Rio Tinto, the world's largest mining group, pulls out of a joint venture with BP to develop a US$2 billion (Dh7.34bn) clean-energy project in Abu Dhabi.
BP buys Rio stake in Abu Dhabi energy venture
Rio Tinto, the world's largest mining group, has pulled out of a joint venture with BP to develop a US$2 billion (Dh7.34bn) clean-energy project in Abu Dhabi. The hydrogen power development also involved the Abu Dhabi Government's alternative energy company Masdar and the Abu Dhabi National Oil Company (ADNOC).
It was designed to be part of a scheme to develop a carbon capture and storage (CCS) network for Abu Dhabi, using industrial carbon dioxide emissions to enhance the productivity of oilfields before storing the waste gas permanently underground. "The Abu Dhabi project is a groundbreaking and important project based on gas feedstock, but Rio Tinto prefers to focus on projects with solid fuel feedstocks, which are better aligned with our other businesses," said Preston Chiaro, the group executive for technology and innovation at Rio Tinto.
The Australian firm announced the sale of its 50 per cent interest in Hydrogen Energy International to BP for an undisclosed amount, leaving BP as the sole shareholder of the enterprise. The Abu Dhabi project, a joint venture with Masdar, was Hydrogen Energy's main asset, after two earlier projects in Scotland and Australia fell through. The generating plant, due for completion in 2013, would have about 400 megawatts of capacity. About 1.7 million tonnes a year of carbon emissions would be captured from a related facility producing hydrogen from natural gas.
Through the affiliated joint venture Hydrogen Energy California, which was recently spun off from the broader enterprise, BP and Rio Tinto will continue to pursue another integrated hydrogen power and CCS project in Kern County, California. That development would use coal or coke from petroleum refining as a feedstock. Hydrogen can be produced from solid carbon fuels by treating them with steam in a "gasification" process.
Mr Chiaro described the California project as a "strategic fit" for Rio Tinto. The development, which should be completed in 2015, has secured substantial government funding. Lewis Gillies, the head of carbon management for BP, said in an interview last week that the Kern County power project was receiving $30 million in financial support from the California Clean Energy Fund, which the state launched last year, and a further $300m from the US federal government.
Support for CCS has become a priority for the Obama administration, which is seeking to boost employment in the emerging clean energy sector while appeasing the powerful US coal lobby. Yesterday, the US energy department announced the awarding of $979m in federal stimulus funds to support CCS projects at three coal-fired power stations. "By harnessing the power of science and technology we can reduce carbon emissions and create new clean energy jobs," said Steven Chu, the US energy secretary.
BP said yesterday that Rio Tinto's decision would not delay the Abu Dhabi project. "It's not going to make any difference to our plans in Abu Dhabi or California," a company spokesman told Bloomberg. Last week, Mr Gillies said the Abu Dhabi development had made good progress this year with the completion last summer of front-end engineering and design. The partners planned to seek bids within the next few months for the main engineering, production and construction contract, and a final investment decision would be made next year, he said.
Masdar officials were unavailable yesterday. The company had previously indicated the financial viability of the hydrogen power joint venture could hinge on it becoming eligible for carbon credits under the UN Clean Energy Development Mechanism. So far, CCS developments have been excluded from the programme, which seeks to make market-based financing available to projects in developing countries that reduce greenhouse gas emissions.
Some environmentalists oppose CCS, arguing it would divert funding from renewable energy projects while prolonging dependence on fossil fuels. Supporters say it is needed as a bridging technology to fight global warming. email@example.com