It’s a slow road to alternative energy

Government delays force BP to pull plug on a carbon dioxide project, reports Mike Spears, editor at large, in this month's End Point column.

By Mike Spear, editor at large

Nearly two years after announcing its involvement in the world’s first industrial-scale project to generate “carbon-free” electricity from hydrogen (see "Should we change our approach to change?"), BP has pulled out of the proposed venture at Peterhead in northeast Scotland.

In collaboration with ConocoPhillips, Shell and the power company Scottish and Southern Energy, BP had planned to convert natural gas into hydrogen and carbon dioxide, using conventional steam reforming technology, and then use the hydrogen to fuel a new 475-MW power station — run on technology developed jointly with GE under an alliance formed earlier this year — with up to 1.8 millon metric tons a year of CO2 being sequestered and piped 240 km offshore to the Miller oilfield for eventual storage after injection into the mature reservoir to increase oil recovery.

As we said here at the time, the $1.9-billion proposed project was by no means speculative. All partners were fully committed and by the time BP decided to call it a day in May some $60 million had been spent on detailed front-end engineering and design (FEED) work. By that time BP also had joined forces with the London, U.K.-based international mining group Rio Tinto to set up a subsidiary company, Hydrogen Energy, Weybridge, Surrey, U.K., that would take on the Peterhead project along with two other hydrogen and carbon-capture power plant projects already announced by BP.

These are the 500-MW Edison Mission Energy petroleum coke-fired plant at Carson, Calif., and a similar sized coal-based project to be built alongside BP’s Kwinana refinery in Western Australia.

Rio Tinto’s own commitment to carbon-capture and storage (CCS) was further highlighted only last month when it became the latest in the rapidly growing number of leading companies to join the Washington, D.C.-based lobbying organization, the United States Climate Action Partnership (USCAP). Now comprising 33 members, including 27 of the world’s largest corporations such as BP itself, ConocoPhillips, Dow, DuPont, GE and Shell, USCAP has called on Congress to enact nation-wide legislation to address climate change.

Explaining his company’s support, Tom Albanese, Rio Tinto’s CEO, says: “Combating climate change means finding new and better ways of producing, using and conserving energy. USCAP provides an important forum to advance comprehensive policy that includes both market approaches and technology options.”

So why did BP decide not to go ahead with the Peterhead project? It certainly wasn’t a technology issue, since the FEED studies had been successfully completed and all local authority planning applications submitted and accepted. As recently as March, BP/Hydrogen Energy was saying “the project is now ready for a final investment decision, provided government support is forthcoming. If a decision to proceed can be made at the end of 2007, the plant could be in commercial operation in 2011.”

Unfortunately, the wheels of government grind somewhat slower than those of the oil industry. When the U.K. government announced in March that a committee to examine how best to support CCS projects wouldn’t be set up until November, BP realized its time had run out.

The problem for BP was that the Miller field was coming to the end of its natural life and a decision had to be made about either using it to sequestrate the CO2 from Peterhead or to decommission it by removing the rig and sealing the wells. “We really needed to know that we could go ahead this summer. Given that the government wouldn’t be able to set up a task force to look at these [CCS] projects until the fourth quarter, we decided that we would have to abandon the project,” a BP spokesperson told the U.K. magazine Process Engineering.

With unintended irony, the U.K. government’s business secretary, John Hutton, said last month: “We are frustratingly close to a dramatic escalation of renewable energy in the U.K., but it’s being held back by a snail’s-pace planning system.” He might well have been talking about CCS projects, but was commenting in the wake of government approval for the world’s first large-scale wave farm, dubbed the Wave Hub, to be built 10 miles out in the Atlantic off the coast of Cornwall in the southwest of England. Acting as a test bed for up to 30 wave energy devices from a variety of suppliers, Wave Hub is expected to become operational in 2009 — CCS will just have to wait its turn.

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