DTI kicks oil-well CO2 disposal into touch

Plans for a demonstration project to sequester carbon dioxide in North Sea oil wells have been dropped by the Department of Trade and Industry. The technology had been seen as a stepping stone to dedicated CO2 storage - and the DTI's move is a blow to the prospects for clean coal technology.

In last year's Energy White Paper, the Government promised to produce within six months an "urgent detailed implementation plan" for a demonstration "enhanced oil recovery" (EOR) project in the North Sea (ENDS Report 338, pp 26-32 ).

EOR involves injecting CO2 into oil wells in order to boost their yield. It had been seen as a stepping stone towards fully fledged CO2 capture and sequestration, piggy-backing on existing infrastructure and the income from increased oil production.

In April - more than a year after the White Paper - the DTI revealed that it has not developed an implementation plan because North Sea oil producers have "little interest" in using the technique. The DTI now says "it would be wrong to press ahead immediately" with a full-scale EOR demonstration.

The DTI interviewed eight oil companies and three electricity generators - none of whom are considering investment in EOR at present. Not surprisingly, three equipment suppliers were in favour of a demonstration project.

A demonstration project would set out to assess the long-term integrity of geological storage and allow regulatory and greenhouse gas accounting procedures to be established. But the oil companies displayed little concern about the technical feasibility of EOR, telling the DTI that it is a proven technique that could be applied in the North Sea without the need for a demonstration project.

However, financial considerations are a key barrier. The DTI says that an EOR project would cost £300-500 million, and is "not a commercially attractive option under current market conditions". Even if the European Commission agrees that the technology is eligible for carbon credits under the EU emissions trading scheme, the revenue is unlikely to make EOR feasible at least until 2010.

The DTI says that the level of subsidies needed to make EOR viable remains uncertain - although last year it put the additional costs at 0.2-1.0p/kWh (ENDS Report 344, p 7 ). The main way that the Government could support a demonstration would be to adjust the North Sea oil taxation regime "to reduce any barriers this presents to investment".

The report maintains that EOR is "worth further consideration over a longer time-scale" as part of a wider strategy for developing low-emission fossil fuel technologies. It lists several work streams that the DTI will press on with, including the development of greenhouse gas verification and monitoring protocols. It also suggests that dedicated CO2 capture and storage "may be required from about 2020-2030."

However, the DTI's report looks like a face-saving exercise - not least because it ignores the rapidly closing window of opportunity for EOR as North Sea output dwindles (ENDS Report 339, p 11 ). By the time the financial outlook for the technology improves, there may be few, if any, suitable oilfields left in operation.

There have been two proposals for "clean coal" electricity generating stations designed to enable carbon capture and storage - Valleys Energy's planned 480MW station in south Wales (ENDS Report 336, p 8 ) and Coalpower's 432MW project at Hatfield in South Yorkshire. However, in December, Hatfield colliery - which was to be the fuel source for the latter project - was placed in administration.