Using CO2 to prolong UK North Sea oil too costly
The UK hopes to combine the two goals by using carbon dioxide (CO2) to pump extra oil and then keeping the gas underground in depleted reservoirs. The increased oil recovery could partially offset the cost of storing the carbon dioxide.
"This study has confirmed that CO2-based enhanced oil recovery is not currently an attractive investment to North Sea oil producers," the UK's Department of Trade and Industry said in a statement.
CO2 gas can be injected into an oil reservoir to reduce the viscosity of the crude oil, making it flow better and so become easier and cheaper to extract.
The UK government said last year that it would set up a plan to implement CO2-based enhanced oil recovery projects, one of several efforts to slow the decline of UK North Sea oil and gas production.
It would also help the country reduce levels of CO2, which is blamed for contributing towards global warming.
Britain is committed to a 20 percent reduction on 1990's CO2 levels by 2010, which exceeds its target under the United Nations Kyoto Protocol on climate change.
"The level of support needed to bridge the economic gap and encourage investment in enhanced oil recovery is uncertain," the study concluded. "The main approach available to government would be to adjust the tax system applying to oil production in the UK North Sea to reduce any barriers."
The study consulted leading oil producers such as BP (BP.L: Quote, Profile, Research) , ExxonMobil (XOM.N: Quote, Profile, Research) and Total (TOTF.PA: Quote, Profile, Research) , as well as power generators including Powergen and Scottish Power (SPW.L: Quote, Profile, Research) .
Norwegian oil company Statoil (STL.OL: Quote, Profile, Research) already has the world's first commercial store of CO2 in sandstone 1,000 metres (3,000 feet) beneath the Norwegian continental shelf.
The European Union and the United States also back so-called "carbon sequestration" techniques to fight global warming, having signed a pact last year to undertake research. The U.S. is the world's biggest emitter of carbon dioxide but pulled out of the Kyoto deal, saying it would hurt economic growth.
Many environmentalists are sceptical of carbon sequestration, saying it will allow the continued use of fossil fuels rather than a reduction in energy consumption and a switch to renewable energies such as wind and solar power. CO2 is produced from burning fossil fuels and traps heat in the atmosphere.