For oil, state soon may look to Canada

Maybe you never think of where it comes from, but there's probably West Texas sweet in your car's gas tank, or Saudi light.

And soon you may have Alberta tar.

Many Indianapolis drivers will burn more gasoline made from Canadian tar sand, a move that might help stabilize pump prices a bit, once London oil giant BP upgrades a massive oil refinery near Gary.

The company's BP America unit Wednesday pledged $3 billion over four years, starting in 2007, to reconfigure its 1,400-acre plant at Whiting for more Canadian crude while vulnerable deliveries diminish from Texas and the Middle East.

Known as BP Whiting, the largest U.S. inland refinery will be reworked to run on 90 percent Canadian heavy crude piped 1,600 miles to Northwest Indiana from near Fort McMurray, Alberta.

"Energy security is one of the key elements," said BP Whiting spokesman Tom Keilman. "This will give us more capability to refine more crude from the oil sands."

Canada, already the United States' largest crude supplier, is stepping up output at a time when Americans nationwide have grown more concerned about energy independence.

Texas' oil reserves are tapping out. And U.S. supplies can appear at risk from Middle East political turmoil as well as the storm-prone Gulf of Mexico. After Hurricanes Katrina and Rita lashed the Gulf Coast last year, gas prices shot above $3 a gallon nationwide.

Those record gasoline prices, though, have set off an oil boom in Canada's Alberta province. Oil geologists say some 85,000 square miles of sand beneath forests of spruce and fir are loaded with oil tar. It's the largest proven oil reserve after Saudi Arabia.

Plans are afoot to invest as much as $110 billion on the oil sands. In terms of spending, it would be the world's largest industrial development. It would bring sand to the surface, remove the grit, bury waste in a landfill and pump the resulting crude oil to refineries.

China is considering its own pipeline from Alberta to Canada's Pacific coast, though the United States is Alberta's largest customer. Daily, about 1.7 million barrels of Canadian crude enter the United States, or about 9 percent of total U.S. consumption.

Developments now planned in Alberta could double Canada's flow to the United States. If that happens, Canada would sell more oil to the U.S. than Saudi Arabia and Venezuela combined.

Once the Whiting project is completed, Keilman said, Canada will supply up to 90 percent of BP Whiting's crude, compared with about 30 percent now. The plant daily refines 16 million gallons of petroleum products, including about 9 million gallons of gasoline.

The new equipment will raise the 1,300-employee refinery's gasoline output about 15 percent, Keilman said, and could help ease the price spikes that result from shortages in crude supplies.

BP Whiting will continue output over the next four years without a break while the new technology is installed, Keilman said.

"It doesn't mean Indianapolis is going to be in a better position than Chicago if there's a catastrophe that interrupts oil supplies from the Gulf," said Maggie McShane, executive director of the Indiana Petroleum Council, a trade group. "It does mean our reliance as a region on a source of petroleum is better."

BP is No. 3 in the Indianapolis gasoline market, accounting for about 20 percent of sales. Shell, which operates a refinery at Wood River, Ill., is second behind Marathon, which produces in Illinois near Terre Haute. Those refineries and two smaller units in Ohio and Kentucky supply about three-fourths of the Midwest's gasoline, McShane said.

The Whiting project will be completed in 2011 using $450,000 in training grants and $1.2 million in tax credits pledged Wednesday by Indiana Gov. Mitch Daniels.

Refiners favor Texas sweet, light crude -- oil of low sulfur content and low viscosity, making it relatively easy to turn into gasoline. Canada's high sulfur load must be refined out. Gasoline and diesel fuel no longer can have high sulfur content in the United States because the sulfur produces toxic exhaust when burned in engines.

BP Whiting's $3 billion upgrade, which will employ 2,500 construction workers, is considered one of the biggest industrial investments in the U.S. in several years. It also will be the refinery's biggest change since its start in 1888 by John D. Rockefeller's Standard Oil of Indiana.