Shell pulls out of the Chukchi Sea: ceases exploratory activity offshore Alaska.

• Author: Stricker, Julie
• Position: SPECIAL SECTION: Natural Resources

After investing more than $7 billion to explore Alaska's Arctic oil and gas prospects, Royal Dutch Shell announced disappointing results on September 28, the day its rigs were scheduled to leave the Burger J prospect in the Chukchi Sea. They won't be returning next year: The company is abandoning drilling operations.

"Shell has found indications of oil and gas in the Burger J well, but these are not sufficient to warrant further exploration in the Burger prospect," the company said in a news release announcing its decision to cease exploration activity offshore Alaska.

"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," Marvin Odum, director, Shell Upstream Americas, noted in the release. "However, this is clearly a disappointing exploration outcome for this part of the basin."

Shell spent more than $1.4 billion this year alone, spokeswoman Megan Baldino says. Shell spent $2.1 billion for the 275 Outer Continental Shelf leases in the Chukchi in 2008.

Many Challenges

The exploration program was beset by many challenges.

Shell's drilling program suffered setbacks in 2012 when a drilling rig ran aground. That incident led to stricter federal regulations on offshore oil exploration in the Arctic.

This spring, protesters who oppose Arctic oil development tried to delay Shell's flotilla as it prepared to embark on the journey to the Arctic from Seattle. Then, one of its icebreakers was delayed when it had to be sent back to Portland, Oregon, for repairs after hitting an underwater object just outside Dutch Harbor. The Fennica carried a capping stack--a key piece of equipment required to be on site before Shell could drill into potentially oil-bearing zones.

However, Shell's two drilling rigs, accompanied by support vessels, arrived at the Burger J prospect in July, still short of its final permits. On July 22, federal regulators approved permits allowing Shell to drill the top sections of two wells but stopping well short of the oil-bearing zone. Shell commenced drilling at Burger J prospect July 30, using its semi-submersible drilling unit, the Polar Pioneer. The well is about 150 miles from Barrow in about 150 feet of water.

After the Fennica arrived on-site in August, Shell was allowed to drill into the oil-bearing zone, but only at the Burger J site.

Under the permits, Shell had to abide by strict noise rules set to protect walrus, polar...