Scottish exploration group Cairn Energy admitted on Tuesday that initial drilling in Greenland had yielded no results, leading to a 7 per cent drop in the company's share price.
The Edinburgh-based company said that the deposits found were too small to be commercially viable and it has plugged two of the three wells it has drilled in the region.
The third project has been suspended because Cairn has been unable to drill to adequate depth owing to technical difficulties.
The group will be writing off the £167m costs endured in the drilling operations and close down its units in Greenland for the winter.
"Exploration in Greenland is at a very early stage and consequently to have encountered both gas and oil in two of the first exploration wells in the previously undrilled Baffin Bay geological basin is extremely encouraging," said Mike Watts, deputy chief executive at Cairn.
Several large oil and exploration companies which have acquired licenses to drill in Greenland have been monitoring Cairn's activities in Greenland after its discovery of gas and oil in its Baffin Bay wells.