Oil firm Royal Dutch Shell announced on Monday (28 September) it will stop drilling in its Burger J exploration well in Alaska. The company said the operations in Alaska's Chukchi sea were too expensive and the disappointing amounts of oil and gas found could not cover the high costs.
Shell is struggling against oil prices at record lows and the company said the news will be a blow to its results. The company is estimated to have spent $7bn in the 10 year process of getting permission from the US federal government to drill in the area.
In August, Shell was given the go-ahead to drill in the well, after it had received permission to operate in Alaska, leading the Netherlands-based firm to drill to 6,800 feet (2.07km). The oil giant said it still thinks the area is largely unexplored.
"The Shell Alaska team has operated safely and exceptionally well in every aspect of this year's exploration program," Shell director of Upstream Americas said in a statement. "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."
Apart from the high costs and lacking results from the operations, the strict regulations from the federal government continued to be an obstacle for Shell.
The news will come as a pleasant surprise for protesters, who have tried for years to prevent the company from starting the operations.
"Big oil has sustained an unmitigated defeat," Greenpeace UK executive director John Sauven "They had a budget of billions, we had a movement of millions. The 'unpredictable regulatory environment' that forced Shell out of the Arctic is otherwise known as massive pressure from more than 7 million people. For three years we faced them down, and the people won."
Investors are likely to be less excited about the news. Shell said it will feel the burn of the failed operations in its balance sheets and said it will update shareholders on 29 October, when the company is reporting on the results of its third quarter.
The firm's share price has fallen more than 35% in the last year, despite extensive efforts to reduce spending, as the company deals with a lower oil price.