Oil giant Chevron has shelved a $400 million plan to drill in the Great Australian Bight.
The company acquired two deepwater exploration permits in 2013 and had planned to drill four wells, but choose to discontinue the work, citing low oil prices.
The decision had nothing to do with government policy or environmental concerns, the company said on Friday.
In the current low oil price environment, the project was not able to compete for capital in Chevron's global portfolio, it said.
"We appreciate the strong support from governments, regulators and the local community for our plans to explore for hydrocarbons offshore South Australia," Chevron Australia managing director Nigel Hearne said in a statement.
"We are confident the Great Australian Bight can be developed safely and responsibly and we will work closely with the interested stakeholders to help realise its potential."
South Australia's peak business group says Chevron's decision is disappointing, but understandable.
'We cannot afford to alienate international investors and other businesses from considering investments here," Business SA spokesman Anthony Penney said.
"Even if such investments may not occur now due to factors beyond our control."
Chevron's decision follows a similar move by BP to withdraw from a $1.4 billion drilling plan in the Bight last year.
SA opposition energy spokesman Dan van Holst Pellekaan says companies should not give up on the idea of responsible exploration in the area.
"We need to explore these opportunities because economically they will be incredibly valuable for our state," he told ABC radio on Friday.
However, Greenpeace says it was the right decision and has called on Norwegian oil company Statoil to also stop potential exploration work in the area.
"The news Chevron has given up on drilling in the Bight means the coastal communities of Southern Australia have dodged another bullet," Greenpeace Australia spokesman Nathaniel Pelle said.
"Chevron's announcement shows the only sane thing to do is for the federal government to terminate all oil leases in this area."
The decision reflects the challenges of the wider oil market, the Australian Petroleum Production and Exploration Association said.
"With the oil price halving over the last three years, exploration activity around the world is at very low level," director Matthew Doman said.
Chevron says it will focus instead on projects to develop offshore natural gas resources in Western Australia.