Shell abandons Alaska Arctic drilling

Polar Pioneer in Chukchi

Shell has abandoned its controversial drilling operations in the Alaskan Arctic in the face of mounting opposition.

Its decision, which has been welcomed by environmental campaigners, follows disappointing results from an exploratory well drilled 80 miles off Alaska’s north-west coast. Shell said it had found oil and gas but not in sufficient quantities.

The move is a major climbdown for the Anglo-Dutch group which had talked up the prospects of oil and gas in the region. Shell has spent about $7bn (£4.6bn) onArctic offshore development in the hope there would be deposits worth pursuing, but now says operations are being ended for the “foreseeable future.”

Shell is expected to take a hit of around $4.1bn as a result of the decision.

The company has come under increasing pressure from shareholders worried about the plunging share price and the costs of what has so far been a futile search in the Chukchi Sea.

Shell has also privately made clear it is taken aback by the public protests against the drilling which are threatening to seriously damage its reputation.

Ben van Beurden, the chief executive, is also said to be worried that the Arctic is undermining his attempts to influence the debate around climate change.

His attempts to argue that a Shell strategy of building up gas as a “transitional” fuel to pave the way to a lower carbon future has met with scepticism, partly because of the Arctic operations.

A variety of consultants have also argued that Arctic oil is too expensive to find and develop in either a low oil price environment or in a future world with a higher price on carbon emissions.

In a statement today, Marvin Odum, director of Shell Upstream Americas, said: “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.”

Shell will now cease further exploration activity in offshore Alaska for the foreseeable future. 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.

Reacting to the news, Greenpeace UK executive director John Sauven said:

Big oil has sustained an unmitigated defeat. They had a budget of billions, we had a movement of millions. For three years we faced them down, and the people won.

The Save the Arctic movement has exacted a huge reputational price from Shell for its Arctic drilling programme. And as the company went another year without striking oil, that price finally became too high. They’re pulling out.

Now President Obama should use his remaining months in office to say that no other oil company will be licenced to drill in the American Arctic.

Source theguardian.com

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