City patience runs out as Cairn's drilling comes up dry and oil explorer looks for partners in Arctic venture

A $1bn (£640m) bet by a British firm to find commercial quantities of oil in the Arctic has ended in failure and there is now mounting speculation there will be no more drilling by Cairn Energy next year.

The controversial exploration off Greenland was physically opposed by Greenpeace but Cairn has been forced to retreat by complex geology and growing criticism in the City.

Shares in the business, which was set up by the former Scottish rugby star Sir Bill Gammell, fell by as much 6% at one point today to make it the biggest faller in the FTSE-100 index of leading companies after admitting no significant finds with its two latest wells off Greenland.

Simon Thomson, Cairn's chief executive, said the company remained optimistic about the region generally but was looking for partners to take on some of the risk. Well placed sources admitted there may be no drilling in 2012.

Cairn made spectacular discoveries in Rajasthan, India – which were sold off, partly to fund a new drive into the Arctic – but the City is now losing patience.

Angus McPhail, an oil analyst at the investment bank Investec, said: "They've drilled four wells – they haven't found anything. I think the company probably needs to refocus on another area, like Sri Lanka or [the] east Mediterranean."

Others noted that Cairn was now in discussions with potential partners about buying into its Greenland licences – showing its diminishing commitment to going it alone in the far north.

Richard Slape, an analyst with Canaccord Adams, said: "People are going to question why Cairn is seeking to farm out after drilling a bunch of dry holes rather than 18 months ago.

"They will find somebody to come in [but] it may not be on such good terms as they would have got before."

The biggest criticism came from Greenpeace, which has repeatedly urged Cairn to abandon its operations on the grounds that they pose a huge risk to a region of paramount environmental importance.

Vicky Wyatt, a Greenpeace campaigner, said: "However the company tries to spin this, Cairn's Greenland misadventures have been an unmitigated disaster from day one, the company squandering a fortune drilling one dry hole after another.

"These results show that the incredible technical, economic and environmental risks of operating in the Arctic simply aren't worth it. Cleaning up a BP-type oil spill in the remote and freezing 'high north' would be impossible, with the devastating consequences this would have for the wildlife and people that live there.

"Other oil companies, like Shell, who are planning to move into the Arctic, should pay close attention to this news. Instead of drilling for the last drops of oil in some of the most extreme and hostile places on the planet, we should be using less oil in the first place."

Cairn has spent $1bn hiring rigs and other equipment to drill wells over the last two years. The pristine nature of the environment and the fact that the drilling took place after BP's accident in the Gulf meant Cairn had to take more care than ever before.

A well placed source said the company may not drill at all next year – regardless of whether it picked up a partner – and might concentrate instead on seismic tests. But he added: "No definite decision on this has yet been taken."