Dec. 21 (Bloomberg) -- Petrobank Energy and Resources Ltd., the best performing energy stock this year in Canada, plans to spend C$225 million ($226.4 million) to develop an oil-sands project in northern Alberta.

The first commercial phase of the Whitesands project will be designed to produce 15,000 barrels of oil a day from Alberta's tar-like deposits, Chief Executive Officer John Wright said in a telephone interview. Output will eventually be expanded to as much as 100,000 barrels a day, he said.

Calgary-based Petrobank holds patents on a process that lowers construction costs and reduces environmental impacts such greenhouse gas emissions and water consumption, Wright said. The method injects air into a controlled underground fire to enable more of the molasses-like oil to be produced, according to the company's Web site.

This ``will change the way we do business and that's a good thing,'' said Wright, 47. ``It reduces environmental impact, has a much higher recovery of oil and is much more applicable over a broader range of reservoir types.''

Petrobank plans to file an application with government regulators in early 2008 and will be able to drill wells and start producing within a year of receiving regulatory approval, he said yesterday. Petrobank expects to fund the project with cash and debt.

Lower Costs

The cost of the project will be about half of those that use wells to inject steam underground to boost the amount of bitumen, a heavy oil, pumped to surface, Wright said.

Such developments cost about C$28,000 per barrel of productive capacity, Calgary brokerage Tristone Capital Inc. said in an October report.

There is interest in Petrobank's project, said Chris Feltin, an analyst at Tristone who doesn't follow the company or own the stock, which is rated ``outperform'' by the brokerage.

``It has the potential to be a step-change process for industry, but it's too early to tell whether the benefits'' will turn out as predicted, he said in a telephone interview.

A pilot project at Whitesands began in March 2006 and will produce about 3,000 barrels of oil a day by the end of December, Wright said. Whitesands is about 120 kilometers (75 miles) south of Fort McMurray, the hub of Alberta's oil-sands industry.

Whitesands may contain as much as 2.6 billion barrels of bitumen, Petrobank said last month in a statement. Bitumen is processed into refinery-ready crude and used to make fuels including gasoline and diesel.

Colombian Projects

The Canadian company may apply its technological process to heavy-oil fields in Colombia, where it is evaluating projects, Wright said.

Petrobank yesterday rose $1.59 cents to C$56.19 in Toronto Stock Exchange stock exchange trading. The stock has tripled this year, the biggest gain among 73 members of an energy stock index in Toronto that advanced 2.9 percent in 2007.

Petrobank also owns oil and natural-gas wells in Canada and about 77 percent of Petrominerales Ltd., which produces oil in Colombia.

To contact the reporter on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net.

Last Updated: December 21, 2007 16:21 EST