Husky Begins Oil Production and Expands Activities

Husky Energy Inc. announced that it has signed petroleum contracts for two additional exploration leases in the South China Sea. Both are located in the Beibu Gulf, north of Hainan Island and within 80 kilometres of the Weizhou oil fields. The agreement includes exploration lease 23/15, which is 1,327 sq. kilometres, and exploration lease 23/20, which is 1,543-sq. kilometres. A single exploration well is required in each contract area in the first three years of the contract. Husky also reported that production from the Wenchang 13/1 and 13/2 oil fields in the South China Sea has exceeded 60,000 barrels of oil per day (bopd). Production commenced in July 2002 and estimated peak production was 50,000 bopd. Further analysis of the production data is required to determine whether estimates of daily production rates and recoverable reserves will be revised. Husky has a 40 percent interest in Wenchang, which is located in the Pearl River Mouth basin about 140 kilometres east of Hainan Island and 400 kilometres southwest of Hong Kong. The China National Offshore Oil Corporation (CNOOC Ltd.) holds the remaining 60 percent. "The Wenchang project was developed on time and within budget. To date, production exceeds our expectations," said Mr. John C.S. Lau, President and Chief Executive Officer of Husky Energy. "The production from the Wenchang development gives Husky a strong focus and strategic position to develop new opportunities in the South China Sea." Husky will proceed with an exploration program on the 39/05 offshore lease that surrounds the Wenchang fields. Husky signed the petroleum contract and participation agreement for 39/05 in July 2001. A drilling program involving two or three wells will commence by the end of 2002 or in the first quarter of 2003. Exploration targets within the 5,700-sq. kilometre lease include fields that could be brought into development using Wenchang facilities. Husky holds a 100 percent working interest in 39-05 during exploration and is the operator. CNOOC has the right to participate in any development program with a 51 percent interest.