Shell abandons exploration in Alaskan Arctic

Shell is pulling out of oil exploration off the coast of Alaska “for the foreseeable future”, after finding insufficient oil and gas quantities in one of its basins, and the impact of high costs associated with further exploration.

Shell has invested around $7bn on Arctic offshore development in the Chukchi and Beaufort seas. But According to a statement yesterday, the 6800 ft Burger J exploration well, located 150 ft beneath Alaska’s Chukchi Sea, found quantities “not sufficient to warrant further exploration in the Burger prospect.”

“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,” commented Marvin Odum, director, Shell Upstream Americas.

The company has suffered huge resistance from environmental groups over Arctic drilling, as well as incentives to drill have inevitably decreasing as a result of the collapse in oil prices. Shell cited as well “the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska.”

Shell expects to take a financial hit from the move to stop exploration in Alaska. The company said the balance sheet carrying value of Alaska fields were $3bn with about $1.1bn in future commitments and it would provide an update on financial charges related to the stopping of exploration in its Q3 2015 results.

The news will put further pressure on offshore industry already blighted by low oil prices, for which exploration in the Arctic regions was expected to be a new revenue stream. 

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