Ivanhoe Pumps First Oil in Ecuador's Pungarayacu Field

Ivanhoe 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," Dave Martin, President and CEO of Ivanhoe Energy Latin America, 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.


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