TransCanada and Phoenix, a subsidiary of PetroChina, signed an equity deal to build the proposed $3 billion Grand Rapids pipeline project from Fort McMurray to Edmonton.
The companies said crude oil production in Alberta province was outgrowing existing infrastructure.
"Given that transportation in the Athabasca (oil sands) region has become a bottleneck, working with TransCanada to build a pipeline system in a timely fashion is crucial to implement our development strategy," Zhiming Li, Phoenix's president and chief executive officer, said in a statement.
The pipeline will have the capacity of 900,000 barrels of crude oil and 300,000 barrels of diluents, a type of thinner to ease tar sands transport, per day.
TransCanada said the final route for the Grand Rapids pipeline would be determined with input from aboriginal communities. A rival project, Northern Gateway, has been met with opposition because of environmental issues associated with tar sands pipelines.
Subject to regulatory approval, the pipeline could enter service by 2017.