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Nexen CEO Marvin RomanowJACK CUSANO

A mechanical problem at Nexen Inc. Buzzard offshore oil rig will slash production until it can install a repair.

Designed to produce 200,000 barrels of oil equivalent a day, Buzzard's output has tumbled to between 30,000 and 50,000 a day, chief executive officer Marvin Romanow said Thursday. It won't come back to full strength for another eight to 12 days.

"Two days ago during a routine inspection, we identified a flange that required repair on the sand removal system of our main oil separator," Mr. Romanow said.

Buzzard began production in the North Sea in 2007. It is majority owned and operated by Nexen. Suncor Energy Inc., BG Group and Edinburgh Oil and Gas all have minority shares in the project.

Nexen has also been plagued by operational difficulties at its Long Lake oil sands project. Nearly three years after it started operations, Long Lake currently produces 18,000 barrels per day, well short of its expected 72,000.

Still, Mr. Romanow expressed confidence that output will surge in 2010 to between 40,000 and 60,000 barrels per day, as the company adds more wells and more steam generation capacity. Long Lake is an in situ project that uses underground injections of high-pressure steam to separate bitumen from sand "That's still a reasonable set of signpost for us to be looking at and aiming towards," he said.

Nexen reported a $259-million profit in the fourth quarter, a turnaround from the loss it experienced a year earlier. The company's production volumes increased 13 per cent, and it succeeded in replacing 90 per cent of its conventional reserves, its second-best performance in seven years.

"Our development activities delivered our best year in quite some time," said chief financial officer Kevin Reinhart.

The Calgary-based company says it made progress last year on all three of its main areas: oil sands, shale gas and conventional exploration and development Nexen's profit for the three months ended Dec. 31 was 50 cents per common share, while net sales rose to $1.55-billion.

In contrast, Nexen had a $181-million loss or 35 cents per share in the fourth quarter of 2008, when it had $1.27-billion of net sales.

With files from Canadian Press



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