Greenpeace has welcomed the sooner-than-expected closure of stage one of the Stuart shale oil plant at Gladstone in central Queensland.
The controversial project has been plagued by environmental issues.
The move will cost about 100 jobs but the company denies the controversial project has stalled.
Queensland Energy Resources, which runs the demonstration plant, says it will be placed into care and maintenance around September.
Chairman Ross Dunning says while the shut down is earlier than expected, enough has been learned from it to warrant its closure.
Greenpeace's Gareth Walton says the move speaks volumes.
"What stage one really shows is that shale cannot be produced from oil economically without significant environmental impacts, without impacts on the local community and without major technical problems," he said.
Mr Dunning says the company's goal is to use the information from stage one to ultimately produce shale oil commercially, but he says environmental issues will be addressed.
"We're not going to build any plant that doesn't satisfy environmental and safety concerns that are reasonable and expected," he said.
The next stage cannot progress without Government approval which is yet to come.