Shell has abandoned its plans to explore prospects in offshore Alaska after failing to find sufficient reserves of oil and gas in the Burger J exploration well in the Chukchi Sea.
The company said it drilled a 6800-foot-deep well there this summer and found indications of oil and gas, “but these are not sufficient to warrant further exploration in the Burger prospect”.
The drilling project is estimated to have cost $7.7bn to complete. Shell said it expects to take financial charges related to the Alaskan operations, which carry a value of about $3bn on its balance sheet with additional contractual commitments of about $1.1bn.
The well, which is located 150 miles offshore from Barrow, Alaska, has been sealed and abandoned.
“The Shell Alaska team has operated safely and exceptionally well in every aspect of this year’s exploration program,” said Marvin Odum, director of Shell Upstream Americas, in a statement today. “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 said its decision to cease exploration in the area was also influenced by the high project costs and “the challenging and unpredictable federal regulatory environment in offshore Alaska”.
Shell holds a 100% working interest in 275 Outer Continental Shelf blocks in the Chukchi Sea. Its employees and equipment are currently being demobilised from the area.
Susan Murray, deputy vice-president of environmental group Oceana, commented the “future of the Arctic Ocean just got a little bit brighter”.
“Shell’s announcement today allows the government to take a step back to apply careful planning, precaution, and science to forge a sustainable future for the Arctic,” she said in a statement today.