Nexen Directors are paid in two ways:

1. annual retainers for board and committee positions; and
2. fees for each board and committee meeting attended.

Annual board and committee retainers are paid quarterly and pro-rated for partial service. The same fees are paid for attending meetings in person or by conference call. A travel allowance of $1,500 was introduced on February 15, 2007. It is paid whenever a director travels outside of his or her home province or state, or travels more than a total of three hours, round trip, to attend a Nexen meeting or site visit. Nexen also reimburses directors for out-of-pocket travel expenses.

New retainers were approved as of January 1, 2008.

Notes:

1. Total of the Board Chair Retainer of $150,000, plus the Board Member Retainer of $28,100.
2. As of January 1, 2008, the Board Chair is paid only this retainer and the travel allowance. He does not receive any other retainers or meetings fees.

2007 Retainers and Fees

Notes:

1. As an executive of Nexen, Mr. Fischer is not paid any director compensation.
2. Mr. O’Neill is the Audit Committee Chair.

Deferred Share Units

Nexen has two DSU plans. Under the first plan, eligible directors may elect annually to receive all or part of their fees in DSUs, rather than cash. Under the second plan, DSUs replaced stock options in 2003 as the long-term incentive used to align the interests of directors with shareowners.

DSUs provide directors with a stake in Nexen during their term of service. DSUs do not grant the right to vote as there are no shares underlying the plans. A DSU is a bookkeeping entry that tracks the value of one Nexen common share. When cash dividends are paid on Nexen common shares, eligible directors are credited with additional DSUs, equal to the value of the dividend paid. DSUs accumulate over a director’s term of service and are only paid when the director leaves the board. At that time, payments may be made in cash or in Nexen common shares purchased on the open market, at Nexen’s option.

Notes:

1. The closing market price of Nexen common shares on the TSX on November 30, 2007.
2. The number of DSUs times the base price.

Share Ownership Guideline

Directors demonstrate their commitment to Nexen's success through share ownership. On February 14, 2008, the board approved guidelines that set out that directors are expected to own or control at least 16,800 shares or DSUs. This amount represents at least three times both the base annual board retainer of $35,000 and the value of the base annual DSU grant. They must be accumulated as follows:

• 5,600 by the end of year 1
• 11,200 by the end of year 2
• 16,800 by the end of year 3

New directors will be required to take their base annual retainer in DSUs until the current threshold is met. If there is a change in share value or size of the annual grant of DSUs that causes a director to no longer meet the requirement, he or she will have nine months to meet the threshold again.

All directors surpass these guidelines.