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Dec. 5, 1:30 p.m. --      Husky Energy has reached an agreement with British oil producer BP PLC to acquire a half-share in BP’s Toledo oil refinery, the company announced Wednesday.    As part of the agreement,  BP will buy a half-share in the Sunrise field in Alberta, Canada, operated by Husky Energy.    Financial terms of the deal were not disclosed.     The agreement is good news for the Lima Refinery, according to a statement released by Husky.    “Securing Toledo refinery capacity for Sunrise bitumen allows Husky to proceed with an efficient, value-added conversion of the Lima refinery to process heavy oil feedstock,” said John C.S. Lau, president and chief executive officer of Husky Energy Inc. “The conversion of the Lima refinery will maximize the value of Husky’s future heavy oil production.”    At Husky’s Lima refinery, the company plans to move forward with the repositioning of its 160,000 barrel per day refinery to process heavier feed stocks. Engineering work has commenced on a number of reconfiguration options. The transaction with BP creates additional flexibility which will allow Lima to be optimized for Husky’s expanding heavy oil production, according to the Husky statement.    Following the review of Husky’s integrated heavy oil and bitumen production strategy, the expansion of the Lloydminster Upgrader has been deferred but remains an option in the future.     The Husky-BP development will be comprised of two joint 50/50 partnerships, a Canadian oil sands partnership to be operated by Husky and a U.S. refining LLC to be operated by BP. Husky and BP will each contribute assets of equal value to the business. Husky will contribute its Sunrise asset located in the Athabasca oil sands in northeast Alberta, Canada and BP will contribute its Toledo refinery located in Ohio, USA. The transaction, which is subject to the execution of final definitive agreements and regulatory approval, is expected to close in the first quarter of 2008 and with effective date Jan. 1, 2008.    “Toledo and Sunrise are excellent assets,” BP said. “In addition this deal will help guarantee a supply of advanced transportation fuels to major North American markets from Toledo.”     BP shares gained 3.6 percent to 608.50 pence ($12.55) on the London Stock Exchange.     Lau noted the transaction completes Husky’s Sunrise Oil Sands total integration with respect to upstream and downstream solutions.     “Husky is extremely pleased to be partnering with BP, a world class global E&P and Refining company. The joint venture will provide better monitoring of project execution, costs and completion timing for this mega project development,” the Husky CEO said.     BP’s move into oil sands provides BP with an opportunity to build a strategic, material position.    “The huge potential of Sunrise is the ideal entry point for BP into Canadian oil sands,” said Tony Hayward, BP’s group chief executive. “In addition this deal will help guarantee a supply of advanced products to major North American markets from Toledo which is a flexible and advantaged site.”     The Sunrise asset is located 60 kilometers northeast of Fort McMurray, Alberta, Canada adjacent to Imperial Oil’s Kearl Lake project and Suncor’s Firebag development. The Sunrise leases included in this transaction cover approximately 42,000 acres and are estimated to contain discovered resources of approximately nine billion barrels. On Dec. 31, 2006, Husky estimated the Sunrise oil sands reserves to be 3.2 billion barrels (probable and possible reserves of 1 billion barrels and 2.2 billion barrels, respectively).      According to the Husky statement, the Sunrise Oil Sands Partnership will proceed with a three-phase development targeting production of the first phase of 60,000 barrels per day in 2012. Joint investment up to 2012 is estimated at around $3 billion. Estimated production of 200,000 barrels per day is scheduled by 2015-2020. Front end engineering is well advanced with corporate sanctions expected in 2008. Site preparation work, including clearing of the various development areas and the rough grading of the central plant site, field facility roads and well pads is ongoing.     The oil sands partnership, headquartered in Calgary, will be responsible for sourcing fuel gas and diluents and for delivering diluted bitumen to a pipeline terminal at Hardisty Alberta. Currently there are pipeline facilities to transport crude volumes from Hardisty to the Toledo refinery.     “Husky will have an immediate benefit in terms of earnings and cash flows from the refining operations,” Lau said. “The partnership solidifies Husky’s position in the U.S. refining market and allows both parties to have better project execution and control on the development of the Sunrise lease and the conversion of the Toledo refinery.”     The Toledo Refinery, has a crude distillation capacity of 155,000 barrels per day. Current throughput is approximately 135,000 barrels per day including 60,000 barrels per day of heavy sour crude oil. Products produced include low sulphur gasoline, ultra low sulphur diesel, aviation fuels, propane, kerosene and asphalt. It is located in one of the largest energy consumption regions of the U.S.    The refining LLC, headquartered in Toledo, plans to expand bitumen processing capacity at Toledo to 120,000 barrels per day with total refinery throughput of approximately 170,000 barrels per day by 2015. Joint investment of around $2.5 billion is expected up to 2015.    Husky will have first call on up to 50 percent of the Toledo Refinery capacity for Husky’s share of Sunrise bitumen production. The refining LLC will initially market 100 percent of the refinery products. Upon commencement of Sunrise deliveries, Husky will have the right to market its share of the refinery products.

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