* UK provides multi-million pound funding for Peterhead CCS
* Government is giving a total 100 mln stg for two CCSprojects
LONDON, Feb 24 (Reuters) - Shell has securedmillions of pounds of funding from the British government forthe next stage of its carbon capture and storage (CCS) projectat SSE's Peterhead gas plant in Scotland, Shell and thegovernment said on Monday.
The demonstration project, led by Shell with support fromthe plant owner SSE, aims to become the world's firstlarge-scale CCS project at a gas-fired power plant.
"The government has agreed a multi-million pound contractfor engineering, design and financial work on the Peterhead CCSproject in Aberdeenshire," Ed Davey, Britain's Secretary ofState for Energy and Climate Change.
"If built, the project could save one million tonnes of CO2each year," he added.
CCS technology captures carbon dioxide emissions from powerstations and other industrial sites. Once captured, the carbondioxide is transported to formations deep underground such asdepleted oil and gas reservoirs, where it is stored.
CCS has been proven to work in several small pilot schemesaround the world but has yet to be operated commercially and ata large scale.
A study last week showed that schemes in the United States,Canada and China are approaching completion but Europe islagging behind.
The British government wants to develop CCS to help it meetboth national and international targets to reduceenvironmentally-damaging greenhouse gas emissions.
By 2050, CCS could save more than 30 billion pounds ($50billion) a year in fighting climate change, it said.
The government is investing around 100 million pounds in twoCCS projects in Britain - the Peterhead scheme and the WhiteRose project in Yorkshire, which is developing a new coal powerplant with CCS.
The government will make financial investment decisions onthe projects by late 2015.
Peterhead CCS aims to capture and store over 85 percent ofthe carbon dioxide emissions from one of the gas plant's threeturbines and is scheduled to be operational by the end of thedecade,
"CCS could be critical to reducing carbon emissions at atime of growing global demand for energy," Ed Daniels, Chairmanof Shell UK, said.
"The successful demonstration of the technology at Peterheadwould be a step towards proving its commercial viability as atool for mitigating climate change. It could also help diversifythe North Sea oil and gas industry and so contribute to thesector's long-term commercial health."
