Nexen, Inpex in latest Canada-Asia shale marriage

Tue Nov 29, 2011 1:48pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Nexen Inc NXY.TO said on Tuesday it will sell 40 percent of its British Columbia shale gas holdings to a group led by Japan's Inpex Corp (1605.T: Quote) for C$700 million ($680 million) in the latest Asian foray into Canada's rich unconventional resources.

Nexen shares surged 6 percent to C$16.20 on the Toronto Stock Exchange as investors digested a positive development following a string of disappointments, including this month's loss of a long-held production contract in Yemen and struggles with its Long Lake oil sands project.

The deal - to include an upfront payment for half the amount and the rest in capital spending by Inpex and partner JGC Corp (1963.T: Quote) - marks the close of Nexen's year-long search for a co-venturer to develop lands that could hold as much as 38 trillion cubic feet of gas.

Inpex joins a rush of Asian-based investors that have entered partnerships to develop such reserves, including Malaysia's Petronas PETR.UL, Korea Gas Corp (036460.KS: Quote) and Mitsubishi Corp (8058.T: Quote), also of Japan.

Like Petronas's tie-up with Calgary-based Progress Energy Resources Corp (PRQ.TO: Quote), Nexen and Inpex will study developing a liquefied natural gas plant on the West Coast as a way to supply markets across the Pacific and avoid the North American gas market, which is glutted with burgeoning shale supplies.

"The next phase with Inpex is to study those choices and determine if we have a feasible and attractive option." Nexen Chief Executive Marvin Romanow said in an interview. "So we plan to evaluate that over the next few years."

It is a nascent industry in Canada. A trio of companies led by Apache Corp (APA.N: Quote) plans the country's first LNG plant at the port of Kitimat, British Columbia, as companies keep improving the technology they use to produce gas trapped in tightly stacked rock.

Inpex is no stranger to LNG, owning controlling stakes in large LNG projects in Indonesia and Australia. It is also building a regasification terminal in Japan.   Continued...