Published By NEWS COMMUNICATIONS since 1977 Saturday September 22, 2012

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NEXEN SHAREHOLDERS APPROVE DEAL WITH CNOOC

Nexen Inc. has announced that the holders of its common shares and the holders of the cumulative redeemable class A rate reset preferred shares, series 2 have app roved the P lan o f A r r a n g e m e n t , p u r s u a n t t o t h e Arrangement Agreement entered into on July 23, 2012 , in connection with the proposed acquisition of Nexen Inc. by CNOOC Limited through CNOOC Canada Holding Ltd. The arrangement was approved by approximately 99% of the votes cast by Nexen common shareholders and approximately 87% of the votes cast by Nexen preferred shareholders at the special meeting held on September 20, 2012. The closing of the arrangement remains subject to the granting of the final order by the Court of Queen's Bench of Alberta, the receipt of required regulatory approvals and the satisfaction or waiver of the other customary closing conditions. Prime Minister Harper and his top ministers have stressed that Canada is open for business as the industry seeks C$650 billion ($666 billion) of investment for new energy projects over the next decade. They have actively courted China and other Asian countries. Still, some of Harper's own Conservative members of parliament have expressed concern publicly over the deal, despite the majority of Nexen's assets being located outside of Canada and CNOOC's pledges to maintain all the staff and make Calgary the headquarters of its Western Hemisphere operations. In late August, the Industry ministry began a review to determine if the takeover has a "net benefit" to Canada. It has an initial 45-day period but it can be extended for 30 more. This week, Ted Menzies, the junior finance minister, said his Alberta constituents were split over the deal, with many voicing fear about the resource sector and foreign ownership. Another Alberta MP, Rob Anders, was more blunt: "I'm never a fan of state ownership of resources, particularly in China's case, because I don't believe it's a benevolent state." Natural Resources Minister Joe Oliver declined to discuss the divergence of opinions within the government, but in an interview, he pointed out officials will issue a framework for future transactions. "There'll be, therefore, an understanding of what the government's policy will be going forward," Oliver said. Bellinski said the sale of Nexen, as opposed to a company seen more as a pillar of Canadian industry, should ease fears over a foreign state's control. "This is a

company that, at best, is a marginal producer in terms of economics. They're not the greatest, they're not the biggest. They do have a sizeable asset portfolio but a lot of it isn't in Canada," he said. "And from CNOOC's perspective they're paying a tremendous amount in terms of premium from what it sold for the day before." The other wild card is Washington's reaction, as Nexen has sizeable exploration and production operations in the Gulf of Mexico. CNOOC has asked the Committee on Foreign Investment in the United States, a panel chaired by Treasury Secretary Timothy Geithner, to review its deal for any national security concerns. A handful of lawmakers have urged the panel to tie its decision to resolution of such issues as China's foreign investment policies and the payment of energy royalties

CANADA TARGETING JAPANFOR NEW LNG EXPORTS

Japan will emerge as a top market for Canadian liquefied natural gas as developers gear up to export more than 9 billion cubic feet a day, the equivalent of nearly all the gas that flows from Alberta's gas fields into its massive pipeline network, Canada's natural resources minister said. Five LNG plants are currently planned for Canada's Pacific Coast, and two of those already have 20-year gas export licenses, Natural Resources Minister Joe Oliver said in an interview from Tokyo. The one snag so far has been the inability of the developers to sign up customers. Japan is already the world's largest importer of LNG. Its moves to cut its reliance on nuclear power present a golden opportunity for Canadian LNG, an industry now in its infancy, Oliver said. He was in Japan for an LNG producer and consumer conference, where he spoke to investors. "We represent an attractive potential market and they represent a market of some considerable size - 33 percent," he said, referring to the country's percentage of global LNG demand. He pointed out that South Korea, the next stop on his Asian visit, accounts for 15 percent of demand, he said. Companies in Alberta, the largest Canadian gas-producing province, inject more than 9 bcf a day into TransCanada Corp's pipeline network. That supply is used in Canadian and U.S. markets, and is currently fetching prices just above 10-year lows. Japanese companies are among several from Asia that have announced investments in both LNG facilities and production assets in British Columbia, the western province that is the site of such massive shale gas regions as the Montney and Horn River. In May, Mitsubishi Corp joined a consortium led by Royal Dutch

North American prices and international prices. That's the nature of negotiations," Oliver said. Shell Chief Executive Peter Voser has warned that Canada likely has only to the end of this decade to build up its LNG industry or face being overtaken by other countries looking to cash in on the booming Asian demand. "There is, in my mind without a doubt, a role for Canada to play in this marketplace. But they're not going to wait forever, and so we've to get moving," Oliver said. "Fortunately the signs are very positive about our moving, so we should be up and running before the end of the decade, but starting to export before then." He acknowledged there is much less opposition among aboriginal

