Husky, CNOOC Ink Deal to Lower Gas Prices from Liwan Gas Project off China

Husky Energy reported Tuesday that its China subsidiary has signed a Heads of Agreement (HOA) with CNOOC Ltd. and relevant companies to lower prices of natural gas piped from the Liwan 3-1 and Liuhua 34-2 fields in the South China Sea to $9.54-11.44 (CAD 12.50-15.00) per thousand cubic feet (mcf) at current exchange rates.

"Long term fundamentals remain strong for natural gas demand in China. The price adjustment will allow Husky and CNOOC to maintain their market share in a competitive gas market ... We reached this agreement in the spirit of the longstanding relationship between Husky and CNOOC that brought to life the first deepwater development offshore China," Husky CEO Asim Ghosh said in the press release.

There will be no change in the gross take-or-pay volumes from the fields, which remains in the range of 300-330 million cubic feet per day (MMcf/d), while liquids production, net to Husky, is also expected to stay in the range of 5,000-6,000 barrels per day. The price adjustment under the HOA will be effective Nov. 20, 2015 and the settlement of outstanding payments will be calculated from that date.

Meanwhile, both firms planned to finalize the commercial and development approach to tie the Liuhua 29-1 field into the Liwan infrastructure. Liuhua 29-1 gross gas sales volumes are expected to add approximately 80 MMcf/d.

"Husky and CNOOC plan to further deepen their cooperation and have undertaken to jointly create more value with the advancement of the Liuhua 29-1 gas field," Ghosh added.

Husky owns a 49 percent interest in the Production Sharing Contract (PSC) for the Liwan Gas Project and operates the deepwater infrastructure, while partner CNOOC holds a 51 percent interest in the PSC and operates the shallow water facilities and the onshore gas terminal.

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