By Sonali Paul
MELBOURNE (Reuters) - Australia's dormant carbon capture and storage projects may gain some momentum after BP Plc and Santos said they would join up on a pending site as world's largest coal and liquefied natural gas (LNG) exporting country steps up its climate change fight.
Australia's conservative government is working on policies to develop carbon capture and storage (CCS), projects where carbon dioxide (CO2) is reinjected underground out of the atmosphere, to meet its Paris Climate Accord commitments to cut carbon emissions.
Santos, Australia's second-largest independent gas producer, has begun engineering studies on a CCS project in the Cooper Basin in central Australia which would inject 1.7 million tonnes a year of CO2 into a former gas reservoir.
"With the world demanding more hydrocarbons for at least the next two decades, any serious response to climate change must include pathways to make these fuels cleaner," Santos Ltd (AX:STO) Chief Executive Kevin Gallagher said in a statement on Wednesday.
The Cooper Basin project could eventually be expanded to inject 20 million tonnes a year. That would be five times bigger than Australia's only operating CCS project, a A$2 billion (1 billion pounds) site at the Gorgon LNG plant off Western Australia operated by Chevron Corp (N:CVX), also the world's biggest commercial CCS site.
BP (L:BP) on Wednesday committed to invest A$20 million in Santos' project.
"We believe CCS has an important role to play in meeting the objectives of the Paris Agreement," BP's Managing Director Exploration and Production Australia Emil Ismayilov said in a statement with Santos on the non-binding agreement.
The two companies announced their agreement ahead of a CCS policy forum in Canberra led by the private CO2CRC, an organisation originally set up under a government research program.
Santos said last month it could make a final investment decision on the Cooper Basin project by the end of 2020 but would only go ahead "subject to the required Government policy being in place".
Another CCS project is being run by coal miner Glencore Plc (L:GLEN) in the state of Queensland, which could also reach a final investment decision later this year.
A third project, already being supported by the Australian government, is a Japanese-backed plan to produce hydrogen from brown coal, with the CO2 stored under the Bass Strait.
Policies sought by CO2CRC include tax credits for storing and using CO2 and carbon credits for stored CO2 which could be sold in the government's Emissions Reduction Fund program.
"There's got to be an economic value attached to sequestering CO2. If you change that dynamic, you change the commercial conditions, then you'll find more projects able to be justified," CO2CRC Chief Executive David Byers told Reuters.
The group also wants the government to allow its Clean Energy Finance Corp to finance CCS.
In a speech last week, Energy and Emissions Reduction Minister Angus Taylor said he is working on a "technology roadmap" to move government investments away from wind and solar to hydrogen and CCS.
He said the aim would be to advance technologies to full commerciality as fast as possible, "without massive government subsidies once full scale deployment is viable."
Green groups on Wednesday urged the government to rule out CCS subsidies.
"Carbon capture and storage is nothing more than a pipe dream of the coal and gas lobby designed to divert money away from affordable, reliable and proven renewable energy technology," Lucy Manne, chief executive of anti-fossil fuel group 350 Australia, said in a statement.
($1 = 1.5135 Australian dollars)