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Shell's Arctic oil search ends

Posted on October 1, 2015 by Grace Montealegre

By mid-August, the US Bureau of Safety and Environmental Enforcement awarded Royal Dutch Shell PLC a permit to drill into rocks in the Chukchi Sea off the north-west coast of Alaska. The license allowed the Anglo-Dutch oil giant to begin drilling 8,000 feet below the ice-cold, foggy depths of the seabed where black gold is thought to be hiding in vast quantities.

After drilling just one well, with disappointing results, Royal Dutch Shell is quitting its $7 billion Arctic campaign and today becomes the latest big oil company to abandon the riches under the northern seas in the face of stubbornly low crude prices. Shell had viewed the Arctic—one of the few remaining unexplored oil frontiers—as a prize too great to walk away from, despite the recent plunge in oil prices and an unsuccessful effort in the region three years ago that ended with one of its rigs running aground.

The Anglo-Dutch oil giant said that it expects charges for the decision and would update the market later on the financial implications of the move, with the company carrying a US$3 billion exposure on its balance sheet for the assets and a further US$1.1 billion in contractual commitments.

"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,” said Marvin Odum, director of Shell Upstream Americas.

La Nota Economica - Media Partner