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.to - News), 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™). 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.