28/09/2015 05:44 BST | Updated 28/09/2015 05:59 BST

Shell Pulls Out Of Alaska Drilling Site In Multi-Billion-Pound Failure, Just Weeks After Gaining Permission

Shell has pulled out of controversial drilling off the coast of Alaska some six weeks after gaining permission to do so, after failing to find sufficient signs of oil and gas.

The company said it would cease exploration activity in the region "for the foreseeable future", blaming high costs associated with the project and a "challenging and unpredictable regulatory environment".

It said the decision to pull out of the multi-billion pound project was "disappointing" and will see it take a financial hit, the Press Association reported.

Shell has pulled out of a drilling operation off the coast of Alaska after failing to find sufficient signs of oil and gas

The company is estimated to have spent almost £5 billion in the seven years it took to get permission from the US federal government to drill in the Chukchi Sea. It was only granted access in August.

The withdrawal is likely to be welcomed by activists who oppose Arctic offshore drilling because of the impact they say it has on the environment.

But Shell said the well, in Alaska's Chukchi Sea, was likely "to remain of strategic importance".

The decision comes at a time when global oil prices have fallen sharply, making complex and costly exploration projects less economical.

Shell said the abandoned project represented about £2 billion on its balance sheet plus £720 million of future contractual commitments.

Marvin Odum, director of Shell's Upstream operations for the Americas, said: "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."


Shell said it had drilled at the Burger J well, about 150 miles off the coast of Alaska, in about 150 feet of water, to a depth of 6,800 feet over the summer "in a basin that demonstrates many of the key attributes of a major petroleum basin".

It added: "For an area equivalent to half the size of the Gulf of Mexico, this basin remains substantially under-explored.

"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 in accordance with US regulations."

Greenpeace has detailed Shell's on-going failures in trying to drill the Chukchi Sea site here.