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Shell launches carbon-capture project

Globe and Mail: NORVAL SCOTT - July 8, 2008

http://www.theglobeandmail.com/servlet/story/RTGAM.20080708.wrshell09/EmailBNStory/energy/

CALGARY Royal Dutch Shell PLC has embarked on a major carbon-capture project to clean up its oil sands output on the same day the Alberta government created a $2-billion fund to promote just such solutions to the problem of its so-called dirty oil.

Shell, one of the world's largest energy companies and a major player in the oil sands, said Tuesday it will begin testing ways to take carbon dioxide spewed from its Scotford Upgrader, near Fort Saskatchewan, Alta., and inject it safely back into saline aquifers in the ground. The upgrader takes tarry bitumen from the oil sands and processes it into a lighter synthetic crude.

The testing is to be the first step toward creating by 2015 one of Canada's largest carbon capture and storage projects so far, with the technology seen as key to preventing emissions in Alberta spiralling out of control as more crude production from the oil sands is brought on stream.

Separately Tuesday, the Alberta government announced it's creating a $2-billion fund to advance carbon capture and storage, with the cash allocated to encourage large-scale projects like that being planned by Shell. The government also set aside a similar amount to promote public transit.

The province has faced a rising tide of criticism as it tries to bring more of its lucrative oil sands crude to market. According to some estimates, crude from the oil sands causes up to three times as much greenhouse gas to be emitted as conventional oil production, and activists across the world have increasingly turned their sights on the perceived negatives associated with development of the resource.

Shell's project, known as Quest, would be almost as large as the only other carbon capture project now operating in Canada and the first to deal with emissions from the oil sands. EnCana Corp.'s Weyburn project in Saskatchewan injects carbon dioxide into a conventional oil field.

Quest would reduce emissions from Shell's oil sands operations by one million tonnes a year beginning in 2015.

The acceleration of carbon capture and storage is not a fantasy, said Dave Collyer, Shell's head of Canadian operations, in a press briefing. This is a very important part of the solution to the climate change challenge.

Shell isn't yet sure what the project would cost. The Scotford mine and upgrader currently produces over 1.75 million tonnes a year of emissions, although that number will increase as expansions are brought on stream.

Debate over how to reduce carbon dioxide emissions is taking on increasing prominence.

On Tuesday leaders of the Group of Eight nations pledged to achieve a 50-per-cent reduction in emissions by 2050, while Liberal leader Stéphane Dion has staked his political future on his Green Shift emissions reduction plan that seeks to bring Canada's emissions down to 20 per cent below 1990 levels by 2020.

Alberta's emissions reduction plan calls only for a freeze in production by 2020, and a reduction in emissions by 14 per cent (from 2005 levels) by 2050. That target has been decried by critics as being insufficient, not least as it heavily relies on carbon capture and storage an industry in its infancy to be reached.

However, the $2-billion fund announced Tuesday for carbon capture and storage, along with another $2-billion amount earmarked for energy-saving public transit, are proof that the province is moving in the right direction, said Premier Ed Stelmach.

There's been a lot of talk lately about whose targets are toughest or whose plan is better. While others talk, Alberta is acting, Mr. Stelmach said.

These are major initiatives with significant funding. We can't wait for others to act. We won't wait for others to determine Albertans' future, he added.

Major business figures in Alberta welcomed the new provincial funds.

It's a terrific piece of news it puts a stake in the ground and declares that Alberta is serious, said Don Lowry, chief executive officer of Edmonton-based power producer Epcor Utilities Inc. This says the funding will be there for companies looking to advance viable projects, and will create incentives for players to bring forward proposals that will have an impact.

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