Shell has spent about $7 billion on exploration in the waters off Alaska so far and said it could take a hit of up to $4.1 billion for pulling out of the treacherous Chukchi Sea, where icebergs can be as large as New York’s Manhattan island.
Advertisement
Shell had already drilled the Burger J exploration well to a depth of 6800 feet over the summer in the Chukchi Sea, a few 80 miles off the coast of Alaska. The company will now seal the well and abandon the project.
“The entire episode has been a very costly error for the company both financially and reputationally”, said analysts at Deutsche Bank, who estimate the Shell’s Arctic exploration project could cost the company about $9 billion.
The move is being hailed by environmental advocacy groups-many of whom banded together to organize protests in Portland, Oregon and Seattle, Washington over the summer to block the Shell oil rigs from reaching their arctic destination.
“Reading Shell’s announcement, it’s not that they’re saying there’s not potential there, but in the current environment it doesn’t make sense”, Giglio said by phone from Norwalk, Connecticut.
Shell is the major leaseholder in the Chukchi.
A Shell source said the company had found US regulation very prescriptive and in a few cases contradictory, making it hard to navigate the regulatory process. That massive quantity could have added a significant oil supply, building on the momentum established by the shale oil boom. Leonard went on to address US President Obama, urging him to “make history by cancelling any future drilling and declaring the US Arctic Ocean off limits to oil companies”.
“Arctic exploration has been a clear casualty of the oil price slump”, said Peter Kiernan, oil and gas analyst at the Economist Intelligence Unit.
Grafe says it also provides a “wonderful” opportunity for the Obama administration to shut down drilling in the Arctic Ocean for good.
The Democrat says the US should “seize the moment” and use its chairmanship of the Arctic Council to develop and agreement to end offshore drill among all Arctic nations. “Predictable rules and regularly scheduled lease sales are needed to attract investment in U.S. Arctic energy development”.
Alaska’s junior senator, Republican Dan Sullivan, said environmental groups are cheering the news, but he says it’s a sad day for Alaska and working Americans.
“Arctic drilling is an inherently risky activity”. “Looking at renewables and clean energy now versus kicking it down the road is of paramount importance”.
Should an oil spill occur, between 44-62 percent of the oil spilled would not disperse or evaporate reaming in the open water or ice for more than 30 days.
Rosneft and Gazprom PJSC are delaying a few offshore exploration by two to three years because of sanctions and weaker oil prices. There’s also the matter of timing.
Advertisement
Despite the scope of the resources, environmentalists remain optimistic. Disappointing results from that well led Shell to announce Monday it was ceasing its Alaska Arctic operations for the foreseeable future. A few had accused him of hypocrisy when he recently visited Alaska to highlight the dangers of global warming, while also endorsing Shell’s drilling there.
