Carbon capture competition hots up as Shell reveals it is joining ScottishPower's bid

Published on Wednesday 12 August 2009 21:28

OIL major Shell has joined the ScottishPower-led consortium aiming to win funding for a key carbon capture scheme at the Longannet Power Station in Fife.

The UK government is holding a competition to demonstrate carbon capture and storage (CCS), with the winner in line for cash to develop the technology on a commercial scale.

ScottishPower has entered the competition and in May began a groundbreaking trial of the technology, the first time it has been used at an operational coal-powered station.

The technology is believed to be capable of capturing 90 per cent of the station's emissions, turning it into liquid, before piping it into disused North Sea oil fields or porous rock beneath the seabed.

Yesterday, the utility giant announced that Shell, Britain's largest oil company, would work alongside it in its bid.

Nick Horler, the chief executive of ScottishPower, appeared bullish about the consortium's prospects.

"The fact that a company of the size and scope of Shell has chosen to join our consortium is a considerable coup and a significant boost to our bid," Horler said.

"Shell's experience of working offshore in the North Sea is clearly critical – not only in terms of the potential for storage in depleted oil and gas reservoirs, but because transport and storage of will demand many of the same engineering and subsurface skills on which the oil and gas industry has depended for many decades."

John Gallagher, a vice-president at Shell, said the company was eager to be involved in the development of CCS technology.

"Shell believes CCS is a technology that will be vital to tackling climate change and we believe that at this stage it is essential that we 'learn by doing' in order to reduce costs, accelerate technology and ultimately make CCS commercially viable," Gallagher said.

National Grid has joined the consortium, although its involvement is not exclusive.

Chris Train, National Grid's director for network operations, said the Longannet project could potentially use some of its existing gas pipelines for transportation, as North Sea gas supplies decline. Two other European utilities are also taking part in the competition.

E.ON is aiming to build a CCS system on its proposed Kingsnorth coal-fired project in Kent, while RWE has also launched a joint-venture bid in conjunction with Peel Energy and Danish company Dong.

The Department for Energy and Climate Change said the funding for the competition would depend on the next spending review, although it wanted to have the technology ready commercially by 2020.

PRICE RISES DEFY DEMAND FEARS

OIL prices rose yesterday despite warnings from a leading industry agency that recovery in demand was likely to be slow.

The International Energy Agency (IEA), which advises 28 leading oil importing countries, said it expects the world to consume 85.3 million barrels of oil a day in 2010.

While this is 1.3 million more than the world is using this year, the estimate is 100,000 barrels a day less than the Paris-based organisation had previously forecast.

Meanwhile, the IEA also warned that it was still unclear whether demand for oil had even yet hit a low.

David Martin, an analyst at the IEA said there was "not clear evidence" that the lowest point in demand was over.

"Evidence of a bottoming out of the recession is still a bit patchy. The latest data on industrial production for some of the larger countries remains negative," Martin said.

On Tuesday, Opec, the cartel of oil producing countries, also cut its forecasts of the amount of oil the world would buy from it by 100,000 barrels a day.

Despite the negative news, crude prices rose as equity markets continued to recover.

In New York, crude oil rose $1.28 to $70.73 in early afternoon trading, while in London, Brent Crude rose just under $1 to $73.41.