(Adds industry comment)
Feb 26 (Reuters) - Canada's biggest oil-producing province, Alberta, said on Monday it will spend up to C$1 billion ($788.7 million) in grants and loan guarantees to spur construction of partial upgrading facilities for its heavy crude.
Partial upgrading reduces the thickness of oil sands bitumen, allowing it to flow through pipelines without having to be diluted, cutting costs and increasing the volume that can move.
Alberta Premier Rachel Notley said the funds will spread over eight years, starting in the government's 2019-20 fiscal year. The money may leverage the building of two to five partial upgrading facilities worth some C$5 billion in private investment, she said.
The step is part of a larger strategy by the Alberta government to squeeze more value from energy resources.
The move is in line with recommendations from Canadian Association of Petroleum Producers (CAPP), one of the largest industry groups, and may spur construction of new facilities, Ben Brunnen, CAPP's vice-president of oil sands, said.
"We could see this move the needle for some companies," Brunnen said.
Alberta's oil producers are under pressure from tight transportation capacity in the landlocked province that has created big price discounts for the heavy crude compared to benchmark West Texas Intermediate light oil. ($1 = 1.2678 Canadian dollars) (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Tom Brown and Susan Thomas)