Shell PLC to develop a 2 billion cubic feet a day liquefaction plant at Kitimat, British Columbia, that would come into service around 2020. Japanese investors, including Mitsubishi Corp, Toyota Tsusho Corp and Inpex Corp have partnered with Canadian producers to develop British Columbia gas fields. Despite the interest in LNG, which Canadian companies pressured by weak North American prices see as a way to boost the value of their production, none of the developers has sanctioned a project. Analysts have said one hurdle is resistance among Asian buyers to sign long-term contracts for supply linked to oil prices. "That's one of the issues - the huge price differential between

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groups and the public in British Columbia to LNG projects than there is to pipelines to ship oil sands-derived crude to the West Coast. "Some people believe that the risk to the environment is less, also natural gas emits less greenhouse gas emissions," he said. "And I don't think it's irrelevant that these projects are all within one province."

US GIVES SHELL OK TOBEGIN PREP IN BEAUFORT SEA

With Royal Dutch Shell's plans to tap Arctic oil this year on hold, the Obama administration on Thursday said it would allow the company to begin some preliminary drilling in Alaska's Beaufort Sea. The U.S. Interior Department said Shell can undertake limited preparatory activity in the Beaufort, but the company would not be allowed to drill to areas containing oil at this stage. The company said previously it would focus on drilling

top hole wells which stop short of oil reservoirs to help pave the way for full fledged oil drilling next year. The government issued a similar permit for Shell in the Chukchi Sea last month. Shell said earlier this week it was giving up on long-delayed plans to explore for oil this year, after its required oil spill containment system was damaged during tests. Shell has spent $4.5 billion since 2005 in its effort to develop the Arctic's vast oil reserves, but the company has faced intense opposition from environmentalists and native groups, as well as regulatory and technical hurdles.

BRITISH COMMITTEE CALLSFOR HALT TO ARCTIC DRILLING

International governments should seek a moratorium on offshore drilling in the Arctic amid concern an oil spill in the region could cause catastrophic environmental damage, British MPs say.

The Environmental Audit Committee of Britain's House of Commons urged action to halt oil and gas drilling in the Arctic until new safeguards — including vastly increased financial guarantees and universal standards on disaster response — are put in place. Legislators on the panel also called for an internationally recognized nature sanctuary to be created to protect at least part of the Arctic from energy exploration. Caroline Lucas, a member of the committee and the only Green Party member in Britain's Parliament, said the panel's findings came as "the race to carve up the Arctic is accelerating faster than our regulatory or technical capacity to manage it." "The Arctic oil rush is bringing unprecedented risks to the area, and it's now clear that the consequences of any potential oil spill would be catastrophic," she said. Recommendations by the panel are not binding on Britain's government, and in response the country's Foreign

Ministry said only that it would consider the proposals. Experts warned the panel that any blowout in the Arctic at the end of the summer drilling season could be disastrous, as the returning winter ice would likely severely hamper the response. "We heard compelling evidence that if a blowout occurred just before the dark Arctic winter returned it may not be possible to cap it until the following summer — potentially leaving oil spewing out under the ice for six months or more with devastating consequences for wi ld l i fe," said MP Joan Wal ley, chairwoman of the committee. In a report, MPs said that the fact Arctic drilling locations are remote means resources to manage accidents are likely to be difficult to access or unavailable. Because shorelines are sparsely populated, it would also be more difficult to detect evidence of a spill. "The infrastructure to mount a big cleanup operation is simply

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not in place and conventional oil spill response techniques have not been proven to work in such severe conditions," Walley said. MPs called on Britain to lobby the Arctic Council — an intergovernmental forum of the eight Arctic nations, including the United States and Canada — to craft a universal standard on disaster response. The panel also suggested a "much higher, preferably unlimited, financial liability regime for oil and gas operations." Britain's energy and climate change ministry said that, given the U.K.'s lack of "expertise or experience of Arctic issues," nations in the region should take the lead. Charles Emmerson, an energy expert at the London-based Chatham House think-tank , said it was "extremely unlikely" that nations competing over Arctic resources would agree to a single regulatory framework. Richard Steiner, an Alaska-based marine conservation consultant who gave evidence to the committee via video link, urged the eight Arctic coastal nations and the UN to adopt the report's recommendations. "It represents the first time a governmental body has really and honestly suggested what needs to happen to manage the Arctic responsibly," he said. "The U.K. parliamentary body has proposed a realistic road-map for Arctic stewardship." Environmental groups strongly oppose Arctic offshore drilling, claiming oil companies have not demonstrated the ability to clean up spilled crude in ice. Operating in one of the world's most hostile marine environments is a risk to its polar bears, walrus and endangered whales, the groups claim. Shell has limited Arctic drilling off Alaska to preparation work this year after a safety system was damaged during testing. However, Marvin Odum, head of Shell Oil Co., Royal Dutch Shell's U.S. subsidiary, insists it is optimistic about tapping into an estimated 26 billion barrels of recoverable oil and 130 trillion cubic feet of natural gas in U.S. Arctic waters. In evidence to the British committee, Robert Blaauw, a senior Shell adviser on the Arctic, said energy demand over the coming decades made it necessary for companies to look to "unconventional resources" such as those in the Arctic. The company said that it welcomed dialogue on Arctic energy exploration.

