OSLO, May 15 (Reuters) - Norway postponed a final decisionon whether to go ahead with a project to develop Europe's firstindustrial carbon capture and offshore storage (CCS) project,after dropping one of its participants, Yara International.
The government said on Tuesday that fertiliser maker Yara'ssite, one of three industrial facilities identified for theproject, was not suitable and the project as a whole needed tobe more cost effective.
Governments and businesses seeking to cut carbon emissionshave long cherished the idea of storing CO2 in the ground ratherthan emitting it.
The Norwegian government, which has estimated its projectwill cost up to 12.6 billion Norwegian crowns ($1.6 billion),had planned to decide in 2019 on whether to invest some of themoney for the project, but on Tuesday put that decision offuntil some time during 2020 or 2021.
The other two industrial sites identified for the projectare Oslo's Klemetsrud waste-to-energy plant owned by Finland'sFortum, and a site owned by Norcem, a subsidiary ofHeidelbergCement.
The government also said on Tuesday that it needed more timeto decide whether to grant support to Fortum's project. However,it gave Norcem's site the green light, saying it would grant 80million crowns ($10 million) for Norcem's project to captureabout 400,000 tonnes of CO2 emissions per year.
The government said Yara's facility was unsuitable due touncertainty about the plant's future emissions as it planned toreplace liquefied petroleum gas (LPG) with less-emittingliquefied natural gas (LNG) as its raw material.
"We agree with the government's conclusion and willdiscontinue the project," a spokeswoman for Yara said.
The International Energy Agency (IEA) considers CCStechnology to be essential to limit CO2 emissions as part of aninternational agreement to curb global warming reached in Parisin 2015.
Investments in the project at Norcem's cement plant wereestimated at 3.1 billion crowns, and at Fortum's plant at 4.5billion crowns, the government said in its revised 2018 fiscalbudget plan on Tuesday.
It said that while estimates by external consultants Atkinsand Oslo Economics showed the overall project costs to be toohigh to make it profitable for society, the government wouldcontinue looking for a cost-effective solution.
"After the concept studies, the timeline for the projectsuggests that a potential investment decision may be taken in2020/2021," the government said.
Norway's oil and gas industry lobby welcomed the decision togrant support to Norcem, but said more capture sites were neededto make the project viable. Both the lobby group and a top tradeunion said they were concerned by the delay in the government'sdecision.
Norway aims to take a lead in developing CCS technology. Aswell as the government-backed project, oil and gas firms Statoil, Total and Shell are separatelystudying the possibility of storing captured CO2 under theseabed on the Norwegian continental shelf.
($1 = 8.0236 Norwegian crowns)(Reporting by Nerijus Adomaitis; Editing by Susan Fenton)
