Pierre River was proposed by Shell Canada in 2007, split out of a joint application in 2009. The decision effectively kills a 200,000 barrels- a-day project that had been dormant for years.

It was originally included with Shell’s 100,000bpd Jackpine mine expansion application to the federal regulator in 2007 on behalf of the Athabasca oil sands project partnership of Shell and 20% owners Chevron Canada and Marathon Oil Sands.

Shell had told employees last month it would cut 5-10% of 3000 jobs at the Athabasca oil sands project operations it manages north of Fort McMurray to improve efficiency.

Shell Canada president Lorraine Mitchelmore had said last August that under then-new global group CEO Ben van Beurden business units around the world were being ordered to cut costs and enhance productivity as they compete for limited capital investment dollars.

Shell decided to pursue separate applications for the two mines in 2009 and the Jackpine expansion was approved by a joint review panel in 2013, but the partnership is yet to sanction it.

“The Pierre River mine remains a very long-term opportunity for us but it’s not currently a priority,” Mitchelmore said this week.

“Our current focus is on making our heavy oil business as economically and environmentally competitive as possible. We will continue to hold the leases and can reapply in the future when the time is right.”

New projects are increasingly falling under the knife in Canada, with energy companies in Western Canada forecast to cut an estimated $C23 billion ($A23.44 billion) from corporate budgets, according to the Canadian Association of Petroleum Producers.

CAPP said oil sands spending was projected to fall by about a quarter to $25 billion, from $33 billion last year.