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Shale Gas

shale Gas

Safe, clean and abundant source of energy

The combined advancement of drilling and reservoir technology has enabled the safe and cost-effective recovery of shale gas a game-changing resource for the worlds energy supply. Shale gas, which is found in abundance throughout many continents, is an affordable, clean-burning fuel. There are many benefits to shale gas production. This vast resource can be developed in stages, which means we can control the pace of development and match production with economic conditions and market demand. Shale gas also has short cycle times between initial investment and first production, and is readily available making it a clear choice for establishing a secure energy future. And the advancement of new technologies, combined with ongoing research and development, allows this valuable energy source to be developed safely and responsibly. Nexen has shale gas operations in northeastern British Columbia, Canada and is assessing new development opportunities in Colombia and Poland.

We recognized the potential of shale gas early and in 2006 began acquiring large blocks of high-quality acreage in the Horn River Basin located in northeast British Columbia one of the most prospective gas fields in North America. In 2010 we purchased more land in the nearby Cordova and Liard basins, bringing our total land position to approximately 300,000 acres held by Nexen and our joint venture partners. Third-party evaluators have estimated that our lands in the Horn River and Cordova basins hold between four trillion and 15 trillion cubic feet of recoverable contingent resources, while the Liard lands contain an estimated five trillion to 23 trillion cubic feet of prospective resources1. Our focus on operational excellence has built our reputation asa leader in shale gas development. Were driving down operating costs and increasing efficiency a critical element ofdelivering gas to markets given current commodity pricing. Importantly, weve made these strides while also maintaining our high standard for safety and the environment.
The foundation of our growth strategy isthe energy and expertise of our employees, who are committed to workingwith integrity and engaging ourstakeholders. Were proud of our strong track record of safe, reliable andenvironmentally responsible energydevelopment. Did you know: Under the joint venture agreement with a consortium led by INPEX Corporation of Japan, which closed in August 2012, INPEX and its partner JGC acquired a combined 40% working interest in Nexens northeast British Columbia shale gas assets.

Nexen Inc. is an upstream oil and gas company responsibly developing energy resources in some of the worlds most significant basinsincluding the UK North Sea, the Gulf of Mexico, offshore West Africa and Western Canada.

Were strategically focused on three businesses: conventional oil and gas, oil sands and shale gas. With a high-quality asset base and significant growth on the horizon, were well-positioned to deliver long-term shareholder value. Nexen is listed on the NYSE and TSX under the symbol NXY.

The facts on shale gas

What is shale gas?
Shale gas is natural gas that is produced in an unconventional way. The gas is tightly locked in very small spaces within the shale rock formation. To unlock it, Nexen uses technology to horizontally drill and stimulate (fracture) the gas-bearing zones. The creation of small fractures within the shale releases the gas. Once released, shale gas is produced the same way as conventional natural gas.
What is horizontal drilling? Horizontal drilling enables us to efficiently access the shale gasreservoir in a cost-effective and environmentally responsible way. This technology utilizes a flexible drilling pipe that bends into a horizontal position that is parallel with the resource zone. This process allows for multiple wells to be drilled from the same drilling pad, which reduces land disturbance.

Horn River Basin

The horizontal well is drilled into arock formation containing gas (typically tens to hundreds of metres thick, extending several hundred metres in every direction). The fractures extend like a spider web in theshale gas formation providing a pathway for the natural gas to flow.

The multi-well pad disturbs less area than vertical well developments.

What is fracing? Hydraulic fracturing is the process of using high-pressure fluid (composed primarily of water and sand) to crack the shale rock formation, allowing the gas thats contained in the rock to be released and processed. Precautions taken to ensure fracing does not interfere with shallow ground water include: Adhering to government regulations on the minimum depth for fracing Using multiple layers of steel and cement throughout the wells to prevent fracing fluids from escaping Controlling fracture pressure to manage fracture length Monitoring pressure inside the well during fracturing to detect leaks Fracing only under dense rock layers to prevent fractures from spreading and fluid from moving upwards to another formation.

Whats in frac fluid? The frac fluid Nexen uses is made up of approximately 99.5% water and sand, with the remainder consisting of chemicals added to reduce friction during fracing. Nexen follows all required regulations and guidelines during the fracing process.

99.58% Water and Sand

0.42% Additives 0.001% Corrosion Inhibitor 0.068% Friction Reducer 0.354% Acid

Operations Overview
Horn River Basin, British Columbia, Canada: Production, which began at our Dilly Creek facility in April 2007, averaged about 38 million cubic feet per day (mmcf/d) during 2011. Expansion is underway and further investments are expected to increase production capacity to about 175 mmcf/d in late 2012.

