Environmental groups oppose drilling in the Arctic due to the vulnerability of animals already struggling to survive because of melting sea ice, as well as risk that a spill could pose to the region.
The announcement represents a big change of heart from Shell, which was counting on offshore drilling in Alaska to help it drive revenue.
Burning the U.S. Arctic’s oil reserves, estimated by the U.S. Geological Survey to exceed 26 billion barrels of conventionally recoverable oil, would add to climate warming and further delay a transition away from fossil fuels.
The company reached a depth of 6,800 feet with the exploratory well drilling in about 150 feet of water.
“Arctic exploration has been a clear casualty of the oil price slump”, said Peter Kiernan, oil and gas analyst at the Economist Intelligence Unit.
The unsuccessful drilling campaign is Shell’s second major setback in the area after it interrupted exploration there for three years in 2012 when an enormous drilling rig broke free and grounded.
“Obviously, we’re disappointed”, said Paul Queary, spokesman for Foss Maritime, which had a contract with Shell to use Terminal 5.
“Typically when you bring a rig and spend that much money, you’ll drill multiple wells, and to be able to drill just the one, that was unfortunate”, he said.
Queary said Foss is waiting to hear whether Shell will use Terminal 5 further.
“We need to get a few oil in the pipeline, and we need to do it as quickly as possible and in the safest method possible”, Walker said. Foss expects a hearing examiner to rule on the dispute in the next week, Queary said.
Oregon Sen. Jeff Merkley countered it’s tremendous news, and a credit to the people who made clear that Arctic drilling in unacceptable.
Johnston believes demonstrations in Seattle, including an Elliott Bay kayak blockage in May, were a factor in Shell’s decision to abandon its Arctic endeavors. Now Shell has announced its Arctic exit, the bear will be transported to Paris where the nations of the world will soon gather to negotiate a deal on climate change.
“Oil prices are going to go up”, he said in a conference call on Monday. If they had, this might have taken longer.
But despite Shell’s reversal, political and industrial winds are making energy developers remain focused on the frozen North, particularly as it becomes less frozen. Let there be no doubt: protest does make a difference.
Noting the President’s trip, Susan Murray of the green group Oceana observed: “Shell’s announcement today allows the government to take a step back and apply careful planning, precaution and science to forge a sustainable future for the Arctic”. “So, I think in the short-term, it’s loss of jobs, it’s loss of investment”.
Sen. Lisa Murkowski says news that Shell is pulling out of the Alaska Arctic hit her hard.
“Big oil has sustained an unmitigated defeat”, said John Sauven, the executive director for Greenpeace UK. It did not disclose the size of the charge but said the accounting value of the project is $3 billion, with another $1.1 billion in commitments to contractors.
Shell’s London-listed shares moved up in early trading but later fell more than 2.8 percent.
A global supply glut has pushed oil prices far below levels needed to support high-cost oil projects like Shell’s effort in the Arctic. As a result, the modern energy industry redefined what projects it considered to be possible and economically viable, particularly during the years of higher prices. In fact, it appeared as if energy companies for the last decade had determined that the public relations costs of drilling in the Arctic outweighed the benefits – a possible win for modern environmentalist action.