UPDATE 4-Canadian Natural buys into oil sands upgrader

* Canadian Natural buys half of North West

* Companies want Alberta to supply upgrading plant

* Start up targeted for 2013
(Adds North West Chairman’s comments)

By Jeffrey Jones

CALGARY, Alberta, Jan 28 (BestGrowthStock) – Canadian Natural
Resources Ltd (CNQ.TO: ), the country’s biggest independent oil
explorer, is buying into a multibillion-dollar upgrading plant
that was stalled by the financial crisis, the latest in a raft
of announcements showing the oil sands sector on the rebound.

Canadian Natural said it will buy 50 percent of privately
held North West Upgrading Inc, which plans to build an upgrader
near Edmonton, Alberta, for an undisclosed sum.

The two companies will apply to take advantage of an
Alberta program aimed at stimulating processing of its vast oil
sands within the province, rather than shipping the resources
and jobs elsewhere.

They hope the government will supply 75 percent, or 37,500
barrels a day, of the raw bitumen for the plant from volumes it
will take in from developers in lieu of cash royalties.

Canadian Natural, one of Alberta’s largest producers of
heavy oil and oil sands, would supply the rest.

“We’re planning for startup in 2013, and one of the things
we have to do is secure the feedstock, so we’re making a
proposal to the Alberta government to process their bitumen
royalty volumes,” North West Chairman Ian MacGregor said.

If all the pieces fall into place, construction could start
in 2011, MacGregor said.

The companies gave no cost estimate for the plant, which is
designed to turn extra-heavy crude into low-sulfur diesel fuel
and other petroleum products.

North West had previously said the plant would process
231,000 barrels a day, starting with a 70,000 barrel a day
phase costing about C$4 billion ($3.8 billion).

That capacity is made up of 50,000 of raw bitumen and the
rest light fuel used to move the crude in pipelines.

North West deferred construction plans as the credit crisis
took hold in 2008. It said last year that the Alberta
government’s bitumen-in-kind proposal had the potential to put
the project back on track.

“It’s a pretty good strategic move for Canadian Natural,
because they are taking a long-term view on protection in terms
of where heavy oil versus light oil differentials end up
being,” analyst Chris Feltin of Macquarie Securities Canada
said.

Over the past two years, the price spread between the two
grades of crude has been narrow, due to high demand for the
thicker oil from U.S. refineries in the Midwest and Gulf Coast,
hurting profit margins for upgraders.

However, as more oil sands projects in Canada and heavy
crude developments around the world start up, the discount
could increase again, Feltin said.

OIL SANDS REVIVAL

In the past two weeks, several companies have announced
they are proceeding with oil sands projects in the first flurry
of activity since the financial crisis forced the deferral of
as much as C$90 billion worth of investments in the sector.

ConocoPhillips (COP.N: ) and Total SA (TOTF.PA: ) will proceed
with the second phase of their Surmont project, Husky Energy
Inc (HSE.TO: ) and BP Plc (BP.L: ) are nearly ready to go ahead
with their C$2.5 billion Sunrise venture, and Canadian Natural
aims to approve the expansion of its Horizon oil sands project
and construction of its Kirby development by year-end.

Also on Thursday, Enbridge Inc said it will spend C$250
million boosting pipeline capacity to the Christina Lake,
Alberta, oil sands project run by Cenovus Energy Inc (CVE.TO: )
and ConocoPhiillips. [nN28232558]

The proposed upgrading plant would use gasification to
convert the heaviest parts of the bitumen into hydrogen to cut
the need for natural gas in the processing. Carbon dioxide
would be piped to old oil fields to boost production there.

The transaction is expected to close later this year.

Canadian Natural shares were off 72 Canadian cents, or 1
percent, at C$69.17 on the Toronto Stock Exchange, amid a
broad-based selloff.

Stock Investing

($1=$1.06 Canadian)
(Editing by Janet Guttsman and Rob Wilson)

UPDATE 4-Canadian Natural buys into oil sands upgrader