Royal Dutch Shell is going ahead with the first carbon capture and storage project for an oilsands operation in Canada, the international energy giant announced Wednesday.

The "flagship" Quest project will be built on behalf of the Athabasca Oil Sands Project's joint venture owners, which include Shell, Chevron and Marathon Oil. It also has the support of the Canadian and Alberta governments.

"CCS is critical to meeting the huge projected increase in global energy demand while reducing carbon dioxide emissions," Shell CEO Peter Voser said in remarks accompanying the announcement.

"If you want to achieve climate change goals, CCS has to be part of the solution. We are helping to advance CCS technology on a number of fronts around the world, but Quest will be our flagship project."

Voser described the Alberta oilsands as a secure and reliable source of energy and an economic engine which drives employment, training and business development across Canada and beyond.

"We will need all sources of energy to meet world demand in the coming decades," Voser noted. "Lower CO2 energy sources will grow, but even by 2050 at least 65 per cent of our energy will still come from fossil fuels. So CCS will be important to manage climate impacts."

The Athabasca Oil Sands project produces bitumen, which is piped to Shell's Scotford upgrader near Edmonton.

From late 2015, Quest will capture and store deep underground more than one million tonnes a year of CO2 produced in bitumen processing. Quest will reduce direct emissions from the Scotford upgrader by up to 35 per cent — the equivalent of taking 175,000 North American cars off the road annually, Shell said.

Government investment

John Abbott, Shell executive vice-president, heavy oil, said the knowledge Quest provides will help enable "much wider and more cost-effective application of CCS through the energy industry and other sectors in years to come."

The Alberta government plans to invest $745 million in Quest from a $2-billion fund to support CCS, while Ottawa will provide $120 million through its Clean Energy Fund.

Quest is the world's first commercial-scale CCS project to tackle carbon emissions in the oilsands, and the first CCS project in which Shell will hold majority ownership and act as designer, builder and operator.

It will also form the core of Shell's CCS research program and help develop its CO2 capture technology.

Shell has received the necessary federal and provincial regulatory approvals for Quest.

Construction has begun and will employ an average of about 400 skilled trades workers over roughly 30 months, peaking at about 700.

The captured CO2 from the Scotford upgrader will be transported via an 80-kilometre underground pipeline to a storage site north of Scotford. There it will be injected more than two kilometres underground into a porous rock formation called the Basal Cambrian Sands, located beneath layers of impermeable rock.