Nations agree to slash sulfur ship emission by 2015

LONDON (Reuters) - Countries have agreed new sulfur limits for ship fuels that will slash air pollutants and clean up the world's oceans, but raise costs for the oil and ship industry, a maritime industry source said on Friday.

Governments agreed the new measures, which will sharply cut harmful sulfur dioxide (SO2) emissions from ships through a staggered timetable to 2015, at a U.N. International Maritime Organization (IMO) meeting in London.

"It's a very significant agreement because it means that there will be substantial reductions in the emissions of harmful sulfur by ships," Simon Bennett, secretary at the International Chamber of Shipping, told Reuters.

"There is going to be much greater demands in the use of distillate fuels, particularly in the years running up to 2015," he said.

Through the IMO, countries agreed to impose sulfur limits in so-called special Sulphur Emission Control Areas (SECA) of 0.1 percent by 2015 from the current 1.5 percent.

By 2010 sulfur limits will be limited to just 1 percent in the protected areas.

There are only two SECA currently -- the North Sea and the Baltic -- but it is expected that the European Union, the U.S., Japan, Singapore and Australia will be declared SECA by that time.

Bennett said that the ambitious targets, first formally aired in April, will likely cost the oil and ship industry billions of dollars to implement.

They could also raise the price of road transport fuels as the industry, which numbers 50,000 ocean going ships, switches from heavy fuel oil to cleaner burning distillates.

"The big question will be whether or not the oil refining industry will be able to deliver this new demand for distillate that is going to be created for shipping," Bennett said.

(Reporting by Stefano Ambrogi; editing by James Jukwey)