The project will allow the refinery to process up to 40,000 barrels per day of heavy crude, starting in 2017.
Less than a month ago, Husky announced it was going ahead with two Saskatchewan heavy oil projects with total output of 20,000 barrels per day — part of a plan to boost thermal oil production to 55,000 barrels per day in 2016.
Meanwhile, the first phase of its 60,000-barrel-per-day Sunrise oilsands project is scheduled to start up later this year.
Heavy oil produced in Western Canada tends to trade at a discount to light oil because of its lower quality and distance to market.
That's affected the bottom lines of producers, who get a lower price for their crude. But it's been helpful for refiners, which get a cheaper feedstock.
Integrated companies like Husky that both produce and refine crude are buffered somewhat against volatile swings in commodity prices.
The refinery will maintain its ability to refine light crude oil, meaning it will have the flexibility to respond to shifting market conditions, Husky said.
Engineering work on the project is already started and the equipment upgrades are expected to be done in late 2015 and late 2016.
Husky, controlled by Hong Kong billionaire Li Ka-shing, is involved in oilsands and offshore production, refining and retailing.Suggest a correction