Carbon capture on hold

Australian
Wednesday 4/3/2009 Page: 20

SANTOS, Australia's third biggest oil and gas producer, has suspended its Moomba carbon storage project a victim of weak government support and plunging prices for permits to release greenhouse gases. Credit prices to emit carbon dioxide into the atmosphere were too low to underpin the investment planned for central Australia's Cooper Basin, Santos spokesman Matthew Doman said yesterday.

Adelaide-based Santos estimated the project would have cost more than $700 million. Governments and energy companies worldwide are revising plans to build underground storage for carbon dioxide, the main gas blamed for global warming, because stalled economies and lower permit prices are making them less attractive. "It just doesn't make sense for them to go ahead with these prices," said Gary Cox, vice president of commodities in Australia for Newedge Australia. Mr Cox said his last trade of domestic allowances, covering 50,000 tonnes of carbon dioxide for delivery in 2011, was at $21/t, compared with prices as high as $24.75 last year.

European Union emission permits for delivery in December have dropped about two-thirds from the 30.53/t price reached on July 1 last year. Carbon capture projects became viable when industrial pollution cost about $US50 (40) a tonne, more than three times the current over-the-counter price in Australia, said London School of Economics professor Nicholas Stern.

Santos had been talking to the federal and state governments about the Moomba project "for some time, and whilst we have received strong interest, we haven't had strong or direct support for it", Mr Doman said. A low carbon price makes it more profitable for coal-fired power plants to simply buy permits to cover future emissions rather than invest in projects to pump CO2 underground.

Some energy companies, including StatoilHydro, Norway's largest oil and gas company, are continuing to pursue carbon capture projects. Santos said that in June 2007 it had proposed to the federal Government to pump CO2 into its depleted fields at the Moomba site, provided that pipelines could be built to coal-fired power plants in the east that needed to dispose of the waste gas to comply with emissions targets. Santos and General Electric cancelled a low-emissions venture in Queensland in 2007. In May, BP and Rio Tinto dropped a plan to build a carbon capture power plant in WA.