Shell to dismantle offshore Alaska program

ANCHORAGE, Alaska, Sept. 28 (UPI) -- Royal Dutch Shell said a combination of weak market conditions and a lack of exploration success meant it was time to dismantle its offshore Alaska program.

Shell said it found evidence of oil and natural gas in its Burger exploration well located in the shallow waters off the coast of Alaska, but not enough to warrant further activity.

"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 United States," Marvin Odum, director of regional upstream operations for Shell, said in a statement. "However, this is a clearly disappointing exploration outcome for this part of the basin."

Shell said the area is roughly half the size of the Gulf of Mexico and remains largely unexplored.

The U.S. Bureau of Safety and Environmental Enforcement in August awarded Shell with one permit to start drilling an exploration well into oil-bearing zones in the Burger prospect in the arctic waters off the coast of Alaska.

A federal study of the Burger prospect from 2004 described it as likely the largest reserve pool of its kind off the Alaskan coast. Nevertheless, a company spokesman said the lack of exploration success, high costs and a challenging regulatory regime meant it was time to abandon the Alaska program for the foreseeable future.

"Operations will continue to safely demobilize people and equipment from the Chukchi Sea," the company said.

Shell's early efforts off the coast of Alaska were plagued by equipment issues. Shell in July discovered a small breach in the hull of MV Fennica, chartered to carry the safety equipment to the Chukchi Sea. A drill ship slated for offshore Alaska, Noble Discoverer, suffered a series of setbacks during a 2012 campaign off the coast of Alaska.

Susan Marry, deputy vice president for advocacy group Oceana, described Shell's ambitions in the arctic waters offshore Alaska as a "pipe dream."

The Dutch supermajor committed about $7 billion to the program. The company said the financial charges would be outlined in its third quarter 2015 results.