UPDATE 1-Canadian Energy Exploration spuds first well, shares up

* Spuds first of three exploratory wells in Saskatchewan

* Says well has estimated costs of C$1.3 mln

* Says granted 3.2 mln options to officers

Nov 29 (Reuters) - Junior oil and gas company Canadian Energy Exploration Inc XPL.V said it spud the first of its three exploratory test wells in agreement with a major oil and gas general partnership in Saskatchewan, sending its shares up as much as 18 percent.

According to the terms of an Oct. 21 agreement with a partnership in the Hardy/Minton area of southeast Saskatchewan, the three wells must be drilled and completed, or abandoned by March 31, 2011, failing which the company would have to pay a fine of C$500,000.

The well, which is licensed to a total depth sufficient to drill to 2300 meters, has estimated costs associated with drilling and casing, completing or abandoning of C$1.3 million, the company said in a statement.

Canadian Energy, which is engaged in exploration and development of oil and natural gas reserves in western Canada, also said it granted 3.2 million options to officers, directors and consultants.

Of these, 800,000 options represent the right to purchase one common share at 39 Canadian cents on or before Nov. 29, 2013, and 2.4 million options on or before Nov. 29, 2015.

The Calgary, Alberta-based company's shares, which have nearly doubled in the last six months, were trading up 5 Canadian cents at 44 Canadian cents on Monday on the Toronto Venture Exchange. (Reporting by Arnika Thakur in Bangalore; Editing by Roshni Menon)