Ivanhoe Energy Spuds Well at Sichuan Gas Project in China

Ivanhoe Energy's subsidiary Sunwing Energy Ltd., has started drilling its first exploration well on the company's 900,000-acre Zitong Block in China's natural-gas-rich Sichuan Basin.

The well is expected to take 60 days to drill to a target depth of 8,700 feet. A seismic program has been completed and a second exploratory well is planned for later this year.

Sunwing, through its wholly-owned subsidiary Pan-China Resources Ltd., has a 100% working interest in a 30-year production-sharing contract with China National Petroleum Corporation (CNPC), signed in September 2002, to commercially develop the Zitong Block. Sunwing will receive approximately 75% of the net project revenues before payout and approximately 45% after payout. PetroChina Company Limited, a subsidiary of CNPC, may elect to participate through a working interest of up to 51% in any development of the project.

The Sichuan Basin, in southwestern China approximately 930 miles southwest of Beijing, is the country's largest gas-producing region - with a natural gas resource potential estimated by Chinese officials to be 260 trillion cubic feet. There is a strong and growing market for natural gas in Sichuan, where approximately 120 million people live within the basin. An existing gas transportation grid is close to the well and a major natural gas trunk line with initial capacity in excess of 200 million cubic feet per day recently was completed to transport gas from the Sichuan Basin to Eastern China. Under existing delivery contracts, the wellhead price of gas destined for residential and commercial consumers is regulated in the range of US$2 to US$3.25 per thousand cubic feet.