Royal Dutch Shell Plc., announced early Monday that it would cease offshore exploration activity in Alaska for the "foreseeable future" after a test well yielded unsatisfactory amounts of oil and gas.
In a statement, Shell said it failed to find enough oil and gas in the Burger J well, located in the Chuckchi Sea about 80 miles off Alaska's northwest coast, to warrant further exploration, according to Reuters.
The decision to stop to the exploration and drilling efforts come as a major blow to the company, according to ABC News. Shell was counting on offshore drilling in Alaska to help it drive future revenue and had spent more than $7 billion in investment and years of work into the exploratory well.
Despite the setback, however, Marvin Odum, president of Shell USA, believes all hope is not lost for that portion 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.," he said, according to Fox News.
The decision to stop exploration reflects the high costs associated with Alaska offshore drilling and the unpredictable federal regulatory environment in offshore Alaska along with the Burger J well results, the company said.
In light of this development, there was one set of people who were quite pleased with the news: conservationists.
Margaret Williams of the World Wildlife Fund in Anchorage, called the news stunning.
"That's incredible. That's huge," she said in an interview. "All along the conservation community has been pointing to the challenging and unpredictable environmental conditions. We always thought the risk was tremendously great."
Miyoko Sakashita, oceans program director for the Center for Biological Diversity, hopes Shell will use this as a chance to leave for good.
"Polar bears, Alaska's Arctic and our climate just caught a huge break," she said in a statement, according to The Economic Times. "Here's hoping Shell leaves the Arctic forever."
Shell will now take writedown of about $4.1 billion with its Alaskan position valued currently at about $3 billion, with an additional $1.1 billion in future contractual commitments.
