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After spending more than $2.5 billion for drilling rights in U.S. Arctic waters, Royal Dutch Shell Plc, ConocoPhillips and other companies have quietly relinquished claims they once hoped would yield the next big oil discovery.
The reversal comes as crude oil prices have dropped to less than half their June 2014 levels, forcing oil companies to cut spending. For Shell and ConocoPhillips, the decision to abandon Arctic acreage was formalized just before a May 1 due date to pay the U.S. government millions of dollars in rent to keep holdings in the Chukchi Sea north of Alaska.
The U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources
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buried below icy waters at the top of the globe.
Shell last year ended a nearly $8 billion, mishap-marred quest for Arctic crude after disappointing results from a test well in the Chukchi Sea. Shell decided the risk is not worth it for now, and other companies have likely come to the same conclusion, said Peter Kiernan, the lead energy analyst at The Economist Intelligence Unit.
"Arctic exploration has been put back several years, given the low oil price environment, the significant cost involved in exploration and the environmental risks that it entails," he said.
For more of the Bloomberg story: www.bloomberg.com
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