The Athabasca oil sands in northeast Alberta is a key growth area for Nexen. Our strategy is to economically develop our bitumen resource in phases to provide low-risk, stable, future growth. Our Long Lake Project involves integrating steam-assisted- gravity-drainage (SAGD) bitumen production with field upgrading technology to produce a premium synthetic crude for sale, and a synthetic gas, which significantly reduces our need to purchase natural gas for operations. We also have a 7.23% investment in the Syncrude oil sands mining operation.

We have approximately 281,000 net acres of bitumen-prone lands in the Athabasca region, with plans to acquire more. We plan to continue developing our bitumen lands in phases using our integrated upgrading strategy. In 2008, we invested $175 million on land acquisition, additional drilling, seismic and engineering to develop our leases and advance regulatory applications for these phases.

During 2007, the federal government announced climate change proposals, however, legislation has not yet been drafted. Due to this regulatory uncertainty and the current global economic crisis, we are delaying certain planned expenditures on Phase 2. Phase 2 is expected to be followed by additional phases every three or four years. Each phase will leverage the knowledge and experience gained from successfully developing Long Lake and subsequent projects will be similar in size and design. By keeping the core team in place and repeating and improving on existing designs and implementation plans, we expect to gain efficiencies in engineering, modular fabrication and on-site construction. We also anticipate enhanced operating efficiencies as we can train and move people easily between the various plants.