The CO2 capture and storage project is near Warrnambool in southwestern Victoria. It was developed by the Cooperative Research Centre for Greenhouse Gas Technologies (CO2CRC) over 10 years.

The project involves compressing and transporting 100,000 tonnes of CO2 and then sequestering it in a depleted natural gas reservoir two kilometres below the Earth's surface. The CO2 will be injected over one to two years.

"The success of this program will confirm the CCS technology as a viable option to reduce the carbon footprint of coal," Federal Energy Minister Martin Ferguson said during the opening of the plant.

"The Australian Government recognises there is no single solution to reducing our carbon footprint which is why we are supporting research and development of a range of options including renewables and gas, greater energy efficiency, demand management, and of course, carbon capture and storage."

CO2CRC chief scientist Professor John Kaldi said all the economic modelling for the project was conducted by researchers in NSW. This team of researchers is now working with the NSW Department of Primary Industries in conducting an assessment of carbon dioxide storage sites in NSW.

"Our research effort currently is on the Gunnedah and Sydney (sedimentary) basins. Very little is known as this stage about NSW storage capacity. A more concentrated and in-depth research effort is needed to identify these sites," Professor Kaldi said.

"Geosequestration technology is essentially an offshoot of the petroleum and gas industry so more is known about storage sites in states with a high level of oil and gas industry activity."