Ivanhoe Begins Production at Dagang Field in China

Ivanhoe Energy's subsidiary Sunwing Energy has successfully drilled and completed its first development oil well at the Dagang field in northeastern China. The initial test of the Nan 105 well produced 330 barrels of 35 degree API oil per day, with no water. Sunwing currently sells the oil from this field to PetroChina for a net price of approximately US$29.00 per barrel.

Following an extensive pilot project that is currently producing approximately 500 barrels of oil per day, the overall development program at Dagang calls for the additional drilling of 115 new wells and the re- completion of 27 existing wells in three phases over three years. The project is being developed under a 30-year production-sharing contract with China National Petroleum Corporation covering an area of 22,400 gross acres within the field.

In November, 2003, China International Trust & Investment Corporation (CITIC) and Ivanhoe Energy signed a Heads of Agreement to jointly develop the Dagang project. Sunwing will be operator for the 60% Ivanhoe / 40% CITIC joint venture, which is expected to be finalized soon. The partners will fund all development costs to earn 82% of the net revenue from oil production until costs are recovered, at which time their shared entitlement will revert to 49%.