(Adds details and comment on Shell decision, industrybackground)
By Scott Haggett and Nia Williams
CALGARY, Alberta, Feb 23 (Reuters) - Royal Dutch Shell Plc is shelving plans to build a new oil sands mine innorthern Alberta, the largest such project to be deferred asproducers struggle with low energy prices.
The company said on Monday it is withdrawing its regulatoryapplication for the 200,000-barrel-per-day Pierre River project.Instead, it will concentrate on boosting the profitability ofits existing 255,000-bpd oil sands operations.
"The Pierre River Mine remains a very long-term opportunityfor us, but it's not currently a priority," LorraineMitchelmore, president of Shell's Canadian unit, said in astatement. "Our current focus is on making our heavy oilbusiness as economically and environmentally competitive aspossible."
The deferral of the mine is the latest blow to the oil sandsindustry as one of the world's highest-cost production regionstries to cope with low prices that fallen to six-year lows.
Cenovus Energy Inc deferred spending on some of itsprospective oil sands projects while it awaits higher pricing.As well, Total SA and Statoil ASA alsorecently postponed big oil sands projects due to weak economics.
The government of Alberta, which expects a C$7 billionreduction in its revenue this year because of low oil prices,called Shell's move "a business decision", saying the oil sandsremain viable despite low prices.
"Oil production in Alberta will continue to grow," saidDerek Cummings, a spokesman for the province's energy minister."Production may grow at a slightly slower pace ... but we seethe oil sands as being resilient."
Mitchelmore said the European oil major continues to holdthe leases on the mine and could reapply in the future.
Shell has regulatory approval to expand its Jackpine oilsands mine in northern Alberta by 100,000 bpd. Spokesman CameronYost said he could not speculate on when a final investmentdecision on that project would take place.
The company said that because planning for the Pierre Rivermine was still in early stages, few jobs will be cut because ofthe deferral.
However, Shell was one of the earliest oil sands producersto slash staff due to low prices, laying off as many as 300 fromits mining operations last month.
Shell has a 60 percent stake in the Athabasca Oil SandsProject, while Chevron Corp and Marathon Oil Corp each hold a 20 percent interest. (Reporting by Scott Haggett and Nia Williams in Calgary;editing by Lisa Von Ahn and Andrew Hay)
