Royal Dutch Shell will halt construction of its Carmon Creek thermal oil sands venture in Canada due to "uncertainties" facing the project, including a lack of infrastructure.
The decision to stop the Carmon Creek project in the western Canadian province of Alberta comes as Shell is cutting costs in the face of higher crude prices and as a shortage of pipeline capacity is constraining growth in the country's oil sands industry.
"We are making changes to Shell's portfolio mix by reviewing our longer-term upstream options world-wide, and managing affordability and exposure in the current world of lower oil prices," said chief executive officer Ben van Beurden.
"This is forcing tough choices at Shell."
Oil giants such as Shell and its rival BP have been slashing investment and jobs after a slide in crude prices, which are trading at less than half of their 2014 highs due to a global supply glut.
Shell's cancellation of the 80,000 barrel per day Carmon Creek project comes after the Anglo-Dutch oil major halted its search for oil off the Alaskan coast in September at a cost of several billion dollars.
The decision also comes as Washington procrastinates over whether to approve the huge Keystone XL oil pipeline to transport crude from Alberta to the Gulf of Mexico, which has been delayed over environmental concerns.
Carmon Creek is wholly owned by Shell, which said it expected the decision to cost US$2 billion (NZ$2.95 billion) in its third-quarter results, due to impairment, contract provision, redundancy and restructuring charges.
Shell, which gave the project its go-ahead in 2013 and announced it would be postponed in March this year, said that it would retain some equipment at Carmon Creek and "study the options for this asset".