Shell calls off Alaska exploration

After exploratory drilling yielded disappointing results, Royal Dutch Shell announced Monday that it would abandon its efforts offshore Alaska “for the foreseeable future.”

In a statement the company said it has found “indications of oil and gas in the Burger J well, but these are not sufficient to warrant further exploration in the Burger prospect.”

The announcement comes 10 days after Shell CEO Ben van Beurden told the BBC’s Kamal Ahmed that abandonment was a possibility after this season.

“Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.,” said Marvin Odum, director, Shell Upstream Americas. “However, this is a clearly disappointing exploration outcome for this part of the basin.”

Shell cited the high costs and the “challenging and unpredictable federal regulatory environment in offshore Alaska” in its decision to abandon the project. The Alaska Dispatch reported that Shell has spent more than $7 billion on Arctic offshore exploration, including $2.1 billion for leases in Alaska’s Chukchi Sea, where the company holds a 100% working interest in 275 Outer Continental Shelf blocks. The company said it expected to take financial charges as a result of the announcement.

Shell’s road to Arctic exploration was never smooth — progress was delayed earlier this summer when a key support vessel required repairs, and a similar attempt in 2012 saw one of the company’s drilling rigs grounded in rough weather. In August, Shell was granted permission to modify its Application for Permit to Drill into potential oil-bearing zones in the well at Burger J, which was drilled to a total depth of 6,800’. Throughout, Shell has met with vehement opposition from environmental activists who opposed their plans.

“That was a huge disappointment not only for Shell but also for the industry,” Fadel Gheit, an oil analyst for Oppenheimer & Co., told the Washington Post. “This has been a saga. Bad timing, bad planning, bad circumstances. It was not meant to be. Everything that could go wrong went wrong.”

The company is now left to demobilize people and equipment from the Chukchi Sea. The well at Burger J. will be sealed and abandoned in accordance with U.S. regulations.

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Ashley Herriman

Ashley Herriman is WorkBoat's online editor.

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