BP GULF DRILLING NEARS PRE-MACONDO LEVELS

BP Plc's oil drilling in the Gulf of Mexico is approaching levels last seen before its Macondo well ruptured and spewed millions of barrels of crude in 2010, the company's vice president of global deepwater response said on Thursday. The executive, Richard Morrison, said on the sidelines of the Rio Oil & Gas Conference that BP's drilling activity in the U.S. Gulf was "close" to what it was before the blowout, which caused explosions aboard Transocean Ltd's Deepwater Horizon drilling rig and killed 11 men. The U.S government halted drilling for six months after the disaster, which gushed nearly 5 million barrels of oil and fouled much of the U.S. Gulf Coast before BP

capped the well two years ago this week. The moratorium was lifted in October 2010, but producers did not resume drilling until regulators began awarding permits in February 2011 when companies could meet stricter standards for safety and oil spill response. BP Chief Executive Bob Dudley told analysts in July that BP had six rigs drilling in the Gulf and would have two more by the end of 2012, a record for the company. Earlier this month, Royal Dutch Shell Plc surpassed BP as the biggest oil producer in the U.S. Gulf, according to rankings by the U.S. Bureau o f S a f e t y a n d E n v i r o n m e n t a l Enforcement.

OIL RIG COUNT DROPS SHARPLY IN NORTH DAKOTA

The number of rigs drilling for oil in North Dakota fell to the lowest in more than a year in September as operators sought to cut costs and increase efficiency, the North Dakota Industrial Commission said on Wednesday. The number of oil-focused rigs in the Midwest state dropped to 194

this month, its lowest level since July 2011, the commission's data showed. The current rig count is 11 percent lower than the all-time high of 214 set in May. The dip, along with escalating costs and regulatory concerns, could further stall growth in the nation's largest oil find in a generation. "The combined effect of several factors has led to a noticeable slowing of activity and production growth," Lynn Helms, director of the state's Department of Mineral Resources, said in a monthly note. Helms, voicing concerns publicly for the first time over slowing growth in the Bakken shale prospect, cited the lower rig count, rapidly rising costs, and uncertainties over regulations on the "fracking", or hydraulic fracturing, drilling technique. North Dakota became the second-largest oil-producing state in the country this year after output from the Bakken and Three Forks prospects surpassed Alaskan production. The state produced 674,000 barrels of oil a day in July, the latest month for which data is available. About 90 percent of this came from the Bakken and Three Forks, where a

combination of horizontal drilling and hydraulic fracturing technologies has unlocked huge shale reserves. However, July's output rose only marginally over June, despite the summer's mild and drilling-friendly weather, according to Helms. The monthly output increase in July was the smallest since April last year, when spring flooding had stalled production. Helms said operators, which are eating into their capital budgets as costs escalate, are trying to rein in expenses by shifting to fewer and more efficient rigs and cutting costs wherever they can. This echoes statements from the largest operators in the Bakken, such as Continental Resources Inc and EOG Resources Inc. Continental Resources raised its capital budget in August for the second time this year as it faced higher costs in the Bakken. The pullback in the number of rigs could quickly lead to a drop in output in the Bakken shale, where average wells deplete at a steep clip every year. Uncertainties over the federal government's bid to regulate fracking

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centrally are affecting investment decisions in North Dakota, Helms said. States that sit on large shale oil and gas reserves are sharp critics of the Obama administration's drive to regulate fracking on federal lands. They say the move will create a duplicate layer of oversight and stifle growth by raising costs. North Dakota Republican Senator John Hoeven, along with Alaska Senator Lisa Murkowski, said on Tuesday that he will introduce a measure to "put states first in the regulation of hydraulic fracturing". The measure will "ensure that states retain the right to manage hydraulic fracturing and gives them the ability to respond first to any violation," Hoeven said in a statement.

