An application to build a unique, clean electricity power plant in Aberdeenshire, capable of powering 720,000 homes, has been approved by Ministers.

The decarbonised fuels project at Peterhead would be the first industrial scale project in the world to combine three separate technologies - hydrogen production, power generation and carbon capture and storage - to generate electricity using hydrogen from natural gas.

The hydrogen would be used to generate low carbon electricity, with the residual carbon dioxide then compressed and pumped back 4,000 metres below the seabed of the North Sea, to recover oil from the Miller oil field.

While BP had announced they were not pursuing this project, Ministers wished to consider the application so that, should a solution to BP's other concerns be found, they knew the result of their application under the Electricity Act.

Energy Minister Jim Mather said: "Carbon capture technology has the potential to transform the way we generate power. In significantly reducing carbon emissions, this project could become an icon for clean energy production throughout the world. "The proposal to build the carbon capture plant in Peterhead would put Scotland at the forefront of that clean electricity revolution and leading the fight against climate change.

"The reasons behind BP's recent announcement on this project are well known. I share their frustration with the DTI about the length of time it has taken to move forward. The First Minister has written to Alistair Darling to express his disappointment and to ask what more can be done.

"This Government is determined to play its part and is doing everything possible to bring this important project to fruition. I believe BP will look at this project further. Together, industry and government can make Scotland the world leader in new energy technology." An application was submitted to Scottish Ministers on August 1, 2006 for a 550 Megawatt Decarbonised Fuel power generation plant, adjacent to the existing Peterhead power station, in Aberdeenshire. Ministers have approved the construction and operation of the plant under Section 36 of the Electricity Act 1989.

The proposals are part of a wider DF1 project (decarbonised fuels project) which combines three separate technologies - hydrogen production, power generation and carbon capture and storage - in one project. The carbon dioxide would be compressed and dehydrated at the new power station, and transmitted through the existing Miller gas pipeline to the St Fergus gas processing plant, from where the carbon dioxide would be transported by pipeline to the Miller oil/gas field for injection 4 km below the seabed.

The injection of carbon dioxide will facilitate enhanced oil recovery and the applicant anticipates that this will extend the life of the Miller oil field by up to 20 years, allowing an estimated 57 million barrels of oil, which is not currently recoverable, to be produced.