Having exhausted its 2015 lease to penetrate the Alaskan Arctic, Shell Oil has decided to pull out of the frigid region “for the forseeable future,” according to a company press release.
The decision, announced on Monday, came as something of a surprise to environmental groups, as Shell has spent some $7 billion over the last decade trying to get into that premium Alaskan soil. Now that the company’s drilled it, it seems to have found the experience somewhat lacking – as if getting exactly what it wanted was somehow less than the wanting.
Disappointing Results from the Chukchi Well
Monday marks the final day of Shell’s 2015 lease to drill in the Chukchi Sea – specifically in its exploratory Burger J well, located about 80 miles off Alaska’s northwest coast. The company reached a depth of about 6,800 feet in about 150 feet of water, but to no great yield. In its press release, Shell said that the amount of petroleum recovered from the process was not in sufficient quantities to merit further exploration – at least in that part of the basin.
“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 U.S.,” said Marvin Odum, president of Shell USA. “However, this is a clearly disappointing exploration outcome for this part of the basin.”
The grass, it would seem, is ever greener on the other side of the Chukchi…
This Has Nothing to Do With Your Silly Little Protests
In its announcement, Shell claims that its decision to abandon Arctic drilling in the Chukchi and Beaufort Seas is due largely to three issues: The insufficient yield of the Burger J lease, the unpredictable nature of federal environmental regulation and the challenge and costs associated with offshore drilling in Alaska. Because of these things, Shell is recalling its 28-vessel flotilla, which includes two mobile oil rigs and their support vessels, to the south. “We’ll begin demobilizing now,” Shell spokesperson Megan Baldino said on Sunday.
The pullout certainly does not have anything to do with the passionate outcry from the conservationists and environmental groups that have been screaming at Shell to leave Alaska alone for years.
“Not only does [oil drilling] put the Arctic’s pristine landscapes at a huge risk for oil spills and industrial development but it’s utterly incompatible with President Obama’s rhetoric to address the climate crisis,” Rebecca Noblin, Alaska Director for the Center for Biological Diversity, said in May.
Marilyn Heimann, director of the US Arctic Program for Pew Charitable Trusts, warned that a blowout in the region would be an even worse disaster than the 2010 Deepwater Horizon spill. “[I]t took months in the Gulf to drill a relief well,” she said, “and they were not contending with extreme cold, darkness, high seas and ice.”
There’s also the fact that the US Interior Department calculated a 75 percent risk of one or more large oil spills should drilling leases be developed in the Chukchi – before inexplicably handing those leases over to Shell.
In Seattle, protesters gathered around Shell’s Polar Pioneer rig when it stationed in the city’s port with signs that read “Shut the Gates of Shell.” In Portland, Greenpeace protesters literally hung off a bridge to turn back The Fennica, a Shell icebreaker essential to its Arctic exploration. An Alaskan federal court fined Greenpeace thousands of dollars for every hour they hung from the St. John’s Bridge. They hung for over 36 hours.
— Greenpeace USA (@greenpeaceusa) July 30, 2015
But apparently none of that bothered Shell too much.
Shell Decided to Take the Hit
During afternoon trading in London, Shell’s share price dropped two percent after the company announced it was putting the kibosh on its Alaskan drilling plans. Oswald Clint, a Bernstein research analyst, told the Wall Street Journal it was for the best. “Investors don’t want Shell to deliver more [capital expenditures] into Alaska,” he said. “I imagine investors will be OK with a $1 billion hit versus tens of billions in the future.”
It’s unknown whether or not Shell will try again. According to the Bureau of Ocean Energy Management, most of the company’s Beaufort leases will expire in 2017, but its Chukchi leases are good through 2020. Technically, this is not a victory for the environment; it’s a recess.
“Polar bears, Alaska’s Arctic and our climate just caught a huge break,” said Miyoko Sakashita, oceans program director for the Center for Biological Diversity, in a statement. “Here’s hoping Shell leaves the Arctic forever.”