PRODUCTION has started at the Liwan gas project in the South China Sea, a joint venture between China National Offshore Oil Company (CNOOC) and Canada’s Husky Energy.

The Liwan 3-1 field started producing in March, with gas reaching volumes of about 175 million cubic feet per day plus about 7,000 barrels per day of liquids in early May.

Husky had expected gas sales of about 250 MMcfd from the well in March, to rise to about 300 million cubic feet per day in the second half of 2014.

“Short-term customer offtake delays, due to reduced demand from three new gas-fired power plants that are undergoing commissioning/operations startup, will result in some production volumes being deferred,” the company said in its first quarter results announcement, released in May.

Husky chief executive Asim Ghosh said Liwan would be a long-term production, earnings and cash flow contributor for the company.

“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,” he said at the time.

Husky said the startup was achieved during one of the most extreme weather seasons in recent history in the South China Sea

“It was a massive undertaking and is a great achievement for deepwater gas production in the Asia Pacific region,” Mr Ghosh said.

Located about 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.

Husky plans to tie in the Liuhua 34-2 field to the Liwan infrastructure in the second half of 2014, subject to final approvals, it said, with gas from both fields to be processed at the onshore gas terminal at Gaolan and sold to the mainland China market.

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