Shell Calls It Quits on Alaska Drilling

“The entire episode has been a very costly error for the company both financially and reputationally”, said analysts at Deutsche Bank, who estimate the Shell’s Arctic exploration project could cost the company about $9 billion. The balance sheet value of Shell’s Alaska position is approximately $3.bn, and a further $1.1bn stems from contractual commitments.

Backed by a 28-vessel flotilla, drillers found indications of oil and gas but not in sufficient quantities to warrant more exploration.

But environmental groups oppose drilling in the Arctic owing to the vulnerability of animals already struggling to survive because of melting sea ice, as well as the risk that a spill could pose to the region.

The botched prospecting is the second setback after Shell downed tools for three years in 2012 when a massive drilling rig tumbled and grounded.

The decision, announced this morning, follows a “disappointing” result at one of its exploratory wells and reflects the low price of oil squeezing budgets at oil companies all over the world.

The oil giant has spent around $7bn on offshore Arctic development in the Chucki and Beaufort Seas since 2007.

In addition to the disappointing results from the well, Shell have said the high costs and “challenging and unpredictable” regulatory situation involved with the drilling have also played a part in the choice to halt the project. And by turning its back on the Chukchi Sea, the oil major will report a huge write-down in Tuesday’s third-quarter results. “Whether they took to kayaks or canoes, rappelled from bridges, or spread the news in their own communities, millions of people around the world have taken action against Arctic drilling”. Greenpeace also successfully lobbied for toymaker Lego to end its 50-plus year sponsorship with Shell through a viral video depicting the Arctic, made from Lego, being covered in oil.

In a statement, the group said it still thought the Arctic region would be significant and that it was putting its operations on hold only for the “foreseeable future”. “Here’s hoping Shell leaves the Arctic forever”. “If the oil price rises again and the well becomes economic, then it can try again”. They’re pulling out.

In August of this year, Shell received permission from the US Government to drill in the Arctic Ocean for the first time since 2012.