EXHIBIT 10.42
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                            INDEMNIFICATION AGREEMENT


         Dated as of January 5, 2004 between Nexen Inc. ("NEXEN") and Eric P.
Newell (together with his or her estate, heirs, executors and legal
representatives the "INDEMNIFIED PARTY")


BACKGROUND
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         (a)      The Indemnified Party:

                  (i)      is or has been a director or officer of Nexen;

                  (ii)     is or has been, at the request of Nexen, a director
                           or officer of a body corporate ("BODY CORPORATE"); or

                  (iii)    is or has been, at the request of Nexen, a director
                           or officer of or is acting or has acted in a similar
                           capacity (and the Indemnified Party shall for
                           purposes hereof be referred to as a director or
                           officer in so acting or having acted) for a body
                           corporate, partnership, unincorporated association,
                           unincorporated syndicate, unincorporated
                           organization, joint venture or trust ("ENTITY");

                  (Nexen, any Body Corporate and any Entity being collectively
                  the "CORPORATIONS" and any one of them being a "CORPORATION");

         (b)      Nexen acknowledges that the Indemnified Party, acting in the
                  capacity of director or officer, is required to make decisions
                  and take actions in furtherance of the business and affairs of
                  any Corporation which might have the result of attracting
                  personal liability; and

         (c)      It is in the best interests of Nexen to agree to indemnify the
                  Indemnified Party from any and all liabilities, losses, costs,
                  charges, expenses or damages sustained or incurred by the
                  Indemnified Party acting in the capacity of director or
                  officer of any Corporation;

AGREEMENT
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In consideration of the Indemnified Party having acted and continuing to act as
a director or officer, the parties agree as follows:

1.       DUTY OF CARE

         (a)      In accordance with the provisions of the CANADA BUSINESS
                  CORPORATIONS ACT (the "ACT"), the Indemnified Party, in
                  exercising his or her powers and discharging his or her duties
                  as a director or officer of any Corporation, shall:

                  (i)      act honestly and in good faith with a view to the
                           best interests of the Corporation; and

                  (ii)     exercise the care, diligence and skill that a
                           reasonably prudent person would exercise in
                           comparable circumstances.

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         (b)      Each Corporation acknowledges that the Indemnified Party has
                  complied with his or her duties under subsection 1(a) hereof
                  if the Indemnified Party relied in good faith on:

                  (i)      financial statements of the Corporation represented
                           to the Indemnified Party by an officer of the
                           Corporation or in a written report of the auditor of
                           the Corporation fairly to reflect the financial
                           condition of the Corporation; or

                  (ii)     a report of a person whose profession lends
                           credibility to a statement made by the professional
                           person.

2.       DUTY TO COMPLY

         (a)      The Indemnified Party shall comply with the Act, the
                  regulations made in the Act, the articles of the Corporation,
                  the by-laws of the Corporation and any unanimous shareholder
                  agreement or partnership agreement respecting the Corporation.

         (b)      Each Corporation acknowledges that the Indemnified Party has
                  complied with his or her duties under subsection 2(a) hereof,
                  if the Indemnified Party exercised the care, diligence and
                  skill that a reasonably prudent person would have exercised in
                  comparable circumstances, including reliance in good faith on:

                  (i)      financial statements of the Corporation represented
                           to the Indemnified Party by an officer of the
                           Corporation or in a written report of the auditor of
                           the Corporation fairly to reflect the financial
                           condition of the Corporation; or

                  (ii)     a report of a person whose profession lends
                           credibility to a statement made by the professional
                           person.

3.       DISCLAIMER OF LIABILITY

         The Indemnified Party shall not be liable for the acts, receipts,
         neglects, omissions or defaults of any other director or officer or any
         employee or agent of any Corporation or for any liabilities, damages,
         costs, charges or expenses sustained or incurred by any Corporation in
         the execution of the duties of his or her office, provided that nothing
         herein contained shall relieve the Indemnified Party of any liability
         for liabilities, damages, costs, charges or expenses suffered or
         incurred as a direct result of any acts, receipts, neglects, omissions
         or defaults of the Indemnified Party which are in contravention of the
         Act or any other applicable law.

4.       INDEMNITY

         (a)      Except in respect of an action by or on behalf of a
                  Corporation to procure a judgment in its favour, Nexen shall
                  indemnify and save harmless the Indemnified Party from and
                  against all liabilities, damages, costs, charges and expenses
                  (including, without limitation, court fees, legal expenses and
                  witness fees), including an amount paid to settle an action or
                  satisfy a judgment or any fine or penalty levied, reasonably
                  incurred by him or her in respect of any civil, criminal,

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                  administrative, investigative or other action, proceeding or
                  inquiry of any nature, to which he or she is, directly or
                  indirectly, a party by reason of being or having been a
                  director or officer of any Corporation if:

                  (i)      the Indemnified Party acted honestly and in good
                           faith with a view to the best interests of the
                           Corporation; and

                  (ii)     in the case of a criminal or administrative action or
                           proceeding that is enforced by a monetary penalty,
                           the Indemnified Party had reasonable grounds for
                           believing that his or her conduct was lawful.

