Nexen to Upgrade Buzzard Cooling System; Yemen Fields Back

Nexen Inc. advises that it has finalized plans to upgrade the cooling system and return to full production at its Buzzard platform in the North Sea. The cooling medium is expected to be replaced by the end of May. During this period production will be limited to about 80,000 boe/d (gross). We expect to increase production beyond current levels through June and July and reach full capacity of over 200,000 boe/d towards the end of July as upgraded coolers are installed and commissioning of the fourth platform is completed. We expect brief periods of downtime, or reduced rates, to complete these activities.

To mitigate this production shortfall we are realigning the two week turnaround previously scheduled for September. We are planning to accelerate some of the work to the next two months and take advantage of a five-day outage in August that is required to support third-party work on the Forties Pipeline.

In West Africa, the Usan floating production and storage offloading vessel is now en route and is expected to be on site for installation this summer. Usan remains on track for first oil next year.

In Yemen, production returned to full rates on May 11 following a shutdown for two days due to a labour strike.

In the Gulf of Mexico, the Bureau of Ocean Energy Management, Regulation and Enforcement approved an exploration plan to drill up to eight wells on Mississippi Canyon blocks 348, 391 and 392 which contain the Appomattox discovery. Shell is the operator of this joint venture. We are currently waiting on a drilling permit to proceed on appraising Appomattox. Nexen estimates the recoverable contingent resource from the original Appomattox discovery exceeds 250 million boe (gross) with upside potential. Nexen has a 20% working interest at Appomattox.

The company also plans to drill two other exploration wells in the Gulf of Mexico this year. Applications to drill the operated Kakuna and Angel Fire deepwater prospects have been submitted and are proceeding through the approval process.

At Long Lake, Nexen successfully completed scheduled maintenance on a second hot lime softener and the first cogeneration unit in April. The final hot lime softener and the other cogeneration unit are scheduled to undergo maintenance in August. This maintenance temporarily impacts production and increases operating costs. Production at Long Lake is currently averaging 28,300 bbls/d (gross). Growth is expected from increased steam injection, well optimization and the ramp up of ten new wells at Pad 11. Six of the wells on the pad have completed initial steaming and are now ramping up. Further increases across the field will come as we continue to steam through high water saturation zones.

Other initiatives at Long Lake include the completion of the additional natural gas pipeline which is expected to be in service this summer. This pipeline enables more consistent steam generation independent of upgrader operations. Drilling has commenced on the first of two new pads (pads 12 and 13) which are located in high quality reservoir. Steaming and production from these new pads are expected to begin next year. Work also continues on the addition of more steam capacity and on a diluent recovery unit to allow for greater independence between the SAGD and upgrader processes.
Source: Nexen