Ivanhoe Passes Halfway Mark in Tamarack Drilling Program

Ivanhoe Energy has completed over 50% of its 30-well delineation drilling program at the Tamarack project in the Athabasca region of northern Alberta, and expects to complete drilling by mid-March.In addition, engineering tasks related to the Tamarack Heavy-to-Light (HTL) upgrading facility and the upstream facilities are firmly on schedule.

Ivanhoe Energy has three drilling rigs on-site, drilling 24 hours per day. Drilling operations are focused on the centre of the Tamarack lease, the area Ivanhoe Energy has targeted for Phase I development. This area contains top quality, thick, clean oil sands with net pay in the 30 to 45 meter range. The well logs that have been obtained are consistent with data from earlier delineation drilling which indicated that the lease contains clean, very thick oil sands with high oil saturation.

Delineation drilling consists of drilling core-holes in sufficient density to accurately map the characteristics of the reservoir. This program will complete all drilling requirements for Phase I before steam assisted gravity drainage (SAGD) well drilling takes place.

"This delineation drilling program is an important milestone for us," said CEO David Dyck. "Once this program is completed, we will have fulfilled a key requirement to file our regulatory application in mid-2010 for the development of the Tamarack integrated heavy oil project."

Submitting the regulatory application is a key stage-gate, under new US SEC reporting guidelines, to allow Ivanhoe Energy to sequentially migrate portions of its Tamarack asset base in 2010 from the current 441 million barrels of "best estimate contingent resource" category to categories of reserve recognition, such as probable and possible reserves.

The results from this drilling program will be utilized by Ivanhoe Energy's independent evaluator, GLJ Petroleum Consultants, to generate an updated resource report. Based on current resource estimates, Tamarack could ultimately be capable of supporting production of up to 50,000 barrels per day from an integrated HTL facility for approximately 30 years.

Tamarack - Integrated HTL Production

Tamarack is an integrated heavy oil project using SAGD production operations, combined with Ivanhoe's proprietary HTL upgrading process. The field-integration of HTL upgrading eliminates or virtually eliminates the need for natural gas for thermal operations and diluent for transport, and removes the risk of volatile heavy-light price differentials.

"HTL provides Ivanhoe Energy with a distinct competitive advantage in producing resources like Tamarack", added Mr. Dyck. "This includes the ability to construct small-scale, partial-upgrading facilities in the field at a fraction of the cost of traditional upgraders, with higher rates of return, higher net asset values, higher-quality earnings and elimination of risk associated with natural gas and diluents costs and supply."

HTL & Upstream Engineering Status

Engineering tasks related to the Tamarack HTL facility, the upstream facilities (production, drilling and surface facilities), and infrastructure (power and access) are on schedule. Significant engineering has already been completed by AMEC and AMEC-BDR for the upstream facilities and Phase 1 of the 20,000 barrel per day facility at Tamarack, including completion of Basic Engineering and Design (BED) for the HTL and upstream facilities as well as sufficient Front End Engineering and Design (FEED) for the HTL facility to be able to execute a Class III capital cost estimate.

The next engineering step for the upstream and the HTL facility is the generation of Class III cost estimates and supporting the regulatory application. It is anticipated that AMEC and AMEC-BDR will complete this work in the second quarter, in time for submission of the Tamarack regulatory application.