Husky southeast Asia will be a separate company, Chief Executive officer John Lau said at the annual meeting of shareholders. It will create a challenge for Husky Energy.

Lau said the company’s directors have agreed to create the new independent entity, which would have its own management and board, at a meeting.

Husky Energy is controlled by Hong Kong billionaire Li Ka-shing.

Many aspects of the new strategy are still being worked out and should be confirmed by the end of 2009, he said to reporters after the meeting.

The company would continue to work in partnership with China National Offshore Oil Corp. (CNOOC) and construct on the reputation of Li, he said.

I feel this company would have a very strong cost base, there would be gas production, and we also have a strong partner in CNOOC, and our chairman is also in Hong Kong with the reputation and everything, Lau said.

I think the flotation of an IPO will [have a] huge a response from the market.

A native of Hong Kong, Lau has been developing a southeast Asia business for Husky since 2001, applying knowledge gained from its projects in Canada’s East Coast offshore.

Southeast Asia’s deep waters are sparsely explored, costs are a fraction of North America’s, and the market for energy is huge. For many operators, it costs $60 to produce a barrel of oil from Alberta’s oil sands, while Husky produces oil in China for $4.75 a barrel, Mr. Lau told shareholders.

Husky Energy’s flagship asset would be Liwan, found in 2006 and estimated to hold four to six trillion cubic feet of natural gas.

Situated 300 kilometers southeast of Hong Kong, Liwan is anticipated to commence producing in the 2012 to 2013, at a rate of one billion cubic feet of natural gas per day as more wells are drilled, Mr. Lau said to shareholders.

Plans to market the gas in Hong Kong and the Guandong province of southeast China are progressing, he said.

The new company would also hold Husky Energy’s interest in the Wenchang oil field in the Pearl River Mouth basin and its interests in gas discoveries in the Madura Strait in Indonesia.