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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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Monday, 23 September 19
CHINA RECORDS SLOWER GROWTH IN COAL PRODUCTION - XINHUA
The growth of China’s raw coal production slowed down in August, data from the National Bureau of Statistics (NBS) showed.
Aro ...
Friday, 20 September 19
INDIA TO INVITE BIDS FOR COMMERCIAL COAL MINING IN DECEMBER - MINISTER FOR COAL
India aims to begin the process of holding the first round of commercial coal mining auctions December end, Minister for Coal, Mines and Parliament ...
Friday, 20 September 19
INDIA: ECONOMIC SLOWDOWN IMPACTS COAL IMPORT CARGO IN H1 FY20 - PTI
Economic slowdown has impacted coal import cargo in the first half of this fiscal, as overall cargo growth at major ports registered a marginal gro ...
Wednesday, 18 September 19
SHIPPING MARKET INSIGHT - INTERMODAL
During the first week of September, I had the privilege of attending the Donsö Shipping Meet 2019, in Donsö, a small island of around 1,& ...
Tuesday, 17 September 19
PANAMA SHIP REGISTRY MODERNIZES SHIP REGISTRATION
The Panama Ship Registry has announced it will integrate in a single platform “Electronic Ship Registration System (ESRS)” the present ...
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- Gujarat Sidhee Cement - India
- The Treasury - Australian Government
- Thiess Contractors Indonesia
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- Videocon Industries ltd - India
- PowerSource Philippines DevCo
- Trasteel International SA, Italy
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- India Bulls Power Limited - India
- Star Paper Mills Limited - India
- San Jose City I Power Corp, Philippines
- Oldendorff Carriers - Singapore
- Wood Mackenzie - Singapore
- Bayan Resources Tbk. - Indonesia
- PTC India Limited - India
- Alfred C Toepfer International GmbH - Germany
- Mercator Lines Limited - India
- Krishnapatnam Port Company Ltd. - India
- Singapore Mercantile Exchange
- Gujarat Mineral Development Corp Ltd - India
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- MS Steel International - UAE
- OPG Power Generation Pvt Ltd - India
- Carbofer General Trading SA - India
- Renaissance Capital - South Africa
- Aditya Birla Group - India
- Borneo Indobara - Indonesia
- Medco Energi Mining Internasional
- Binh Thuan Hamico - Vietnam
- Manunggal Multi Energi - Indonesia
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- Ministry of Transport, Egypt
- Semirara Mining Corp, Philippines
- Indian Oil Corporation Limited
- Price Waterhouse Coopers - Russia
- Dalmia Cement Bharat India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Samtan Co., Ltd - South Korea
- Ministry of Finance - Indonesia
- Salva Resources Pvt Ltd - India
- The State Trading Corporation of India Ltd
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- Indogreen Group - Indonesia
- Barasentosa Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Romanian Commodities Exchange
- Posco Energy - South Korea
- CIMB Investment Bank - Malaysia
- International Coal Ventures Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Port Waratah Coal Services - Australia
- IHS Mccloskey Coal Group - USA
- Rashtriya Ispat Nigam Limited - India
- Latin American Coal - Colombia
- Asmin Koalindo Tuhup - Indonesia
- Energy Link Ltd, New Zealand
- Africa Commodities Group - South Africa
- Aboitiz Power Corporation - Philippines
- Meralco Power Generation, Philippines
- Eastern Coal Council - USA
- Jorong Barutama Greston.PT - Indonesia
- Globalindo Alam Lestari - Indonesia
- London Commodity Brokers - England
- Banpu Public Company Limited - Thailand
- TeaM Sual Corporation - Philippines
- Goldman Sachs - Singapore
- Sojitz Corporation - Japan
- Jindal Steel & Power Ltd - India
- Kideco Jaya Agung - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Australia Pty. Ltd.
- Global Business Power Corporation, Philippines
- SMG Consultants - Indonesia
- Australian Commodity Traders Exchange
- TNB Fuel Sdn Bhd - Malaysia
- Intertek Mineral Services - Indonesia
- Kobexindo Tractors - Indoneisa
- Therma Luzon, Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Bharathi Cement Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- Bhushan Steel Limited - India
- Savvy Resources Ltd - HongKong
- Sree Jayajothi Cements Limited - India
- Attock Cement Pakistan Limited
- PetroVietnam Power Coal Import and Supply Company
- Cement Manufacturers Association - India
- Mintek Dendrill Indonesia
- Edison Trading Spa - Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Straits Asia Resources Limited - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bahari Cakrawala Sebuku - Indonesia
- Eastern Energy - Thailand
- Anglo American - United Kingdom
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Jaiprakash Power Ventures ltd
- Siam City Cement PLC, Thailand
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- Thai Mozambique Logistica
- Karaikal Port Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Baiduri Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- GAC Shipping (India) Pvt Ltd
- Xindia Steels Limited - India
- Mjunction Services Limited - India
- AsiaOL BioFuels Corp., Philippines
- Energy Development Corp, Philippines
- Altura Mining Limited, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Uttam Galva Steels Limited - India
- Rio Tinto Coal - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Coal and Oil Company - UAE
- European Bulk Services B.V. - Netherlands
- Ambuja Cements Ltd - India
- Standard Chartered Bank - UAE
- Planning Commission, India
- Cigading International Bulk Terminal - Indonesia
- Deloitte Consulting - India
- Commonwealth Bank - Australia
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- Chamber of Mines of South Africa
- Bangladesh Power Developement Board
- Gujarat Electricity Regulatory Commission - India
- Vijayanagar Sugar Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Petron Corporation, Philippines
- SMC Global Power, Philippines
- CNBM International Corporation - China
- Kumho Petrochemical, South Korea
- Minerals Council of Australia
- Orica Mining Services - Indonesia
- Metalloyd Limited - United Kingdom
- Directorate General of MIneral and Coal - Indonesia
- PNOC Exploration Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Australian Coal Association
- Economic Council, Georgia
- ICICI Bank Limited - India
- Georgia Ports Authority, United States
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Malabar Cements Ltd - India
- Directorate Of Revenue Intelligence - India
- Indika Energy - Indonesia
- GVK Power & Infra Limited - India
- Central Electricity Authority - India
- SN Aboitiz Power Inc, Philippines
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Kartika Selabumi Mining - Indonesia
- Electricity Authority, New Zealand
- Global Green Power PLC Corporation, Philippines
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
- New Zealand Coal & Carbon
- Grasim Industreis Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Essar Steel Hazira Ltd - India
- Wilmar Investment Holdings
- Madhucon Powers Ltd - India
- Indo Tambangraya Megah - Indonesia
- Ministry of Mines - Canada
- Lanco Infratech Ltd - India
- Kepco SPC Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Pendopo Energi Batubara - Indonesia
- Coalindo Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Coastal Gujarat Power Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bukit Asam (Persero) Tbk - Indonesia
- McConnell Dowell - Australia
- The University of Queensland
- GN Power Mariveles Coal Plant, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- Bhatia International Limited - India
- Formosa Plastics Group - Taiwan
- Central Java Power - Indonesia
- Parliament of New Zealand
- Bukit Makmur.PT - Indonesia
- Siam City Cement - Thailand
- Sical Logistics Limited - India
- Independent Power Producers Association of India
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Larsen & Toubro Limited - India
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- Ind-Barath Power Infra Limited - India
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Indonesian Coal Mining Association
- Riau Bara Harum - Indonesia
- ASAPP Information Group - India
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
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