VANCOUVER, Jan. 4 /CNW/ - Ivanhoe Energy Inc. (NASDAQ: IVAN and TSX: IE),
through its wholly owned subsidiary Sunwing Zitong Energy Ltd. (Sunwing), will
proceed with Phase II of its gas exploration and development contract for the
Zitong Block in China's Sichuan Basin. Mitsubishi Gas Chemical Company Inc.,
which owns a 10% working interest in the project, also has indicated its
interest in proceeding with Phase II.
Sichuan is the oldest gas-producing province in China and currently
accounts for approximately 27% of China's annual gas production. Ivanhoe's
Zitong gas exploration contract covers an area of 900,000 acres in the Sichuan
Basin. Sunwing is carrying out its exploration activities under a 30-year
exploration and development, production-sharing contract (Zitong PSC) signed
with China National Petroleum Corporation (CNPC) in September 2002. CNPC is
China's flagship energy enterprise, producing approximately 75% of China's gas
production and over 50% of its oil production.
"The 900,000-acre Zitong Block is right in the heart of China's most
prolific gas-producing area", said Gerry Moench, Ivanhoe Energy's Executive
Vice President. "Our work to date has confirmed the presence of gas and has
taught us a great deal. Our partnership with Mitsubishi Gas Chemical Company
(MGC) and our contract with PetroChina associates us with two of Asia's energy
leaders. We look forward to executing Phase II and proving out the potential
of this important block."
Sunwing holds a 90% contractor working interest in the Zitong PSC and is
the operator. MGC owns the remaining 10% contractor interest and has an option
to acquire a further 10%. Sunwing and MGC will receive approximately 75% of
any net project revenues before payout and approximately 45% after payout.
PetroChina, a subsidiary of CNPC, may elect to participate in any development
of the project through a working interest of up to 51%.
The Zitong PSC provides for two exploration phases, each three years in
length. Sunwing, MGC and CNPC will jointly participate in the development and
production of any commercially viable discoveries, with production rights
limited to the lesser of 30 years following the date of the Zitong PSC or
20 years of continuous production.
Sunwing now has completed Phase I under the Zitong PSC. This included
reprocessing approximately 1,649 miles of existing 2D seismic data and
acquiring approximately 705 miles of new 2D seismic data, and interpreting
this data. This was followed by drilling two wells, totalling an aggregate of
22,293 feet. Both wells encountered expected reservoirs and gas was tested on
the Yixin No. 1 well, but neither well demonstrated commercially viable flow
rates and both have been suspended. Sunwing may elect to re-enter these wells
to stimulate or drill directionally in the future.
Phase II entails additional drilling of a total of approximately
22,965 feet, to take place over a three-year period ending in December, 2010.
Sunwing has identified potential target structures and its onward plans
include acquiring additional high-quality 2D seismic and shooting selected 3D
seismic. Drilling is expected to commence late in 2009 and continue in 2010.
Over the past 30 years PetroChina has drilled 27 wells, testing Jurassic,
Triassic and Permian formations on the Zitong Block. Gas has been tested from
all zones to a depth below 21,000 feet in the Lower Triassic. PetroChina and
Sinopec are drilling deeper Lower Triassic and Upper Permian tests on
prospects adjacent to Zitong following their successful deep exploration
efforts over the past five years.
Ivanhoe Energy is an independent international heavy oil development and
production company focused on pursuing long-term growth in its reserves and
production using advanced technologies, including its proprietary heavy oil
upgrading process (HTL(TM)). Core operations are in the United States and
China, with business development opportunities worldwide. Ivanhoe Energy
trades on the NASDAQ Capital Market with the ticker symbol IVAN and on the
Toronto Stock Exchange with the symbol IE.
FORWARD-LOOKING STATEMENTS: This document includes forward-looking
statements, including forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, but are not limited to, statements relating to the continued
advancement of Ivanhoe Energy's projects, the success of ongoing exploration
at Zitong, including Phase II additional drilling and planned additional
exploration, statements relating to anticipated capital expenditures and other
statements that are not historical facts. When used in this document, the
words such as "could," "plan," "estimate," "expect," "intend," "may,"
"potential," "should," and similar expressions relating to matters that are
not historical facts are forward-looking statements. Although Ivanhoe Energy
believes that its expectations reflected in these forward-looking statements
are reasonable, such statements involve risks and uncertainties and no
assurance can be given that actual results will be consistent with these
forward-looking statements. Important factors that could cause actual results
to differ from these forward-looking statements include the potential that the
company's projects will experience technological and mechanical problems,
geological conditions in reservoirs may not result in commercial levels of oil
and gas production, the availability of drilling rigs and other support
services, uncertainties about the estimates of reserves, the risk associated
with doing business in foreign countries, environmental risks, changes in
product prices, our ability to raise capital as and when required, competition
and other risks disclosed in Ivanhoe Energy's Annual Report on Form 10-K filed
with the U.S. Securities and Exchange Commission on EDGAR and the Canadian
Securities Commissions on SEDAR.
RESERVES DATA AND OTHER OIL AND GAS INFORMATION: Ivanhoe Energy's
disclosure of reserves data and other oil and gas information is made in
reliance on an exemption granted to Ivanhoe Energy by Canadian securities
regulatory authorities, which permits Ivanhoe Energy to provide disclosure in
accordance with U.S. disclosure requirements.
The information provided by Ivanhoe Energy may differ from the
corresponding information prepared in accordance with Canadian disclosure
standards under National Instrument 51-101 (NI 51-101). Further information
about the differences between the U.S. requirements and the NI 51-101
requirements is set forth under the heading "Reserves, Production and Related
Information" in Ivanhoe Energy's Annual Report on Form 10-K.
For further information:
For further information: Information Contact: Bill Trenaman, (604)
331-9834, Website: www.ivanhoeenergy.com