Industry News

Shell Halts Alaska Exploration

On 28 September 2015, Shell announced that their Burger J exploration well, located in Alaska’s Chukchi Sea, provided disappointing results, and subsequently, the company has abandoned plans for drilling for oil offshore Alaska.

 

The company faced staunch opposition to drilling plans from environmental activists in spite of receiving US federal approval for exploratory drilling, as well as questions from shareholders about the longterm profitability such plans.

The Burger J well is approximately 150 miles from Barrow, Alaska, in about 150 feet of water. Shell drilled the well without incident to a total depth of 6800 feet this summer in a basin that demonstrates many of the key attributes of a major petroleum basin. For an area equivalent to half the size of the Gulf of Mexico, this basin remains substantially under-explored. In a statement, Shell said that while they 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 U.S. regulations.

"The Shell Alaska team has operated safely and exceptionally well in every aspect of this year's exploration program," said Marvin Odum, Director, Shell Upstream Americas. "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 will now cease further exploration activity in offshore Alaska for the foreseeable future. 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. The company reportedly planned to invest as much as $7 billion in Arctic exploration over the next several years, but their most recent press release states, “The balance sheet carrying value of Shell's Alaska position is approximately $3 billion, with approximately a further $1.1 billion of future contractual commitments. An update will be provided with the third quarter 2015 results.”

Shell holds a 100% working interest in 275 Outer Continental Shelf blocks in the Chukchi Sea and the company said, “Operations will continue to safely de-mobilize people and equipment from the Chukchi Sea.”

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