Norwegian company Equinor has become the third major fossil fuel producer to abandon plans to drill for oil in the Great Australian Bight.

Key points: Equinor said its exploration plan was "not commercially competitive"

Equinor said its exploration plan was "not commercially competitive" Drilling has been fiercely opposed by environmental groups who warned about a catastrophic spill

Drilling has been fiercely opposed by environmental groups who warned about a catastrophic spill The Federal Government is disappointed but supportive of future drilling

The company said it had concluded that its exploration drilling plan was "not commercially competitive" compared with other exploration opportunities.

In December, Equinor was granted environmental approval to drill 372 kilometres south of the Nullarbor coastline, despite protests from environmentalists.

BP abandoned plans to drill the bight in 2016, with Chevron following suit in 2017.

Equinor, which had planned to drill at a depth of 2.5 kilometres, said it made its decision after a "holistic review of its exploration portfolio".

Equinor Australia company manager Jone Stangeland said the venture was simply too expensive.

"We have received bids for the drilling rig, the helicopters, the supply base — the cost for these activities is just too high and too expensive to go ahead and drill the well," he said.

He said the company would "engage with the federal and state authorities regarding our decision to discontinue the exploration program".

"We hold an exploration permit offshore [of] Western Australia and will maintain other ongoing interests and activities in Australia," Mr Stangeland said.

Last month, the Wilderness Society launched legal action against the national regulator — the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) — after it granted conditional environmental approval to the project.

The environmental approval would have allowed the company to drill 24 hours a day for about 60 days between November and April in either 2020–21 or 2021–22.

Protesters line the shore at Victor Harbor to oppose drilling plans for the Great Australian Bight. ( ABC News: Nicola Gage )

Drilling in the bight has been fiercely opposed by environmental groups concerned about the threat of a catastrophic oil spill, and both Greenpeace and the Wilderness Society have welcomed the development.

"It's been obvious for a long time now that the people of Australia are very concerned about proposals for deep-sea drilling in the bight," society director Peter Owen said.

"This is fantastic, it's great to see Equinor following the responsible lead of BP, Chevron and withdrawing from proposals to drill in the bight."

Greenpeace described it as an "incredible win" for "coastal communities, Indigenous traditional owners, surfers, the seafood industry, tourism operators and other local businesses".

"The only way to protect coastal communities and the Great Australian Bight's unique marine life is to rule out drilling permanently," Greenpeace Australia Pacific chief executive officer, David Ritter, said.

Equinor's own modelling showed that a worse-case scenario oil spill in the bight would see oil stretching as far west as Albany in Western Australia, to Port Macquarie in New South Wales.

Government supportive of future exploration

Federal Resources Minister Keith Pitt said the company's decision to withdraw was "disappointing", but expressed support for future exploration in the bight.

"Equinor has made it clear this was a commercial decision," he said in a statement.

"I know many will find Equinor's decision not to proceed with this oil exploration project in the Great Australian Bight extremely disappointing, and it is particularly hard for South Australia.

"The Liberals and Nationals Government remains committed to encouraging the safe development of Australia's offshore petroleum resources.

"The Bight Basin remains one of Australia's frontier basins and any proposals for new oil and gas fields in this area will be assessed fairly and independently."

A map of potential oil exposure on the sea surface from a spill in the Great Australian Bight. ( Supplied )

Kangaroo Island Mayor Michael Pengilly, who supported the company's plan, said the business case did not "stack up".

"I'm sure someone else will do it — I'm quite convinced that this won't be the end of oil or gas drilling in the Great Australian Bight," he said.

"Bearing in mind initially it was a test hole anyway, to see if there was anything there, but clearly the costs of doing that have outweighed any potential benefits, and they've decided not to do it.

"I didn't have an issue with it at all, it was in the hands of the independent regulator. And if they'd gone ahead and found gas or oil it would have been in the national interest in my view."

Mr Pengilly described opposition to the project as a "fear campaign" but conceded some island residents did not support it.

Thousands of jobs protected by decision, Greens say

The Norwegian Government has a 67 per cent majority stake in Equinor, formerly known as Statoil.

Supporters spruiked the economic benefits but critics had warned a spill like that in the Gulf of Mexico would destroy thousands of jobs, and more than 100 activists staged a paddle-out protest off Oslo in May.

The company previously insisted that drilling could be carried out safely.

"Lessons learned from major incidents in the last decade, in particular the Deepwater Horizon [incident] in 2010, have resulted in the advancement of regulations," it stated.

Environmental groups warned of the potential of a catastrophic spill. ( Sean Gardner: Reuters )

The Australian Petroleum Production and Exploration Association said it was not yet clear if another company would take up the mantle.

"We know the oil and gas resources are there, but what we don't know is the commercial viability of producing them," director Matthew Doman said.

"There are other companies that retain interest in the Great Australian Bight, they are much less advanced with their plans than Equinor were, so this is clearly a setback … and we'll have to wait and see what the longer term plans of other companies might be."

Greens senator Hanson-Young said South Australians "overwhelmingly did not want this to go ahead".

"The fishing and tourism industries were very worried … we've been now able to protect thousands of jobs," she said.

Protesters on canoes and kayaks in Olso against drilling in the Great Australian Bight. ( Supplied: Hallvard Kolltveit )

The bight is internationally recognised because of its pristine ocean wilderness and as a breeding ground for whales.

The Great Australian Bight Alliance, a group of environmental organisations along with the Mirning Indigenous people, had previously accused Equinor of refusing to formally consult with "key Indigenous groups and local governments".

Equinor noted in its final environmental plan that it had met with Barngarla, Narungga, Nauo and Wirangu people during consultation.

However, the company said "the Mirning and Ngarrindjeri peoples did not claim they were relevant persons during the public comment process" — an assertion which was rejected by NOPSEMA.

"This is not considered a sufficient reason to determine that the Mirning and Ngarrindjeri people are not relevant persons, and is incorrect in the case of the Ngarrindjeri people," it said in November.