Husky Threatens Legal Action Against CNOOC in Gas Dispute

Canada’s Husky Energy has indicated will take legal action against CNOOC in a dispute over gas delivery payment if a satisfactory outcome is not obtained.

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.

Natural gas sales from the Liwan gas project were impacted due to a temporary land based pipeline outage within the pipeline network. A temporary land based pipeline has been put in place while the permanent pipeline repair is underway.

Although full payments were made by CNOOC for gas liquids sales payments for natural gas sales were received from the customer only for the actual volumes sold, rather than the full take or pay contract volumes, Husky said in a statement published Monday, adding that company is pursuing full payments in accordance with the take or pay contractual arrangements.

Concurrently, CNOOC officials indicated changes in the Guangdong gas market and consideration for a natural gas price reduction.

Husky said it has an enforceable contract and the company's position is that a change in terms, if any, must be value neutral.

“The company is in discussions with CNOOC to find a solution and will take legal action if a satisfactory outcome is not obtained,” Husky said.

Meanwhile, Liwan gross gas sales averaged 207 million cubic feet per day (mmcf/day) in the first quarter and associated liquids sales were 9,050 boe/day. Current gross sales are averaging about 150 mmcf/day and 8,000 boe/day of associated liquids.