Calgary-based Canadian Natural Resources Ltd. is buying into a proposed technologically advanced plant to upgrade bitumen from the Alberta oilsands and produce low-sulphur diesel fuel.

The oil and gas producer said Thursday it plans to buy 50 per cent of the assets in North West Upgrading Inc., another Calgary company, and form a partnership to operate the refinery, planned for northeast of Edmonton.

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Hydrogen can be used to turn bitumen into refinable crude oil, as is done at this plant in Long Lake, Alta., operated by Calgary-based Nexen Inc. ((CBC))

The project still requires the approval of the Alberta government.

Canadian Natural didn't provide an estimated cost for the project or how much it would spend to buy the stake in North West Upgrading, a privately held company formed in 2004.

Canadian Natural is one of the largest companies in Canada's oil industry and operates the Horizon oilsands project north of Fort McMurray.

"We are also supporting the Alberta government's efforts to build upgrading and refining capacity in Alberta, creating additional employment and wealth opportunities for Albertans," Canadian Natural CEO Steve Laut said in a statement.

The plant would be what's known as a merchant upgrader, supplying its service to any operator in the oilsands, or to the Alberta government if the province someday decides to require oilsands companies to pay royalties in the form of bitumen.

The facility, proposed for Redwater, Alta., would be able to process 50,000 barrels per day of bitumen.  Canadian Natural would supply 12,500 barrels per day of that.

The refinery is also designed to reduce environmental impacts usually associated with upgrading bitumen. It will capture carbon dioxide for use in oil extraction and turn some of the bitumen into gas to reduce the need for natural gas for fuel in the heating process.

Its backers argue it could eventually contribute to the development of the hydrogen economy by providing a platform for research into the increased use of hydrogen for oilsands upgrading.

With files from The Canadian Press