Canada-listed Husky Energy Inc., a unit of Hutchison Whampoa Ltd. (00013.HK), plans to make its Gaolan onshore gas plant — part of the South China Sea Liwan gas project — a regional hub for future projects.
“The Gaolan gas plant is very large and it is capable of handling gas and additional fields… There will be additional fields that [China National Offshore Oil Corp.] CNOOC Ltd. (00883.HK) fields only, [but are] tied into the central platform and go directly to the onshore gas plant, too,” Robert Hinkel, chief operating officer of Husky Energy Asia Pacific, said Tuesday.
“CNOOC is operating two shallow-water fields that Husky is not partnered in it. They are also coming through the same facilities. We hope to make the shallow platform and the onshore gas platform a regional hub for future discoveries.”
The onshore gas plant and the central platform are jointly owned by Husky and CNOOC. The plant will extract condensates and natural gas liquids (NGLs) and compress and move the Liwan gas to commercial markets. The condensates and NGLs will be sold separately, Hutchison Whampoa said Sunday.
Husky expects to recover about US$800 million in exploration costs in the first 18 months of production, it said.
Husky Energy and CNOOC have started initial production at the Liwan project. 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 gross sales of initial natural gas expected to be about 250 million cubic feet per day (mmcf), increasing to about 300 mmcf per day in the second half of 2014. Total gas sales are expected to rise towards a gross range of 400 to 500 mmcf per day with the planned tie-in of the Liuhua 34-2 field and Liuhua 29-1 field in the 2016-2017 timeframe. The 3-1 field is projected to have an 18-year life-cycle.
It has been 10 years since Husky first drilled in the area, and “it is still promising in the South China Sea… There could be additional oil and gas fields to be discovered [in the future],” Hinkel said.
“We have drilled 21 wells in the South China Sea and have three commercial discoveries, performing higher than an industry average at 10 percent,” he added. South China Sea projects make up 10 percent of Husky’s production, 20 percent of its net cash flow this year and 15 percent of its earnings, Hinkel said, adding that Asia is becoming a larger and larger part of Husky’s portfolio.
“There is no new discovery for Husky at this moment… We will continue to grow the business here as the Wenchang oil field in Hainan … [gives Husky confidence] to make ways in the South China Sea,” he said.
Husky has a 40 percent interest in the Wenchang project with CNOCC Group, which has produced more than 137 million barrels of light, sweet crude oil.
Other than the Liwan gas project, Husky also has deep-sea projects in Indonesia and Taiwan. “We have started doing earthquake detection in our 10,000 square kilometer field in Taiwan to be developed with Taiwan’s CPC Corp. We signed the contract in December last year,” he said.
Each of the two Indonesian projects located in the Madura Strait will be allocated US$100 million for exploration. “One of them is in shallow water — that is operated by CNOOC — while the other one is fully owned by Husky, which has seven discoveries with ongoing evaluation,” he said.
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