Plans for the UCG facility at Kincardine were put on hold last year after the Scottish Government imposed a moratorium on the process, stating it was treating UCG as a separate technology to onshore unconventional oil and gas, which includes hydraulic fracking.

It involves producing gas from coal seams deep underground.

In its trading update, CNR said it will now focus on projects outside of Scotland.

The firm said: “The Company has moved its primary focus from its Underground Coal Gasification (‘UCG’) assets (in particular the development of its Kincardine Project in Scotland) to developing its portfolio of five conventional oil and gas licences in the Southern North Sea.

“This was precipitated by the introduction of a moratorium on UCG in Scotland in October 2015 despite previous assurances the Company had received from the Scottish Government.

“While the Company is confident that the evidence in relation to UCG will result in the moratorium being lifted, it has stopped all expenditure related to the Kincardine Project and is now focussing its attention outside of Scotland, in particular the North East of England, where the Company believes the political situation is more favourable with regards to UCG and considerable support exists for investment in energy and industry with a view to regeneration.”

Environmental groups said the announcement was a victory for those who had campaigned against the project.