"Over the past several months, the management team has been working to move further along on several projects under our stated growth strategies. These efforts are resulting in specific activities that should bring positive results to the company," said David Martin, Ivanhoe's Chairman.
In the South Midway Field located in Kern County, California, an active drilling program is underway to extend the field to the south. To date, under this expansion plan, nine wells have been drilled and an additional eight wells are expected to be drilled before the end of August. The average oil sand thickness has been better than expected, indicating that continued expansion is warranted. These are shallow, heavy crude oil wells and steaming operations to increase production volumes are underway. This development phase could more than double Ivanhoe's current daily production volumes from the field and ultimately add approximately 30 new wells to the field in 2003.
Depending on results from this drilling program, subsequent phases of development could result in up to 40 additional wells being drilled in 2004. Current production is averaging approximately 500 barrels per day and Ivanhoe has secured an acreage position covering the entire planned expansion area. Ivanhoe is the operator with a 100% working interest and a 93% net revenue interest.
Ivanhoe also intends to initiate additional drilling operations elsewhere in the San Joaquin Basin. The company has defined several exploration and development targets at depths ranging from 2000 feet to 12,500 feet, beneath or nearby existing producing fields in the basin. Depending on equity partners' negotiations and additional funding, drilling should begin in the next few months.
In June, Ivanhoe signed a contract with Ensyn Petroleum International to test its Rapid Thermal Processing (RPT(TM) technology to upgrade the quality of heavy oil by producing lighter, more valuable crude oil. Ensyn's plant is currently under construction and the test, utilizing oil produced by Ivanhoe in the South Midway field, is scheduled to be complete before the end of the year. Depending on the degree of success, the process may enable Ivanhoe to lower operating costs and increase the value of its South Midway crude oil. The contract with Ensyn also gives Ivanhoe exclusive rights to apply this technology in two foreign countries where large heavy oil fields have been discovered but only partially developed.
Ivanhoe resumed exploration activities in its 61,500-acre holdings in East Texas. In early 2003, the company reached an agreement with Perryman Exploration to further test the potential for natural gas production from new zones in two wells drilled last year on the Creslenn Ranch Prospect in Henderson County. The reactivated Creslenn Ranch No. 2 well has been completed in a new gas zone and production testing to pipeline sales should commence soon. Completion operations in the Creslenn Ranch No. 1 well are scheduled to begin in September. Ivanhoe has a 30% carried interest in the testing of these two wells and a 50% working interest in the remaining acreage position.
Approval of the Overall Development Program for Ivanhoe's Dagang Oil Development Project (ODP) by the Central Government was received in the second quarter 2003. Ivanhoe, through its wholly-owned subsidiary Sunwing Energy, is currently finalizing drilling and other service contracts in order to begin drilling operations by the end of September. Discussions are currently underway with banking interests to provide additional development funding for this project. Once fully developed, production volumes are expected to reach a peak of 14,000 barrels per day. Current production volumes from the Dagang oil field range between 400 and 500 barrels per day from the pilot area wells. The company sells its oil for US dollars to PetroChina at world market prices.
At the Zitong project in the Sichuan Basin, Ivanhoe is continuing seismic reprocessing activities as part of the first three-year exploration period. These activities and commencement of a new geophysical survey will continue throughout 2003 prior to a drilling program that is expected to begin in 2004. The Zitong Block covers approximately 900,000 acres in the western portion of the Sichuan Basin. Previous drilling and seismic surveys indicated gross natural gas resource potential of five trillion cubic feet or more. The Sichuan Basin, located in central China and approximately 930 miles southwest of Beijing, is the country's largest gas-producing region with a natural gas resource potential estimated by Chinese officials of 260 trillion cubic feet.
Ivanhoe has agreed with Syntroleum to cooperate more closely on the identification and development of GTL project opportunities. The agreement removes all the geographic and certain product restrictions that were part of Ivanhoe's Master License Agreement. This has opened the potential for GTL opportunities in China and elsewhere under the worldwide strategic alliance with CITIC.
Recently, Ivanhoe has been invited by Egyptian authorities to return to Cairo to continue commercial discussions relating to a proposed GTL facility in Egypt. The company has been in discussions over the past three years with Egyptian authorities on GTL facilities ranging up to 90,000 barrels-per-day. Current discussions are related to a 45,000 barrel-per-day facility that would be located at El Hamra along the coast of the Mediterranean Sea, west of Alexandria. The feasibility studies that the company has undertaken contemplate the natural gas feedstock being purchased, rather than developed. The company plans to commence these discussions in September.
Ivanhoe is also pursuing other new opportunities to obtain rights to stranded natural gas reserves for GTL projects. In July 2003, we signed an agreement with Repsol-YPF Bolivia S.A. and Syntroleum to join a study to build a 90,000-barrel-per-day GTL plant in Bolivia. Upon determination that the project is economically feasible and meets financing requirements, the three parties will enter into discussions regarding a joint-venture agreement.
Most Popular Articles