Shell pulls plug on $7b Arctic exploration
Royal Dutch Shell will halt exploration in the US Arctic after $7 billion of spending ended with a well off Alaska that failed to find any meaningful quantities of oil or natural gas.
Shell said it expects to take financial charges related to the Alaskan operations, which carry a value of about $3 billion on its balance sheet with additional contractual commitments of about $1.1 billion. The Hague-based company will cease further offshore activity in the region for the foreseeable future.
“This could be negative for third-quarter earnings because of potential impairment charges,” Ahmed Ben Salem, a Paris-based analyst with Oddo & Cie, said by phone. “On the other hand, in a $50 oil-price environment it’s not so bad to abandon that search because it’s expensive. Shell has enough resources already.”
Europe’s largest oil company was targeting resources it said could be 10 times greater than the oil and gas produced so far in the North Sea. The decision to explore in the Arctic met with resistance from environmental groups including Greenpeace, whose activists occupied the company’s drilling rigs. Shell and its peers are also curbing spending after the price of oil slumped about 50 per cent in the past year amid a global oversupply. Details