Shell abandons Alaska oil exploration

Oil giant steps away from contentious drilling operations.

Shell made the announcement after failing to find "meaningful quantities of oil or gas" from its test well in Alaska's Chukchi Sea.  Described by the company as "a clearly disappointing exploration outcome", the Dutch-based oil producer is set to face a write-off of some $4.1bn from the current value and contractual commitments of the project, which is likely to cost a total of $7bn.

Although Shell - amongst other oil majors - had felt the region offered significant opportunities for large oil and gas deposits after first discovering deposits in the late 1980s, a combination of factors made the operation an unattractive proposition.

For one, the inhospitable conditions made drilling difficult and Shell had suspended activities since 2012 when the main rig planned to sink the well ran aground and was lost.  The collapse in oil prices, set against high project costs, also put the viability of the Alaskan site into question.

Shell, amongst others, has come under significant pressure from politicians, environmentalists and public interest groups concerned about the potential damage to the fragile natural infrastructure of the region.  The company received approval from the US Interior Department for a two-year drilling plan in May 2015 after the USID deemed the activities would not have a major environmental impact on the area.

However, environmental activist group, Greenpeace, described Shell's decision as "an unmitigated defeat" for what it described as "Big Oil", claiming that the "price became too high" for Shell both financially and reputationally.

This is not necessarily the end of Alaskan oil exploration, with ExxonMobil and Rosneft amongst those still seeking to exploit the significant resources believed to be held within the region.