Canadian company Sagres Energy on Thursday said it halted investing in Jamaica to focus on greater oil prospects in Colombia, the island's nearest southern neighbour.
The pull-out will result in the possible impairment of US$3.2 million (J$288m) of assets held by Sagres in Jamaica, according to its latest financial report.
"Should the company be unsuccessful in obtaining a partner and elect not to enter phase two, Sagres would record impairment with respect to the previous US$3.2 million capitalised to date," said the Canadian explorer, referring to Jamaica in its 2011 annual report.
Sagres entered into the phase two but never found a partner.
The cessation of phase two, however, represents the reversal of interest demonstrated in June when Sagres subsidiary Rainville received an extension from the Jamaican Government to conduct drilling activities off the Pedro Cays.
Now it has "elected to focus its attention and near-term resources on its Colombian exploration assets and the company will not be investing further resources in Jamaica," Sagres said in its explanation to investors posted Thursday on its website.
The decision resulted in the company's interest in potential drilling sites labelled blocks 9, 13 and 14 in Jamaica reverting to the Petroleum Corporation of Jamaica (PCJ).
The move comes with no further obligations or liabilities to the company, added Sagres.
Previously, Rainville completed all the work commitments under the first phase, which consisted of acquiring a total of 2,458 kilometres of new 2D seismic data, carrying out bathymetric, geologic and environmental surveys on the blocks and regional geologic surveys of the adjacent Walton and Lower Walton basins, and the island of Jamaica.
"Sagres intends to exclusively focus on its Colombian exploration portfolio, in particular its joint venture on the El Triunfo block, which is comprised of 25,205 gross acres in the oil-rich Llanos Basin in Colombia and is at an advanced exploration stage with multiple drill-ready prospects and extensive seismic coverage, including 3D seismic, on the main prospect," the energy company said.
On Wednesday, the PCJ announced via press release that it "revoked" the licence based on Sagres' inability to finance its obligation to drill.
Under the agreement, which dated back to 2006, Rainville should have secured the necessary funding for the second phase of the programme which began in May 2012. Among other things, this phase involved the drilling of an exploratory well by November 2013.
"While it is regrettable to have to take this step, the PCJ understands that drilling is a very expensive undertaking and we simply cannot move forward without the requisite financing," said PCJ group managing director Dr Mario Anderson.
The PCJ will continue to market its open blocks and actively pursue investment for exploration and drilling in Jamaica's onshore and offshore areas, added Anderson.
"We have a comprehensive strategy for pursuing the development of our open acreages. In keeping with this, we are actively seeking to engage partners and we are targeting a number of exploration and production players, including majors and supermajors, with a view to securing an agreement for major investment in the future," Anderson said.