Alberta Premier Rachel Notley said her government had signed a letter of intent for the loan guarantee to private company Value Creation Inc [VALCT.UL], which intends to make a final investment decision by year-end on building the facility, near Edmonton.
Partial upgrading reduces the thickness of oil sands bitumen, allowing it to flow through pipelines without having to be diluted. Alberta announced its strategy nearly a year ago to offer up to C$1 billion in loan guarantees and grants to spur construction of such facilities.
The move is one of a series of steps the left-leaning New Democratic Party has announced to clear chronic bottlenecks of Alberta's oil production, which has expanded faster than pipeline capacity. Notley's government, which faces an election this spring, has also ordered mandatory curtailments to clear a storage glut and said it planned to buy trains to move more oil.
Record-large discounts on prices for the province's heavy oil last year, mainly the result of problems shipping it, have shrunk profits for many oil producers and damaged the Canadian economy.
(Reporting by Rod Nickel in Winnipeg, Manitoba; editing by G Crosse and Steve Orlofsky)
