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* Liwan Gas Project 85 percent complete
* First-quarter adjusted profit fell 3 percent to 56 Canadian 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 Tuesday its $6.5 billion Liwan Gas Project in the South China Sea was on track to start production in late 2013 to early 2014.
The company also reported a 9 percent drop in first-quarter profit due to lower crude oil prices.
In a conference call with analysts, Husky's Chief Operating Officer Robert Peabody said Liwan was 85 complete and being readied for production. The field lies 300 kilometers (186 miles) southeast of Hong Kong and will supply as much as 500 million cubic feet of gas per day to the Chinese market.
The 30,000-metric-tonne topsides portion of the offshore central platform is set for installation onto the jacket platform in the second quarter.
"This will be done by floating over the topsides and lowering it on to the jacket. It is my understanding this will be the largest floatover ever in the industry," said Peabody.
Husky CEO Asim Gosh said the company believes the biggest operational risks to the project were behind it, given the wells had been completed and tested and the results were as expected.
Liwan 3-1 is the largest ever natural gas discovery offshore China and Husky has been jointly developing the field in partnership with CNOOC.
Husky, a heavy oil producer, also owns refineries in Western Canada and Ohio.
It is also building the C$2.7 billion ($2.69 billion) Sunrise oil sands project in northern Alberta. The 60,000-barrel-per-day project, co-owned with BP Plc, is expected to begin operations next year.
Husky said the first phase of the project was about two-thirds complete, with first production on track for 2014.
The company, controlled by Hong Kong billionaire Li Ka-shing, reported a drop in its net income to C$535 million ($530 million), or 54 Canadian cents per share, from C$591 million, or 60 Canadian cents per share, a year earlier.
Adjusted profit fell 3 percent to C$547 million, or 56 Canadian cents per share.
Results were in line with expectations, with the average analyst forecast for the adjusted profit pegged at 54 Canadian cents 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 the first quarter from $87.11 per barrel a year earlier.
Cash flow, a key measure of the company's ability to pay for new projects and drilling, rose 9 percent to C$1.28 billion, or C$1.30 per share.
Production rose slightly to 321,000 barrels of oil equivalent per day (boe/d) from 320,000 boe/d a year earlier.
Shares of the company, which has a market value of about C$29 billion, were down 22 Canadian cents to C$29.70 by midday on the Toronto Stock Exchange.