Shell Stops Alaska Oil Drilling

Business & Finance

September 28, 2015

Royal Dutch Shell Plc will cease further exploration activity in offshore Alaska for the foreseeable future and take a USD 4.1 billion write-down after not finding enough oil and gas deposits in the Burger J well located in the Chukchi Sea, some 150 miles off Barrow.

Shell says the tests have shown indications of oil and gas in the Burger J well, but these were deemed not sufficient to warrant further exploration in the Burger prospect. The well will be sealed and abandoned in accordance with U.S. regulations.

Apart from the Burger J well result, the decision to stop the activities also reflects ”the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska,” Shell said in a statement.

“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.”

The company expects to take financial charges as a result of this announcement. The balance sheet carrying value of Shell’s Alaska position is approximately USD 3 billion, with approximately a further USD 1.1 billion of future contractual commitments.

Shell holds a 100% working interest in 275 Outer Continental Shelf blocks in the Chukchi Sea.

Operations will continue to de-mobilize people and equipment from the site.