Nexen Stays Strong with Offshore Exploration and Operations

Nexen, Inc. has issued an operational update on its North Sea, Gulf of Mexico, West Africa and Middle East operations.

North Sea Update

During the quarter, we drilled exploration wells in the North Sea at Blackbird and Pink. Blackbird is located 6 km south of Ettrick and if successful, this prospect could be fast tracked for development given the short distance to the Ettrick floating production, storage and offloading vessel (FPSO). We operate both Ettrick and Blackbird and have an 80% working interest in each.

Pink has been sidetracked and we are currently evaluating the results of this discovery. The Pink well is a candidate for co-development with Golden Eagle. We have a 46% operated working interest in this field.

At Ettrick, delivery of the leased FPSO has taken longer than expected due to third-party labour shortages in the Singapore construction yard. The FPSO is designed to handle 30,000 bbls/d of oil and 35 mmcf/d of gas. We expect first production to commence in the fourth quarter with a modest contribution to our annual production volumes.

"We are encouraged with the results of our exploration program in the North Sea," commented Fischer. "The prospects we have drilled are near existing infrastructure and can be tied back quickly upon success, providing incremental production growth to complement our outstanding Buzzard asset."

Gulf of Mexico Update

In the Eastern Gulf of Mexico, we recently spud the Fredericksburg exploration well. This is the third prospect to be drilled in this area following earlier success at Vicksburg and Shiloh. We have a 20% interest in Fredericksburg and Shiloh, and a 25% interest in Vicksburg, with Shell operating all three. When we combine the discoveries at Shiloh and Vicksburg with several prospects we see on our land holdings, this area has the potential to become a significant part of our Gulf of Mexico business.

Development of the Longhorn discovery is progressing well and first production is expected in 2009 with a peak production rate of approximately 200 mmcf/d gross (50 mmcf/d net to us). We have a 25% non-operated working interest and ENI is the operator.

At Knotty Head, we plan to drill an appraisal well in mid 2009 when the first of our two new deep-water drilling rigs arrives. We have a 25% operated interest in the field.

Offshore West Africa Update

Development of the Usan field, offshore Nigeria has recently commenced. The field development plan includes a FPSO vessel with a storage capacity of two million barrels of oil. All major contracts for deep-water facilities have been awarded and contractors are mobilizing for detailed engineering and project execution. Development of the Usan field commenced earlier this year than we expected and we recently allocated additional capital accordingly. Our investment is expected to be within the range of US$1.6 to US$2.0 billion over the development period. The Usan field is expected to come on stream in early 2012 and will ramp up to a peak production rate of 180,000 bbls/d (36,000 bbls/d net to us).

The Usan field development is located in OML 138 and is covered by the original production sharing contract for OPL 222 issued in 1993, with the Nigerian National Petroleum Corporation as concessionaire. The contract conveys the right to develop and produce crude oil and continue with exploration activity. We are currently processing three-dimensional seismic in anticipation of further exploratory drilling in the area in 2009. The Usan field was discovered in 2002 and is located approximately 100 km offshore in water depths ranging from 750 to 850 meters. Drilling of the development wells is expected to commence next year. Nexen has a 20% interest in exploration and development along with Elf Petroleum Nigeria Limited (20% and Operator), Chevron Petroleum Nigeria Limited (30%) and Esso Exploration and Production Nigeria (Offshore East) Limited (30%).

Middle East Opportunity

We have recently been advised that we have successfully pre-qualified to participate in future oil and gas opportunities that may present themselves in Iraq.

"We were the only Canadian company to successfully pre-qualify in a group that contains a number of the world's major oil and gas companies," stated Fischer. "This builds on our strength in the Middle East and could present us with long term opportunities in one of the world's richest resource basins."