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The Husky Energy tower in Calgary, Monday, Feb. 1, 2010.Jeff McIntosh/The Canadian Press

Husky Energy Inc. was once on the verge of spinning off its $6.5-billion (U.S.) Liwan natural gas project in the South China Sea as the flagship asset of an Asia-focused company.

But one of Asim Ghosh's first orders of business when he became chief executive officer at Husky in 2010 was to scrap that plan, saying that the cash flow it would eventually kick off will go a long way to funding the company's other big-ticket projects.

With production now under way at Liwan, Husky's largest project to date, the company's list of developments that will require capital spending has only grown.

Meanwhile, by selling gas into the Chinese market under a lucrative long-term contract, Husky has jumped ahead of a crowded field of liquefied natural gas proponents on the British Columbia Coast that also hope to eventually serve Asia with North American supplies.

"There's a hell of a lot more in the hopper, and the returns from China will enhance our financial capability for continued transformation of the company," Mr. Ghosh, 66, said in an interview at Husky's Calgary headquarters, where the company had put up a banner to celebrate the Liwan startup.

"It's been a good decision to keep it in-house," said the former cellular-phone executive.

A joint venture with China's state-owned CNOOC Ltd., the deep-water project includes three fields about 300 kilometres southeast of Hong Kong. The partners delivered seven years after the initial discovery without the cost overruns that have plagued energy developments around the world in recent years.

A major benefit to Husky, the Canadian energy producer that is controlled by Hong Kong billionaire Li Ka-shing, is the price for the gas at Liwan, which can be as much as three times than in the North American futures market.

The price, at $11-$13 (U.S.) per thousand cubic feet under a long-term contract, will allow Husky to recoup its exploration costs of $800-million in 18 months, it said. By contrast, gas on the New York Mercantile Exchange currently sells for about $4.35 per thousand cubic feet.

That degree of price difference is driving grand plans among oil majors, foreign national oil companies and smaller players for multibillion-dollar LNG plants to supply Asian markets. Many of the proponents have amassed large tracts of acreage in northeast B.C. as a source of supply.

A combination of high capital costs, a tight labour supply and tough negotiations with potential Asian LNG buyers has so far kept those planning projects from making final investment decisions.

Husky has no desire to join the Canadian LNG rush, especially now that it is selling the Liwan gas into the market, Mr. Ghosh said.

"LNG, per se, is what I would call a big boy's game, and if the right niche project would come along, I would look at it. But you've got to be true to yourself," he said

"The reason LNG is a big boy's game is because LNG projects, to be effective, need to be part of a global system. Because of the large capital involved, people want long-term commitments. If they want long-term commitments you need security of supply – if one area goes down you can pick it up in another area of the world."

Among Husky's other projects are the Sunrise oil sands venture with BP PLC, due to start up before the end of the year and follow-up drilling to the Bay du Nord oil find in the Flemish Pass off the Newfoundland coast, the world's largest discovery last year.

Husky and its partner, Norway's Statoil ASA, plan to drill at least one more well on that prospect this year, he said.

Initial output from the the Liwan 3-1 field, where water depths are up to 1.5 kilometres, is 250 million cubic feet a day, and that is slated to increase to 300 million a day in the second half of this year.

The field also produces up to 14,000 barrels of condensate and gas liquids a day, said Husky.

The adjacent Liuhua 34-2 field will be tied into the Liwan production facilities after midyear, which will mean output from the first project will be shut off for up to eight weeks.

Once the second field is connected, total sales are expected to increase to 340 million cubic feet a day. Output is targeted at up to 500 million cubic feet a day by 2017, when the Liuhua 29-1 reserves are added.

The gas will be processed at the onshore gas terminal at Gaolan and sold to the mainland China market.