Global energy company Royal Dutch Shell plc ( RDS.A - Analyst Report ) announced that it will progress with the construction of the carbon capture and storage (CCS) project in the Canadian oil sands play – the first of its kind in the region.

The project – named Quest – is expected to come online in 2015 and is part of the larger Athabasca Oil Sands Project –– a joint venture between Shell Canada (60%), Chevron Corporation ( CVX - Analyst Report ) (20%) and Marathon Oil Corporation ( MRO - Analyst Report ) (20%). The venture will also receive support from the Governments of Canada and Alberta.

The Quest CCS project – worth C$1.35 billion – will see funding of C$745 million coming form the Alberta government from a $2-billion fund set up to support CCS. The Canadian authority will put in almost C$120 million through its Clean Energy Fund, while the remaining C$485 million will be collected from the industry.

Located at the Scotford site, northeast of Edmonton, Alberta, the Quest venture will capture more than 1 million tons of carbon dioxide annually from Shell’s Scotford upgrading process and transport the same via a 50-mile long pipeline to a northern site.

Quest – largely owned, designed and operated by Shell – will be the world’s first commercial-level CCS project targeted to minimize the effects of greenhouse gas in the oil sands. The project will also contribute immensely in expanding and enhancing the domestic energy resource base.

The Hague, Netherlands-based Shell is engaged in oil and gas exploration, production, refining and marketing with operations and assets, worldwide. Shell currently retains a Zacks #3 Rank that translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

The company displays a strong and diversified portfolio of development projects offering attractive long-term opportunities. The group – renowned for its success in bringing some of the largest and technically challenging capital-intensive projects to fruition – is expected to continue improving both the top and bottom lines in the forthcoming days.

However, the company’s high exposure to the downstream business, its major natural gas focus, as well as lofty capital spending, may result in reduced returns going forward.