Come to the Light

What market factors led to the establishment of Ivanhoe Energy in Ecuador in 2008?

In 2008, Ivanhoe Energy Ecuador (IEE) signed a contract with Petroecuador to develop Block 20 of the Pungarayacu oil field. Block 20 is a major heavy oil field some 1,102 square kilometers in size, located approximately 180 kilometers southeast of Quito. During the first stage of the contract, it is mandatory for a company to conduct an exploration program, engineering work, and research in order to prepare a development plan for a block. Once we hand in our proposal, it should be reviewed and approved by EP Petroecuador, the national oil company, and then we may begin exploitation of the field. Recently, EP Petroecuador approved, as part of the appraisal stage, drilling a new well in the pre-cretaceous reservoirs, which is part of our contract with the state. If we are successful in exploring and exploiting this new well, I believe that Ecuador will enter a new phase of major oil development. IEE is taking this risk with full knowledge of the complexity of these unknown reservoirs, as part of the company’s commitment to its project in the country.

What are your production prospects for the Block 20 field?

To date, we have carried out 2D seismic and technical studies. We expect to produce large volumes of heavy crude oil. However, this depends on the results of our appraisal and exploration work, which will be available by the end of 2013. As stated by the government of Ecuador, the Pungarayacu field could be key to further development of the oil industry in the country; the field has large reserves of some 6 billion barrels of heavy crude oil. We believe that Ecuador is gradually moving from light oil toward heavy oil production. In this regard, our current drilling of the IP-17 well (pre-cretaceous) is key, as it could open new opportunities in the pre-cretaceous reservoirs for the industry, creating new exploration and production areas.

Who owns the Block 20 concession in the Pungarayacu field?

EP Petroecuador owns Block 20 and Ivanhoe Energy Ecuador is responsible for specific services, operation, production, and investments in the block. Our company, using its patented Heavy To Light (HTL„¢) technology, has the possibility to transform heavy crude into a lighter product, and is also leading exploration work in potential wells. Once we begin production activities, we will transfer crude oil to EP Petroecuador as per our contract, and it will distribute it.

Ivanhoe owns the HTL„¢ technology patent. Could you tell us more about this process?

HTL„¢ is an upgrading process that can be located on-site at heavy oil fields and is completely integrated with upstream operations. The HTL„¢ process converts heavy oil to lighter oil, a more valuable product that can be transported by pipeline without the need for light blend oils. In addition, coke and gas—products gained from the upgrading process—are converted in situ to steam or power, which becomes available to the operator developing the field. HTL„¢ is based on the time-tested concept of thermal cracking and carbon rejection, and incorporates ultra-short processing times compared with those of conventional technology. Moreover, the process does not require catalysts, hydrogen, or significant pressure. The net result is relatively small-scale, low-cost facilities that can be located where the energy is, maximizing the benefits of heat integration. We are able to transform heavy oil into light oil, as well as gas and electricity by-products, thanks to this technology. IEE’s HTL„¢ process represents the application of a commercial technology to a new feedstock, and incorporates the benefits of this unique development process to any heavy and/or ultra heavy oil field.

Is IEE currently holding talks with potential companies that could be operating in the southern fields?

Thus far, we have not consulted with other companies about this possibility. However, we are in the process of establishing partnerships and associations with enterprises in other countries. I believe that in the near future, IEE will take similar steps in Ecuador.