Shell announced Monday that it was abandoning the controversial $7 billion, seven-year quest for crude oil under Arctic waters after an exploratory well failed to find significant amounts of oil and gas.
Shell had repeatedly stressed the enormous hydrocarbon potential of the far north region in public, but the Guardian reported that in private Shell had began to admit being surprised by the popular opposition it faced.
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.”
According to Shell, the decision to close up the exploratory well, known as Burger J, will come with a large financial hit of around $4.1bn on future earnings to the company, which has spent $7 billion dollars on oil and gas exploration in the Alaskan Arctic.
“The balance sheet carrying value of Shell’s Alaska position is approximately $3.0 billion, with approximately a further $1.1 billion of future contractual commitments,” the company said in a statement. An update to the company’s finances, which will include these costs, will be provided with the company’s third quarter 2015 financial results.
Shell Oil Company’s Marvin Odum said in a statement: “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 U.S. 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,” the company 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.”
The Burger J well is located in about 150 feet of water, and the company drilled down to 6,800 feet during the short 2015 drilling season. The company said it drilled in an area that “demonstrates many of the key attributes of a major petroleum basin. For an area equivalent to half the size of the Gulf of Mexico, this basin remains substantially under-explored.”