* Project would allow up to 40,000 bpd of Canadian heavy crude processing
* Project targeting 2017 completion if Husky moves forward
* Canadian heavy crude at $23 per-barrel discount to U.S. crude
By Kristen Hays
HOUSTON, Aug 7 (Reuters) - Husky Energy is considering a revamp of its Lima, Ohio, refinery to process up to 40,000 barrels per day of Canadian heavy crude, a spokesman said on Wednesday.
Canada's No. 3 integrated oil company has sanctioned preliminary engineering design for the project in the third quarter this year that, if approved, would revamp existing process units and add new equipment to handle heavy crude by 2017 at the 155,000 bpd plant.
The refinery now processes light-sweet crude, and it would maintain that capability, spokesman Mel Duvall said.
Several refiners have already conducted similar major conversion projects in recent years at U.S. refineries in the Northern Tier so the plants can process more Canadian heavy crude, which trades at a discount to the U.S. crude benchmark, West Texas Intermediate.
On Wednesday Canadian heavy for September delivery was at a $23 per barrel discount to U.S. crude prices, which closed at $104.37 on the New York Mercantile Exchange on Wednesday.
The latest such project is BP Plc's $4 billion revamp of its 405,000 bpd refinery in Whiting, Indiana - the largest in the U.S. Midwest. When finished, the plant will be able to process up to 350,000 bpd of Canadian heavy crude - up from 80,000 bpd.
Marathon Petroleum Corp spent $2.2 billion on a revamp that added 80,000 bpd of Canadian heavy crude processing capability to its 120,000 bpd Detroit refinery last year.
And Phillips 66 in November 2011 finished a $4 billion coker and refinery expansion at its 333,000 bpd joint-venture refinery in Wood River, Illinois that increased heavy crude capacity by up to 110,000 bpd.
Husky did not disclose an estimated cost for such a project at the Lima refinery.
Valero Energy Corp, which sold the Lima plant to Husky for $1.9 billion in 2007, had considered a $2 billion heavy crude conversion project at the refinery as part of a possible joint venture with Canada's EnCana Corp.
The companies dropped the idea in late 2005, as Valero decided the cost to revamp the refinery was too high and other potential projects would bring better returns, according to a statement at the time from Chief Executive Bill Klesse.
Husky has such a joint venture with BP at their joint 135,000 bpd refinery in Toledo, Ohio - about 80 miles (128.7 km) northwest of Lima - which BP operates.
The Toledo plant is undergoing work so it can swap out existing Canadian heavy crudes it processes so it can run crude produced at Husky's 60,000 bpd Sunrise oil sands project, slated to start up next year.
On Monday, Houston engineering and construction firm KBR announced that it had secured a contract to do such a revamp job on a Midwest light-sweet crude refinery, but Duvall declined to say KBR was the firm on Husky's potential project.
"It is not our normal practice to issue releases or provide statements in regards to the awarding of engineering contracts," Duvall said.