* Fuel sulphur content to be cut to 0.1 pct from Jan 2015
* Cost of switching fuels far outweighs fines
* Not yet clear how will be enforced in each member state
By Jonathan Saul and Nina Chestney
LONDON, June 20 Northern European regulators
will face a battle with many shipping companies over new EU
rules aimed at cutting pollution from ship fuels as some owners
are likely to find it cheaper to pay fines than to comply.
Ships are typically powered by heavy fuel oil or bunker oil,
both of which produce harmful pollutants such as sulphur dioxide
which can cause respiratory and heart problems.
Such fuels contain 2.5 to 3 percent sulphur on average,
which is up to 3,000 times the sulphur content of road fuel in
Europe, according to marine campaigners Seas at Risk.
Under EU rules from Jan. 1, 2015, all ships operating in the
North Sea, Baltic Sea and English Channel will have to use a
fuel with a maximum sulphur content of 0.1 percent.
Ship owners can comply by changing fuels, such as to
low-sulphur marine gasoil, which can cost four times as much as
high-sulphur bunker fuel.
Or they can use bunker fuel and fit a "scrubber", a
technology that filters out pollutant gases before they are
released into the atmosphere.
This costs as much as 3 million euros ($4 million) for a
small vessel - often more than the value of the ship itself -
and as much as 12 million euros for a larger ship, and it could
take up to two years for every ship to be fitted.
Another option is to use liquefied natural gas (LNG), but
ships would need expensive retrofitting, and there is not yet a
reliable supply chain in place for LNG.
"Neither of these options (scrubbers and LNG) can easily be
deployed by January 2015," the International Energy Agency said
COST OF COMPLIANCE
Many shipping firms have complained about the costs of
meeting the regulation, saying it will damage competitiveness
and lead to job losses.
All ships worldwide, however, will be subject to a limit of
0.5 percent sulphur content in fuels by 2020 under rules by the
International Maritime Organization, which are still subject to
a feasibility review.
Maersk Line, the world's biggest
ship container group, said switching to low-sulphur fuel under
the EU rules will cost it an extra $200 million a year. P&O
Ferries' fuel bill will rise by 30 million pounds ($50 million)
a year, which it said it would pass onto customers.
"On longer routes fares will need to rise more than on
shorter ones to cover the greater increase in fuel costs," P&O
Ferries Chief Executive Helen Debbie wrote in a letter to staff,
which was seen by Reuters.
There is also the risk that some firms will find it cheaper
to pay fines for not complying with the limits than pay upfront
capital costs to change fuels or fit technology.
"The potential for not following the regulations is there,
because you can save a lot of money. It is so significant that
over time companies in compliance may not even be able to
compete with companies who are not in compliance," said Mads
Stensen, global adviser on sustainability at Maersk Line.
Britain-based ferry group Red Funnel has been using
low-sulphur fuel for 18 years, however, and a spokeswoman said
the company has maintained its competitiveness through
Apart from the costs, there is also a lack of clarity about
how enforcement will work. Each EU member state is responsible
for deciding its own methods of enforcement including penalties,
according to the European Commission.
Industry sources say many countries have yet to decide on
the level of fines, how to monitor the sulphur content of fuel
or how often to check ships.
A spokeswoman at Britain's transport ministry said the
government was still in consultations on the new sulphur regime.
"Repeat offenders could potentially be subject to penalties
other than fines, including the detention of their vessels until
such time as compliant fuel was supplied," she said.
Britain's shipping minister, Stephen Hammond, said the
government was trying to secure EU finance to compensate ship
owners and ports for the higher fuel costs.
(editing by Jane Baird)