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Nexus, Shell May Develop $3 Billion LNG Plant at Crux

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Nexus, Shell May Develop $3 Billion LNG Plant at Crux (Update1) 

By Eduard Gismatullin

Dec. 2 (Bloomberg) — Nexus Energy Ltd., the Melbourne-based gas explorer set to start production next year, may develop a $3 billion gas liquefaction plant withRoyal Dutch Shell Plc should they find sufficient resources at Australia’s Crux project.

Shell, Nexus and Japan’s Mitsui & Co. discovered gas at the project’s offshore Libra-1 well, the Australian company said today in a statement. Nexus Managing Director Ian Tchacos had said yesterday that resources at Libra may help the partners find more gas reserves to reach the 3 trillion-cubic-foot threshold necessary for a liquefied natural gas project.

“The potential for LNG will start to look quite compelling” if resources are found, Tchacos said in an interview in London. “It’s such an excellent reservoir and the gas is a very high quality.”

Nexus, whose shares have slumped 78 percent in the past six months, said in November it may have to consider a sale of the company or an alliance rather than offering a stake in the Crux natural gas liquids venture as it seeks to arrange financing for the project off Australia’s far northwest.

Nexus and Osaka Gas Co., Japan’s second-largest distributor of LNG, are developing the AC/P23 area of the Crux deposit in the Browse Basin, estimated to hold 75.2 million barrels of gas liquid reserves. The Libra-1 well may prove that Crux is expanding into the AC/P41 area, Tchacos said.

Nexus Gas Sale

Nexus in June 2006 sold gas reserves in the Crux field to Shell for A$52 million ($33 million), with access to be granted from 2021, Tchacos said.

“There is a potential compromise, where we’ll allow Shell to come earlier” to tap the reserves, he said. The partners need to find a way of combining the projects to produce liquids and allow Shell to take the gas earlier, he said.

Nexus, Shell, Mitsui, Osaka Gas and a further possible partner may decide in the middle of 2009 to build a floating LNG plant at the deposit. A floating facility would cause less damage to the environment than an onshore plant and the 120-meter (390- foot) water depth makes it an “ideal” solution, Tchacos said.

Nexus was forced to increase the interest it plans to sell in the Crux liquids venture to as much as 40 percent from 25 percent as it seeks about $260 million for project funding amid falling oil prices. The company has started to seek buyers for the stake, which may lead to the sale of the entire company or an alliance, Chairman Michael Fowler said Nov. 20.

Approval Delay

Deutsche Bank AG is managing the Crux stake sale after Mitsui scrapped a plan to buy an interest for $255 million. A final investment decision on the project was due this quarter, with the start scheduled for the first half of 2011. The partners now plan to approve it in the first quarter of 2009, Tchacos said.

Nexus holds 85 percent of the Crux venture, which it expects to produce 33,000 barrels to 35,000 barrels of liquids a day, he said.

Should the partners agree to build a 2 million-ton-a-year LNG plant at Crux, the first LNG may be produced in 2015 or 2016, Tchacos said. Crux may hold 6.4 trillion cubic feet of gas and 220 million barrels of liquid resources, according to Nexus estimates.

To contact the reporter on this story: Eduard Gismatullin in London at[email protected]

Last Updated: December 2, 2008 03:44 EST

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