Construction of the upgrader's first phase is expected to begin in 2011 and it could be ready for use by 2013. (CBC)

Alberta is one step closer to reaching an upgrader agreement to process bitumen in the province's Industrial Heartland.

Energy Minister Ron Liepert told CBC News Tuesday a preliminary agreement has been reached with North West Upgrading and its part owner, Canadian Natural Resources Ltd., to build a new upgrader in Sturgeon County, north of Edmonton.

A final deal could be signed as early as the fall, the minister said.

The 150,000 barrel-per-day refinery would be built in three stages and include integrated carbon capture and storage technology to cut CO2 emissions.

Construction of the upgrader's first phase is expected to begin in 2011 and it could be ready for use by 2013.

Some 75,000 barrels of bitumen per day from the refinery would go toward Alberta's bitumen royalty-in-kind program, which is meant to boost that sector in the province.

Bitumen, a tar-like substance mined in the oilsands, is first upgraded into synthetic crude oil, which can then be piped to refineries for processing into gasoline, lubricants or other petroleum products.

The upgrader's construction would create 8,000 jobs, and when complete would employ about 500 full-time workers, Liepert said.

Liepert said building a plant like this would keep jobs in Canada, instead of shipping the bitumen down a pipeline to the United States.

Because of the huge costs of building upgrading refineries, many oil companies ship bitumen or heavy oil south via pipeline to American refineries, where it is processed into gasoline, jet fuel and other products.

"First of all, it's construction for over two years … but I think even more important than that is the fact that we've had in the past periodic shortages of diesel in this province," Liepert said.

"This would be a diesel-producing [plant] and would also produce off gases for our petrochemical industry."

Good news for Alberta's oil industry

The upgrader plan is a step in the right direction for a group that wants Alberta to process more of its raw resources.

Without the deal, more upgrading jobs and investments will head south, said Neil Shelly, spokesman for the Industrial Heartland Association.

"We can become very good at pulling bitumen out of the ground and it helps pay the bills with royalties and things like that, but if we diversify a bit more and get into higher value-added products, we need to go down the other path," Shelly said.

With files from The Canadian Press