Faroe Petroleum said yesterday it was giving up a west-of-Shetland licence.
The firm intends to cease operations on the P1161 licence, where it is operator with a 50% stake.
Faroe said that, in July 2011, it drilled an exploration well on the Fulla prospect and the targeted Clair and Whiting reservoir sands were found to be oil-bearing.
It added: “Extensive modelling has since been undertaken to establish the resource potential and assess a means of economically developing the Fulla discovery in conjunction with the Freya discovery, located immediately to the south. The results of this work confirm relatively poor oil quality, smaller-than-expected resource size and limited access to infrastructure.
“No economically viable solution has been found to bring these discoveries to development at this time, and consequently the licence will be relinquished.”
Chief executive Graham Stewart said: “Faroe Petroleum adheres to a strict policy of protecting shareholder interests such that substantial development investments are only made where there is good potential for an attractive return, and unfortunately the P1161 licence does not satisfy our economic criteria.
“The high potential west-of-Shetland area continues to be a core element of Faroe Petroleum’s strategy.
“The company has considerable knowledge and experience in this important region, holding a large portfolio position there, including the Glenlivet and Tornado gas discoveries, which are progressing towards development.”