Ivanhoe & Ecopetrol to Study Heavy Oil Upgrading in Colombia

Ivanhoe Energy and Ecopetrol have signed a memorandum of understanding for a study of the heavy crudes from the large Castilla and Chichimene Oil Fields in Colombia.

In the initial step Ivanhoe will run tests on the two heavy crudes to determine the value that could be added to these fields using Ensyn Petroleum International Ltd.'s (Ensyn) RTP(TM) heavy-to-light oil (HTL) conversion technology. On December 13, 2004 Ivanhoe announced the acquisition of Ensyn Group Inc. and, through this acquisition, the acquisition of the 85% of Ensyn Petroleum it did not already own.

The RTP(TM) technology processes low value heavy oil, which is a viscous, tar-like crude oil that does not flow well and is difficult to extract and transport. RTP(TM) upgrades this oil in the field into lighter, more valuable oil at lower costs and with smaller plants than conventional technology. The upgraded oil, similar to conventional light crude oil, is easier to transport and obtains a higher price at market. In addition, a RTP(TM) facility yields large amounts of surplus energy for the production of steam and electricity for on-site use.

Leon Daniel, Ivanhoe's President and CEO, said, "After the recently announced agreement related to the acquisition of Ensyn, we are very pleased to announce another initiative based on Ensyn's leading-edge RTP(TM) technology. The RTP(TM) heavy-to-light oil conversion technology has the potential to significantly increase the volume and value of the production from these heavy oil fields. This study is another important step toward achieving our objective of utilizing new technologies to increase oil production and reserves, and leverages the considerable successful experience that our management team has in developing major projects in Colombia."

The two oilfields are about 75 miles by paved road southeast of Bogota in the Central Llanos Basin. This region is an active oil producing area and the Castilla and Chichimene fields have successfully been producing oil since the 1970's.