After All the Fuss and Fighting and Lobbying, Shell Gives up on Offshore Alaska Oil Drilling
Royal Dutch Shell has decided to give up on its $7 billion-dollar investment to develop oil off the coast of Alaska after spending years to gain government approval for the risky project.
The effort to drill deep under the Arctic Ocean has long been fraught with problems, from lawsuits by environmentalists to stop the drilling, to losing a ship as a result of the rough seas and unpredictable weather.
But the deciding factor for pulling the plug on its 9-year undertaking was the outcome of this summer’s exploratory drilling. The Burger J well that Shell was tapping into didn’t produce the oil it was hoping for, leading the company’s top official, CEO Ben van Beurden, to call a halt to its plans.
No more drilling “for the foreseeable future,” Shell announced on Monday.
The well, located 150 miles offshore in the Chukchi Sea, “found indications of oil and gas, but these are not sufficient to warrant further exploration,” according to Shell, given “the high costs associated with the project and the challenging and unpredictable federal regulatory environment in offshore Alaska.”
Another factor was drilling innovations, such as fracking, that have contributed to the glut in the world oil market, which in turn has caused the price of oil to plummet from $110 a barrel to less than $50.
“When prices go down, the oil industry shortens their list of projects in development by removing the most expensive ones,” Michael C. Lynch, president of Strategic Energy and Economic Research, told The New York Times.
Shell encountered warning signs three years ago that the project could be costly when one of its drilling ships, the Kulluk, ran aground. Even after this mishap, the Obama administration allowed Shell to resume drilling this summer, much to the consternation of environmentalists who said an oil spill in the Arctic could be disastrous to the region. Those environmentalists are now celebrating the latest turn of events.
“This is a victory for everyone who has stood up for the Arctic,” Greenpeace executive director Annie Leonard told the Times. “There is no better time to keep fossil fuels in the ground, bringing us one step closer to an energy revolution and sustainable future.”
-Noel Brinkerhoff, Danny Biederman
To Learn More:
Shell Abandons Disappointing Offshore Alaskan Well (by Stanley Reed, New York Times)
Shell to Cease Oil Exploration in Alaskan Arctic After Disappointing Drilling Season (by Sarah Kent, Wall Street Journal)
Obama Gives Go-Ahead to Arctic Oil Drilling (by Noel Brinkerhoff and Steve Straehley, AllGov)
Interior Dept. Ignores Own Advice and Embraces Bush-Era Oil Leases for Arctic Drilling (by Noel Brinkerhoff, AllGov)
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