Norwegian major Statoil and oil giant Shell have signed an agreement to develop the world’s largest carbon capture and storage project. The carbon dioxide will be used for enhanced offshore oil recovery, following which it will be stored underground in the exhausted oilfield.

The project consists of a gas-fired power plant and methanol production facility at Tjeldbergodden in Mid-Norway. Carbon dioxide emissions from the plant will be captured and delivered for reinjection to the Draugen and Heidrun offshore oil and gas fields to the tune of 2 – 2.5mn tonnes annually. Power from the plant will also be used for the offshore fields, enabling near zero CO2 and nitrogen oxide (Nox) emissions from these installations, and a nearby gas terminal.

The $1.2 billion-1. 5billion project, which depends on substantial government funding and involvement, will be phased in during 2010-2012, the companies said.