Shell announced on Monday that it will cease further exploration activity in offshore Alaska for the foreseeable future. The company said the decision reflects the results from Burger J exploration well located in Alaska’s Chukchi Sea; the high costs associated with the project; and the “challenging and unpredictable” federal regulatory environment in offshore Alaska.
The company expects to take a financial hit as a result. 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. Shell will provide an update with third quarter 2015 results.
The Burger J well is approximately 150 miles (241 km) from Barrow, Alaska, in about 150 feet (46 meters) of water. Shell safely drilled the well to a total depth of 6800 feet (2.073 meters) 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.
Although Shell found indications of oil and gas in the Burger J well, these were insufficient to warrant further exploration in the Burger prospect. The well will be sealed and abandoned in accordance with US regulations.
The Shell Alaska team has operated safely and exceptionally well in every aspect of this year’s exploration program. 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 US. However, this is a clearly disappointing exploration outcome for this part of the basin.—Marvin Odum, Director, Shell Upstream Americas
Shell holds a 100% working interest in 275 Outer Continental Shelf blocks in the Chukchi Sea.
Operations will continue to safely de-mobilize people and equipment from the Chukchi Sea.