The company said it would cease exploration activity in the region “for the foreseeable future”, blaming high costs associated with the project and a “challenging and unpredictable regulatory environment”.
It said the decision to pull out of the multi-billion dollar project was “disappointing” and will see it take a financial hit.
The move is likely to be welcomed by activists who oppose Arctic offshore drilling because of the impact they say it has on the environment.
But Shell said the well, in Alaska’s Chukchi Sea, was likely “to remain of strategic importance”.
The decision comes at a time when global oil prices have fallen sharply, making complex and costly exploration projects less economical.
Shell said the abandoned project represented about $3 billion on its balance sheet plus $1.1 billion of future contractual commitments.
Marvin Odum, director of Shell’s Upstream operations for the Americas, said: “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.
“However, this is a clearly disappointing exploration outcome for this part of the basin.”
Shell said it had drilled at the Burger J well, about 150 miles off the coast of Alaska, in about 150 feet of water, to a depth of 6,800 feet over the summer “in a basin that demonstrates many of the key attributes of a major petroleum basin”.
It added: “For an area equivalent to half the size of the Gulf of Mexico, this basin remains substantially under-explored.
“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 well will be sealed and abandoned in accordance with US regulations.”