Shell ends exploration in Arctic near Alaska 'for the foreseeable future'

Royal Dutch Shell will cease exploration in Arctic waters off Alaska's coast following disappointing results from an exploratory well it just completed.

Shell found indications of oil and gas in the well in the Chukchi Sea about 120 kilometres off Alaska's northwest coast, the company said Monday in a release from The Hague, Netherlands. However, the petroleum was not in quantities sufficient to warrant additional exploration in that portion of the basin, the company 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 U.S.," said Marvin Odum, president of Shell USA, in the announcement. "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.

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The decision reflects the results of the exploratory well in the Burger J lease, the high costs associated with Alaska offshore drilling and the challenging and unpredictable federal regulatory environment in offshore Alaska, the company said.

Shelled out $7B

Shell has spent upward of $7 billion US on Arctic offshore development in the Chukchi and Beaufort seas.

Monday 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 company reached a depth of nearly 2,075 metres with the exploratory well drilling in about 45 metres of water.

Environmental groups oppose Arctic offshore drilling and say industrial activity and more greenhouse gases will harm polar bears, walrus and ice seals.

Over the summer, protesters in kayaks unsuccessfully tried to block Arctic-bound Shell vessels in Seattle and Portland, Oregon.

Reaction to decision

The Audubon Society, whose concern is preserving bird breeding habitat, welcomed the decision.

"Some ideas are just non-starters, like drilling for oil in the Arctic Ocean," said Audubon CEO David Yarnold  in an email statement.

 "The Arctic Ocean is crucial for marine birds and mammals, holding globally significant feeding and resting areas for dozens of species. Spills under ice sheets can't be controlled, and America doesn't need the oil in order to maintain its energy independence."

Warren Mabee, director of the Queen's Institute for Energy and Environmental policy, said low oil prices and the high cost of operating in the Arctic will have played a role in Shell's decision.

But he added that public awareness of the threat to the Arctic also may be an important factor.

"I suspect the social pressure against drilling in the Arctic and maybe some recognition of the challenges of operating up there would have contributed to this decision," Mabee told CBC News.

"In the future it is going to be harder and harder for companies to access resources in fragile environments and this may be a sign that companies are beginning to be aware of that," he added.