The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Log evaluation results increase upside potential of Zitong Block

Monday, November 01, 2010

Log evaluation results increase upside potential of Zitong Block08:02 EDT Monday, November 01, 2010Guan structure now believed to have potential of up to 1 trillion cubic feet of gasCALGARY, Nov. 1 /CNW/ - David Dyck, President and Chief Operating Officer of Ivanhoe Energy Inc. (TSX: IE, NASDAQ: IVAN) and Gerald Moench, President of Sunwing Energy Ltd., today announced better-than-expected reservoir characteristics at Sunwing's Zitong-1 gas well in Southwest China based on an analysis of logs from the Xu5 and Xu4 shallower target formations. "The results of this evaluation significantly increase the upside natural gas potential in the 70-square-kilometre Guan structure to approximately 0.8 to 1.0 trillion cubic feet, double our previous view of 0.3 to 0.6 trillion cubic feet, Mr. Dyck said. "This is also very encouraging information relative to our view of the entire Zitong block where we see the potential for several trillion cubic feet or more of natural gas. As we proceed with drilling, logging and testing operations, we aim to demonstrate this upside potential."The Xu5 and Xu4 formations, originally considered as secondary targets to the deeper Xu2 formation, were encountered at depths between approximately 3,500 metres and 3,800 metres. The two formations were logged and casing has been successfully cemented in place. Drilling has resumed towards the deeper Xu2 formation at approximately 4,150 metres.Guan is the largest known structure on Sunwing's 2,669-square-kilometre block located in the heart of the prolific Sichuan gas basin. Log data on Xu5 and Xu4 formations at Zitong-1Data from the open-hole logs indicate the Xu5 and Xu4 formations most likely share the same pressure regime, with a total sand shale sequence of 357 metres, from 3,445 metres to 3,802 metres. Within this sequence, up to 58 metres (190 feet) of primary sand package has been identified in four sand packages between 3,841 metres and 3,564 metres in the lower Xu5 formation with porosity ranging up to 13%, and an additional 22 metres (72 feet) of secondary reservoir sand in three sand packages between 3,592 metres and 3,801 metres in the Xu4 formation with porosity up to 8.5%.Log data indicate that gas shows were present throughout the Xu5 and Xu4 formations. Gas also was observed in the mud at surface while drilling through these formations. As indicated in the company's October 5, 2010 news release, Sunwing encountered significant pressures while drilling through the Xu5 and Xu4 formations. High pressures potentially are a very positive characteristic of the reservoir, increasing flow rates and reserve quantities of any potential gas discovery.Next steps at Zitong-1 wellDrilling at Zitong-1 will continue to a planned total depth of approximately 4,500 metres (14,764 feet). Horizontal drilling options will be determined after testing of the vertical wellbore is completed. Sunwing expects to reach total depth by the end of November.Progress update on the Yixin-2 wellThe Yixin-2 well is drilling ahead and has reached a depth of 3,700 metres (11,781 feet).  Increased gas readings have been recorded in the drilling mud as drilling as progressed into and through the top of the Xu4 formation. The well is expected to reach total depth of 3,950 metres within the next week, when open hole logs will be run.The Yixin-2 well is being drilled as a twin of Yixin-1, which was drilled by Sunwing in 2007, and generated significant, but unverified, gas flow rates, before being shut-in due to surface equipment complications.Applying leading-edge technologies in ZitongSunwing's development program in the Zitong gas block represents the application of leading-edge technologies that have been dramatically successful in similar fractures reservoirs in tight gas projects in North America. These include horizontal drilling to improve the chances of intersecting the natural vertical fractures, as well as multi-stage fraccing.Sichuan is the oldest and one of the most productive gas producing regions of China. Sinopec and PetroChina have made significant gas discoveries from the Xu2, Xu4 and Permian formations in blocks adjacent to Sunwing's Zitong Block. Any gas produced in Zitong would be tied into an established local and regional gathering and sales distribution system.Sunwing is the operator of the 659,840-acre (1,031 square miles) gas exploration block in Sichuan, and it holds a 90% Contractor Interest in a Petroleum Contract with PetroChina Company Limited. Mitsubishi Gas Chemical Company of Japan holds the remaining 10% Contractor Interest.Ivanhoe Energy Inc. is an independent, international heavy oil development and production company focused on pursuing long-term growth in its reserves and production using advanced technologies, including its proprietary, patented heavy to light upgrading process (HTL™). Core operations are in Canada, Ecuador, China and Mongolia, with business development opportunities worldwide. Ivanhoe's shares trade on the NASDAQ Capital Market with the ticker symbol IVAN and on the Toronto Stock Exchange under the symbol IE.For more information about Ivanhoe Energy Inc. please visit our web site at STATEMENTS: This document includes forward-looking statements, including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning the estimated quantities of gas in each target in the Guan structure, the planned total depth of the Zitong-1 well, the anticipated amount of time required for, and the estimated cost of, drilling, testing and casing the well, the schedule for commencement of drilling the Yinxin-2 well and other statements which are not historical facts. When used in this document, the words such as "could", "plan", "estimate", "anticipate", "intend", "may", "potential", "should", and similar expressions relating to matters that are not historical facts are forward-looking statements. Although Ivanhoe Energy and Sunwing Energy believe that their expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include the possibility that the company will be unable to raise financing, the potential that the company's projects will experience technological and mechanical problems, geological conditions in reservoirs may not result in commercial levels of oil and gas production, the availability of drilling rigs and other support services, uncertainties about the estimates of the reserves, the risk associates with doing business in foreign countries, environmental risks, changes in product prices, our availability to generate cash flow and raise capital as and when required, competition and other risks disclosed in Ivanhoe Energy's Annual Report on Form 10-K files with the U.S. Securities and Exchange Commission on EDGAR and the Canadian Securities Commissions on SEDAR.For further information: Contact:David Dyck:1 (403) 817-1138 Ian Barnett:1 (647) 203-6588 Dorreen Miller:1 (403) 817-1108