Shell Withdraws from Arctic Offshore Oil

By August Pimentel,
Money and Investing Writer

Royal Dutch Shell (NYSE: RDS.A) announced Monday, Sept. 28 that the company would withdraw from their seven-year oil-drilling project off the northwest coast of Alaska.

A disappointment to Shell and its investors, the Arctic waters were viewed as one of the last unused regions by the oil industry.

According to U.S. News and World Report, the British-Dutch energy corporation leased an area in the Chukchi Sea for $2.1 billion in 2008.

Shell executives had previously called this part of the sea a “potential game-changer” for the petroleum industry.

According to the U.S. Geological Survey, it is estimated that this area containS 26 billion barrels of recoverable oil, which could supply the U.S. with oil for upwards of 50 years.

28 ships in total cumulated approximately 80 miles offshore and drilled to approximately 6,800 feet.

This venture, however, was not as successful as the company had hoped.

The total cost of the project totaled $7 billion, and as a result of this loss, the company has laid off 200,000 workers worldwide, approximately five percent of the total workforce.

Shell has also decreased its total investments by about 20 percent.

Although Shell did post a net profit for the second quarter of this year, it was smaller than the company has been accustomed to, approximately $3.4 billion.

Some experts predict Shell’s decrease in business is partly due to the global drop in oil prices in the past 12 months.

“The decision of Shell to abandon its Arctic oil drillings for now primarily reflects the realities of lower global oil prices,” said Michael Lynch, president of Strategic Energy and Economic Research. “When prices go down, the oil industry shortens their list of projects in development by removing the most expensive ones.”

According to the New York Times, the current market for crude oil is approximately 94 million barrels each day, which leaves a two million barrel surplus each day.

While economists and petroleum professionals are having difficulty coming to a solid conclusion on the state of the oil industry, environmentalists consider Shell’s retreat a victory.

Protesters made headlines this past July when a group of kayakers in Portland, Oregon unsuccessfully attempted to block a ship heading up the coast of the northwest U.S. to Alaska. Environmental organizations such as Greenpeace have been campaigning against Shell’s offshore oil-drilling for years.

“[Shell’s retreat] is a victory for everyone who has stood up for the Arctic,” said Annie Leonard, executive director of Greenpeace. “There is no better time to keep fossil fuels in the ground, bringing us one step closer to an energy revolution and a sustainable future.”

Facing both economic and environmental pressure, Shell is uncertain of its future drilling in the Arctic Circle, but feels confident that the petroleum industry will stay viable for the foreseeable future.

“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.,” Marvin Odum, president of Shell USA. “However, this is a clearly disappointing exploration outcome for this part of the basin.”

A version of this article appeared in the Tuesday, October 6th print edition.

Contact August at


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