Shell fits final module on Alberta oil sands' first carbon capture project

CALGARY, Alberta Wed Aug 27, 2014 3:01pm EDT

CALGARY, Alberta Aug 27 (Reuters) - Shell Canada has fitted the final module at the first carbon capture and storage project in Alberta's oil sands, the company said on Wednesday, putting start-up on track for 2015.

The Quest CCS project, now 70 percent complete, is being built with funding from the Alberta and Canadian federal government to help mitigate greenhouse gas emissions from the oil sands.

It will capture more than 1 million tonnes of carbon dioxide each year from Shell's Scotford upgrader north of Edmonton and inject it 2 km under the Alberta prairies into impermeable layers of rock for permanent storage.

The upgrader converts mined bitumen from Shell's Athabasca oil sands project, a joint venture with Chevron Corp and Marathon Petroleum Corp, into refinery-ready crude. The CCS project will capture 35 percent of direct emissions from the Scotford facility.

Extracting and processing raw bitumen requires vast amounts of fossil fuels to be burned, making oil sands crude around 17 percent more "greenhouse gas intensive" than average oil used in the United States, a State Department report said last year.

Oil sands producers have come under heavy pressure from environmentalists to reduce the carbon footprint of their projects and environmental concerns are one of the chief reasons for a six-year delay in getting U.S. presidential approval for the Keystone XL pipeline.

Shell Canada president Lorraine Mitchelmore said the CCS project would be cost neutral for the company and there was a potential future market for carbon, although Shell was not looking at that right now.

"It's very early stage technology. We are thinking about what's happening in the future and where could policy evolve to. We are in the risk management business, that's how we look at long term projects," Mitchelmore said.

Shell declined to give a cost estimate for Quest but in 2009 the government provided an estimate of $1.35 billion and the project is on budget.

Of that $865 million is funding from the federal and provincial governments on the understanding Shell will share knowledge to bring down costs on any future CCS projects. (Editing by Cynthia Osterman)