(EnergyAsia, November 30 2011, Wednesday) — A Japanese consortium of upstream company Inpex and engineering firm JGC has agreed to pay C$700 million for a 40% stake in a shale gas prospect in Canada’s British Columbia province.

Calgary, Alberta-based Nexen Inc retains a 60% stake and will continue to operate the project to extract and produce gas from its holdings in the Horn River, Cordova and Liard basins. Inpex Gas British Columbia Ltd will pay half the sum upfront and the rest as capital carry, with closing expected in the first quarter of 2012, at which time C$600 million would be due to Nexen.  (US$1=C$1.03).

Nexen said the joint venture lands contain as much as 15 trillion cubic feet (tcf) of recoverable resource in the Horn River and Cordova basins and as much as 23 tcf in the Liard basin.

Upon closing of the agreement, the partners said they will appraise and develop the resource, subject to economic conditions, and investigate the feasibility of a downstream project that includes exporting liquefied natural gas (LNG).

Nexen said it expects to complete drilling an 18-well pad in the acreages by the fourth quarter of 2012, increasing gross production volumes to peak rates of approximately 155 million cubic feet a day (mmcf/d) in early 2013.

Inpex said it expects venture’s holdings in the Horn River and Cordova basins to produce up to 1,250 million standard cubic feet per day of shale gas or 200,000 barrels of oil equivalent per day (boe/d).

Proclaiming the sale both as an advancement of its shale gas strategy and a profitable deal, Marvin Romanow, Nexen’s President and CEO, said:

“The transaction provides us with world-class partners that have significant upstream and LNG expertise. It also recognises the outstanding team we have put in place and the execution excellence they have consistently demonstrated.”

Inpex’s entry into Canada represents growing international recognition of Canada’s hydrocarbon resources as the company is already involved in 71 oil and gas projects in 26 countries. As Japan’s largest exploration and production (E&P) company, it holds the country’s largest hydrocarbon reserves, and produces more than 400,000 boe/d from its global assets mostly to meet the needs of the domestic market.

Inpex brings significant LNG expertise and market access to the partnership, vital for Canada to achieve its declared goal to become an oil and gas exporter to Asia, and to reduce dependence on the US markets. Inpex owns interests in LNG projects, and oil and gas reserves in Indonesia and Australia, and is building a regasification terminal in Japan.

The company operates as well as hold a 76% working interest in the Ichthys project off the coast of Australia that is expected to produce 8.4 million tonnes of LNG per year. Inpex also operates and owns a 60% working interest in the Abadi LNG project off the coast of eastern Indonesia that is expected to produce 2.5 million tonnes of LNG per year.

Combined, these two projects will meet the equivalent of 15% or more of Japan’s current LNG annual import volumes.

Japan has been stepping up its import of oil, gas and coal to make up for the loss of the bulk of its significant nuclear power capacity following the March 11 2011 earthquake and tsunami that struck the country’s north-eastern corridor.

Despite the urgent need to develop new energy supply sources, Japan has been surprisingly slow in coming to Canada, a stable First World country with one of the world’s largest proven oil reserves. Japan’s most recent major hydrocarbon investment in Canada was made last year, a C$850 million bid by trader Mitsubishi to acquire a share of Penn West Exploration’s shale gas project in northeastern British Columbia.