photo credit: The news is a major climb down for the oil and gas giant. Charles Conatzer/Flickr CC BY 2.0
In a surprise announcement, Shell has revealed it is to stop oil and gas exploration off the Alaskan coast “for the foreseeable future.” Despite finding both fossil fuels, the “disappointing” results from an exploratory well drilled in the Chukchi Sea did not indicate there were sufficient quantities to justify continued drilling. The well will be capped and abandoned, to the delight of many environmental groups that have strongly opposed any plans to exploit the oil and gas found beneath the Arctic.
The major news comes just under a month after Shell received a final permit that allowed it to drill the 2,070 meter (6,800 foot) exploratory well needed to assess the exploitability of the reserves in U.S. 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.”
It seems that even after having invested an estimated $7 billion (£4.6 billion) in the venture, in the face of plunging oil prices, increasing political uncertainty and public pressure, Shell has decided to pull the plug. There had been mounting concerns about how the company would be able to respond to a major spill like that seen in the Gulf of Mexico, although the company continually maintained that they had adequate safety procedures in place to cope. Even so, environmental groups are ecstatic by this latest turn of events.
“Big oil has sustained an unmitigated defeat,” said Greenpeace U.K. executive director John Sauven in a statement. “They had a budget of billions, we had a movement of millions. For three years we faced them down, and the people won. The Save the Arctic movement has exacted a huge reputational price from Shell for its Arctic drilling programme. And as the company went another year without striking oil, that price finally became too high.”
Shell was not the only company interested in exploiting the Arctic’s rich deposits. With an estimated 30% of the world’s undiscovered natural gas and 13% of its oil, many others are keen to explore the area. Most, however, have been held back by the slump in oil prices, which are now sitting at under $50 a barrel. When prices pick up, it’s expected that the profitability of drilling in the Arctic will rise accordingly.