Shell to halt Arctic exploration after test drilling yields ‘disappointing

Environmental groups had vociferously opposed Shell’s Arctic drilling bid, as well as the Obama administration’s granting of a drilling permit to the company this spring.

“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 deciding factor to relinquish all drilling operations in the Arctic came after the results from the Arctic Burger J exploration well found insufficient amounts of oil and gas that would not be financially significant to pursue.

When Shell paid $2.1 billion for a 10-year lease in Alaska’s Chukchi Sea back in 2008, oil was priced around $140 a barrel.

Given that Shell cited, among other reasons, “the challenging and unpredictable federal regulatory environment” in deciding to end drilling in the Alaska Arctic for the foreseeable future, Rock said the regulatory environment has proven to be a burden to development.

Shell has invested more than $7 billion in seven years of exploring the area, which was thought to have more than 4 billion barrels of oil. But worst of all, Shell drilled just two of its five planned exploratory holes, and those only to a partial depth. While none of these suits has yet put a permanent stop to the drilling, the ongoing litigation delayed Shell’s ability to explore the area until this summer. “They had a budget of billions, we had a movement of millions”.

“The loss for Canada is we really could have learned something from the Shell operation about how to better operate in the Arctic waters”, he said.

“Big Oil has sustained an unmitigated defeat”, Greenpeace United Kingdom Executive Director John Sauven said by email.

Environmentalists cheered the surprise news, claiming victory after years of marches, blockades and chants of “Shell No!”

In an interview earlier this month, Shell USA President Marvin Odum said the company looks at projected prices at least a decade out.

“There was always the knowledge with most people that this may work out for them-and it might not”, she said.

Once the Fennica was fixed, Shell was delayed from leaving Portland for much of a day by Greenpeace activists who rappelled from a bridge to block its path. The vessel eventually threaded between protesters dangling from ropes only a few dozen feet away.

Shell, whose share price has fallen by around a third over the past year, is also in the middle of an expensive takeover of British-based gas exploration company BG Group.

Given Shell’s apparent determination, a few environmental groups were startled by the company’s decision to pull out.

Walker says he’s contacted the White House to set up meetings about the impact of Shell’s decision on the state.

Any oil from Shell’s Arctic venture would have taken 10 to 20 years before it wound up in a pipeline or in anyone’s gas tank. Shell officials had called the Chukchi basin “a potential game-changer”, a vast untapped reservoir that could add to America’s energy supply for 50 years. “The next step is demanding an energy policy that’s in line with climate policy”.

Regions like the Arctic “are one of the areas that, if we’re going to be able to do this, we need to examine”, he said.