         (b)      For all purposes of this Agreement, a director or officer
                  shall be conclusively deemed to have acted honestly and in
                  good faith with a view to the best interests of the
                  Corporation and to have had reasonable grounds for believing
                  that his or her conduct was lawful, unless and until the
                  applicable court hearing the action in which indemnity is
                  sought determines in a final judgment that is non-appealable
                  that the director or officer in question did not act honestly
                  and in good faith with a view to the best interests of the
                  Corporation or did not have reasonable grounds for believing
                  that his or her conduct was lawful, as applicable.

         (c)      In respect of an action by or on behalf of a Corporation to
                  procure a judgment in its favour, to which the Indemnified
                  Party is, directly or indirectly, a party by reason of being
                  or having been a director or an officer of the Corporation,
                  Nexen shall make an application at its expense for, and use
                  its best efforts to obtain, approval of the Court of Queen's
                  Bench of Alberta to indemnify and save harmless the
                  Indemnified Party from and against all liabilities, damages,
                  costs, charges and expenses (including, without limitation,
                  court fees, legal expenses and witness fees) reasonably
                  incurred by him or her in connection with such action, if the
                  Indemnified Party fulfills the conditions set out in clauses
                  4(a)(i) and 4(a)(ii).

         (d)      Notwithstanding the foregoing, Nexen shall indemnify and save
                  harmless the Indemnified Party from and against any and all
                  liabilities, damages, costs, charges and expenses (including,
                  without limitation, court fees, legal expenses and witness
                  fees) reasonably incurred by him or her in connection with any
                  action or proceeding to which the Indemnified Party is,
                  directly or indirectly, a party by reason of being or having
                  been a director or officer of a Corporation (including,
                  without limitation, an action or proceeding to enforce or
                  interpret this Agreement), if the Indemnified Party was not
                  judged by the court or other competent authority to have
                  committed any fault or omitted to do anything that the
                  Indemnified Party ought to have done and the Indemnified Party
                  fulfills the conditions set out in clauses 4(a)(i) and
                  4(a)(ii).

         (e)      For the purposes of this Agreement, the termination of any
                  civil, criminal or administrative action or proceeding by
                  judgment, order, settlement or conviction shall not, of
                  itself, create a presumption either that the Indemnified Party
                  did not act honestly and in good faith with a view to the best
                  interests of the Corporation or that, in the case of a
                  criminal or administrative action or proceeding that is
                  enforced by a monetary penalty, the Indemnified Party did not
                  have reasonable grounds for believing that his or her conduct
                  was lawful.

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         (f)      Upon the Indemnified Party becoming, directly or indirectly, a
                  party to any action, proceeding or inquiry of any nature
                  referred to in paragraph 4(a), Nexen shall forthwith assume
                  and pay, or reimburse the Indemnified Party for and indemnify
                  and save harmless the Indemnified Party from and against, any
                  and all costs, charges and expenses (including, without
                  limitation, court fees, legal expenses and witness fees)
                  referred to in paragraph 4(a). Such assumption, payment or
                  reimbursement shall be made continuously and promptly after
                  the Indemnified Party has advised Nexen of such costs, charges
                  and expenses. If the outcome of such action, proceeding or
                  inquiry establishes that the Indemnified Party were not
                  entitled to indemnification of such costs, charges and
                  expenses, then the Indemnified Party shall repay to Nexen all
                  amounts paid by it to or for the benefit of such Indemnified
                  Party under this paragraph 4(f) for which there was no
                  entitlement to indemnification.

5.       INSURANCE

         (a)      Unless otherwise agreed between the Parties hereto, Nexen
                  shall purchase and maintain, or cause to be purchased and
                  maintained, while the Indemnified Party remains a director or
                  officer of a Corporation and for a period of six years
                  thereafter, directors' and officers' errors and omissions
                  insurance for the benefit of the Indemnified Party on terms no
                  less favourable in terms of coverage and amounts, to the
                  extent permitted by law and available on reasonable commercial
                  terms, than such insurance maintained in effect by Nexen on
                  the date hereof, provided that such insurance shall not apply
                  to any liability incurred by the Indemnified Party relating to
                  any failure by the Indemnified Party to act honestly and in
                  good faith with a view to the best interests of the
                  Corporation. Nexen shall provide the Indemnified Party with a
                  copy of the insurance policies, if requested, and shall
                  provide the Indemnified Party with prompt written notice if
                  such insurance is not maintained for any reason.

         (b)      The indemnification provided pursuant to this Agreement is
                  intended to be available in all circumstances permitted under
                  the Act and, without limitation, is intended to be available
                  in circumstances where any insurance coverage maintained by
                  Nexen is not available, either because the insurer is denying
                  coverage, the actions are not covered due to an exemption or
                  exclusion from the terms of the insurance policy or otherwise,
                  or where Nexen determined for whatever reason not to obtain or
                  maintain insurance coverage.

