Shell abandons Arctic Ocean drilling efforts amid costs and controversy

Shell is abandoning its controversial efforts to drill for oil the U.S. Arctic Ocean after an expensive and disappointing drilling season.

The company said it will stop its oil exploration efforts off the coast of 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. However, this is a clearly disappointing exploration outcome for this part of the basin," said Marvin Odum, Shell’s upstream America’s director.

Shell has spent some $6 billion on its Arctic exploration effort and failed to extract any oil. With other oil and gas companies closely watching Shell’s pioneering efforts to see if drilling would succeed in the harsh environment, Shell’s result likely means that no one else will attempt to drill the U.S. Arctic Ocean anytime soon.

Environmental groups, who battled President Barack Obama’s decision to allow Shell to explore for oil in the Arctic, hailed the company’s announcement as a huge victory.

"Hopefully, this means that we are done with oil companies gambling with the Arctic Ocean, and we can celebrate the news that the Arctic Ocean will be safe for the foreseeable future," said Lois Epstein, Arctic program director for the The Wilderness Society.

This summer Shell drilled an exploration well called Burger J about in the Arctic Ocean 150 miles from Barrow, Alaska.

Shell, working in Chukchi Sea water about 150 feet deep, drilled the well 6,800 feet below the ocean floor. The oil company was betting that the Burger Propect would turn into a world-class, multi-billion-barrel discovery.

"Shell has found indications of oil and gas in the Burger J well, but these are not sufficient to warrant further exploration in the Burger prospect. The well will be sealed and abandoned," the company said Monday.

Shell said its decision to abandon its U.S. Arctic Ocean drilling program came from the Burger J result, the huge costs of drilling in the remote and unforgiving environment, and "the challenging and unpredictable federal regulatory environment in offshore Alaska."

The company said it expects to take a financial charge as a result of the decision, noting that the balance sheet of its Alaska position is about $3 billion and that it has more than $1 billion of future contract commitments. 　

"Operations will continue to safely de-mobilize people and equipment from the Chukchi Sea," the company said.

This story was originally published September 28, 2015 at 3:42 AM with the headline "Shell abandons Arctic Ocean drilling efforts amid costs and controversy."