After years of effort, Shell is leaving the region “for the foreseeable future” because it failed to find enough oil to make further drilling worthwhile.
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Royal Dutch Shell’s decision to end its quest for oil in the Arctic waters off Alaska sparked jubilation among environmental activists, who said Tuesday that they will seize the opportunity to seek an end to all drilling to in the region.
Another factor was drilling innovations, such as fracking, that have contributed to the glut in the world oil market, which in turn has caused the price of oil to plummet from $110 a barrel to less than $50. Subsequently, the Burger J well “will be sealed and abandoned in accordance with U.S. regulations”.
Shell said it would take financial charges as a result of halting exploration, which it would disclose during its third quarter results. “It is seeking more time to drill an exploration well so further geological interpretation can be undertaken in this under-explored frontier basin”.
The company has spent more than $7 billion on the effort, slogged through a regulatory gauntlet and fought environmental groups that feared a spill in the harsh climate would be hard to clean up and devastating to polar bears, walruses, seals and other wildlife.
– Italian company Eni Petroleum US LLC pay $8.9 million for 17 tracts.
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Aging reservoirs tend to decline in production, and Alaskan leaders have in the past been slow to change tax and royalty policies to attract new investment in the oil patch, said Amy Myers Jaffe, executive director of energy and sustainability at the University of California-Davis. “We already have an operation with the Russian firm, Gazprom, to explore in the Russian Arctic around Sakhalin Island”. Instead they’re often interdependent, as states, countries and companies use revenue from oil and gas to invest in alternative energy. However, Arctic offshore drilling is by no means over.
“We are looking for solutions on how we continue to sustain our local economies to support our communities”, Rock said. “With this news though, I’m afraid that Shell will go to Congress to seek funding from the taxpayers to pursue oil at a later date”. The National Transportation Safety Board concluded that the Kulluk grounding accident was primarily caused by Shell’s inadequate assessment of the risk for its planned tow of the drilling rig in December, when weather creates hazardous conditions on the water.
Greenpeace, Sierra Club and Oceana have created petitions to ask President Obama to say “no” to any drilling in the Arctic.
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“Alaska has been a bone of contention for many investors thus today’s update is a positive”, said Bernstein analysts, who rate Shell’s stock as outperform. “An oil spill in the Arctic would be an environmental catastrophe that would pollute and cripple the ocean ecosystem, harming wildlife and damaging fragile shores for decades to come”, Huffman said.
