Goldman expands in commods with Nexen unit buy

NEW YORK (Reuters) - Goldman Sachs (GS.N), already the largest bank in commodities trading, has expanded that business by acquiring the North American natural gas marketing operations of Nexen Inc (NXY.TO), Canada's No. 5 independent oil explorer, for an undisclosed sum, Nexen said on Friday.

The deal gives Goldman a business that Nexen has said is one of the top 10 in gas trading on the continent.

It buys and sells about 6 billion cubic feet of gas a day and manages more than 50 billion cubic feet of gas storage capacity. The business adds to Goldman's existing commodities trading operation in Calgary.

Nexen, best known as operator of the Long Lake oil sands project in Alberta and the giant Buzzard offshore oil field in the North Sea, had put the unit on the block last year, saying it wanted its marketing business to reflect its production weighting toward crude oil.

"We can confirm the sale," Nexen Vice-President Pierre Alvarez said, but he declined to offer more details.

Earlier, Reuters reported the sale to J. Aron & Co, the commodities division of Goldman Sachs, quoting a source familiar with the transaction.

The source also declined to comment on price, timing or if Nexen's traders would be transferred to the buyer.

A Goldman spokesman said he could not confirm the details.

One Canadian-based analyst, who declined to be named, said he believed the deal was worth under $100 million, and possibly well under.

"I'm sure this (deal) is well below what is material for either company," he said.

Goldman, which is under fire from the U.S. Securities and Exchange Commission for the design and marketing of a subprime mortgage securities product, is the biggest commodities player among Wall Street banks, with more than 200 commodity professionals in locations throughout the world.

It risks more of its own money in commodities than any other Wall Street bank, a figure hovering around $40 million for the past two years.

Goldman's J. Aron division is based in New York and trades gas, precious metals, foreign exchange and over-the-counter options.

For Nexen, the deal follows the C$15 million ($14.6 million) sale of its European gas and power marketing business to Nomura Holdings Inc (8604.T), Japan's largest brokerage, in February.

Calgary-based Nexen said last month that it expects to record a noncash loss of C$250 million to C$290 million on the North American gas trading unit sale, relating to the transfer of long-term physical gas transportation commitments.

Last July, when Nexen began weighing options for the business, it said its production was weighted 85 percent toward oil, but that most of its trading was in gas, hence its desire to align its operations.

Nexen shares fell 44 Canadian cents, or 2 percent, to C$22.36 on the Toronto Stock Exchange, on a day when crude had tumbled nearly 4 percent and the TSX oil group .SPTTEN sank 1.7 percent.

Goldman Sachs fell $1.42, or 1 percent, to $143.23 in New York.

(Additional reporting by Scott Haggett; Editing by Alden Bentley and Rebekah Kebede)