Colombia: We have approximately 1.5million acres of prospective shale gas lands located near Bogota Colombias largest gas market. While initial geological surveying indicates shale gas potential, long-term investment decisions will depend on exploration results. Poland: Nexen has entered into a joint venture partnership toexplore 10 concessions in Polands Paleozoic shale gas play considered one of the most significant unconventional resource plays in central Europe, with over 185 trillion cubic feet of estimated recoverable shale gas resource. Seismic surveys are underway.

Cordova Basin

Liard Basin

Horn River Basin

Joint venture with INPEX/JGC

The calibre of Nexens resource base and operating expertise were underscored by the joint venture agreement announced in 2011 with a consortium led by INPEX Corporation of Japan. Under this agreement, which closed in August 2012, INPEX and its partner, JGC, acquire a combined 40% working interest in Nexens shale gas holdings in northeast British Columbia. We believe liquefied natural gas (LNG) export could be an attractive option for maximizing the value of our shale gas business. With this joint venture, Nexen gains partners with world-class LNG expertise and access to Asian LNG markets.

Fort Nelson

Shale Gas Basins

Cordova & Liard Basins, British Columbia, Canada: We consider these leases to contain high potential shale gas opportunities. Were in the initial planning and exploratory stages of development.

Research: Nexen is advancing the testing of new technology that could enable us to use saline water as an alternative to fresh water in our shale gas operations. Additionally, were supporting efforts to establish regional surface and shallow groundwater monitoring networks. Commitment to wildlife: Nexen is committed to both minimizing the negative operational impacts of our activity and research that enables us to continually improve. In Canada, examples include collaring caribou to increase knowledge on calving sites and our participation in the development of industry operational best practices in caribou areas.

Community matters
A safe, clean and abundant source of energy: Nexen contractor Zoe Robson collects a water sample near Dilly Creek.

Environmental Stewardship
Technology has enabled the responsible development of shale gas; however, concerns regarding impacts on the environment have been raised. We comply with all regulatory requirements, and are actively collaborating with government, industry, researchers and community stakeholders to conduct research thats expected to further minimize impacts. Other actions include: Manage impacts to water: Nexen is in compliance with rigorous protection measures for water sources such as lakes, rivers and aquifers. Our shale gas wells have steel casing and cement barriers in place to protect shallow ground water zones. Comprehensive water monitoring is done and the data collected is shared with regulators. Nexen is also supporting a more sustainable approach to sourcing water via continuous real-time monitoring and variable allocations dependent on water levels. In a third-party review requested by the Fort Nelson First Nation, Dr. Sean Carey, an Associate Professor of Hydrology at McMaster University, stated that the approach Nexen is using I believe is the right one. This is a conservative approach with an honest concern for in-stream flow needs.

At Nexen, how we work is as important as the results we deliver. Were committed to managing our relationships and working with community members and other stakeholders in the areas where we operate. We build long-term relationships with stakeholders by sharing information about our operations and working collaboratively to understand their needs and expectations.

Our approach to engagement

Being a good neighbour starts with understanding the impact of our operations on local communities. This understanding isachieved through an ongoing engagement process that is maintained throughout the lifecycle of our operations. It includes: Using various assessment tools to identify potential negative impacts and the steps well take to mitigate them. These detailed assessments, which start before each project begins, include a comprehensive examination of environmental and community impacts. Consulting with our stakeholders before each new project and continuing the dialogue through the operational phase. We listen. We share information openly. We collaborate. Weparticipate. And we recognize that some of the most important connections are made at the kitchen table as wellas the boardroom table. We also give back through investments and sponsorships that advance education, artsand culture and community development.

Nexen Inc. Head Office 801 7th Avenue SW Calgary, AB T2P 3P7 Canada T: 403.699.4000 Nexen Inc. P.O. Box 3202 Northern Rockies Plaza (ExplorerBuilding) Unit 106 5415 51 Street, Avenue West Fort Nelson, B.C. V0C 1R0 Canada T: 250.774.5150 Nexen Petroleum Colombia Ltd. Carrera 9# 76-49 Piso 6 Edificio ING Barins Bogota, Colombia T: 5713191330 nexen-inc.

July 2012 Forward-Looking Statements This fact sheet contains forward-looking statements and information that is based on Nexens current expectations, estimates, projections and assumptions. Actual results may differ materially from those expressed or implied by these forward-looking statements. Readers are encouraged to learn more about the risks and uncertainties that could impact these forward-looking statements by reviewing our annual report, annual information and other documentation posted to our website and filed with regulators. All financial information is in Canadian dollars. 1 For information about our shale gas resource estimates, see our November 15, 2010 news release, available at