"Norway is an energy nation but we also have a strong green movement," said Hans Henrik Ramm, an independent consultant and former senior oil ministry official.

On Wednesday, Norwegian energy group Statoil and Royal Dutch/Shell unveiled plans for the world's biggest project to bury carbon dioxide (CO2) in the seafloor off Norway to help raise oil production at a maturing Shell field.

The scheme involves building a huge 860-megawatt gas-fired power station on the west coast to supply the needed CO2 and quench a thirst for power in mid-Norway by 2010-2012.

The plant at Tjeldbergodden and another on the drawing board would be the first gas-fired plants in Norway, which supplies 15 percent of the gas consumed in Europe and as much as 30 percent of gas used in France but burns no gas to produce power at home.

Business leaders, officials, trade unions and some environmental groups praised the Statoil-Shell plan, though Greenpeace said it would only lead to more oil consumption.

Big questions remain about who will pay for the project which the companies estimate would cost $1.2 billion to $1.5 billion and would need "substantial" state support or be uneconomical.

"NOBODY ASKED THE TREASURY"

"This is extremely popular," said Ramm. "Everyone is jubilant that mid-Norway's power problem will be solved and Norway will look green, and nobody has asked the treasury."

A left-of-centre coalition government that took office last year bowed to pressure from the Socialist Left party and said that gas power plants built in Norway should have CO2 capture from Day 1, overturning an earlier policy that would have let the first few plants be constructed without such technology.

That policy meant opening the government's cheque book to industry. And with the plan announced by Statoil and Shell, the oil industry has challenged the government to pay up.

So far ministers in the Labour-led coalition praised the plan as a bold step, but have been vague about the money.

"The government is positive to contributing but it is too early to go into details now," Oil and Energy Minister Odd Roger Enoksen said. "The project is an early phase."

Ramm said that the government painted itself into a corner and would have to fork out the requested support.

"Statoil and Shell said 'we are going to do it, and we are going to send part of the bill to the state - just like you said you want us to do. Just sign on the dotted line'."

"I am sure this will come together," Ramm said. "The political pressure is enormous and these companies' lobbying power is enormous, and mid-Norway needs the power and no one sees any other way to do it."