OREANDA-NEWS. Husky Energy and CNOOC Limited have commenced first production at the landmark Liwan Gas 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," said CEO Asim Ghosh. "It was a massive undertaking and is a great achievement for deepwater gas production in the Asia Pacific Region."

Located approximately 300 kilometres southeast of the Hong Kong Special Administrative Region, the project consists of three fields: Liwan 3-1, Liuhua 34-2 and Liuhua 29-1, which share a subsea production system, subsea pipeline transportation and onshore gas processing infrastructure.

The Liwan 3-1 field has started production, with initial natural gas sales expected to be approximately 250 million cubic feet per day (mmcf/day) gross and increasing to approximately 300 mmcf/day in the second half of 2014. Initial sales of condensates and natural gas liquids from Liwan 3-1 are expected to be approximately 10,000 to 14,000 barrels of oil equivalent per day (boe/day) gross.

The Liuhua 34-2 field will be tied into the Liwan infrastructure in the second half of 2014, subject to final approvals. Production from the Liwan 3-1 field is scheduled to go offline for approximately six to eight weeks to provide for the tie-in of the field.

Following the tie in of Liuhua 34-2, combined gas sales are anticipated to increase to approximately 340 mmcf/day (gross). Natural gas from both fields will be processed at the onshore gas terminal at Gaolan and sold to the mainland China market, with initial gas production covered by fixed-price gas sales agreements.

Total gas sales are expected to rise towards a range of 400 to 500 mmcf/day (gross) with the planned tie-in of the Liuhua 29-1 field in the 2016-2017 timeframe.

Production from Liwan will contribute to the Company's growth this year as per overall guidance. The startup was achieved during one of the most extreme weather seasons in recent history in the South China Sea. Husky expects to achieve the lower end of its Asia Pacific production guidance of 35,000 to 45,000 boe/day.

Husky holds a 49 percent interest in the Production Sharing Contract (PSC) for the Liwan Gas Project and operates the deepwater infrastructure. Its partner CNOOC Limited holds a 51 percent interest in the PSC and operates the shallow water facilities and onshore gas terminal. The first stage of the USD 6.5 billion project connecting the Liwan 3-1 field and work to date to tie in the Liuhua 34-2 field have been completed on budget.

The Company continues to advance a rich portfolio of opportunities in the Asia Pacific Region, including shallow water gas developments offshore Indonesia and exploration prospects offshore Taiwan.