Ivanhoe to Suspend Oil Drilling in China's Dagang for Now
(Dow Jones Commodities News Select via Comtex) Canadian independent upstream firm Ivanhoe Energy Inc. (IE.T) will temporarily suspend drilling operations at China's onshore Dagang oil field before the end of this year, partly because reserves at the field have been depleted sooner than expected.
Ivanhoe Energy is also in talks with two potential partners to invest in its Zitong natural gas exploration block in China's Sichuan basin.
"We have made some important decisions about our operations in China. Drilling will be temporarily suspended while we evaluate the production performance of the recently drilled wells in our Dagang project," said Ivanhoe Energy's chairman David Martin in the company's third quarter earnings statement.
"Initial rates of production have been less than originally expected, but if these rates are sufficiently maintained, development drilling may be resumed in the most productive areas," he added.
Ivanhoe Energy has a 60% working interest in Dagang and is the operator of the field. The other 40% is held by state-owned China International Trust & Investment Corp. (CI.YY).
Although Dagang is a development project and not an exploration project, Ivanhoe recently conducted more drillings in Dagang's northern blocks, and found that the reservoir quality, thickness and productivity are below expectations.
The company has revised lower its projections of the field's peak daily oil output and total proven reserves. Proven oil reserves at Dagang were previously estimated at 52 million barrels.
Ivanhoe Energy's annual independent review at the end of this year will confirm its expectation of a lower figure.
Meanwhile, Ivanhoe Energy is in talks with two potential partners to participate in its Zitong gas exploration project, the company said in the statement.
Ivanhoe Energy has a 100% working interest in Zitong, where potential gas reserves are estimated at up to 5 trillion cubic feet.
State-controlled PetroChina Co. Ltd. (0857.HK) has the option to take up to a 51% stake in the project.
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