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Ivanhoe Energy successfully produces oil from its second appraisal well in Ecuador

October 28, 2010

Effectiveness of steam injection demonstrated for production of
Pungarayacu heavy oil

QUITO, Ecuador, Oct. 28 /PRNewswire/ – David Dyck, President and Chief
Operating Officer of Ivanhoe Energy Inc. (TSX: IE, NASDAQ: IVAN), and

David Martin, President and Chief Executive Officer of Ivanhoe Energy
Latin America, announced today that the company has successfully
produced oil at its second appraisal well in the Pungarayacu field on
Block 20 in Ecuador, following steam injection operations.

“This is an historic event,” Mr. Martin said. “While the existence of
the Pungarayacu oil field has been known for 30 years, these are the
first barrels of oil ever to have been produced from the field. The
Ecuadorian government has identified Block 20, including the
Pungarayacu oil field, as a key, strategic project and we are pleased
with the initial results of our appraisal work.”

The IP-5b well was successfully drilled, cored and logged to a total
depth of 1,080 feet. The well then was perforated in the Hollin oil
sands and steam was successfully injected into the reservoir. This was
followed by the production of heated heavy oil back to the well bore
and to surface.

“In line with our expectations, the IP-5b well demonstrates that the
Hollin formation in the Pungarayacu oil field contains oil and
reservoir characteristics that allows for thermally-assisted production
of heavy oil,” Mr. Martin added. “We now will proceed with our
evaluation process in order to design a development plan for this
potentially large resource.”   

The oil produced from the IP-5b well will be transported to Ivanhoe
Energy’s HTL Feedstock Test Facility at the Southwest Research
Institute in San Antonio, Texas. The state-of-the-art testing facility
is used to support detailed engineering and design of commercial-scale
HTL plants and to test crude oil associated with potential HTL
projects.

IP-5b oil and reservoir characteristics

Independent lab analysis of the oil produced from the IP-5b well
indicates an API gravity of approximately 9 to 10 degrees. The oil
demonstrated very favourable viscosity reduction at elevated steaming
temperatures. The produced oil also contained dissolved gas, which
further enhances its mobility in the reservoir and will positively
impact thermal recovery potential. The Hollin formation has exhibited
very favourable reservoir permeabilities and this is the primary
sandstone reservoir and principal producing formation in the Oriente
Basin, one of the most productive of( )the South American Sub-Andean Basins.

An independent review completed by Gaffney, Cline & Associates estimated
that within the 250-square-mile delineated portion of the block, and
within the Hollin formation, there are between four to 12 billion
barrels of original-oil-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”.

Next steps

Production testing at the IP-5b well is continuing. The recently
completed steam program was initiated in the Hollin formation at a
depth of approximately 750 feet. During the drilling and coring of the
well, oil shows also were encountered in the shallower, Napo T-Sand
formation at a depth of approximately 540 feet. A specific program is
underway to test this formation.

Ivanhoe Energy plans to commence a seismic program following testing
operations at the IP-5b well to increase understanding of the
geological faulting that is known to be present on Block 20 and to help
determine locations for the next appraisal wells.

Santiago Pastor leading operating activities in Ecuador

Santiago Pastor, Vice-President, Operations for Ivanhoe Energy Ecuador,
is spear-heading the company’s field operations. Prior to joining
Ivanhoe Energy Ecuador early this year, Mr. Pastor was Operations,
Facilities and Construction Manager with Petrobras Ecuador. Ivanhoe’s
practice is to employ local Ecuadorians and Mr. Pastor continues to
build a high-calibre team to carry out the company’s activities in the
field.

Commitment to corporate social responsibility

Ivanhoe Energy Ecuador takes pride in its reputation as a company that
is committed to effective and responsive environmental management, to
responsible health and safety practices, and to consulting with and
contributing to the development of sustainable local communities. The
company is conducting extensive consultations with indigenous
communities located in the vicinity of the proposed seismic program and
new well locations on Block 20, and also is liaising with local
authorities, the Ministry of Environment and the Ministry of
Non-Renewable Resources on its operations.

Ivanhoe Energy Ecuador is committed to ensuring that local communities
share in the benefits from the work that is being carried out in Block
20. The company seeks to employ local workers and support local
businesses, utilizing local supplies and services, to maximize the
economic benefits to Ecuador and, specifically, within Block 20.

Ivanhoe Energy Ecuador is a Canadian company and a wholly-owned
subsidiary of Ivanhoe Energy Latin America Inc., the parent company of
Ivanhoe Energy Inc.’s Latin American corporate group. Ivanhoe Energy
Ecuador’s head office is located in Quito and conducts all operating
activities in Ecuador.

Ivanhoe Energy Inc. 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, patented, heavy to light upgrading process (HTL(TM)).
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.

 

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 anticipated quantities of
recoverable barrels of oil or bitumen from Block 20, the scope and
timing of the evaluation activities in respect of the results obtained
from appraisal well IP-5b, the schedule for commencement of drilling
and testing of additional wells in different areas of Block 20 for
which permits have already been obtained, the commencement of the
permitting process for additional wells on Block 20 for which permits
have not, to date, been obtained 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 Ivanhoe Energy Ecuador 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 result 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, new product development will not proceed as
planned, the HTL technology  to upgrade bitumen and heavy oil may not
be commercially viable, heavy oil samples from Block 20 may not have
the product qualities anticipated, Ivanhoe Energy’s lack of history in
developing commercial HTL opportunities, 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
associated 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.


Source: newswire



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