Shell pulls out of the Arctic

Shell has announced that the company is to stop Arctic oil and gas exploration off the coast of Alaska after disappointing results from a key well. Despite discovering traces of oil and gas at the Burger prospect offshore Alaska they are not sufficient to warrant further exploration, the company said in a statement last month.

The Burger J exploration well, located in Alaska’s Chukchi Sea, approximately 150 miles from Barrow in 150 feet of water, will now be sealed and abandoned in accordance with US regulations.

‘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 US. However, this is a clearly disappointing exploration outcome for this part of the basin,’ said Martin Odum, Director, Shell Upstream Americas.

The company will now cease further exploration activity offshore Alaska for the foreseeable future. This decision reflects both the Burger J well result, the high costs associated with the project, and the challenging and unpredictable regulatory environment in offshore Alaska, Shell said. The company’s Alaskan project was valued at about $3bn on its balance sheet, with a further $1.1bn of future contractual commitments for rigs, ships and other assets.

Shell caused controversy with environmental campaigners when it returned to the Arctic this year having interrupted exploration after its Kulluk drilling rig ran aground following a storm in 2012. Arguing that oil and gas exploration will pollute and damage a natural wilderness largely untouched by human activity and home to populations of whales, walrus and polar bears, environmentalists have claimed victory at this latest announcement.

Greenpeace UK Executive Director John Sauven said: ‘The Save the Arctic movement has exacted a huge reputational price from Shell for its Arctic drilling programme. And as the company went another year without striking oil, that price finally became too high. They’re pulling out. Now President Obama should use his remaining months in office to say that no other oil company will be licenced to drill in the American Arctic.’