Alaska fears fallout of Shell’s Arctic drilling decision

The Hague-based company originally obtained the necessary licenses to drill in the Chukchi Sea in 2008 when oil prices were more than 0 a barrel.

In light of Shell’s decision, other smaller companies lining upto drill in the area are also likely to hold off on exploration, following the larger company’s lead, Senner said.

“This decision reflects both the Burger J well result, the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska“, a statement on the company’s website read. Analysts say that in addition to selling non-core operations, the company should reduce capital spending to help fund its 47 billion-pound ($71 billion) acquisition of BG.

Shell’s shares were down 3 percent Monday in afternoon trading, in line with a broad market decline, to $45.89. Now she worries we won’t see any offshore Alaska drilling for decades. The U.S. Interior Department did require Shell to keep its rigs at least 15 miles apart to drill at the same time, a regulation put in place to protect walruses in the area from the noise of drilling.

Environmental groups had been pushing-unsuccessfully-for the Obama Administration to block the drilling.

Greenpeace United Kingdom executive director John Sauven said: “Big oil has sustained an unmitigated defeat”.

British/Dutch oil giant Shell has pulled out of drilling off the coast of Alaska, one of the remaining great battlefields between the likes of Greenpeace and Big Oil.

Production rigs extracting oil would be subject to punishing storms, shifting ice and months of operating in the cold and dark. Today’s news from Shell is a painful reminder that exploration is expensive, involves huge risk, and does not guarantee success.

Tellingly, Shell also blamed its quite pivotal decision yesterday on the “challenging and unpredictable regulatory environment”.

Friends of the Earth chief executive Craig Bennett called Monday’s announcement “wonderful news for the people and wildlife of the Arctic region, but it must become a turning point in the fight to prevent catastrophic climate change”.

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. The Chukchi Sea is estimated to hold the equivalent of 29 billion barrels of oil and gas, according to the U.S. Bureau of Ocean Management.

Shell is the major leaseholder in the Chukchi.

Shell had planned a two-year drilling program starting this July.

The probability that Canadian Beaufort resources will one day be exploited was already looking dicey. Giving up has got to hurt at a company that prides itself on scientific and technical prowess.

Shell’s effort has been plagued by blunders and accidents involving ships and support equipment, reaching a climax with the grounding of one of its drilling vessels in December 2012 in stormy seas.

Another, the Noble Discoverer, was recently cited by the US Coast Guard for numerous safety and operational deficiencies.

Shell will incur further costs in pulling out of the Arctic, starting with withdrawal of its drilling fleet.

“Building on today’s news, the US should seize this moment to use its chairmanship of the Arctic Council to develop an agreement among all Arctic nations to end offshore drilling”, he said.