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The hard-hitting allrounder will continue to play Twenty20 cricket for Central Districts and various other teams around the world but doesn't believe he can commit to focusing fulltime on playing for New Zealand and the various obligations and demands that go with having a NZC contract.
He hasn't totally ruled out playing for the Black Caps again but, at 34, age and fitness is against him.
He has battled injury throughout his 12-year international career and is missing from the New Zealand side thumped by South Africa in the first Twenty20 international this morning because of the impending birth of his second child.
He had signalled in 2011 that this year's Twenty20 World Cup in Sri Lanka might be his international swansong but he toured Sri Lanka in October and November.
"This was a very difficult decision but in recent weeks I have come to the conclusion that I can no longer make a full-time commitment to NZC," Oram said.
"Various factors have led me to make this decision including my age, the stage of my career and the impending birth of my second child. I really enjoy the Twenty20 format and see it as a way to stay involved in cricket for a while longer.
"I have loved every minute I have been fortunate enough to play for my country but the time has come for me to prioritise other areas of my life.
"Fortunately as a professional cricketer I can continue to play some T20 cricket as I transition into the next phase of my life.
"If the timing was right, and my form and fitness warranted selection, then I would definitely be available to play T20 cricket for my country but I have absolutely no expectations of NZC in that regard."
Oram played 33 tests, 160 one-day and 36 Twenty20 internationals and was, at his peak, considered one of the most explosive batsmen in the game. He also backed that up with his useful medium pacers.
He retired from test cricket in 2009 to prolong his career in limited overs cricket.
Another player will now be offered a NZC contract for the remainder of the contract period up to July 31, 2013. An announcement will be made in the New Year.
"We appreciate Jacob's situation and respect his decision," NZC chief executive David White said. "A NZC playing agreement has significant obligations on players and requires a fulltime commitment and focus on playing for New Zealand.
"We understand Jacob's situation and accept his request to finish his playing agreement early."
"Jacob has been a highly valued member of the Black Caps team and can be very proud of his achievements on the field."