Ivanhoe Begins Exploration in Sichuan Basin

Ivanhoe Energy's subsidiary, Sunwing Energy, has initiated its exploration and development program on the company-operated 900,000-acre Zitong Block in China's gas-rich Sichuan Basin. Based upon previous drilling data and seismic surveys conducted by the Chinese, Sunwing's evaluations have indicated a potential gross natural gas resource of over five trillion cubic feet (tcf) on this large block.

"The Zitong project exposes Ivanhoe to very significant natural gas potential and will allow us to take advantage of numerous under-developed and under-explored natural gas structures at a time when China has a strong demand for a cleaner-burning energy source," said Mr. Martin.

Sunwing has a 30-year production-sharing contract with PetroChina, signed on September 19, 2002, to commercially develop the Zitong Block. To put the size of the potential resource at Zitong in perspective, five tcf of natural gas equates to 833 million barrels of crude oil on a heating-value (btu) basis. At US$3 per thousand cubic feet of gas and before costs such as, capital expenditures, production expenses and profit-sharing payments, the potential gross revenues from the Sichuan resource could amount to US$15 billion over the life of the project.

As a part of the initial exploration and development program, Sunwing has reprocessed a total of 1,650 miles of existing seismic data covering much of the Zitong Block. The company is currently evaluating this reprocessed data using state-of-the-art seismic analysis and is negotiating with local seismic contractors to commence shooting a new 2-D seismic program over areas of special interest in the block. This program will consist of up to 470 line-miles of seismic during the balance of 2003 and the first half of 2004. Following completion of the seismic program, Sunwing expects to begin a multi-year, exploration and development drilling program. Average drilling depths are expected to be approximately 13,000 feet.

The geologic interpretation from the existing 2-D seismic data by PetroChina has identified 16 structures with hydrocarbon-bearing potential on the block. To date, PetroChina has successfully drilled 22 gas wells - testing four of the 16 structures on the block. All four structures drilled by PetroChina tested commercial gas with initial test rates ranging between two and 32 million cubic feet of gas per day. Sunwing will receive approximately 75% of the net project revenues before payout and approximately 47% after payout. PetroChina may elect to participate through a working interest of up to 51%.

The Sichuan Basin, in central 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 tcf. There is a strong and growing market for natural gas in Sichuan, with approximately 120 million people living within the basin. An existing gas transportation grid is moving more than 775 million cubic feet per day to many end users, including 800 industrial customers. A major natural-gas trunk line with an initial capacity in excess of 200 million cubic feet per day is under construction to ship gas from the Sichuan Basin to Eastern China, including Shanghai. Under existing delivery contracts, the price of gas to residential and commercial consumers is regulated in the range of US$2 to US$3.25 per thousand cubic feet.