NEXUS ENERGY LIMITED - ASX: NXS

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Description

Nexus Energy Limited (ASX:NXS) is a Melbourne based, Australian Stock Exchange listed oil and gas company. In 2009 Nexus transitioned from explorer to producer with the start up of the Longtom gas project. The company holds interests in seven permits located offshore Australia. Operations are focused on the Gippsland Basin, offshore Victoria and the Browse Basin, offshore Western Australia.

Longtom gas project VIC/L29 (Nexus 100%) - Victoria

The Longtom gas field is located in the Gippsland Basin, offshore Victoria. Longtom was originally discovered by BHP in 1995 but was considered non-economic at the time. In 2006, Nexus and its partners drilled the Longtom-3 well which confirmed the commercial potential of the field when a flow rate of over 75 MMscf/d was recorded during a production test over several reservoir sections.

A gas sales agreement for Longtom was signed with Santos in December 2005. A final commitment to the development of the Longtom gas project was made in April 2007 following completion of commercial arrangements for financing the development. First production from the Longtom gas project commenced in October 2009.

The development concept for Longtom involves the production of gas through two horizontal subsea wells tied-back to an upgraded Santos operated Orbost onshore gas plant. Gas is delivered into the eastern gas pipeline connecting the Melbourne and Sydney gas markets and condensate is trucked and sold to the Shell refinery in Geelong.

Nexus is the operator of the Longtom gas project and has managed the drilling of the offshore wells, with substantial horizontal sections; construction and design of all offshore facilities; and the gas sales and financing arrangements.

Crux asset AC/L9 (Nexus 85%, Osaka Gas 15%) - Western Australia

The Crux field is located in Production Licence AC/L9 in the Browse Basin, offshore Western Australia and was acquired by Nexus in January 2006.

Nexus is operator of AC/L9 and holds 85% equity in the liquids resource with joint venture partner Osaka Gas holding the remaining 15%. Shell Development Australia holds the rights to 100% of the gas resource within the permit and under the current contract can access the gas in 2021. Average water depth is around 170 meters with the major Crux reservoir at 3,800 meters.

Five intersections of the Crux field have been drilled to date and around 280km2 of 3D seismic has been collected to delineate the structure. Importantly the Crux reservoir has high permeability and high porosity and the gas is low in CO2 and other impurities. In addition to the Crux gas condensate resource, upside potential has been identified around the undrilled Auriga and Caleum structures.

It is proposed to develop the Crux field as a liquids stripping project. The development concept is based on four subsea production wells and four subsea gas re-injection wells tied back to a custom built leased floating production storage and offloading vessel (FPSO). Crux appraisal and engineering has matured to a point where the proposed liquids project could be sanctioned within a short period of time. Nexus has received interest in Crux from domestic and international oil companies and continues to explore the option of a part sell-down and a development of the liquids project with the introduction of an additional new partner.

To help fund the appraisal of the Crux field, Nexus sold the rights to the gas in AC/L9, excluding condensate to Shell. The gas sales agreement enables Nexus to undertake its liquids stripping project until 31 December 2020 at which time Shell will assume ownership of the permit and will have the right to extract the gas and any remaining condensate. The terms of the arrangements with respect to Shell's rights to gas in AC/L9, include provisions for where the liquids joint-venture unanimously decides not to progress with a liquids stripping project, and notifies Shell prior to 31 December 2020.

These provisions include the ability for Nexus and Osaka Gas, to participate in the production of any liquid hydrocarbons in a gas commercialisation project initiated by Shell. Such contractual rights are triggered upon transfer of the AC/L9 licence to Shell (with the notification allowing earlier access for Shell to the licence, at its option) and last until the end of that project life (the 1 January 2021 cut-off date would not apply).

As reported on 25 November 2010 Nexus has reached agreement on commercial terms with Shell to purchase an option to a three (3) year extension of the gas rights handover date from 31 December 2020 to 31 December 2023. The agreement is subject to final legal documentation and requisite parties’ board approvals. This represents an important milestone in the commercialisation of Crux.

Echuca Shoals WA-377-P (Nexus 100%) - Western Australia

The exploration permit WA-377-P located in the Browse Basin, offshore Western Australia was awarded to Nexus (100%) in March 2006. The permit contains the Echuca Shoals gas discovery, located in close proximity to the Ichthys and Prelude gas fields. Echuca Shoals-1 was drilled in 1983 and encountered gas at several levels.

Echuca Shoals-1, intersected a gas column over a 70 metre gross interval, but did not intersect a gas water contact (GWC). Pressure data from the well indicated the potential for a significant column and the likelihood that the accumulation was stratigraphically trapped. The pressure data also allowed for the possibility of condensate rich gas, no samples had been collected in the original well.

Fossetmaker-1 was drilled in August 2007, 7 kilometres east of Echuca Shoals-1 to evaluate the possible eastern extension of the field. The well intersected approximately 10 metres of gross pay however pressure communication with Echuca Shoals-1 was unable to be determined due to the tight reservoir.

The current estimated most likely gas in place at the Echuca Shoals gas field within WA-377-P is approximately 0.5 Tcf, plus up to an additional 1.8 Tcf at the same reservoir level in the Backmaker prospect to the north. Geophysical studies also indicate the presence of deeper exploration potential at Backmaker which could add up to another 6 Tcf of gas in place. An additional prospect (Mashmaker) has been identified on 3D seismic in the north-east of the permit in the prospective Plover reservoir with volume estimates ranging between 0.4 and 3 Tcf in place. Additionally, the combined potential for associated condensate in the permit is most likely more than 200 MMbbls.

WA-368-P (Nexus 50% - Operator, AWE 50%) - Western Australia

The Yngling prospect is defined by 3D seismic data from the Catalina survey which was acquired in August 2006. Yngling is a large low relief structure with an unrisked resource of 90MMbbl. Nexus will farmout equity in the permit prior to drilling the prospect.

Mine For

oil, gas

Location of operation(s)

Victoria, Western Australia

Australian Basins

Browse, Gippsland

Address

Level 23, 530 Collins St
MELBOURNE, VIC, AUSTRALIA

Phone

(61 3) 9660 2500

Email

Website

http://www.nxs.com.au/

Last Updated

23/03/2011