Canada's Husky Energy Inc announced Wednesday it had discovered a significant deepwater gas reserve with its Chinese partner CNOOC, renewing exploration hopes in the South China Sea.

Based on preliminary analysis of drilling results, the discovery could provide more than 140 million cubic feet (four million cubic metres) of natural gas a day, the energy company said in a statement.

"This exciting exploration discovery ... is a significant milestone towards our goal of strategic commercial development and production from this promising area," Husky CEO and president John Lau said.

CNOOC Ltd, the Hong Kong-listed unit of CNOOC, also confirmed the discovery in a statement to the Hong Kong stock exchange.

The discovery, in the mouth of the Pearl River about 250 kilometres (150 miles) south of Hong Kong, will nearly double Husky's potential output rate in the area.

"We are very encouraged that our geological predictions regarding the potential of this area are being validated by our drilling programme," Lau said.

Exploration efforts in the South China Sea have largely disappointed since Husky found an estimated four to six trillion cubic feet of recoverable gas reserves in June 2006, with wells turning up dry and foreign companies returning blocs to CNOOC.

Most recently, US oil producer Devon Energy Corp said it wanted to sell its three deepwater blocks in the South China Sea as part of a broader pullout of offshore and international oil and gas operations to focus on its onshore assets in North America.

Devon did not find commercial quantities of crude oil or gas during its 2008 drilling campaign in a block next to where Husky made its 2006 discovery and its latest big find.

China National Offshore Oil Corp (CNOOC) has the right to participate in the development of any discovery for up to 51 percent working interest, Husky said.

-- Dow Jones Newswires contributed to this story --