Husky Increases Stake in Indonesian Gas Fields

Husky Energy has been reached to purchase a 68.7 percent interest in a production sharing contract (PSC) from its partner in the Madura Strait, offshore Indonesia. The US$50-million transaction gives Husky a 100 percent interest in an exploration block where two natural gas fields have been discovered. Husky plans to develop the fields and pursue additional opportunities as part of its international growth strategy.

The Madura block is located about 40 kilometers north of East Java and covers 2,794 square kilometers of exploration acreage. Nine wells have been drilled on the block since 1984, resulting in the two discoveries which are entitled Madura BD and MDA.

The larger of the two gas fields is Madura BD. It has probable reserves of 212 billion cubic feet (bcf) of natural gas and 12.2 million barrels (mmbls) of natural gas liquids (before host government share) based on the current term of the PSC. Husky anticipates that an additional 303 bcf of natural gas and 10.8 mmbls of natural gas liquids resources within the same field will be reclassified as probable reserves upon signing of an extension to the term of the PSC with the Indonesian government.

The proposed development plan for the Madura BD gas field includes the installation of an unmanned production platform, a nine kilometer pipeline to new gas processing facilities to be constructed on Kambing Island and a 45 kilometer pipeline to market. Peak production is estimated to be approximately 80 million cubic feet per day. After completion of the PSC extension and finalization of a gas supply contract, the development is expected to come on stream within approximately three years.

The MDA field has discovered resources of 150 bcf. Husky will pursue future opportunities for commercializing the MDA field, which could potentially be produced into the East Java gas pipeline. Husky has identified several exploration prospects in the PSC area that it plans to pursue.

"The Madura purchase is another step forward in Husky's plans to expand its international gas exploration and development interests," said Mr. John C.S. Lau, President and Chief Executive Officer, Husky Energy Inc. "The Madura PSC strategically enhances our investments in Southeast Asia and has the potential to meet an increasing demand for natural gas in East Java."

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