By KJETIL MALKENES HOVLAND
OSLO -- Norway is shutting down the Statoil-operated Mongstad full-scale CO2 capture project, Oil Minister Ola Borten Moe said Friday, ending the prestigious environmental project that outgoing Prime Minister Jens Stoltenberg branded Norway's "moon landing" in 2007.
The International Energy Agency -- the energy watchdog of the Organization of Economic Cooperation and Development -- has said that CO2 capture and storage from power plants fired by oil, gas and coal will play a vital role in worldwide efforts to limit global warming, contributing to about 20% of required emissions reductions in 2050.
The Mongstad full-scale project was meant to capture CO2 from the nearby gas-fired power plant and refinery, and the government had estimated the planning to cost NOK3 billion. The project is led by Statoil, but the government pays all the costs.
The project has been both challenging and costly, and the risks are now seen as too big to go through with it, the government said.
"We must have a project we can stand for, so we can show that this [technology] is good," Mr. Moe told the Wall Street Journal in an interview. "When our assessment is that Mongstad isn't such a project, it's the right thing to do what we are now doing, taking the consequences."
The uncertainty about the CO2 capture project also increased because the Western European refinery business is struggling, the government said. This has hurt the margins at Statoil's Mongstad refinery, one of the project's CO2 sources.
Statoil said it has no plans to shut down the refinery, which ran a surplus in 2012 for the first time in years, and was going through a cost savings program.
"The margins in the refinery market are challenging," Statoil spokesman Oystein Johannessen told the Wall Street Journal.
Earlier this week, the Norwegian Office of the Auditor General slammed the lack of government control over the costs of the Mongstad capture project, which includes a full-scale CO2 capture project and a test center where companies Aker Clean Carbon and Alstom are testing different CO2 capture technologies.
The government said it has spent a total of NOK7.2 billion on the project, but will continue to fund the test center in coming years. The full-scale capture project ends in 2014.
"The government has spent NOK1.2 billion on full-scale capture on Mongstad alone," Mr. Moe told an Oslo press conference, adding that he still has the ambition to establish a full-scale CO2 capture project by the end of 2020, giving no more details.
"This is some of the worst political incompetence and [lack of] will to control an oil company I've seen," said Frederic Hauge of the Bellona foundation, an environmental organization that has been a key advocate for CO2 capture technology. "I'm angry."
The reason the government allowed Danish company Dong Energy to build the Mongstad gas power plant, in operation since 2010, was that it had plans to capture the CO2 emissions and store them underground. Nature and Youth, another environmental organization, claimed that Statoil was never really interested in the CO2 capture project.
"This should be the big moon landing and was the big environmental issue in 2005, but now it will just be a pollution bomb that will spew out CO2 for decades," said Silje Lundberg, leader of Nature and Youth.
Statoil said it hasn't been able to solve the technical challenges with installing a huge, complex capture plant at a refinery and gas heat and power plant in full operation.
"We've had a binding deal, which we have taken most seriously. We've worked dedicated and hard," said Statoil's Mr. Johannesen, adding that the project "has been big and complex and has met challenges."
Mr. Stoltenberg, who lost last week's national elections to a center-right coalition headed by Conservative Erna Solberg, was on a plane and wasn't immediately available for comment.
Dow Jones Newswires