limited - Singapore
- Australian Coal Association
- Tata Chemicals Ltd - India
- LBH Netherlands Bv - Netherlands
- Banpu Public Company Limited - Thailand
- Heidelberg Cement - Germany
- Holcim Trading Pte Ltd - Singapore
- Posco Energy - South Korea
- Altura Mining Limited, Indonesia
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- Xindia Steels Limited - India
- Interocean Group of Companies - India
- CNBM International Corporation - China
- Billiton Holdings Pty Ltd - Australia
- Antam Resourcindo - Indonesia
- Marubeni Corporation - India
- Kapuas Tunggal Persada - Indonesia
- Chamber of Mines of South Africa
- International Coal Ventures Pvt Ltd - India
- Parliament of New Zealand
- London Commodity Brokers - England
- Leighton Contractors Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Timah Investasi Mineral - Indoneisa
- Planning Commission, India
- Malabar Cements Ltd - India
- Meralco Power Generation, Philippines
- Sojitz Corporation - Japan
- Mintek Dendrill Indonesia
- Ministry of Mines - Canada
- Global Green Power PLC Corporation, Philippines
- Parry Sugars Refinery, India
- Indian Oil Corporation Limited
- Sinarmas Energy and Mining - Indonesia
- Ministry of Transport, Egypt
- Kaltim Prima Coal - Indonesia
- Edison Trading Spa - Italy
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- Indian Energy Exchange, India
- Energy Development Corp, Philippines
- Siam City Cement - Thailand
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Grasim Industreis Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Bhushan Steel Limited - India
- The University of Queensland
- Eastern Coal Council - USA
- Electricity Authority, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Renaissance Capital - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Jindal Steel & Power Ltd - India
- GVK Power & Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Bhoruka Overseas - Indonesia
- ICICI Bank Limited - India
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Attock Cement Pakistan Limited
- PTC India Limited - India
- Sical Logistics Limited - India
- Australian Commodity Traders Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Mercator Lines Limited - India
- Africa Commodities Group - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Agrawal Coal Company - India
- Miang Besar Coal Terminal - Indonesia
- Sakthi Sugars Limited - India
- Trasteel International SA, Italy
- Semirara Mining Corp, Philippines
- Ambuja Cements Ltd - India
- Metalloyd Limited - United Kingdom
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