Shell abandons Arctic drilling as exploration disappoints

Arctic drilling: In a move that could cost it billions of dollars, Royal Dutch Shell has abandoned its controversial plans to develop hydrocarbon fields off the coast of Alaska after initial exploration failed to locate any significant discoveries. The decision  reflected  the “unpredictable” US regulatory environment, the company said,  as well as concerns that the collapse in oil prices had brought  the commercial viability of pursuing technically challenging and high-cost production projects in hostile environments like the Arctic into question.
At the time that it  launched its  drilling campaign in the Chukchi Sea last summer, Shell claimed that the time and expense were justified by the size of the prize if the exploration was successful; but in a statement released today,  it said that while it had found “indications” of oil and gas, “these are not sufficient to warrant further exploration” in the area.
“Shell will now cease further exploration activity in offshore Alaska for the foreseeable future, ” it said.
Shell has put the balance sheet value of its Alaska position at about $3bn, with a further $1.1bn of future contractual commitments. It is thought the group will aim to bring down the $1.1bn charge by farming out the rigs and ships it has hired, and will provide an update with third-quarter results.

 

Source: FT