Royal Dutch Shell is to cease exploration in Arctic waters off Alaska’s coast following disappointing results from an exploratory well backed by billions of dollars in investment and years of work.
The announcement was a huge blow to Shell, which was counting on offshore drilling in Alaska to help it drive future revenue. However, environmentalists had tried repeatedly to block the project and welcomed the news.
Shell has spent upward of US$7 billion on Arctic offshore exploration, including US$2.1 billion in 2008 for leases in the Chukchi Sea off Alaska’s northwest coast, where an exploratory well about 130km offshore drilled to 2,073m, but yielded disappointing results. Backed by a 28-vessel flotilla, drillers found indications of oil and gas, but not in sufficient quantities to warrant more exploration at the site.
“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,” Shell USA president Marvin Odum said in The Hague, Netherlands. “However, this is a clearly disappointing exploration outcome for this part of the basin.”
Shell will end exploration off Alaska “for the foreseeable future,” the company said, because of the well results and because of the “challenging and unpredictable federal regulatory environment in offshore Alaska.
Margaret Williams of the World Wildlife Fund in Anchorage called the news stunning.
“That’s incredible. That’s huge,” she said. “All along the conservation community has been pointing to the challenging and unpredictable environmental conditions. We always thought the risk was tremendously great.”
Environmental groups said oil exploration in the ecologically fragile Arctic could lead to increased greenhouse gases, crude oil spills and a disaster for polar bears, walrus and ice seals. Production rigs extracting oil would be subject to punishing storms, shifting ice and months of operating in the cold and dark. Over the summer, protesters in kayaks unsuccessfully tried to block Arctic-bound Shell vessels in Seattle and Portland, Oregon.
“Polar bears, Alaska’s Arctic and our climate just caught a huge break,” Center for Biological Diversity oceans program director Miyoko Sakashita said in a statement. “Here’s hoping Shell leaves the Arctic forever.”
Yesterday was Shell’s final day to drill this year in petroleum-bearing rock under its federal permit. Regulators required Shell to stop a month before sea ice is expected to re-form in the lease area.
The US Geological Survey estimates US Arctic waters in the Chukchi and Beaufort seas contain 26 billion barrels or more of recoverable oil in total. Shell officials had called the Chukchi basin “a potential game-changer,” a vast untapped reservoir that could add to the US’ energy supply for 50 years.
Shell had planned at least one more year of exploration with up to six wells drilled.
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