Newfoundland and Labrador Refining, in which Desmond has a 20.8% stake, has commissioned a $7m feasibility study on its proposal to build a refinery in the Placentia Bay region of eastern Canada.

The refinery project was conceived by Canadian exploration company Altius, which is the largest individual investor in NL Refining. The other shareholders in the business are Scottish mining millionaire Harry Dobson, who is a long-time associate of Desmond, and ex-Salomon Brothers executive Stephen Posford.

Altius president Brian Dalton said the feasibility study began two weeks ago and should be finished by October.

The eight-month study will examine a number of factors, including the likely demand for the facility and the financial viability of such a large plant.

"We've done some initial scoping. The first part of the study is marketing, " said Dalton.

The Placentia Bay refinery would primarily process crude oil from the US and from the oilfields off the Newfoundland and Labrador coastline.

NL Refining envisages the facility handling up to 300,000 barrels of oil per day.

Placentia Bay was chosen because of its ready access to the major energy markets along the east cost of America.

Dalton said the project had the support of the provincial government in Newfoundland, which was keen to establish another refinery in the region. The province has just one refinery at the moment.

Dalton said NL Refining was hopeful that the refinery could be operational within three years if the feasibility study made the case for going ahead with it.

The estimated cost of the project would be "around about $2bn, " he added.

NL Refining does not anticipate too much difficulty in raising the necessary funding required if the venture does get the go-ahead. "When the project is right, the money shows up, " said Dalton.

He said the backing of highprofile investors such as Desmond, Dobson and Posford, who was chief executive of investment bank Salomon Brothers' European operations, was an indication of the quality of the refinery proposal.

"I guess between Mr Dobson and Mr Desmond, there's some good financial depth there, " he added.

Altius is involved in a copper mining venture with Dobson, who introduced Desmond to the Newfoundland project.

The two men are shareholders in Celtic football club in Glasgow, and both turned a profit from investments in Manchester United, in which they had acquired stakes prior to US billionaire Malcolm Glazer's successful takeover approach.

Altius owns 37.5% of NL Refining. The remaining 62.5% is split equally between Dobson, Desmond and Posford.