BP may not go ahead with a US$1 billion clean energy project in Scotland if it fails to get the government incentives it needs by the end of the year, a senior executive told Reuters. The project is to produce carbon-free power, but is not economically viable at market prices for electricity.

BP needs the government to put in place regulation similar to that for wind farms to allow it to charge slightly more than the market rate for power from the plant, BPs Managing Director for Hydrogen Power Lewis Gillies said. "What we are looking for is a clear signal by the turn of the year that the government not only sees this as part of the solution to climate change but that it is prepared to put money behind it," Gillies said on the sidelines of an industry event in Norway. "We cant invest a billion dollars in a project that would be loss-making for its entire life."

UK Chancellor Gordon Brown will outline further carbon capture and storage measures in his pre-budget report later this year, Energy Minsister Malcolm Wicks said this week. But it is unclear what those measures will be. "We await the pre-budget report, which promises to say more, with some eagerness," Gillies said. The project in Peterhead, Scotland, would split natural gas into hydrogen and carbon dioxide (CO2). The hydrogen would be used to feed a power plant, while the CO2 would be pumped offshore and injected into the North Sea Miller field. Gillies said the regulation needs to be put in place not just for Peterhead, but also to trigger more carbon capture and storage projects, he said.

Gillies said that of all the measures available to reduce greenhouse gas emissions, carbon capture and storage was the second-most cost effective after wind farms. "The thing thats going to make the biggest impact for sure is carbon capture and storage," he said. "If we are going to continue burning fossil fuels, we have got to deploy this technology." The Peterhead project would capture two million tonnes per year of carbon emissions, he said, the equivalent to taking half a million cars off the road a year.

The carbon injection would also boost recovery of oil and gas from the Miller field. BP is also planning another US$1 billion hydrogen-fuelled power plant in Carson, California. Last month BP said it will set up a joint venture with General Electric Co. to develop hydrogen power plants. The two companies plan 10-15 projects over the next decade.
(Por Simon Webb, Planet Ark, 25/08/2006)