Energy groups seek green light to pump carbon under the sea

Standing on the roof of Scottish and Southern Energy's power station just outside Peterhead, on the Scottish coast, it's hard to imagine this could become the launch pad of an environmental revolution.

Across the sea and beyond the horizon lies the Miller gas field, which is almost empty and now only occasionally able to supply the power station. But the otherwise unremarkable field, which is operated by BP, could become home to millions of tons of carbon dioxide (CO ₂)pumped out from a new power station on the Scottish and Southern Energy (SSE) site.

The two companies are in talks to build the world's first commercial-sized project to take CO ₂ from a power station and store it under the sea, rather than allow the gas to be emitted into the atmosphere and contribute to global warming.

A recent report from the Inter- governmental Panel on Climate Change, backed by the UN, estimates that up to 45 per cent of the CO ₂ emitted globally (37 billion tons) could be stored in this way by 2050. But the technology has yet to be commercially proven.

Ian Marchant, the chief executive of SSE, which reports annual results later this week, says that the £750m demonstration project needs government support to go ahead. "Everyone knows it's do-able but it has not been done on a large scale before."

The Government has yet to match its glowing endorsement of the technology with substantial funding. So is CO ₂ sequestration, as this process of capturing and storing carbon is known, the future - and will it get off the ground?

The Peterhead project would involve the construction of a new plant, adjacent to the existing site, able to generate 475 mega- watts of electricity - enough to provide power for around 500,000 people. The plant would separate the gas pumped to the plant into CO ₂ and hydrogen, the second of which would be burnt to generate electricity.

The CO ₂ would be pumped 150 miles out to sea and into the Miller gas field, more than two miles beneath the seabed.

SSE estimates that 90 per cent of the new plant's CO ₂ emissions could be stored in this way, or 1.8 million tons every year - equivalent to taking over 200,000 SUVs off the road.

Dr Sam Holloway from the British Geological Survey says that rock formations have stored gas, including CO ₂, naturally for thousands of years. So in theory, pumping CO ₂ back into the semi-porous rock should not be any different.

The technology is not altogether new. US companies have been pumping carbon into oil fields since the 1980s because it speeds up the extraction of the black stuff. But the CO ₂ being stored needs to stay in place for thousands of years, possible in theory but as yet untested.

There is also a set of legal and regulatory obstacles. In the UK, new legislation would be needed, possibly arising from the current Energy Review. No one knows who would be liable for the CO ₂ stored (although in the short term it's likely to be the oil companies, such as BP). And no existing mechanism for rewarding companies that reduce emissions, such as the Renewable Obligation Scheme in the UK or the European Union emissions trading scheme, recognises carbon sequestration. Some industry executives argue that the Government should set up a regulatory body, dubbed "OfCO ₂", to oversee schemes such as carbon sequestration.

Mr Marchant estimates that generating power and storing the CO ₂ could be more expensive than operating offshore wind farms, which are heavily subsidised and themselves at least twice as expensive as conventional gas power stations. He says SSE and BP will decide next year whether to go ahead with the project, based largely on what governmental financial and regulatory regime is in place.

In return for supporting the project, the Government could, for example, receive any money the project makes as a result of cutting pollution, he said. This could come from SSE and BP selling the "carbon credits" they have earnt under the emissions trading scheme.

The Peterhead project, which could be operational by the end of the decade if it receives full backing, faces competition. Shell and a Norwegian oil company have announced plans to build their own generation and sequestration project. But they need to overcome similar financial and regulatory challenges. Helge Lund, the chief executive and president of Statoil, says: "We have been clear that we are not able to go ahead unless there is some sort of involvement from the Norwegian government."

Statoil and Shell are looking for an energy company to build and operate the new power station, he said. Norwegian group Norsk Hydro, Danish generator Elsam and US chemicals company Du Pont could be in the frame.

The potential for carbon sequestration is huge. But it's a long way from taking off. When there are so many other cheaper and less risky forms of clean energy, you may wonder why the likes of BP, Shell, Statoil and SSE are bothering.

But the oil companies know that showing willing for technologies such as sequestration is politically astute. As Mr Lund says: "There will be more and more political pressure on the oil industry to find a solution to global warming. It's better to be proactive in this field rather than be dragged along." And, cynics might add, if carbon sequestration discourages the development of alternative to fossil fuels, so much the better for the oil giants.