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* Liwan Gas Project 85 percent complete
* First-quarter adjusted profit fell 3 percent to 56Canadian cents per share
* Results in line with expectations
By Nia Williams
CALGARY, Alberta, May 7 (Reuters) - Husky Energy Inc, Canada's No. 3 integrated oil company, said on Tuesdayits $6.5 billion Liwan Gas Project in the South China Sea was ontrack to start production in late 2013 to early 2014.
The company also reported a 9 percent drop in first-quarterprofit due to lower crude oil prices.
In a conference call with analysts, Husky's Chief OperatingOfficer Robert Peabody said Liwan was 85 complete and beingreadied for production. The field lies 300 kilometers (186miles) southeast of Hong Kong and will supply as much as 500million cubic feet of gas per day to the Chinese market.
The 30,000-metric-tonne topsides portion of the offshorecentral platform is set for installation onto the jacketplatform in the second quarter.
"This will be done by floating over the topsides andlowering it on to the jacket. It is my understanding this willbe the largest floatover ever in the industry," said Peabody.
Husky CEO Asim Gosh said the company believes the biggestoperational risks to the project were behind it, given the wellshad been completed and tested and the results were as expected.
Liwan 3-1 is the largest ever natural gas discovery offshoreChina and Husky has been jointly developing the field inpartnership with CNOOC.
Husky, a heavy oil producer, also owns refineries in WesternCanada and Ohio.
It is also building the C$2.7 billion ($2.69 billion)Sunrise oil sands project in northern Alberta. The60,000-barrel-per-day project, co-owned with BP Plc, isexpected to begin operations next year.
Husky said the first phase of the project was abouttwo-thirds complete, with first production on track for 2014.
PROFIT FALLS
The company, controlled by Hong Kong billionaire LiKa-shing, reported a drop in its net income to C$535 million($530 million), or 54 Canadian cents per share, from C$591million, or 60 Canadian cents per share, a year earlier.
Adjusted profit fell 3 percent to C$547 million, or 56Canadian cents per share.
Results were in line with expectations, with the averageanalyst forecast for the adjusted profit pegged at 54 Canadiancents per share, according to Thomson Reuters I/B/E/S.
The company said average realized prices for crude oil,natural gas liquids and bitumen fell to $68.32 per barrel in thefirst quarter from $87.11 per barrel a year earlier.
Cash flow, a key measure of the company's ability to pay fornew projects and drilling, rose 9 percent to C$1.28 billion, orC$1.30 per share.
Production rose slightly to 321,000 barrels of oilequivalent per day (boe/d) from 320,000 boe/d a year earlier.
Shares of the company, which has a market value of aboutC$29 billion, were down 22 Canadian cents to C$29.70 by middayon the Toronto Stock Exchange.
