UK Gov’t Approves USD 3.3 Billion Golden Eagle Development

Nexen Petroleum UK Ltd., a subsidiary of Nexen Inc., announced today it has received approval from the UK Department of Energy and Climate Change (DECC) to proceed with the Golden Eagle area development – a GBP 2 billion (C$3.3 billion) investment (GBP 750 million net to Nexen) that is expected to produce an estimated 140 million barrels of oil equivalent (gross) of proved and probable reserves over an 18-year period.

The Golden Eagle development encompasses both the Golden Eagle and Peregrine reservoirs located in central North Sea blocks 20/1N, 20/1 and 14/26a, approximately 43 miles from Aberdeen. The development plan for Golden Eagle incorporates a combined production, utilities and accommodation platform linked to a separate wellhead platform. Plans call for 20 development wells (16 platform-based and four subsea) to be drilled. The development will also include associated in-field and export pipeline infrastructure.

Detailed design engineering has commenced and fabrication is scheduled to start in late 2011. Pipeline and subsea installation is expected to begin in early 2013, to be followed by drilling later that same year. First oil production is forecast for late 2014 and the development is expected to have an initial gross production rate of up to 70,000 barrels of oil equivalent per day (boe/d), about 26,000 boe/d net to Nexen.

“This is a great day for the UK oil and gas industry. Regulatory approval marks a major milestone in the development of Golden Eagle, which is one of the largest oil discoveries in the UK North Sea since our Buzzard discovery,” said Phil Oldham, Managing Director of Nexen Petroleum UK Ltd.

During construction, the Golden Eagle development is expected to create employment for more than 2,000 workers. Once operational, the facility is expected to employ more than 400 people and provide thousands of indirect jobs throughout its 18-year production life. More than two-thirds of the contracts for products and services for Golden Eagle are to be sourced in the UK, a total benefit estimated at more than GBP 1.4 billion.

The project’s design, construction and operation will reflect the results of a comprehensive environmental impact assessment, which has also been approved by the DECC.

“Continuous improvement in safety and environmental performance has been built into our project planning. Safe, responsible energy development is our priority,” said Oldham.

Nexen holds significant acreage adjacent to the Golden Eagle development and continues to explore and appraise the UK North Sea to identify future opportunities and potential synergies with the Golden Eagle infrastructure. This includes participating in an active UK North Sea exploration and appraisal campaign and investing in other development projects in the region.

Nexen is the second largest oil producer in the UK. In 2010, the company’s UK-based business produced approximately 110,000 boe/d, primarily from the Buzzard field. The company currently provides employment for about 1,200 full-time and contract staff at its offices in Uxbridge and Aberdeen and at its offshore facilities.

Nexen Petroleum UK Ltd. is the operator of Golden Eagle and holds a 36.54% working interest in the field. The remaining interest is held by Maersk Oil North Sea UK Ltd. (31.56%), Suncor Energy UK Ltd. (26.69%) and Edinburgh Oil and Gas Ltd. (5.21%).

Nexen Petroleum UK Ltd. is a subsidiary of Nexen Inc., a global energy company listed on the Toronto and New York stock exchanges under the symbol NXY. Nexen is focused on three growth strategies: oil sands and shale gas in Western Canada and conventional exploration and development primarily in the UK North Sea, offshore West Africa and deepwater Gulf of Mexico.

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Source: Nexen, October 27, 2011