Shell To Suspend Oil Exploration In Alaskan Arctic

Transcript

ARI SHAPIRO, HOST:

The company Royal Dutch Shell is stopping its drilling operations in the Arctic for the foreseeable future. The oil company says it failed to find enough crude to warrant further exploration of the area. This decision comes after $7 billion in costs and years of fighting the regulatory process and environmentalists. NPR's Jackie Northam has more.

JACKIE NORTHAM, BYLINE: Shell's announcement today that it will stop drilling in the Arctic came as a surprise to many. The company had received federal clearance just six weeks ago to drill a well called Burger J in Cukchi Sea off Alaska's northwest coast. Heather Conley with the Center for Strategic and International Studies says despite damage to one of its vessels, Shell's operations in the Arctic this year were proceeding well except for one thing.

HEATHER CONLEY: It was assumed that the Burger J would hold, you know, potentially 4.3 billion barrels of oil. That's extraordinary. But they didn't find that.

NORTHAM: Shell says it found only indications of oil and gas. Conley says that raises questions whether there are huge amounts of oil and gas reserves in the Arctic. The U.S. geological survey estimates there are potentially 26 billion barrels of oil there.

ERIK MILITO: It's always frustrating when we see exploration activities not lead to, you know, commercial discoveries.

NORTHAM: Erik Milito with the American Petroleum Institute says the region remains promising and that Shell's disappointing findings are just a setback, not a death knell, for oil exploration in the Arctic.

MILITO: We're always optimistic because technology continues to advance, and we, as an industry, are very successful over time in developing these types of resources.

NORTHAM: The Arctic's warming water should make it easier for oil exploration, but it is still a harsh environment. Icebergs make it treacherous for rigs and ships. There are few roads and airports. The cost of getting equipment and people into the region are huge and all this at a time when crude oil is about 45 to $50 a barrel. Conley says that wasn't lost on investors or Shell's directors.

CONLEY: Even before this decision, there were concerns expressed by Shell's board of directors about the costs and whether this was viable. But I - you know, I think the company had already invested substantially, and they wanted to see that process through.

NORTHAM: Environmentalists see Shell's decision as a victory.

MARISSA KNODEL: It's probably the best start to a work week I've had in a long time (laughter).

NORTHAM: Marissa Knodel has been fighting Shell's effort to explore the Arctic since the company got its first lease in 2008 by organizing and taking part in protests. Knodel says Shell's decision today sends an important message for the future of Arctic drilling.

KNODEL: Shell is the only company reckless enough to actually go out there and try to drill. And it's spent over $7 billion on this dangerous gamble with our environment and with our climates, and it's proven unsuccessful.

NORTHAM: But Milito with the American Petroleum Institute says Shell's decision won't have a huge impact on an industry that's used to spending lots of time and money in the pursuit of oil.

MILITO: Companies are making investments on this scale with a 10-, 20-, 30-year horizon.

NORTHAM: Milito says that's because the global demand for oil and gas is expected to remain high for a long time. Jackie Northam, NPR news, Washington. Transcript provided by NPR, Copyright NPR.