Shell will end exploration off Alaska “for the foreseeable future,” the company said, because of the well results and because of the “challenging and unpredictable federal regulatory environment in offshore Alaska.”
The announcement was a huge blow to Shell, which was counting on offshore drilling in Alaska to help it drive future revenue.
Environmentalists, however, had tried repeatedly to block the project and welcomed the news. Hundreds of “kayaktivists” in Seattle took to the water in May and June in an attempt to stop Shell's exploratory drill rig from beginning work.
Critics of the project argued that it would exacerbate climate change, threaten a sensitive ecosystem, and that cleanup of any potential spill would be difficult or impossible in the Arctic's unpredictable weather conditions.
“Polar bears, Alaska's Arctic and our climate just caught a huge break,” Miyoko Sakashita, oceans program director for the Center for Biological Diversity, said in a statement. “Here's hoping Shell leaves the Arctic forever.”
Shell has spent upward of $7 billion on Arctic offshore exploration, including $2.1 billion in 2008 for leases in the Chukchi Sea off Alaska's northwest coast, where an exploratory well about 80 miles off shore drilled to 6,800 feet but yielded disappointing results. Backed by a 28-vessel flotilla, drillers found indications of oil and gas but not in sufficient quantities to warrant more exploration at the site.
“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.,” Marvin Odum, president of Shell USA, said in The Hague, Netherlands. “However, this is a clearly disappointing exploration outcome for this part of the basin.”
Monday was Shell's final day to drill this year in petroleum-bearing rock under its federal permit. Regulators required Shell to stop a month before sea ice is expected to re-form in the lease area.
The U.S. Geological Survey estimates U.S. Arctic waters in the Chukchi and Beaufort seas contain 26 billion barrels or more of recoverable oil in total. Shell officials had called the Chukchi basin “a potential game-changer,” a vast untapped reservoir that could add to America's energy supply for 50 years.
Shell had planned at least one more year of exploration with up to six wells drilled. A transition to production could have taken a decade or longer. Odum called drilling off Alaska's coast the most scrutinized and analyzed oil and gas project in the world and said he was confident Shell could drill safely.
Shell has not drilled in the Arctic since its mishap-filled 2012 season, in which its Kulluk drill rig ran aground.
Margaret Williams of the World Wildlife Fund in Anchorage called the news stunning.
“That's incredible. That's huge,” she said. “All along the conservation community has been pointing to the challenging and unpredictable environmental conditions. We always thought the risk was tremendously great.”
Al Jazeera and The Associated Press