The company's Peruvian subsidiary will stop exploration in the Maranon Basin and plans to exit the country once it completes ongoing commercial transactions.
Despite the company's success in finding light oil in a property called "Situche Central," or Block 64, it was "unable to build a material resource position in Peru," Richard Herbert, Talisman's executive vice-president of international exploration, said in a statement.
"After careful consideration, a decision has been made to exit Peru and focus on near-term liquids and oil-linked gas opportunities in our global portfolio," he said.
The company will withdraw from licence contracts and work with local authorities to transition them to a new opearator.
"While we are disappointed this play has not come to fruition for Talisman, we are hopeful another operator will continue our good work in the area and develop the Situche discovery in the future," said Herbert.
Talisman drilled a successful well in the area in 2009, but a second one drilled this spring came up dry. A process to sell the Peruvian assets began shortly after that.
"We didn't receive any competitive bids for the business as a whole, but we are now in discussions to sell our stake in individual blocks," said company spokeswoman Phoebe Buckland.
Talisman (TSX:TLM) says it enjoyed strong support from the Peruvian government and local authorities.
"The company has worked extremely hard to build relationships with local communities on the ground and local authorities and we wouldn't have been able to do the work we did without their support," said Buckland.
But the support for Talisman's operations in Peru was not unanimous. Members of Peruvian indigenous groups regularly travelled to Calgary for Talisman's annual shareholder meetings to tell then-CEO John Manzoni directly they oppose any oil drilling in their territory.
On Monday, Talisman announced Manzoni had "agreed to" step down and had been replaced by Talisman board member and former TransCanada Corp. (TSX:TRP) CEO Hal Kvisle.
In a statement Thursday, opponents to the Amazon drilling declared victory.
"We have fought long and hard against Talisman's drilling in our territory because of the negative environmental and social impacts we have seen from oil drilling around the world," said Peas Peas Ayui, president of the National Achuar Federation of Peru.
"Now that Talisman is leaving we can focus on achieving our own vision for development and leave a healthy territory for future generations."
Gregor MacLennan, with the group Amazon Watch, said the company recognized it couldn't drill without the consent of the Achuar people.
"Talisman's exit sends a clear message to the oil industry: Trampling indigenous rights in the rush to exploit marginal oil reserves in the Amazon rainforest is not an option."