After years of legal battles, Royal Dutch Shell said Monday it will abandon its exploration efforts in offshore Alaska after a disappointing find.
The company said it safely drilled its Burger J well in Alaska’s Chukchi Sea to a total depth of 6,800 feet this summer in a basin that “demonstrates many of the key attributes of a major petroleum basin.”
Shell found indications of oil and gas in the Burger J well, but those indications were not sufficient to warrant further exploration in the Burger prospect.
The well will now be sealed and abandoned.
The Burger J well is 150 miles from Barrow, Alaska, in about 150 feet of water.
“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 Upstream Americas director Marvin Odum.
The company said it expects to take financial charges tied to the campaign.
The balance sheet carrying value of Shell’s Alaska position is $3 billion, with a further $1.1 billion of future contractual commitments.
Shell has spent about $7 billion on its Arctic efforts.
The company will provide further updates about potential charges in its third quarter results.
Shell will now cease further exploration activity in offshore Alaska for the “foreseeable future.”
The company said its decision was prompted by the Burger J well result, the high costs associated with the project and “the challenging and unpredictable” federal regulatory environment in offshore Alaska.
The announcement comes three years after Shell’s troubled 2012 attempt to find oil in the Arctic when its Kulluk drilling rig broke free and ran aground in southern Alaska.
Shell’s latest Arctic campaign was plagued by legal issues, protests and equipment delays.
The company’s exploration plans were stymied in July after the U.S. Interior Department said the company could not simultaneously drill two wells in offshore Alaska as initially planned, citing a Fish and Wildlife Services rule aimed at protecting marine life.
Shell was also forced to delay drilling into oil bearing zones after an ice breaking vessel hauling a capping stack was damaged in July.
Environmentalist staged several protests against the company that saw Greenpeace members illegally board an Arctic bound drilling rig and suspend themselves from a bridge in Seattle in an effort to obstruct a departing vessel.
The company won the rights to its offshore Alaska leases in 2008 but a January 2014 federal court decision had suspended the leases until the Bureau of Ocean Energy Management conditionally approved its plan in May.