Robert Friedland, Executive Chairman, President and CEO of Ivanhoe Energy Inc. and David Martin, Chairman and CEO of Ivanhoe Energy Latin America Inc., declares that Ivanhoe Energy Ecuador Inc. has signed a contract with Ecuador state oil companies Petroecuador and Petroproduccion to explore and develop Ecuador’s Pungarayacu heavy-oil field, utilizing Ivanhoe’s HTL upgrading technology.

Ivanhoe Energy Ecuador, a Canadian company, is a wholly-owned subsidiary of Ivanhoe Energy Latin America Inc., the parent company of Ivanhoe Energy Inc.’s Latin America corporate group. The contract, dated October 8, 2008, was signed this week in a ceremony in the Presidential Palace in Quito, Ecuador’s capital, attended by President Rafael Correa, the President’s cabinet and senior ministers, Petroecuador’s Executive President Luis Jaramillo, Petroproduccion’s Vice-President Camilo Delgado and Canadian Ambassador Christian Lapointe.

The contract covers project appraisal and development of Block 20, including production and upgrading of the heavy oil. Block 20 is an area of approximately 426 square miles (1,100 square kilometers, or 272,000 acres), approximately 125 miles (200 kilometers) southeast of Quito, in the Amazon Basin. Block 20 contains the 250-square-mile (647 sq. km) Pungarayacu heavy-oil field, which was discovered approximately 30 years ago. Ivanhoe plans to apply its patented field-located, HTL™'99 heavy-to-light upgrading technology to the development of the Pungarayacu field.

Petroproduccion drilled 26 wells in Block 20’s Pungarayacu field during the 1980s. The field has been studied and evaluated by Petroproduccion, ARCO and other major oil companies. These third-party studies estimated that Pungarayacu contains between 4.5 billion barrels (Petroecuador-ARCO) and 7.0 billion barrels (Petroecuador) of oil-in-place.

Confirmation of these resources would make the Pungarayacu field the largest accumulation of heavy oil in Ecuador and one of the largest in Latin America. Preliminary engineering estimates would support production from the field at rates in excess of 100,000 barrels per day.

Ivanhoe Energy Ecuador will lead the development of the project. The contract is guaranteed by corporate parent Ivanhoe Energy Latin America, which will obtain or provide all funding and financing for Ivanhoe Energy Ecuador’s operations under the contract. This reflects the strategy of the corporate restructuring program that Ivanhoe Energy Inc. announced March 17, 2008.

Capital requirements are estimated to be approximately US$20 million during the first year of the contract and a total of approximately US$110 million for the first three years of appraisal - primarily for seismic work, assessment wells, initial production wells and thermal-recovery pilot tests. Capital requirements for further evaluation and full field exploitation of Block 20 will depend on the ultimate scope of the project.

The magnitude of the Pungarayacu oil field - together with access to the existing pipeline to Ecuador’s Pacific Rim export terminal and transportation to Asian and North American seaborne energy markets - makes the project of significant interest to numerous international oil companies. Aware of Block 20’s potential, several large international oil companies already have approached Ivanhoe Energy Latin America and expressed serious interest in participating in the project. Under Ecuadorian law and the terms of the Block 20 contract, Ivanhoe must seek Petroproduccion’s approval when specific strategic partners are introduced to the project.

Ivanhoe’s HTL: creating value, jobs, skills training and new state revenues Speaking at the signing ceremony today, President Correa said the Block 20 contract is “one of the most important” ever signed in Ecuador’s history. “This contract will be a model to be followed by other companies,” he said. “It also shows that companies from other countries of the world are willing to invest in a responsible contract in Ecuador.”

David Martin, Executive Chairman and CEO of Ivanhoe Latin America, said he is pleased that Ivanhoe has been selected to develop the Pungarayacu heavy-oil field.

“The work on this major project will begin immediately,” Mr. Martin said. “We look forward to demonstrating the substantial advantages of our HTL process, which include enhanced efficiency, significant environmental benefits and the economic production of previously stranded petroleum resources.”

“The Pungarayacu oil field is a sleeping giant that belongs to the Ecuadorean people, who now can look forward to the benefits that its development will bring. We are committed to assisting the national university with a skills-training program to help ensure that we fulfill our expectation that Ecuadorians will hold more than 90% of the jobs. We also will be supporting Ecuadorian students and teachers with advanced petroleum-sector studies in Canadian and American universities.”

Mr. Martin said investment in the project will help to generate major increases in direct and indirect local employment, and provide support for local businesses and improved health services in the region. The government also will receive substantially increased tax revenues.

Tags: Ivanhoe Energy Inc., Petroecuador