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Shell, Drax Named Preferred Bidders for $1.5 Billion CCS Funding

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March 20 (Bloomberg) -- The U.K. selected two projects led by companies including Royal Dutch Shell Plc and Drax Group Plc as preferred bidders for 1 billion pounds ($1.5 billion) of funding for carbon capture and storage.

The Peterhead project in Aberdeenshire, Scotland by Shell and SSE Plc was selected along with the White Rose venture in northern England by Drax, Alstom SA and BOC Group Ltd., according to a statement on the Department of Energy and Climate Change website. The projects were chosen from among eight original bids last year.

The government wants to spur a carbon capture industry by the 2020s by supporting commercial operations that bury emissions under the seabed. The plans appeared to falter after British CCS projects missed out on a first round of European funding and a first attempt at the 1 billion-pound contest failed in 2011.

“Today’s announcement moves us a significant step closer to a carbon capture and storage industry,” Energy Secretary Ed Davey said in the statement.

DECC will make an investment decision to build “up to two” projects in early 2015, with facilities slated for operation from 2016, according to the statement. The department plans to agree on contracts to carry out early engineering and design studies for the projects by summer.

Capture Power Ltd., the CCS venture comprising Drax, Alstom and BOC, said in a separate statement it will get government funding for preliminary engineering work for carbon capture at a coal-fired power station at the Drax site near Selby in northern England.

Shell and SSE plan to fit equipment to trap 90 percent of the emissions from the Peterhead power station in what would be the world’s first commercial CCS demonstration at a gas-fired plant, for storage in the depleted Goldeneye gas reservoir offshore Scotland.

“The government’s decision sends a strong signal of support for the role of gas in meeting the rise in global energy demand,” Ed Daniels, chairman at Shell U.K., said in a separate statement.

To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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