Ivanhoe Completes Farmout to CITIC in China Oil Project

David Martin, Chairman of Ivanhoe Energy Inc., announced that China International Trust & Investment Corporation (CITIC) has completed the previously agreed US$20 million transaction to acquire a 40% working interest in the company's Dagang oil project. Ivanhoe will retain a 60% working interest and Sunwing Energy, Ivanhoe's Chinese flagship subsidiary, will be the operator. The transaction has received final approval by the Ministry of Commerce of the People's Republic of China for the amendment to the project's petroleum contract. The US$20 million payment will be used to advance the development program at the Dagang oil project and completes the agreement signed by CITIC and Ivanhoe which was announced in Ivanhoe's November 18th 2003, news release.

Under the terms of the agreement, CITIC may elect to convert its participating interest into common shares of Ivanhoe's subsidiary, Sunwing Energy at any time prior to the first anniversary of the date that Sunwing completes an initial public offering ("IPO") at a discount to the IPO price of between 8% and 10%. Instead of electing to convert into Sunwing Energy common shares, CITIC may elect to convert its participating interest into Ivanhoe common shares at any time within eighteen months of closing at a price equal to the average closing price of Ivanhoe's common shares on the Toronto Stock Exchange for the 30 trading days preceding conversion, less an 8% discount.

As part of the agreement, CITIC is working with the company and various banking institutions to arrange financing to cover the remainder of the investment required to fully develop the Dagang project.

The Dagang oil project, located approximately 125 miles southeast of Beijing, is being developed under a 30-year production-sharing contract with China National Petroleum Corporation covering an area of 22,400 gross acres divided into six blocks in the Kongnan oilfield in Dagang, Hebei Province. Sunwing Energy and CITIC will fund 100% of the development costs to earn 82% of the net revenue from oil production until cost recovery, at which time their shared entitlement reverts to 49%. Sunwing Energy will remain the operator of the Dagang project throughout the 30-year term of the contract. Last fall, Sunwing began the initial stage of the Overall Development Program (ODP) for the Dagang project. Current production from nine producing wells is approximately 800 barrels a day, an increase of approximately 300 barrels a day since the beginning of the year. Three rigs are now conducting drilling operations on three development wells and an additional well is currently being placed into production. The ODP calls for the company to drill up to 115 new wells, work over 28 existing wells and upgrade and install new surface and transmission facilities.

CITIC is a large Chinese state-owned enterprise. It holds major interests in many industries throughout the world that have strategic value to the expanding Chinese economy including power, banking, airlines, information technology, investment services, real estate, engineering services, heavy industries, infrastructure investment and resource industries.

Ivanhoe Energy trades on the NASDAQ SmallCap market with the ticker symbol IVAN and on the Toronto Stock Exchange with the symbol IE.

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