Husky Energy is one the latest crop of operators to start adjusting its strategy in the face of rising project costs and the drop in oil prices, but in terms of its deepwater projects its plans are still progressing largely as previously outlined.
The company has a stake in Statoil’s Bay Du Nord discovery in the Flemish Pass offshore Canada, as well as its Liwan Gas Project offshore China, which is now onstream (see story, page 7). According to CEO Asim Ghosh, Husky will “continue to steer a steady ship through stormy waters. Our strong financial position and resilient portfolio are helping weatherproof our business against current market conditions.”
Husky has a varied portfolio, with other assets including heavy oil and oil sands projects in Canada, but its offshore activity is still pretty significant. The company says rig availability, or rather a lack thereof, means that its South White Rose satellite extension offshore Canada is now expected to start up mid-2015. It also has the Hibernia-formation well beneath its North Amethyst field also due onstream in the second half of the year.
The company says that by the end of 2016, about half of its total production will be from low sustaining capital cost projects. Its two major capital investments are now largely complete, namely Liwan and its Sunrise project, meaning that its 2015 capital budget will be US $3.4 billion ($5.1 Bn in 2014).
On Liwan in the South China Sea production will continue to ramp up, with fixed-price sales gas volumes expected to average between 290-320 MMcf/d in 2015, compared to an average gross production of 200-220 MMcf/d in Q3 2014. Husky’s net share of production from Liwan in 2015 is expected to be 160-195 MMcf/d, with an additional 5,000-7,000 boe/d of liquids. Husky says that Liwan gives it a full cycle rate of return of about 10%.
Offshore Indonesia, meanwhile, it also has four natural gas projects being advanced in the Madura Strait, with the company recently awarding US $1.18 billion contract to Bumi Armada for an FPSO to support development of the liquids-rich BD shallow-water field (due onstream in 2017).
In the Atlantic region offshore Canada, an estimated production of 15,000 b/d net from the South White Rose satellite extension by mid-2015 will see the company achieve (assuming a flat $60 WTI price over the life of the project), full cycle rates of return of approximately 15%, it says.
Interestingly, Husky says it is continuing to advance an appraisal program to assess the commercial potential of discoveries in the Flemish Pass offshore Newfoundland and Labrador.
Husky and its partner Statoil have started an 18-month appraisal and exploration drilling program in the Flemish Pass, including the area of the Bay du Nord find. Husky holds a 35% working interest in the discovery, which partner and operator Statoil has high hopes for. Again, however, based on Statoil’s recent decisions with other large potential field developments, Bay Du Nord is likely to be pencilled in for considerable further appraisal work before any Final Investment Decision is considered. Conceptual development options for the field at this stage have included the full range of harsh environment floating production solutions.
However Husky appears positive on Bay Du Nord, saying that subject to further ongoing appraisal and evaluation, it expects to progress the discovery “towards commercial production”.