The project will use a power station in northern Scotland and will transport carbon dioxide from the process to an oil reservoir in the North Sea where it can be safely stored.

BP said the project is currently undergoing an economic feasibility study that is expected to be complete in late-2006, with operation starting in 2009 if approval is given.

“This is an important and unique project configured at a scale that can offer significant progress in the provision of cleaner energy and the reduction of carbon dioxide emissions,” said BP chief executive Lord Browne.

“For example, if applied to just 5% of the new electricity-generating capacity that the world is projected to require by 2050, such schemes would have the potential to reduce global carbon dioxide emissions by around 1 billion tons a year – a material step in the challenge the world faces.”

The project would create hydrogen from natural gas, producing carbon dioxide in the process. With the carbon dioxide safely sequestered and used to increase oil recovery from a North Sea reservoir, the plant would be able to use the hydrogen gas to power a 350MW station with zero carbon dioxide emissions.

According to BP, when fully operational the plant is projected to be able to power around 250,000 homes while storing over 1.3 million tons of carbon dioxide.