AMSTERDAM (AP) — Oil companies' rush to find reserves off Alaska's Arctic shores suffered a setback on Thursday after Shell said it would suspend its operations in the region — and possibly withdraw for good.
Royal Dutch Shell PLC is the main company to have purchased leases for oilfields off Alaska's Arctic shores, but its attempts to drill have been halting due to technical and legal hurdles.
While other companies are still seeking to exploit deep-water Arctic fields nearby in Canada, Shell's troubles may indicate that the difficulties outweigh the potential economic benefits.
"We will not drill in Alaska in 2014, and we are reviewing our options there," Shell CEO Ben van Beurden told reporters in London.
Shell received a negative Federal court decision last week. Environmentalists are still challenging whether the government's 2008 decision to open the area to exploration was correctly granted in the first place: it is covered by sea ice for much of the year.
Asked whether Thursday's retreat means the project is finished, Van Beurden said that depends in part on how the ongoing lawsuit proceeds.
Environmental activists cried victory.
"Shell's Arctic failure is being watched closely by other oil companies, who must now conclude that this region is too remote, too hostile and too iconic to be worth exploring," Greenpeace International Arctic oil campaigner Charlie Kronick said in a reaction.
Jacqueline Savitz, the U.S. chief of the Oceana conservationist group, said Shell's retreat shows that offshore drilling in the Arctic is "simply not a good bet from a business perspective."
Shell's troubles in Alaska are only the most visible in a series of setbacks for the company in the U.S., and Van Beurden hinted he won't prioritize investments there in the future.
While oil prices remain high globally, "North America natural gas prices and associated crude markers remain low, and industry refining margins are under pressure" Van Beurden said.
Last month, Shell said it was scrapping a $20 billion dollar project to develop an onshore natural gas-to-diesel facility in Louisiana.
Van Beurden's predecessor, Peter Voser, spent billions building up the company's portfolio of U.S. shale properties to $26 billion, only to write $2 billion off their value last summer.
"Yes, we went into North America in a big way. You could argue that we went a little bit too far too soon. But we are where we are," Van Beurden said.
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