6.       INCOME TAX

         Should any payment made pursuant to this Agreement be deemed by any
         taxing authority to constitute a taxable benefit or otherwise be or
         become subject to any tax or levy, then Nexen shall pay such greater
         amount as may be necessary to ensure that the amount received by or on
         behalf of the Indemnified Party after the payment of or withholding for
         such tax, is equal to the amount of the costs, charges, expenses or
         liability actually incurred by or on behalf of the Indemnified Party
         such that the Indemnified Party shall be indemnified for any and all
         such taxes.

7.       ASSIGNMENT

         The duties and obligations of Nexen under this Agreement shall be
         binding upon, and

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         enforceable by the Indemnified Party, against Nexen and its successors
         and assigns, including any corporation with which Nexen is merged or
         amalgamated. Nexen covenants and agrees that it shall not, without the
         consent of the Indemnified Party, transfer of dispose of all or
         substantially all of its assets or business to any entity that does not
         agree to assume all of the obligations of Nexen under this Agreement.

8.       EFFECTIVE DATE

         Notwithstanding the date of execution of this Agreement, the terms and
         provisions hereof shall be effective, binding upon, and enforceable by
         the parties as of and from the date on which the Indemnified Party was
         first appointed or elected a director or officer of a Corporation.

9.       INDEMNIFICATION NOT EXCLUSIVE

         The indemnification provided by this Agreement is in addition to the
         indemnification provided by by-laws of any Corporation or those
         provided under the legislation governing any Corporation. In addition,
         the indemnification provided by this Agreement shall be in addition to
         any right of indemnification, contribution or reimbursement that a
         director or officer has under applicable law, the constating documents
         of any Corporation or any other agreement between the director or
         officer and any Corporation and shall continue for the benefit of the
         Indemnified Party notwithstanding that he or she may have ceased to be
         a director or officer of one or more Corporations.

10.      DEFENCE OF CLAIMS

         The Indemnified Party covenants and agrees that, upon becoming aware of
         any facts or circumstances which may give rise to the Indemnified Party
         becoming a party, directly or indirectly, to any action, proceeding or
         inquiry referred to in paragraph 4(a) (a "CLAIM"), the Indemnified
         Party shall provide written notice to Nexen setting out in reasonable
         detail the nature of the facts relating to such Claim. Upon receipt of
         the notice of the Claim, Nexen shall, at its expense and in a timely
         manner, contest and defend against the Claim or cause the relevant
         Corporation to contest and defend against the Claim and take all such
         steps as may be necessary or proper to prevent the resolution thereof
         in a manner adverse to the Indemnified Party. The Indemnified Party
         shall fully cooperate with Nexen in taking all such steps. If Nexen
         does not in a timely manner undertake or cause the contestation or
         defence of the Claims, the Indemnified Party may do so and such
         contestation or defence shall be at the expense and risk of Nexen
         provided that if the outcome of such action, proceeding or inquiry
         establishes that the Indemnified Party was not entitled to contest or
         defend the Claim at the risk and expense of Nexen, then the Indemnified
         Party shall repay to Nexen all amounts paid by Nexen in connection with
         such contestation or defence pursuant to this section 10 and paragraph
         4(f) for which there was no entitlement to indemnification.

11.      OBLIGATIONS OF NEXEN ABSOLUTE

         The obligations of Nexen under this Agreement are absolute and
         unconditional and shall not be released, discharged or reduced, and the
         rights of the Indemnified Party hereunder shall not be prejudiced or
         impaired, by any neglect, delay or forbearance in demanding, requiring
         or enforcing payment or performance by Nexen of any of its obligations
         hereunder or by granting any extensions of time for such performance or
         by

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         waiving any performance (except as to any particular performance which
         has been waived), or by permitting or consenting to any assignment in
         bankruptcy, receivership, insolvency or any other creditor's
         proceedings of or against Nexen or by the winding-up or dissolution of
         Nexen or any other event or occurrence which would or might otherwise
         have the effect at law of terminating the obligations of Nexen under
         this Agreement.

12.      INTERPRETATION

         This Agreement is not intended to, and shall not be interpreted to,
         authorize a payment of an indemnity contrary to section 124 of the Act.

13.      SEVERABILITY

         If any part of this Agreement or the application of such part to any
         person or circumstance shall, to any extent, be invalid or
         unenforceable, the remainder of this Agreement, or the application of
         such part to any other person or circumstance, shall not be affected
         thereby and each provision of this Agreement shall be valid and
         enforceable to the fullest extent permitted by law.

14.      CHOICE OF LAW

         This Agreement shall be governed and construed in accordance with the
         laws of Alberta and the laws of Canada applicable therein.

IN WITNESS WHEREOF the parties have executed this agreement on the date first
above mentioned.

SIGNED by the Indemnified Party in the presence of:


/s/ Michel Lupien                                  /s/ Eric P. Newell
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Witness Signature                                  Eric P. Newell

MICHEL LUPIEN
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Witness Name

11607-134 STREET
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Witness Address

EDMONTON, AB  T5M 1J3
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Witness Address

SENIOR PUBLIC AFFAIRS OFFICER
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Witness Occupation

                                                   NEXEN INC.


                                                   /s/ Sylvia L. Groves
                                                   -----------------------------
                                                   Sylvia L. Groves