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Press release from CNW Group

Ivanhoe Energy's Tamarack Project marks major advance toward production with submission of regulatory application

Thursday, November 04, 2010

Ivanhoe Energy's Tamarack Project marks major advance toward production with submission of regulatory application08:00 EDT Thursday, November 04, 2010Initial output of 20,000 barrels per day projected in 2013 CALGARY, Nov. 4 /CNW/ - David Dyck, President and Chief Operating Officer of Ivanhoe Energy Inc. (TSX: IE, NASDAQ: IVAN) announced today that the company has completed a major milestone towards commercial production at its Tamarack Project with the submission of its regulatory application to the Government of Alberta. The application is for the development of an integrated in-situ heavy oil project to be built in two phases, each 20,000 barrels per day, with ultimate production capacity of approximately 40,000 barrels per day (bitumen basis)."Filing this application marks the culmination of over three years of detailed environmental, engineering and geological work as well as extensive socio-economic analysis," Mr. Dyck said. "Our team has worked diligently to prepare and complete this application, and its submission to the regulatory authorities is the next critical step in our development schedule which targets first oil in 2013."The application contains a full description of the detailed project development plan and a comprehensive Environmental Impact Assessment. In support of the application, Basic Engineering and Design and Front End Engineering and Design were completed to generate a Class III (+25/-20%) capital cost estimate. Ivanhoe Energy's top-tier contractors, AMEC in London, England and AMEC-BDR in Calgary, Alberta worked closely with Ivanhoe Energy's technical team throughout this process.As part of the application process, Ivanhoe Energy conducted extensive public consultation, including over 800 meetings and direct communications, to seek ideas and feedback from aboriginal groups, area residents, government and other key stakeholders.An integrated SAGD/HTL projectTamarack is a 6,880-acre contiguous block located approximately 10 miles (16 km) northeast of Fort McMurray. Ivanhoe Energy holds a 100 percent working interest in the Project, subject only to a 20% back-in right held by Talisman Energy, which expires in mid-2011.Ivanhoe Energy's independent reserve evaluator, GLJ Petroleum Consultants Ltd. (GLJ), has assigned best-estimate contingent resources of 441 million barrels of bitumen to the Tamarack Project. With the submission of this regulatory application, Ivanhoe Energy expects to update its resource estimates coincident with the company's year-end reporting and transition a portion of its contingent resources to the probable and possible reserve category. Upstream operations - SAGDIvanhoe Energy plans to develop the resources at Tamarack utilizing state-of-the-art steam-assisted gravity drainage (SAGD). SAGD is a thermal production method for heavy oil that utilizes pairs of stacked horizontal wells. Steam is injected into the reservoir through the upper well. As the steam rises and expands, it heats up the heavy oil, reducing its viscosity. Gravity forces the oil and condensed steam to drain into the lower well where it is produced.The company expects that 12 well pads and approximately 160 SAGD well pairs will be required to fully develop and produce the targeted resource base. The engineering for the upstream portion of the project has been carried out by AMEC-BDR, Calgary. AMEC-BDR is a leading SAGD facility engineering and construction management firm specializing in complete engineering, procurement, construction management project delivery. Downstream operations - HTLIvanhoe Energy's proprietary, HTL upgrading process converts heavy, viscous crude oil in the field to a lighter, transportable synthetic crude oil which commands a higher price in the marketplace, and does not require light oil as a blending agent for transport. In addition, natural gas for steam generation is not required because upgrading by-products are converted onsite into steam or power that can be used in field operations. HTL also allows Ivanhoe Energy to capture the majority of the value differential between light and heavy oil resulting in enhanced profitability and reduced earnings volatility.Significant environmental benefitsThe Tamarack Project has been designed to meet or exceed all applicable regulatory requirements including no freshwater use, a water recycle rate of over 95 percent and state-of-the-art air emission controls. In addition, the integration of HTL (heavy-to-light) upgrading provides several environmental advantages over traditional upgraders, including a significantly smaller carbon footprint, the avoidance of large accumulations of coke by-products and virtually eliminating natural gas consumption.Economic benefits generated for the provinceOnce fully operational, the Tamarack Project is expected to create approximately 13,500 person years of direct and indirect employment. The Project will also contribute several billion dollars of both direct and indirect economic benefit, largely to the Alberta and Canadian economies, through engineering and construction activities and the significant taxes and royalties payable to the Province of Alberta. The associated economic and employment benefits related to the integration of an HTL upgrading facility in the field will also be retained by the province.First oil in 2013Subject to the receipt of regulatory approvals from the Alberta Energy Resources Conservation Board and Alberta Environment construction of the Tamarack Project could commence in mid-2012, with first bitumen production expected towards the end of 2013. The regulatory process is expected to require approximately 18 to 24 months.The application will be available on Ivanhoe Energy's web site at www.ivanhoeenergy.com in the near future.Ivanhoe Energy Inc.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.STATEMENTS CONCERNING RESOURCES. Cautionary Note to U.S. Investors: The Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this news release, such as contingent bitumen resources which the SEC's guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to also consider closely the disclosure in our Form 10-K for the fiscal year ended December 31, 2009, available from our website. You also can obtain this Form from the SEC website at www.sec.gov.The determination of oil and gas resources involves the preparation of estimates that have an inherent degree of associated risk and uncertainty. The estimation and classification of resources requires the application of professional judgment combined with geological and engineering knowledge to assess whether specific classification criteria have been satisfied. Statements in this news release concerning "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, of the ability to produce in the future the resources described. Actual resources and, if commenced, future production will differ from the estimates provided herein, and the difference may be significant.All bitumen resource volumes referred to in this news release have been classified as "contingent resources" within the meaning of the Canadian Oil & Gas Evaluation Handbook (COGE Handbook). The term "contingent resources" is defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of uncertainty associated with the estimates and may be subclassified based on project maturity and/or characterized by their economic status.The "best estimate" is considered to be the best estimate of the quantity of bitumen resources that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. The contingencies that currently prevent the contingent resources referred to herein from being classified as reserves are a lack of regulatory approval, the absence of a firm development plan, and the uncertainty of funding approval for development. There is no certainty that it will be commercially viable to produce any portion of the contingent resources referred to in this press release.FORWARD-LOOKING 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 that the Tamarack project would have an estimated capacity of approximately 40,000 barrels per day over 30 years 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 believes that its 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 in the future for any of its projects or to repay acquisition financing interest or principal, the potential that the company's projects will experience technological and mechanical problems, new product development will not proceed as planned, the HTL technology to upgrade bitumen and heavy oil may not be commercially viable, samples from the Athabasca bitumen test may not have the product qualities anticipated, market acceptance of the HTL technology may not be as anticipated, Ivanhoe Energy's lack of history in developing commercial HTL opportunities, 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 associated 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 filed with the U.S. Securities and Exchange Commission on EDGAR and the Canadian Securities Commissions on SEDAR.For further information: Please visit our web site at www.ivanhoeenergy.comIvanhoe Energy Contacts: David Dyck: 1 (403) 817-1138 Ian Barnett: 1 (647) 203-6588 Dorreen Miller:1 (403) 817-1108 info@ivanhoeenergy.com