The Canadian and Alberta governments have promised C$865 million ($823 million) to help oil major Royal Dutch Shell Plc develop carbon capture and storage at its oil sands processing plant in an effort to help meet goals to curb global warming.
In a letter of intent, Alberta has signaled it will contribute C$745 million and Ottawa will kick in C$120 million for the Quest project at Shell's Scotford upgrader near Edmonton. The overall cost of the project was not immediately disclosed.
Shell's project was picked out of three that had made the short-list for public funding. The governments had also weighed proposals from groups including Epcor and Enbridge Inc as well as Enhance Energy and Northwest Upgrading.
Alberta is known for its vast oil sands, which represent the largest source of crude outside the Middle East. But developing and producing the tar-like crude is carbon-intensive and environmental groups have launched major campaigns to warn of the developments' environmental impact on the fight against global warming.
Shell, with partners Chevron Corp and Marathon Oil Corp, aim to capture 1.1 megatonnes of greenhouse gas emissions annually, representing a cut of about 40 percent of those emissions from the upgrading plant.
In total, Alberta, which expects massive expansion of its oil sands industry, has set aside C$2 billion to invest in development of carbon capture schemes as it aims to reduce emissions by about 14 percent from 2005 levels by 2050.
Canada is aiming for an overall 20 percent reduction from 2006 levels by 2020.
(Reporting by Jeffrey Jones; editing by Rob Wilson)