Husky Energy has agreed to reduce the price of gas it supplies to Cnooc Limited from the Liwan 3-1 and Liuhua 34-2 fields offshore China.
Calgary-based Husky announced on Tuesday that it has signed an agreement with CNOOC to accept a price of between C$12.50 ($9.54) and C$15 ($11.45) per thousand cubic feet. The new rates are lower than $11 to $13 Husky was guaranteed under a previous contract. The price adjustment is effective November 20, 2015 and the settlement of outstanding payments is calculated from that date, Husky said.
The new price agreement brings to an end the dispute between the two parties. Earlier this year, Husky had threatened to take legal action against CNOOC if a satisfactory outcome was not obtained.
"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," said Husky's CEO Asim Ghosh. "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."
Gross take-or-pay volumes from the fields remain unchanged in the range of 300-330 million cubic feet per day (mmcf/day). Liquids production, net to Husky, is also expected to remain in the range of 5,000-6,000 barrels per day.
"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," said Ghosh.
Plans will get underway to finalise 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/day.
Husky operates and owns 49 percent of the offshore Liwan gas project, offshore Hong Kong. CNOOC owns the remaining stake in the project and also buys gas from Husky through a take or pay contract.
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