03-03-09 Santos, Australia's third- biggest oil and gas producer, suspended its Moomba carbon-storage project, a victim of weak government support and plunging prices for permits to release greenhouse gases.
Credit prices to emit carbon dioxide into the atmosphere are too low to underpin the investment planned for central Australia's Cooper Basin, Matthew Doman, a spokesman at Adelaide-based Santos said. Santos has estimated the project would cost more than A$ 700 mm ($ 450 mm).

Governments and energy companies worldwide are revising plans to build underground storage for carbon dioxide, the main gas blamed for global warming, because stalled economies and lower permit prices are making them less attractive.
"It just doesn't make sense for them to go ahead with these prices," said Gary Cox, vice president of commodities in Australia for Newedge Australia in Sydney. Cox's last trade of domestic allowances, covering 50,000 tons of carbon dioxide for delivery in 2011, was at A$ 21 a ton, compared with prices as high as A$ 24.75 last year, he said.

In Europe, European Union emission permits for delivery in December have dropped about two-thirds from the EUR 30.53 ($ 38.47) a ton price reached on July 1 last year. Carbon-capture projects become viable when industrial pollution costs about $ 50 (EUR 40) a ton, more than three times the current over-the-counter price in Australia, London School of Economics professor Nicholas Stern said in January.
Santos has been talking to governments in Australia about the Moomba project "for some time, and whilst we have received strong interest, we haven't had strong or direct support for it," Doman said.

A low carbon price makes it more profitable for coal-fired power plants to simply buy permits to cover future emissions rather than invest in projects to pump CO2 underground. Some energy companies, including StatoilHydro, Norway's largest oil and gas company, are continuing to pursue carbon- capture projects. Stavanger-based Statoil expects a full-scale storage facility at the country's Mongstad energy project to cost about NOK 25 bn ($ 3.5 bn).
A decision on whether to build the plant will likely be made within two to three years, company spokeswoman Catherine Torp said Feb. 12. Construction would take about four years, she estimated.

Santos said in June 2007 it proposed to the federal government to pump CO2 into its depleted fields at the Moomba site, provided pipelines could be built to coal-fired power plants located in the east that needed to dispose of the waste gas to comply with emissions targets. Slower economic growth, which cuts factory output, and a lower oil price depress carbon-permit prices.
"There's a very real possibility that new carbon projects or CDMs will be very difficult" to complete, said Cox.

CDMs, emission-reduction projects supervised by the United Nations under its Clean Development Mechanism, are built in developing countries with financing by energy companies, carbon investors and banks, including Enel of Italy, Japan's Mitsubishi and Goldman Sachs Group of the US.
The decision makes Santos's Moomba project the latest low-emissions energy or carbon-storage project to be delayed or scrapped in Australia even as Resources Minister Martin Ferguson promotes their development to cut greenhouse-gas pollution. Royal Dutch Shell and Anglo American in December said they delayed plans to develop a A$ 5 bn project in Australia to convert coal into clean fuels, citing higher costs.

"The economic and financial factors are not in place at the moment to justify the heavy investment that it would require," Doman said. "We're going to focus on what we do best, and that's supply gas and particularly look to increase the provision of gas for power generation."
He said the "most immediate contribution we can make to lightening the carbon footprint" is to promote the use of natural gas, which emits about half as much greenhouse gas as coal when burned.

Santos and General Electric in 2007 cancelled a low-emissions venture inQueensland, while BP and Rio Tinto Group in May dropped a plan to build a carbon-capture power plant in Western Australia.