Royal Dutch Shell has abandoned a contentious Arctic drilling campaign off the coast of Alaska and is preparing to take billions of dollars in writedowns after its exploration efforts failed to make a significant discovery.

The decision, which has been welcomed by environmental campaigners, reflected the high costs of the project and the “unpredictable” US regulatory environment, Shell said.

The collapse in oil prices since last June, from more than $115 a barrel to less than $50 now, has called into question the viability of challenging, high- cost production in areas such as the Arctic. Dozens of projects have already been put on hold.

Shell, when it embarked on its summer drilling campaign in the Chukchi Sea, had said that the time and expense were justified by the size of the prize if exploration was successful. Its Burger prospect is in an area that has been estimated by the US as potentially holding 4.3 billion barrels of recoverable oil.

However, the company said in a statement on Monday that while it had found “indications” of oil and gas, “these are not sufficient to warrant further exploration” in the area.

“Shell will now cease further exploration activity in offshore Alaska for the foreseeable future. This decision reflects both the Burger J well result, the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska,” it said.

It is expected to take financial charges as a result. Shell put the balance sheet value of its Alaska position at about $3 billion, with a further $1.1 billion of future contractual commitments. It is thought the group will aim to bring down the $1.1 billion charge by farming out the rigs and ships it has hired, and will provide an update with third-quarter results.

The company has spent about $7 billion on offshore Arctic development in the Chukchi and Beaufort Seas since 2007, or about 20 per cent of its exploration budget. – Copyright The Financial Times Limited 2015