TAG Oil has abandoned oil exploration at a site near Gisborne because of extremely difficult drilling conditions.
Chief executive Garth Johnson said the oil rig at the Waitangi Valley-1 well encountered gas at a shallow depth under extremely high-pressure, which made continuing very dangerous.
The Canadian-based company was granted consent to drill the exploratory well in May.
Mr Johnson had previously said the potential oil resource in the East Coast region was significant by world standards, with independent estimates of potentially 14 billion barrels of oil.
He had also said TAG Oil's vision was to establish the country's first unconventional oil production, or fracking, at Waitangi Valley-1 and prove the potentially large resource is commerically viable.
However today he said the well will be plugged and abandoned.
Mr Johnson said that will be done in line with regulatory requirements and there have been no environmental issues encountered to date.
He said the drilling rig will be moved back to Taranaki to focus on the company's core oil producing assets.
