Dec. 5 (Bloomberg) -- BP Plc, the world's third-largest oil refiner, and Calgary-based Husky Energy Inc. agreed to form partnerships for production and processing of crude from Alberta's oil sands. Husky's shares rose more than 5 percent.

The two partnerships will spend about $5.5 billion through 2015 to bring oil from the tar-like deposits to market, according to a statement today from the companies. Husky will contribute its Sunrise assets, located in the Athabasca oil-sands region, and London-based BP will provide its Toledo refinery in Ohio, the company's smallest in the U.S.

``It's a bit of a turnaround in strategy for BP, who has not previously been involved with oil sands,'' said Jason Kenney, an Edinburgh-based analyst for ING Wholesale Banking. ``It's a positive thing because of the integrated nature of the project. It's not a minor investment, nor is it over the top in oil sands, which have seen costs escalate.''

BP has been slow to invest in oil sands after rivals including Royal Dutch Shell Plc poured billions of dollars into so-called unconventional oil projects that require higher prices to make them profitable. Husky, which earlier this year bought Valero Energy Corp.'s Lima, Ohio, refinery, said in July that it planned to add more refining capacity as it seeks to expand production from the oil sands.

BP rose 21 pence, or 3.6 percent, to 608.5 pence in London. Husky, which is controlled by Hong Kong billionaire Li Ka-shing, gained C$2.14, or 5.5 percent, to C$41.29 on the Toronto Stock Exchange, the biggest one-day gain since May 2006.

Spending Plans

The oil-sands partnership plans to spend $3 billion on Sunrise through 2012, when initial production of 60,000 barrels of oil a day is expected, the companies said. The refining partnership will spend $2.5 billion through 2015 to increase the capacity of the Toledo refinery to process bitumen from Sunrise.

The oil-sands project, estimated to hold 3.2 billion barrels of oil, will be developed in three stages and may reach output of 200,000 barrels a day by 2015-2020, according to the statement.

BP spokesman Robert Wine said the company will book reserves from the first stage of the project, without specifying how much that will be.

Refinery Expansion

The Toledo refinery will be expanded to process 170,000 barrels of oil a day, including 120,000 barrels of bitumen, the companies said. The plant, with a capacity of 155,000 barrels a day, currently processes about 135,000 barrels a day.

``BP's move into oil sands with Husky is an opportunity to build a strategic, material position, and the huge potential of Sunrise is the ideal entry point for BP into Canadian oil sands,'' BP Chief Executive Officer Tony Hayward said in the statement.

Hayward, who became CEO in May, said in February BP wasn't planning to enter into oil-sands production. The company on Oct. 31 revived plans to spend about $3.8 billion to expand its Whiting, Indiana, refinery to enable the plant to process more Canadian heavy crude oil.

``It's a very interesting change of strategy for BP,'' said Ivor Pether, who helps oversee about $17 billion at Royal London Asset Management. ``Previously, they've always said that there is margin to be earned in oil sands, but they've stated in the past that they could get their margin from refining.''

EnCana-ConocoPhillips Venture

EnCana Corp. in October 2006 announced a similar collaboration with ConocoPhillips, a joint venture that will spend more than $10 billion to boost output from the Calgary- based company's oil sands leases and expand ConocoPhillips plants in Illinois and Texas to process the crude into fuel. Houston- based ConocoPhillips is the second-biggest refiner in the U.S.

Alberta's oil sands contain the largest oil reserves in the world behind Saudi Arabia, the provincial government estimates. A surge in oil prices, which touched a record $99.29 a barrel in New York futures trading on Nov. 21, spurred a boom in oil-sands projects by companies including Shell, Chevron Corp. and Husky.

Canada's National Energy Board expects oil-sands production to reach 2.8 million barrels a day by 2015, up from 1.3 million a day currently.

Husky's refinery in Ohio, which was acquired partly to help process Sunrise crude, will now be devoted to more conventional oil, Donald Ingram, head of Husky's midstream and refined products business, said on a conference call with analysts and reporters. The refinery can process 165,000 barrels of oil a day.

``The Toledo plant is much more complex'' than Lima, Ingram said. Toledo's processing of ``the much heavier bitumen allows for much better economics.''

Husky said it suspended plans for a C$2.3 billion ($2.27 billion) expansion of its Lloydminster upgrader in Saskatchewan, which processes heavy oil for refining into gasoline and other fuel. The company had planned to increase the plant's capacity to 150,000 barrels a day from 80,000 barrels. The expansion remains an option, the company said.

Exxon Mobil Corp., based in Irving, Texas, is the world's largest refiner, followed by The Hague-based Royal Dutch Shell Plc.

To contact the reporters on this story: Sonja Franklin in Calgary at sfranklin6@bloomberg.net; Eduard Gismatullin in London at egismatullin@bloomberg.net.

Last Updated: December 5, 2007 16:25 EST