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

May 5, 2011

Tests demonstrate wide operating range of Ivanhoe Energy’s HTL(TM) (Heavy-to-Light) technology

CALGARY, May 5 /PRNewswire/ – 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(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.

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.

Source: newswire

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