The decision means about 70 jobs will be cut, the Norwegian energy firm said Thursday.
In a statement on its website, Statoil said improvements have been made to the project, but it has decided not to go any further at this stage.
"Costs for labour and materials have continued to rise in recent years and are working against the economics of new projects," said Statoil Canada country manager Stale Tungesvik.
"Market access issues also play a role — including limited pipeline access which weighs on prices for Alberta oil, squeezing margins and making it difficult for sustainable financial returns."
Tungesvik said the decision was part of Statoil's strategy to prioritize its most competitive projects around the world.
Last December, Tungesvik signalled costs were a big concern, not just in the oilsands but in its offshore operations as well.
He told reporters that doing business with US$100-a-barrel crude nowadays is just as difficult as $30 oil was several years back and that the company would be more picky about the projects it chooses to develop.
"The easy barrel's gone," he said. "We invest more than ever but we see that it's much more costly to develop one barrel of oil today than it was earlier."
Greenpeace campaigner Mike Hudema said Statoil's move shows that high-profile campaigns against pipeline proposals like Keystone XL, which would connect up to 830,000 barrels per day of mostly oilsands crude to Gulf Coast refineries, are working. This month, Keystone XL will have spent six years waiting on U.S. regulatory approval.
"It's time our government acknowledges what the science has already shown, if we are serious about addressing climate change then the vast majority of bitumen needs to stay in the ground," said Hudema.
"Now we need to ensure the billions not spent on Statoil's Corner project are redirected to renewable energy solutions that solve the climate problem not accelerate it."
The company said the decision has no implications for its Leismer oilsands project, which is in production. The steam-assisted gravity drainage project has an operating capacity of 20,000 barrels per day.
Last year, Statoil, together with its partner Husky Energy (TSX:HSE), announced a major oil discovery off the coast of Newfoundland.
The reservoir of light crude, believed to hold between 300 million and 600 million barrels of recoverable oil, is in an area known as the Bay du Nord prospect, about 500 kilometres northeast of St. John's, N.L.
Statoil's decision to hit the pause button on its Corner project on follows a move earlier this year by Total and Suncor Energy Inc. (TSX:SU) to put their $11-billion Joslyn North oilsands project on hold indefinitely.
A report by the Canadian Association of Petroleum Producers in June predicted oilsands production would grow at a slower pace than previously expected due to rising costs.
The association forecasted oilsands production hitting 4.8 million barrels a day by 2030 compared with last year's output of 1.9 million barrels.
However, that figure is down from the 5.2 million barrels of daily oilsands output CAPP predicted last year.
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