HTL Integrated Heavy Oil Production Athabasca, Canada by klutzfu59

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									IVANHOE
 Energy
             HTL
Integrated Heavy Oil Production
      Athabasca, Canada




      Canadian Embassy, Tokyo
          August 1, 2008
Ivanhoe & HTL: A Canadian Success

Ivanhoe Energy: A Canadian Company


HTL: A Canadian Technology


Athabasca: A Canadian home for the first commercial
HTL project




 IVANHOE
    Energy
              Thermal Heavy Oil Production:
                  Centers of Excellence

                Athabasca



Bakersfield




       IVANHOE
              Energy
              Ivanhoe Energy Inc.

Incorporated:                   Canada
Stock Exchange Listings:        TSX (IE) & NASDAQ (IVAN)
Market Capitalization:          ~ US$ 700 million
Shares Outstanding:             272 million
Bd. & Mgmt. Ownership:          23%
Offices:                        Vancouver, Calgary,
                                Bakersfield, London,
                                Tokyo, Beijing

             Website: www.ivanhoe-energy.com


   IVANHOE
       Energy
      Ivanhoe Energy Inc. - Overview
Focus: Growth in production and reserves of heavy oil
  Acquisition of Talisman’s Athabasca oilsands completed
  Next: Additional Canadian Consolidation & International


Technology advantage: HTL


People advantage
  Upstream: thermal experience - Bakersfield & Athabasca
  Downstream: HTL technology center in Houston
  Board, Occidental heritage

    IVANHOE
       Energy
              Corporate Structure

Ivanhoe Energy Inc.
   Athabasca heavy oil projects
   Ownership of HTL technology rights and IP
   Holdings of shares in international subs
   California E&P

International Subsidiaries
   China: Sunwing Energy
   Middle East and North Africa
   Latin America


  IVANHOE
     Energy
             Heavy Oil
  Ivanhoe Experience & Operations




San Joaquin Valley,   Athabasca, Alberta
    California             Canada


  IVANHOE
     Energy
       San Joaquin Valley - California


Historical base of Ivanhoe Energy

Birthplace of heavy oil technology

Ongoing operations in Midway
Sunset

Location of HTL Commercial
Demonstration Facility




    IVANHOE
       Energy
          Ivanhoe drilling rig at
          South Midway Sunset
             Heavy Oil Field




IVANHOE
 Energy
          San Joaquin Valley:
          Dense well spacing
          and surface facilities




IVANHOE
 Energy
           Ivanhoe's HTL
   Commercial Demonstration Facility


      Ivanhoe Energy’s
Commercial Demonstration
Facility in the Belridge Field,
near Bakersfield, California




   IVANHOE
      Energy
                HTL Overview

Field located heavy oil upgrading
Small minimum economic scale: 10-30,000 bpd
Conversion of upgrading byproducts to onsite energy
New Application of an existing commercial technology
Analogous to widely used FCC technology
First commercial application: Athabasca



  IVANHOE
     Energy
  Heavy Oil Production Challenges

external energy required for thermal operations

Diluent (light oil) required for transport to market

Low value of heavy oil in the market

Conventional solutions: large minimum scale, no
integration


                  Stranded and Distressed assets
Result            worldwide

 IVANHOE
    Energy
                The HTL Solution       Home Run !!


Key heavy oil challenges eliminated:

  external energy

  transport

  heavy/light differentials

  large minimum economic scale




 IVANHOE
    Energy
         HTL Competitive Advantage

In Athabasca (developed infrastructure, distressed assets)
   Higher financial returns
   Lower volatility of earnings
   Reduction of risk: self sufficient projects



International (stranded assets)
   Enabling technology allows assets to be developed




   IVANHOE
       Energy
                 What is HTL ?
Rapid thermal cracking
Upgraded sour synthetic
crude and by-product
energy
Carbon rejection, no
hydrogen, no catalysts, low
pressure
  Lower cost per bbl and
  smaller minimum scale



   IVANHOE
     Energy
HTL Technology: Hybrid of Existing
  Refining/Upgrading Processes




                 Similar to Fluid Catalytic Cracking
                      used in most refineries and
                              Fluid Coking




IVANHOE
  Energy
                    HTL / FCC Analogue
Analogous to FCC
   •   Similar temperatures
   •   Similar pressures and feed rates
   •   Comparable equipment and vessels
   •   No significant operational risk


However, HTL has:
   • Simpler design
   • No catalyst required, only sand
   • Greater operational flexibility
              400+ FCCs in operation worldwide

