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Following in Shell’s footsteps, oil major Statoil will also exit the Alaskan Arctic

The Statoil ASA logo sits on display outside the company’s headquarters in Fornebu, Norway, on Wednesday, Oct. 28, 2015. Photographer: Krister Soerboe/Bloomberg

Statoil, the major Norwegian oil company, announced Tuesday that just like Royal Dutch Shell, it too is abandoning plans of drilling in the Alaskan Arctic.

The company said it is exiting 16 leases under its own operation and also shutting down its Anchorage, Alaska office. It is also exiting its stake in 50 leases that, it said, are under the operation of Conoco Phillips. The company cited “recent exploration results in neighbouring leases,” and added that “leases in the Chukchi Sea are no longer considered competitive within Statoil’s global portfolio.”

One major factor that has dampened prospects for Arctic drilling is low oil prices. Earlier this year, Statoil also signaled that it would not explore in the Barents Sea this year.

The news came just a month after the Obama administration canceled two planned Arctic oil lease sales, in 2016 and 2017, citing lack of interest.

[In a major setback for Arctic drilling, the Obama administration cancels two oil lease sales]

“First Shell and now Statoil abandoning offshore leases sends a strong message to decision makers meeting in Paris next month. Pursuing oil and gas in the U.S. Arctic Ocean is too risky and expensive for both the environment and companies’ economic portfolios,” Susan Murray, a deputy vice president of Oceana, said in a statement. “The global threats imposed by climate change require that decisions made about important Arctic Ocean resources apply careful planning, precaution, and science to ensure a sustainable future for the Arctic and, in turn, our planet.”

For Alaskans, whose state budgets have been decimated by low oil prices, the sudden turnabout for both Shell and Statoil may seem a bit dazzling. Many had welcomed the ventures.

“This is extremely bad news for our state,” said Alaska Republican Sen. Dan Sullivan in a statement. Sullivan rather bluntly blamed the Obama administration for the outcome: “I don’t think that most Alaskans could have imagined that it would be our own federal government that would kill, through over burdensome regulations and uncertainty, the great promise of energy development in the Arctic [outer continental shelf].”

But the real picture may be more complicated. Yes, there were regulatory hurdles, suggests Heather Conley, senior vice president for Europe, Eurasia, and the Arctic at the Center for Strategic and International Studies. “Both Statoil and ConocoPhillips were closely following Shell’s progress (or lack thereof) in the Chukchi,”  Conleysaid  by e-mail. “They observed the challenges Shell experienced in receiving federal permits as well as certifications and numerous legal challenges. All these things informed their decision.”

“At the same time, both the current price environment as well as the need to dramatically reduce costs made this decision fairly straightforward,” Conley added. “Statoil will focus its Arctic operations closer to home in the Barents Sea.”