Shell gets C$865 million for Canadian CO2 project

A logo is seen under a canopy of trees at a Shell petrol station in central London July 29, 2010. REUTERS/Toby Melville

CALGARY, Alberta (Reuters) - Royal Dutch Shell Plc said on Friday the governments of Alberta and Canada have agreed to contribute C$865 million ($873 million) toward the cost of a carbon capture and storage project at its Scotford oil sands upgrader.

The money will go to the construction and operation of Shell’s Quest carbon capture and storage (CCS) project at the Scotford site northeast of Edmonton, Alberta.

Quest will capture more than 1 million metric tonnes of carbon dioxide from the upgrading process and pump it into underground storage reservoirs when work is complete in 2015.

The Alberta government will provide C$745 million in funding for the project over 15 years, part of a C$2 billion fund set aside for carbon capture and storage, while the Canadian government will contribute C$120 million.

Both governments are pushing to advance carbon-capture technologies in order to reduce the environmental impact of producing oil from the tar sands of northern Alberta and lessen harsh criticism from environmental groups.

“CCS ... isn’t just about environmental benefits. It’s going to support Alberta’s oil sands and other industries in responding to increasing international expectations for environmentally sustainable exports,” said Alberta Premier Ed Stelmach.

Stelmach was speaking to crowd at an official opening at the Scotford site, staged to mark the 100,000 barrel per day expansion of the oil sands upgrader that began service in May.

The upgrader is part of the Athabasca oil sands project, 60 percent owned by Shell. Chevron Corp and Marathon Oil Corp each have a 20 percent interest in Athabasca.

($1=$0.99 Canadian)

Reporting by Scott Haggett; editing by Rob Wilson