Shell, governments agree funding for Canadian CO2 storage project

Shell announced it had signed agreements with the Governments of Alberta and Canada to secure $865 million in funding for its Quest Carbon Capture and Storage (CCS) Project in Canada. The Quest Project will capture and permanently store deep underground more than one million tonnes of CO2 per year from Shell’s Scotford Upgrader near Edmonton, Alberta, which processes heavy oil from the Athabasca oil sands.

“Quest would be the first application of CCS technology for an oil sands upgrading operation,” says John Abbott, Shell’s Executive Vice President of Heavy Oil. “Not only would it allow us to significantly reduce the carbon footprint of our oil sands operation here in Alberta, but it will contribute to the global knowledge that will help to get other CCS projects up and running more quickly.”

Shell aims to be a leader in continuously improving its oil sands environmental performance, through CO2 reduction, improved water management and minimizing the impacts of tailings ponds. A number of innovative technological solutions, including CCS, will be required to achieve that goal.

“CCS is recognized as one of the most promising technologies to reduce greenhouse gas emissions from fossil fuels. To realize that potential, government support in this important demonstration phase is essential. We would like to thank both levels of government for their commitment to progress CCS technology by investing in Quest,” Abbott concluded.

“By continuing to move CCS technology forward, Alberta is demonstrating its ongoing leadership in realizing the commercial-scale deployment of this technology and greening our energy production,” said Alberta Premier Ed Stelmach.

“Canada is a world leader in carbon capture and storage and we are in an excellent position to use this technology on a wide scale,” said the Honourable Joe Oliver, Minister of Natural Resources. “The Government of Canada is committed to supporting innovative clean energy technologies such as the Shell Quest Project which will help to bring high-quality jobs to Alberta while contributing to the responsible development of Canada’s energy resources.”

The signing of the funding agreement was announced today as part of an event marking the earlier start-up of Shell’s 100,000-barrel-per-day expansion of its Athabasca Oil Sands Project (AOSP), bringing total capacity to 255,000 barrels per day. The AOSP includes the Muskeg River Mine, Jackpine Mine and Scotford Upgrader.

Regulatory applications for the Quest Project were submitted in November 2010. The signing of the funding agreements represents another important milestone prior to Shell taking a financial investment decision in 2012, subject to the outcome of the regulatory process and economic feasibility.

With CO2 injection planned for 2015, the Quest Project would join a handful of CCS projects around the world that are injecting CO2 at a commercial scale. Shell is working with governments and other experts globally on both political and technical levels to facilitate the development and wide-scale deployment of CCS and is involved in progressing a number of projects around the world, across a wide range of sectors.

The Quest Project is being advanced on behalf of the AOSP, a joint venture among Shell Canada (60 per cent) Chevron Canada Limited (20 per cent) and Marathon Oil Canada Corporation (20 per cent).

Notes to editors

* According to the International Energy Agency (IEA), CCS is the only technology available to mitigate GHG emissions from large-scale fossil fuel usage, particularly power generation. The mitigation potential through CCS could account for about one-fifth of the total mitigation effort needed by 2050 if projects are started quickly. The IEA has also said that without CCS the cost of reducing emissions will be 70% higher.

* Countries around the world are actively pursuing CCS development. The Global CCS Institute reported that at the end of 2010, 234 active or planned CCS projects have been identified across a wide range of technologies, project types and sectors.

* The Alberta government will invest $745 million in Quest from a $2-billion Carbon Capture and Storage Fund, while the Canadian government is contributing $120 million from its $795-million Clean Energy Fund. Shell signed Letters of Intent for Quest funding with provincial and federal governments in October 2009.

* The funding is phased over 15 years (including the development, construction and 10-years of operations of the Project) and is tied to Shell achieving established performance targets. It also includes extensive knowledge-sharing commitments with both levels of government to benefit future CO2 storage projects.

* Shell is exploring or implementing a number of other technology solutions to mitigate oil sands environmental impacts including: starting up a commercial-scale Atmospheric Fines Drying field demonstration project designed to test technology to speed up the pace at which tailings can be reclaimed and working collaboratively with other oil sands operators to advance technology to manage tailings.

* In 2011, Shell celebrated its 100th year of operations in Canada and 100 years of innovation. Shell was the first company in Canada to:
o Remove the lead from gasoline
o Introduce engine oil lubricants
o Build tunnel car washes
o Open self-serve gas stations
o Produce Ultra Low Sulphur Diesel fuel
o Offer pay-at-the-pump technology

* Shell is involved in a number of CCS research and demonstration projects worldwide:
o With partners* and government support it is helping to develop an advanced CO2 test centre at Mongstad, Norway.
o It is involved in the Gorgon LNG project (Shell interest 25%)**, which will include the world’s largest CCS project. The project will capture nearly 3.8 million tonnes a year of CO2 produced with the natural gas, and store it more than 2 km underground. The CCS project has received A$60 million in financial support from the Australian government.
o In March 2010, as part of the UK government’s CCS competition, the ScottishPower led CCS Consortium, with National Grid and Shell, was awarded funding to develop detailed designs for a CCS project at Longannet power station in Fife, Scotland. This could be the world’s first full-scale CCS project on a power plant, with Shell transporting the CO2 offshore and storing it in a depleted gas reservoir in the North Sea. It is also working with Scottish and Southern Energy (SSE) to explore the possibility of storing CO2 from SSE’s gas-fired Peterhead Power Station.

* Gassnova SF, A/S Norske Shell and Statoil ASA
** Chevron is leading the Gorgon project, with Shell and ExxonMobil as partners.



Royal Dutch Shell plc
Royal Dutch Shell plc is incorporated in England and Wales, has its headquarters in The Hague and is listed on the London, Amsterdam, and New York stock exchanges. Shell companies have operations in more than 90 countries and territories with businesses including oil and gas exploration and production; production and marketing of liquefied natural gas and gas to liquids; manufacturing, marketing and shipping of oil products and chemicals and renewable energy projects. For further information, visit www.shell.com.



Shell Canada Ltd
Shell has been operating in Canada since 1911 and employs approximately 8,000 people across the country. A leading manufacturer, distributor and marketer of refined petroleum products, Shell produces natural gas, natural gas liquids and bitumen, and is Canada’s largest producer of sulphur. Shell is one of Canada’s oil sands developers and operates the Athabasca Oil Sands Projects on behalf of the joint venture partners.

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