SIOUX FALLS, S.D. - Two major energy companies will spend $7 billion to nearly double the amount of crude flowing through a pipeline from Canada's tar sands to the U.S. Gulf Coast, highlighting intense demand for crude that was once too expensive to pull from the ground and process.

Alberta, Canada-based TransCanada Corp. and Houston-based ConocoPhillips Co. said Wednesday they will add 500,000 barrels of daily capacity to the Keystone Pipeline, a 1,980-mile project connecting Hardisty, Alberta with a delivery point near existing terminals in Port Arthur, Texas.

Demand for oil has driven the price for a barrel of oil up 80 percent above where it was a year ago and up about 40 percent from the start of the year.

That includes demand for crude from oil sands, previously an afterthought in the crude market.

Unlike the benchmark light, sweet crude, oil extracted from the Alberta oil sands of northern Canada is a dirty, bottom-of-the-barrel substance that is more difficult to refine into gasoline and diesel.

U.S. refiners have been converting plants to handle the thicker Canadian crude as supplies for lighter crude continue to tighten, much to the consternation of environmental groups.

The Canadian province of Alberta is home to vast reserves of oil sands. Industry officials estimate the region could yield as much as 175 billion barrels of oil, which would make Canada second only to Saudi Arabia in crude oil reserves.

In western Canada, oil sands production has grown fourfold since 1990 and exceeded 1.2 million barrels a day last year, according to the Canadian Association of Petroleum Producers. That could grow to 3 million barrels a day by 2015 - not an insignificant amount, given that the current global output of oil is roughly 85 million barrels a day.

Gulf Coast refiners have traditionally processed crude oil from Mexico and Venezuela. But output from the Mexican Cantarell oil field is in decline and many Venezuelan contracts will change over the next couple years as the South American country shifts its oil from the U.S. to other markets across the world, said Russ Girling, president of TransCanada's pipelines division.