May 12 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, and BP Plc, Europe's second-largest oil producer, canceled a plan to build a coal-fired power plant in Australia that would capture and store carbon to cut emissions.

The plant at Kwinana, which was being studied by the Hydrogen Energy joint venture between Rio and BP, won't be built after it was found that rock formations wouldn't seal in carbon dioxide, said Rio spokesman Nick Cobban. The project would have required $1.5 billion to $2 billion in investment, according to the venture's estimates.

``We don't understand as fully as other formations'' the proposed reservoir, David Nicholas, a London-based spokesman at BP, said today by telephone. ``Particularly considering this would be one of the first projects of its kind, we would want some very high level of certainty of the long-term storage of CO2.''

Hydrogen Energy, based in Weybridge, England, will still work on projects in California and Abu Dhabi, Cobban said today by telephone from London.

In the U.S., the venture is working to use hydrogen derived from coal or natural gas to generate power and capture carbon for storage to minimize greenhouse-gas emissions.

The project with Abu Dhabi National Oil Co., or Adnoc, which controls the United Arab Emirates' petroleum reserves, would pump carbon dioxide into oil fields, forcing out more crude. Currently, natural gas is used to create pressure inside the aging oil reservoirs to increase oil recovery.

To contact the reporters on this story: Brett Foley in London at bfoley8@bloomberg.net; Eduard Gismatullin in London at egismatullin@bloomberg.net

Last Updated: May 12, 2008 10:54 EDT