Ivanhoe Energy successfully upgrades heavy oil from its Pungarayacu field in Ecuador to pipeline quality

Tests demonstrate wide operating range of Ivanhoe Energy's HTLTM (Heavy-to-Light) technology

CALGARY, May 5 /CNW/ - David Dyck, President and Chief Operating Officer of Ivanhoe Energy Inc. (TSX: IE) (NASDAQ: IVAN) and Dr. Michael Silverman, Executive Vice President and Chief Technology Officer today announced that heavy crude oil extracted from Ivanhoe's IP-5B well in the Pungarayacu field in Block 20 in Ecuador has been successfully upgraded to local pipeline specifications using Ivanhoe Energy's proprietary HTL upgrading process. The successful tests demonstrate the flexibility and robustness of the HTL upgrading process to convert diverse heavy crude feedstocks into more valuable and marketable, pipeline-ready synthetic crude oil. In addition, these tests help position Ivanhoe Energy for full-scale heavy oil operations in Ecuador and in other countries having similar heavy oil characteristics.

Ivanhoe Energy drilled its first two appraisal wells in the Pungarayacu field in 2010. This followed a 26-well appraisal drilling program in the 1980's carried out by Petroecuador, which provided valuable preliminary data on the field but did not include thermal recovery and hence did not produce any oil for characterization and testing.

Ivanhoe Energy's goals for the initial wells in Pungarayacu were to add to its preliminary understanding of the reservoir, to carry out thermal recovery tests, and to extract heavy oil for characterization and upgrading tests using its proprietary HTL upgrading process.

Ivanhoe Energy drilled its second well, IP-5B, at the southern end of the Pungarayacu oil field in Block 20. Following thermal operations, heavy crude was extracted and test volumes were sent to Ivanhoe Energy's HTL Feedstock Test Facility (FTF) in San Antonio, Texas. These heavy crude volumes were successfully processed and converted to a product that would meet pipeline specifications in Ecuador and would have a higher value and greater marketability than the raw heavy crude.

"This successful processing test confirms the capabilities and flexibility of our HTL upgrading technology", said David Dyck. "We believe our HTL process provides Ivanhoe Energy with a unique capability to help the Government of Ecuador, and other governments and heavy oil owners around the world, develop this important resource in a cost-effective and environmentally-responsible manner".

Ivanhoe Energy's technical team is pleased with this result given the specific characteristics of the crude samples that were obtained from IP-5B. The crude gravity is similar to Athabasca bitumen, at approximately 8 °API, however other characteristics are quite different and present specific upgrading challenges. This included higher residual oil (heaviest fraction of the crude), metals, viscosity, solids, and water. In order to deal with these challenges, the FTF was calibrated and customized to suit the feed, and the processing was successful. The input heavy crude, with a gravity of approximately 8°API, was upgraded to approximately 17°API, while the viscosity of the feed was virtually eliminated and the metals significantly reduced. All of this was accomplished with an overall liquid yield of 88%. These results were from Ivanhoe's first well of recovered volumes and as such represents an early test result. Ivanhoe anticipates that improvements in technical attributes, including API, will continue to advance as progress is made on the overall Ecuador project. This would be consistent with improvements achieved in the Tamarack Project also operated by Ivanhoe.

"In recent years, we have dramatically improved the overall performance and capabilities of the HTL process from its early stage design," said Dr. Silverman. "Over the last twelve months we have focused deliberately on making the process as flexible as possible so we can handle different and more challenging crudes. This preparation served us well when processing the heavy crude from well IP-5B."

An independent review by Gaffney, Cline & Associates estimated that within the 250 square-mile delineated portion of Block 20, and within the Hollin formation, there are between 4 and 12 billion barrels of oil originally-in-place. Canadian reporting standards and, in particular, the Canadian Oil and Gas Evaluation Handbook, stipulate that, until it can be established that oil will flow to the surface, original-oil-in-place must be reported as "undiscovered resources".

Ivanhoe has also commenced a 190 kilometre 2-D seismic program on the southern part of the Pungarayacu Block.  Ivanhoe anticipates that this initial phase of shooting and processing of 2-D seismic will be completed in early July. The seismic data will be used to better identify sub-surface structures, assist in the selection of future drilling locations and possibly determine deeper geologic trapping systems which may contain lighter quality crude products.

HTL represents a unique competitive advantage as Ivanhoe executes its heavy oil business plan around the world.  HTL has demonstrated the ability to upgrade a wide range of heavy oil feedstocks with significant variability in characteristics into a more valuable and marketable synthetic crude oil meeting pipeline specifications.  HTL eliminates the need for diluent and blend agents for transport, and eliminates, or virtually eliminates, the need for natural gas for steam generation for thermal recovery. These HTL advantages all come to bear in Pungarayacu in Block 20, as well as in many other heavy oil fields in Ecuador, where access to natural gas and blend agents is restricted, and heavy oil is abundant.

Ivanhoe Energy Inc. is an independent, international oil and gas company with a focus on heavy oil development and production using advanced technologies, including its proprietary, patented heavy to light upgrading process (HTL™). Core operations are in Canada, Ecuador, China and Mongolia, with business development opportunities worldwide. Ivanhoe's shares trade on the NASDAQ Capital Market with the ticker symbol IVAN and on the Toronto Stock Exchange under the symbol IE.

For more information about Ivanhoe Energy Inc. please visit our web site at www.ivanhoeenergy.com.

Cautionary Statement Regarding Undiscovered Resources: There is no certainty that the Block 20 oil-in-place identified to date can be made to flow to the surface such that these undiscovered resources can be upgraded to a higher resource category nor that it will be commercially viable to produce the resources.

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 concerning the estimated quantities of gas in each target in the Guan structure,  the anticipated amount of time required for, and the estimated cost of, drilling, testing and casing the Yixin-2 and Zitong-1 wells, and other statements which are not historical facts. When used in this document, the words such as "could", "plan", "estimate", "anticipate", "intend", "may", "potential", "should", and similar expressions relating to matters that are not historical facts are forward-looking statements. Although Ivanhoe Energy and Sunwing Energy believe that their 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 possibility that the company will be unable to raise financing, 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 the reserves, the risk associates with doing business in foreign countries, environmental risks, changes in product prices, our availability to generate cash flow and 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.

SOURCE Ivanhoe Energy Inc.

For further information:

David Dyck:  1 (403) 817-1138
Greg Phaneuf: 1 (403) 817-1131


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