Shell halts Arctic oil exploration campaign after wildcat disappoints

ANCHORAGE, Alaska -- Shell has called a halt to further exploration work offshore Alaska after the company’s Burger J well, in the Chukchi Sea, failed to find meaningful quantities of oil or gas, the company said Monday.

The Burger J well is approximately 150 miles from Barrow, Alaska, in about 150 ft of water. Shell drilled the well to a total depth of 6,800 ft this summer in a basin that demonstrates many of the key attributes of a major petroleum basin. For an area equivalent to half the size of the Gulf of Mexico, this basin remains substantially under-explored.

Shell has found indications of oil and gas in the Burger J well, but these are not sufficient to warrant further exploration in the Burger prospect. The well will be sealed and abandoned in accordance with U.S. regulations.

Disappointing outcome

"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 U.S. However, this is a clearly disappointing exploration outcome for this part of the basin.”

Shell will now cease further exploration activity in offshore Alaska for the foreseeable future. This decision reflects both the Burger J well result, the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska.

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 $3.0 billion, with approximately a further $1.1 billion of future contractual commitments. An update will be provided with the third quarter 2015 results.

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