IRAQ ALLOCATES BILLIONS FORPROJECTS OVER FIVE YEARS

Iraq has earmarked $250-275 billion for spending on infrastructure projects and other investments over the next five years, the planning ministry said on Wednesday. Iraq needs development in almost every sector, as rubble and incomplete buildings are still commonplace more than nine years after the 2003 U.S.-led invasion that toppled Saddam Hussein. "Allocating these huge sums will have a positive effect on pushing the development pace forward," Planning Minister Ali al-Shukri, who was attending a financial and investment conference in London, said. The investment plan will run from 2013 to 2017, his office said in a statement about his visit, without giving further details about possible projects or investors. Shukri called on foreign companies to invest in Iraq's housing, tourism, agriculture, industry and higher education sectors. Other than oil, economic development in Iraq has lagged despite an easing of violence since the height of sectarian strife in 2006-2007. Al-Qaeda militants and other insurgent groups are still active however, and manage to hit Iraq with daily attacks, bombings and assassinations which make security costs a large burden for foreign investors. Investors also complain about bureaucracy and red tape. Government infighting has delayed projects in areas s u c h a s e l e c t r i c i t y a n d telecommunications. However, the market is potentially lucrative for foreign investors. On May 30, Iraq signed a final contract worth $7.75 billion with South Korea's Hanwha Engineering & Construction company to build 100,000 housing units on the outskirts of Baghdad as part of the government's plan to alleviate a severe housing shortage. Also in May, the deputy minister of industry said that the ministry was in talks with Shell to build a petrochemicals factory that would cost at least $8-10 billion in the southern oil hub of Basra.

TRIOIL INCREASESEQUITY FINANCING

TriOil Resources Ltd. has announced that it has agreed to increase the size of its previously announced bought deal equity financing through a syndicate of underwriters led by Canaccord Genuity

Corp. and GMP Securities L.P. and including Dundee Securities Ltd., TD Securities Inc., AltaCorp Capital Inc., Haywood Securities Inc., Cormark Securities Inc., Raymond James Ltd., and Desjardins Securities Inc. (collectively the "Underwriters"). Under the new terms of the financing, the Underwriters have agreed to purchase, on a bought deal basis, 7,845,000 common shares of TriOil (the "Common Shares") at a price of $2.55 per Common Share and 2,917,288 common shares to be issued on a "flow-through" basis (the "Flow-Through Shares") at a price of $3.00 per Flow-Through Share, for aggregate gross proceeds of $28,756,614. In addition, the Company will grant the Underwriters an option to purchase up to 1,176,750 additional Common Shares exercisable 30 days prior to the Closing Date to cover over-allotments, if any. TriOil will use the net proceeds from the Offering to expand and accelerate its capital program focused on the Company's Cardium light oil drilling program at Lochend and the emerging Dunvegan light oil resource play at Kaybob, as well as for general corporate purposes. Closing of the Offering is expected to occur on or about October 4, 2012 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the TSX Venture Exchange.

PEMEX TO BOOST IMPORTSAFTER DEADLY BLAZE

Mexico's state-run oil firm, Pemex, will import more natural gas to avoid shortages and possible price hikes after a deadly fire at a gas compression station near the U.S. border disrupted supplies in the region, a company official said on Wednesday. Several explosions and a fire killed 29 people at the facility near the northern city of Reynosa on Tuesday in one of the worst accidents in the oil and gas industry in recent years. The station, which receives gas from Mexico's Burgos field, was

damaged, and Pemex was forced to turn off a pipeline, putting a strain on local deliveries. "The supply is guaranteed," Carlos Morales, director of Pemex exploration and development, told a Mexican radio station. Morales said the accident has reduced the volume of natural gas Pemex handles by 700 million cubic feet (mmcf) per day. "Because the volume from Burgos is going to decrease, it would be feasible to use pipelines from the center (of the country) with a higher load of imported gas," he said. "We're doing everything possible to maintain ... the same price levels so that industry does not suffer any shutdowns." Pemex produced 6.59 billion cubic feet of natural gas in 2011 and imported 791 mmcf, according to company data. To compensate for the supply

squeeze, Mexico plans to import between 250 and 300 mmcf per day from the United States via pipelines and another 200 million cubic feet per day through the Altamira port on the Gulf of Mexico. It is also contemplating bringing in another 200 mmcf per day through the port of Manzanillo on the Pacific and could boost supply further with 100 mmcf from its Campeche fields in the Gulf. Morales said Pemex was still investigating the cause of the accident and dismissed speculation that it may have been an attack related to drug cartel violence in the region. Energy Min is ter Jordy Herrera sa id on Wednesday workers were doing maintenance work at the plant at the time of the explosions.

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