From Houston (BN): Shell has begun demobilising its massive deployment of equipment, supplies and personnel in the Alaskan offshore Arctic after disappointing results from its Burger J (SEN, 32/11) well.
Shell said there were “indications of oil and gas, but these were not sufficient to warrant further exploration. Shell will now cease further exploration activity in offshore Alaska for the foreseeable future.” The well will be sealed and abandoned.
The shutdown ends a nine-year, $7 billion effort marred in 2012 by equipment problems, including the grounding of a rig being towed to winter harbour.
After the campaign resumed this year, it was hampered by regulators who required Shell to have a backup rig nearby for relief well emergencies but would not allow that rig to drill a second well simultaneously for fear of disturbing marine life.
“This decision reflects both the Burger J well result, the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska,” Shell said.
The company, which owns leases on 275 Chukchi Sea blocks, remains confident of the basin’s potential and expects the Alaskan offshore to be strategically important to U.S. energy supply in future.
Sidelines chatter at the Offshore Technology Conference in May guessed Shell must see something big in the Chukchi to keep going despite $50 oil prices. Whatever it is, Burger J didn’t find it.
Shell will take a financial charge in the billions, to be detailed in its third-quarter earnings report. Opponents of Arctic offshore oil exploration declared victory, but analysts said the Alaskan economy will suffer from the loss of offshore oil activity.
And the world will have to wait at least another few years (decades?) for active U.S. oil exploration in Arctic offshore waters.
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