Ivanhoe Energy Increases Holding in Ensyn Petroleum

Ivanhoe Energy has exercised its option to acquire an additional 5% equity ownership interest in Ensyn Petroleum International Ltd. (Ensyn) of Boston, Massachusetts, increasing Ivanhoe's total ownership position to 15%.

Ivanhoe decided to increase its stake in Ensyn following the August 27, 2004, announcement of the signing of a non-binding agreement between Ensyn and Aera Energy LLC (Aera) to advance negotiations for a 10,000-barrel-per-day RTP(TM) plant in a California oilfield. Ensyn is commercializing its leading-edge, Rapid Thermal Processing (RTP(TM)) technology used to upgrade heavy oil to produce lighter, more valuable crude oil at lower costs. Aera, a California limited liability company owned by affiliates of Shell and ExxonMobil, is California's leading oil producer with about 250,000 barrels per day of oil production. Ensyn and Aera plan to begin negotiations for a definitive agreement to build a processing facility that would yield upgraded crude oil and surplus energy. The plant, if completed, will be owned and operated by Ensyn. Additional projects with a combined heavy oil throughput of up to 50,000 barrels per day may be located on Aera properties if the performance of the initial plant meets expectations.

In 2003, Ensyn agreed to build a 1,000-barrel-per-day demonstration plant in the San Joaquin Valley in southern California to test heavy oil produced from fields throughout the world, including Ivanhoe's South Midway field and Aera's Belridge field in California. At that time, Ivanhoe acquired a 10% interest in Ensyn and exclusive rights to use Ensyn's RTP(TM) process in a number of important countries - China, Mongolia, Iraq, Oman and all of South America, with the exception of Venezuela.

"Initial testing of components at the demonstration plant is underway and the first crude oil runs are planned for the fourth quarter of 2004," said Ivanhoe Chairman David Martin. "Ensyn is moving ahead quickly and we are very pleased with the progress being made on the commercialization of this advanced technology."

There are significant quantities of heavy oil deposits worldwide that have not been developed. Ensyn's RTP(TM) technology has the potential to substantially improve the economics and transportation on certain heavy oil properties. In remote parts of the world, the considerable drop in viscosity of the heavy oil through the RTP(TM) process will allow the oil to be transported economically over long distances. In addition to a dramatic improvement in oil quality, an RTP(TM) facility can yield large amounts of surplus energy for production of the steam and electricity used in heavy oil production. The thermal energy from the RTP(TM) process would provide heavy oil producers with an alternative to increasingly volatile prices for natural gas that now is widely used to generate steam.

Ensyn Group, Inc., the parent company of Ensyn Petroleum International Ltd., is a privately held company engaged in heavy oil and renewable (biomass) projects. Ensyn has seven commercial biomass facilities in operation, processing primarily wood by-products into fuels and chemicals. Since 1997, Ensyn has been testing heavy crude oils from throughout the world using its patented RTP(TM) technology in the company's Canadian RTP(TM) pilot plant facility.

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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