Nexus cancels Crux FPSO order; seeks asset buyer

Rick Wilkinson
OGJ Correspondent

MELBOURNE, Nov. 25 -- Nexus Energy Ltd., Melbourne, and its joint venture partner Osaka Gas Co. Ltd. of Japan have terminated a memorandum of understanding with Vanguard Oil & Gas International and Viking Shipping for the supply of a floating production, storage, and offloading vessel for the Crux liquids project in the Browse basin off Western Australia.

Nexus says the JV was unable to proceed to a final investment decision with Viking as the FPSO provider and will now negotiate an alternative offer from another provider for the project. The company said this would increase confidence that delivery of first liquids from Crux would be achieved by mid-2011. There was no indication of the problem surrounding the Viking deal which was originally signed in 2007.

Nexus (with 85% of Crux development and Osaka Gas 15%) has further incentive to complete the liquids project on time because it also has a $40 million deal to sell Crux gas to Shell Australia (OGJ, July 10, 2006, p. 27). That deal stipulated that Shell has the right to all Crux gas and any remaining liquids in the field after 2020.

Crux has an estimated 75.2 million bbl of recoverable condensate. Nexus says that even if oil falls to $40/bbl, the field is still economic.

Nevertheless the company is suffering the strain of the current world economic crisis. This was evident from comments by chairman, Michael Fowler, at the Nexus annual general meeting last week when he said that the company is open to a takeover in order to maximize shareholder value.

Fowler said that during the company's Crux asset sale process, it received expressions of interest at the corporate level, as well as some offers of strategic alliances.

"The board will evaluate any serious proposals," he said. He said the objective is to maximize value to all shareholders, and currently the board believes this will best be achieved through an asset sale process, which underlies the value of Nexus' asset base.

"However, it may be that the best outcome, in terms of shareholder value, proves to be a sale of the company or some other corporate-level transaction," Fowler added.

Nexus began a global sales process for its Crux AC/P23 exploration permit in October this year after Mitsui E7P Australia withdrew from an earlier intention of buying a 25% stake because of poor global market conditions.

Nexus subsequently appointed Deutsche Bank to carry out the renewed effort to sell down its 85% stake in the permit.

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