Shell Quits Arctic, Halts Drilling

Shell Quits Arctic, Halts Drilling
The mobile drilling unit Kulluk sits aground on the southeast shore of Sitkalidak Island about 40 miles southwest of Kodiak City, Alaska, in 40 mph winds and 20-foot seas Tuesday, Jan. 1, 2013. The Kulluk grounded following many efforts by tug and Coast Guard crews to tow the vessel to a safe harbor when it was beset by winter storm weather during a tow from Dutch Harbor, Alaska, to Everett, Wash. U.S. Coast Guard photo by Petty Officer 1st Class Sara Francis.

In a surprise move, Royal Dutch Shell is abandoning its Arctic drilling plans, reported the BBC.

The company has maintained one of the largest, and most high profile, commitment to the region. It has so far invested roughly $7b, drawing the ire of many environmental groups.

But due to increasing costs, falling revenues, and continuing vilification of its actions, Shell is dropping its Arctic plans. The company said it would end exploration off Alaska “for the foreseeable future.”

“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 US,” said Marvin Odum, president of Shell USA.

While the US EIA has estimated that the Arctic contains 30% of the worlds undiscovered natural gas, as well as 13% of its oil, the results from a recent test well drilled were very disappointing for Shell. Many analysts are saying it was the “final nail in the coffin.”

“The exit today of Royal Dutch Shell from the US Arctic and Alaska is deep with a lot of underlying reasons,” noted said Carl Larry, oil and gas director at consulting firm Frost & Sullivan. “We may only hear the standard line that ‘they couldn’t find enough oil and gas,’ but there’s more to this if we look inside the move,” noted the Oil & Gas Journal.

Larry went on to say that even if there was significant quantities of oil or gas found by Shell, the development would be increasingly unviable in the current price environment.

“The idea that Shell is leaving America’s Arctic lands may be only one of the first that will have to look elsewhere to find profitable oil drilling,” Larry finished.

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