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updated 6/30/2005 2:09:42 PM ET 2005-06-30T18:09:42

Energy giants BP, ConocoPhillips and Shell announced Thursday they had formed a joint venture to build a plant in Scotland that would be the first in the world to generate “carbon free” electricity from hydrogen.

The project would convert natural gas into hydrogen and carbon dioxide, then use the hydrogen to fuel a power station and ship the CO2 to a North Sea oil field to increase oil recovery and for storage ultimately.

“This is an important and unique project configured at a scale that can offer significant progress in the provision of cleaner energy and the reduction of carbon dioxide emissions,” BP Chief Executive Lord Browne said in a statement.

The energy industry is one of the top producers of CO2, a greenhouse gas that many scientists tie to global warming.

“If applied to just 5 percent of the new electricity-generating capacity that the world is projected to require by 2050," Browne said, "such schemes would have the potential to reduce global carbon dioxide emissions by around 1 billion tons a year — a material step in the challenge the world faces.”

$600 million investment
BP said the project, which would make use of a power station in northern Scotland and export leftover carbon dioxide to a North Sea oil reservoir, would cost some $600 million.

Initial engineering feasibility studies have been completed, BP said, and the partners are now working to confirm the economic viability of the project.

BP said it expects that review to be completed in the second half of 2006, allowing a final investment decision to be made next year. If approved, the group plans to start operation of the project in 2009.

In its March 2005 budget, the British government announced that it is examining the potential for new economic incentives to support the development of carbon capture and storage technologies and applications.

CO2 would be injected in oil field
The BP-led project would convert natural gas to hydrogen and carbon dioxide gases, then use the hydrogen gas as fuel for a 350 megawatt power station near Peterhead, northern Scotland, and export the carbon dioxide to a North Sea oil reservoir for increased oil recovery and ultimate storage.

When fully operational, the project would be expected to capture and store around 1.3 million tons of carbon dioxide each year and provide ’carbon-free’ electricity to the equivalent of a quarter of a million U.K. homes.

BP said the project would reduce the amount of carbon dioxide emitted to the atmosphere by the power generation by over 90 percent.

Scottish and Southern Energy is also partnering on the project.

U.S. activists praise move
The Natural Resources Defense Council, a U.S.-based group, was quick to praise the project and criticize the Bush administration, which opposes mandatory limits on greenhouse gas emissions.

This "shows that new energy technologies to fight global warming are affordable and feasible," David Hawkins, the group's climate center director, said in a statement. "Americans will ask why aren’t we doing this in our own country?"

"It’s no surprise that these technologies are happening first in Europe, where mandatory limits on global warming pollution are creating markets for innovation," he added. The project "should be a wake-up call to the Bush administration and Congress that stalling on global warming policy protects neither the climate nor our economy."

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