Husky Energy reported Sunday that the company and its joint venture partner CNOOC Limited have commenced first production at Liwan Gas Project in the South China Sea, offshore China. The project, located approximately 186 miles (300 kilometers) southeast of the Hong Kong Special Administrative Region, consists of the Liwan 3-1, Liuhua 34-2 and Liuhua 29-1 fields. The development consists of a subsea production system, a subsea pipeline transportation and an onshore gas processing infrastructure.

Initial natural gas sales from the Liwan 3-1 field are expected at around 250 million cubic feet per day (MMcf/d) gross before rising to approximately 300 MMcf/d in the second half of 2014, while initial sales of condensates and natural gas liquids are likely to be approximately 10,000 to 14,000 barrels of oil equivalent per day (boed) gross.

Meanwhile, 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 from the Liwan project are expected to increase to approximately 340 MMcf/d (gross). Natural gas from both fields will be processed at the onshore gas terminal at Gaolan and sold to China, with initial gas production covered by fixed-price gas sales agreements. Total gas sales are expected to increase to between 400 and 500 MMcf/d (gross) with the planned tie-in of the Liuhua 29-1 field in 2016-2017.

"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 ... It was a massive undertaking and is a great achievement for deepwater gas production in the Asia Pacific Region," CEO Asim Ghosh said in a company release Sunday.

Husky holds a 49 percent interest in the Liwan Production Sharing Contract (PSC) and operates the deepwater infrastructure, while partner CNOOC, with a 51 percent stake in the PSC, operates the shallow water facilities and onshore gas terminal. The first stage of the $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.