Big Green waste money trying to stop Shell's discovery of dry hole under Chukchie Sea in Arctic
Royal Dutch Shell on Monday said it was abandoning a $7 billion, seven-year quest for crude under Arctic waters, after an exploratory well failed to find significant amounts of oil and gas.
Shell said its exploratory oil well in the Chukchi Sea north of Alaska encountered “indications of oil and gas” but the findings are “not sufficient to warrant further exploration” — a significant blow for the Anglo-Dutch firm that had hoped to find a multibillion barrel crude reservoir in those remote waters.
“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, director of Shell Upstream Americas. “However, this is a clearly disappointing exploration outcome for this part of the basin.”
Shell said in a statement that it would cease further exploration activity off the coast of Alaska “for the foreseeable future.” “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 company said.
Shell also will take a financial charge from the decision, since the firm’s Alaska assets have a carrying value of about $3 billion and the company still has an additional $1.1 billion already committed in existing contracts for rigs, ships and other assets. Shell could pare its potential $4.1 billion write down by putting some of those contracted vessels to work elsewhere or subcontracting them to others.
Shell had been pursuing a major Arctic oil discovery for years, having spent a record-setting $2.1 billion to buy 275 Chukchi Sea oil and gas leases in a 2008 government auction.
The company’s declaration is likely to chill oil industry investment in the region. Other oil companies, including Statoil and ConocoPhillips, have leases in U.S. Arctic waters but have delayed their own exploratory bids, citing regulatory uncertainty.
...The Big Green paranoia about drilling in the Arctic appears to have been based on invalid assumptions that oil would be produced. The failure to find commercial quantities was a blow to Shell and its investors, but it also showed how Big Green is willing the wate its own resources in futile gestures.