Shell Chief Executive Officer Peter Voser said the drilling would be postponed until at least 2012 as the company pushes for the necessary environmental permits and to convince regulators that it is prepared to contain an out-of-control well in remote, icy waters, should that eventuality occur.
"We have been working rigorously for the past five years to meet and exceed all the regulatory and permitting requirements in Alaska. However, despite our investment in acreage and technology and our work with stakeholders, we have not been able to drill a single exploration well," Voser said in an earnings call Thursday, the Houston Chronicle reports.
"Despite our best efforts, critical permits continue to be delayed, and the timeline for getting these permits is still uncertain."
Shell's plans for drilling in the Beaufort Sea last summer were suspended by the U.S. Department of the Interior following BP's Deepwater Horizon rig explosion in the Gulf of Mexico last April. Shell had hoped to drill after ice cleared this year. The projected offshore Alaska drilling season is approximately 105 days in summertime.
But last month, a ruling by the federal Environmental Appeals Board revoked federal clean air permits that would have allowed drilling ships and support vessels to operate in the environmentally sensitive region.
Shell has invested more than $3 billion in its Arctic development plan in the Beaufort and Chukchi seas. The U.S. Minerals Management Service estimates that the two Arctic seas hold up to 19 billion barrels of oil and up to 74 trillion cubic feet of natural gas.
Shell's drilling delay was applauded by environmental groups, which have long opposed the project.
"Shell Oil's decision to forego any plans to drill in America's Arctic Ocean in 2011 just reinforces what we have been saying all along, that they are not ready to drill in the Arctic's uncharted waters," said Cindy Shogan, executive director of the Alaska Wilderness League, in a statement Thursday.
"The bottom line is that there is no known way to clean up an oil spill in the Arctic's conditions and too little is known about the Arctic's marine environment."
Shell has maintained that a blowout of the type that occurred at Deepwater Horizon would be highly unlikely in Alaska, mostly because the Arctic project would be carried out in shallower water -- 150 feet, compared with Deepwater Horizon's 5,000 feet -- and at a much lower well pressure.