Nexus awaits Crux retention leaseBY: MATT CHAMBERS From: The...

Nexus awaits Crux retention lease
BY: MATT CHAMBERS From: The Australian January 14, 2013 12:00AM
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SHELL and Nexus Energy, or a buyer of Nexus's stake, may be required to conduct a multi-well exploration program under conditions of a retention lease for the Crux gas and liquids field in Western Australia's offshore Browse Basin.

The companies are expecting to hear soon from the federal government on whether a retention lease has been granted over Crux, where the owners last year abandoned a previous plan to strip the liquids out and save the gas for later.

The lease will be critical for the sales process Nexus is conducting to sell some or all of its 15 per cent stake in Crux, which, based on the $75 million sale of a 2 per cent stake to Shell last month, could be worth more than $500m. Until the lease is finalised, prospective buyers will not know the spending commitments and study of the fields the government requires.

Shell, which now has 82 per cent of Crux, plans to develop the field through either a stand-alone LNG plant or later when reserves at the under-construction Prelude floating LNG project nearby run low.


Either way, an existing production licence over the liquids needs to be converted into a retention lease and a government-approved program of work for the next five years put in place.

In November, Nexus chief Lucio Della Martina said Shell and Nexus had proposed that the terms of the lease include investigation of a stand-alone floating LNG plant.

To do so is believed to require a three or four well drill program to test nearby gas prospects. There is also the prospect of third-party gas from nearby fields.

To try to stop any warehousing of gas resources that could be developed now, the federal government would require the case for a stand-alone project to be tested before agreeing to let Shell save the gas for Prelude.

A retention lease had been expected in November but the Crux partners are still waiting to hear back on whether their proposals for a work program have been accepted.

Also in November, Nexus said it had received interest in both full and partial selldowns of its remaining stake in the project.

Mr Della Martina said at the time that Nexus was "formally engaged with a range of very high-quality parties", which was interpreted to mean international oil and gas companies.