Shell to Stop Alaska Offshore Drilling

Royal Dutch Shell will cease exploration in Arctic waters off Alaska’s coast following disappointing results from an exploratory well backed by billions of dollars in investment and years of work. The announcement was a huge blow to Shell, which was counting on offshore drilling in Alaska to help it drive future revenue. However, environmentalists who had tried to block the project repeatedly welcomed the news.

Shell (RDS.A) 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.”