Under the deal, Shell will make an initial payment of $US20 million ($A26.3 million) to Nexus to buy a 13.6% interest in the permit, which is expected to be paid by mid-December when the transaction is sealed.
Shell will also provide $30 million to go towards well costs on the next WA-377-P appraisal well at Echuca Shoals, earning it another 20.4% interest. Nexus will retain a 66% stake in the permit and will be operator.
“This deal provides Nexus with much more than funding,” managing director Ian Tchacos said.
“We have attracted the participation of Shell, a company with the technical and marketing capability necessary to commercialise any possible liquefied natural gas scale resource which may be delineated at Echuca Shoals.”
Tchacos said the terms of the farm-in agreement revealed the resource potential of Echuca Shoals.
“The introduction of a single capable participant like Shell to the permit at this stage is expected to place Nexus in a position to make more rapid progress with the field’s appraisal and development in the case of success,” he said.
Melbourne-based Nexus said the deal is conditional on both companies carrying out a farm-in and joint operating agreement as well as appropriate regulatory approvals.
It also said it has agreed to deal exclusively with Shell until December 5, giving it six weeks to approve and implement the agreement.
The Echuca Shoals-2 appraisal well is expected to be drilled early next year.
Meanwhile, Nexus said it has decided to go it alone on its Crux liquids project after terminating another heads of agreement to farm-out an interest in the project.
Nexus said the party involved in the agreement - not named but described in July as a "multi-billion dollar international oil and gas company" had failed to satisfy certain conditions precedent.
“Going forward, Nexus' significantly strengthened financial position will allow us to retain 100% ownership of this important asset through a phase, which we believe is likely to deliver a large step up in the value,” Tchacos said.
“This may enable the company to introduce a partner at a later stage and may provide the additional flexibility to consider options for the next stage of Crux’s development, including early commercialisation of gas in conjunction with the liquids.”
The Crux field lies in permit area AC/P23 in the Browse Basin and is 100km northeast of the 100% Nexus-owned permit, WA-377-P, containing the Echuca Shoals gas discovery.
Nexus said it expects to finish front-end engineering studies in January next year and will then make an investment decision mid-2007.
