CALGARY – Husky Energy Inc. says natural gas has started to flow from the massive $6.5-billion Liwan offshore project in the South China Sea.
“Liwan is Husky’s largest project to date and places us inside the door of one of the fastest growing energy markets in the world,” CEO Asim Ghosh said in a release.
“It was a massive undertaking and is a great achievement for deepwater gas production in the Asia Pacific Region.”
On a quarterly conference call last year, Ghosh likened the assembly of Liwan’s offshore infrastructure to affixing downtown Calgary’s Palliser Hotel to the top of the Calgary Tower — an enormous undertaking that requires extreme precision.
Husky (TSX:HSE) operates the deepwater infrastructure, while its partner, Chinese state-owned firm CNOOC Ltd., operates the shallow water facilities and onshore gas terminal. CNOOC holds 51 per cent of their production sharing contract, with Husky holding the rest.
The project, about 300 kilometres southeast of Hong Kong, taps into three offshore fields, using shared infrastructure to produce the gas and get it to market.
Gas from the first field, Liwan 3-1, has started flowing, with sales expected to increase to 300 million cubic feet per day in the second half of this year. Initial sales of condensates and natural gas liquids are expected to be between 10,000 and 14,000 barrels of oil equivalent per day.
The second field, Liuhua 34-2, is expected to be tied into the Liwan infrastructure during the second half of 2014, after which sales are expected to increase to 340 million cubic feet per day.
The third field, Liuhua 29-1, is expected to be tied in around 2016-2017, when total gas sales are expected to rise to between 400 and 500 million cubic feet per day.
For the first five years, gas from Liwan 3-1 and Liuhua 34-2 will sell at between US$11 and US$13 per 1,000 cubic feet, while negotiations are underway for the Liuhua 29-1 sales contract.
The project started up amid extremely stormy weather in the South China Sea. Husky expects production from its Asia Pacific segment to come in at the lower end of its 35,000 to 45,000 barrel per day guidance range for this year.
Husky shares rose 36 cents to $32.96 in late morning trading on the Toronto Stock Exchange.
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