The Shell Oil Company’s arctic drilling Polar Pioneer is shown in Seattle, Washington, in this file photo taken May 14, 2015. Teurers/Matt Mills McKnight/Files
By Karolin Schaps
LONDON (Reuters) – Royal Dutch Shell has abandoned its Arctic search for oil after failing to find enough crude, a move that will appease environmental campaigners and shareholders who said its project was too expensive and risky.
The withdrawal came six weeks after the final U.S. clearance and three months after Shell was still defending the project, a rapid change of heart for such a large company that showed it is preparing for a prolonged period of low oil prices while trying to close its $70 billion takeover of rival BG.
Shell has spent about $7 billion on exploration in the waters off Alaska so far and said it could take a hit of up to $4.1 billion for pulling out of the treacherous Chukchi Sea, where icebergs can be as large as New York’s Manhattan island.
“The entire episode has been a very costly error for the company both financially and reputationally,” said analysts at Deutsche Bank, who estimate the Shell’s Arctic exploration project could cost the company about $9 billion.
The unsuccessful campaign is Shell’s second major setback in the Arctic after it interrupted exploration for three years in 2012 when an enormous drilling rig broke free and ran aground.
Environmental campaigners and shareholders have also pressured Shell to drop Arctic drilling. Some are worried an oil spill would harm protected species while others are concerned about the cost after oil prices more than halved in a year.
Shell said the decision to withdraw from the area reflected poor results from its Burger J exploratory well, the project’s high costs and the unpredictable federal regulatory environment in the area off the U.S. state of Alaska.