       IVANHOE
          Energy
  Simplified Process Flow Diagram
    Process video - www.ivanhoe-energy.com




IVANHOE
 Energy
            HTL HQ Upgraded Product

Captures large part of light                    Hardisty   HTL
heavy price differentials                        Light     HQ
                                 API              28.8     19
Valued at 12% discount to
WTI, similar to Hardisty Light   % Sulfur         1.6      3.6
Crude.
                                 % Naphtha        18.9     16.2
Reduction in metals of up to
90%                              % Distillate     29.0     30.8
Reduction of TAN to less than
                                 % VGO            31.1     53.0
0.5 mg KOH/g
                                 % Resid          21.0      0




     IVANHOE
        Energy
                  HTL Background
Technology development initiated early 1980’s by Ensyn

Conversion of wood residues to liquid for natural fuels and
chemicals

7 commercial facilities currently in operation



    100 TPD
 Biomass Facility,
 Renfrew Ontario




  IVANHOE
      Energy
         HTL Development Timeline

1980’s RTP developed for biomass
1999: 20 bpd Petroleum Pilot, Ottawa
2005: 1000 bpd Commercial Demonstration Facility (CDF)
April 2005: Ivanhoe acquires HTL technology for petroleum
2005 -2007
   Testing in CDF
   July 2007 Athabasca bitumen run
   3-4Q 2007: Updated independent reports
   July 2008: Talisman assets acquisition & CA$88 MM funding



    IVANHOE
       Energy
                 Engineering

2005: Commercial “hot section” design – Colt, Calgary
2006: Tier 1 Contractor established – AMEC
2007: Bitumen run - confirmed pilot plant data
2007: PDP completed for bitumen
Fall 2008: Commercial Basic Engineering Design
Fall 2008: Feedstock Test Facility commissioned




 IVANHOE
    Energy
           Feedstock Test Facility

 Location: Southwest Research, San Antonio, Texas
 5 bpd
 Includes all commercial capabilities




Low cost screening of crudes
Optimization




  IVANHOE
     Energy
                       Canada

Lease 10 oil sand block
acquired from Talisman
Energy, July 2008


Home for Ivanhoe’s
first integrated HTL
heavy oil project




  IVANHOE
     Energy
Oil Sands Assets Purchased from Talisman
                 Energy
                               Leases 10
                                 and 6



                             Ft. McMurray




 IVANHOE
   Energy
                              Lease 10 Location
                                                                                                          T93 R12 W4M




                                                                                                                   MACKAY RIVER
                                                                                                                                      T93 R11 W4M
                                                                                                                                                                  T93 R10 W4M
                                                                                                                                                                                             T93 R9 W4M


                                                                                                          30




                                                                                                                                       24                                                                                                                                                                           T93 R3 W4M



                                                                                                                                                      M
                                                                                                                                                             IL
                                                                                                                                                             T92 R10 W4M
                                                                                                                                                                                         T92 R9 W4M




                                T91 R15 W4M
                                                 T91 R14 W4M
                                                                                                                                                                       ES                                                                                                                   T92 R4 W4M
                                                                                                                                                                                                                                                                                                                  T92 R3 W4M
                                                                         T91 R13 W4M



                                                                                                                                                           T91 R10 W4M
                                                                                                                                                                                       T91 R9 W4M
                                                                                                                                                                                                                     T91 R8 W4M



                                 T90 R15 W4M
                                                                                                                                                                                                                                                                                         T91 R4 W4M




                                                                                                                                                                                                                           LEASE 10
                                                 T90 R14 W4M                                                                                                                                                                                                                                                     T91 R3 W4M
                                                                         T90 R13 W4M                                                                                                             T1 6- 27
                                                                                                                                                                                                                                                                                                                                  T91 R2 W4M



                                                                                                                                                                                                 41




                                                                                                                                                      T90 R10 W4M


                              T89 R15 W4M                                                                                                                                                                                                                                                T90 R4 W4M
                                               T89 R14 W4M                                                                                                                                   T90 R9 W4M                                                                                                      T90 R3 W4M
                                                                                                                                                                                                                           T90 R8 W4M
                                                                                                                                                                                                                                                                                                                                 T90 R2 W4M
                                                                       T89 R13 W4M




                                                                  FT MCMURRAY
                                                                                                                                                         T89 R10 W4M
                                                                                                                                                                                    T89 R9 W4M
                                                                                                                                                                                                                  T89 R8 W4M
                                                                                                                                                                                                                                            T89 R7 W4M
                                                                                                                                                                                                                                                             T89 R6 W4M




                                                                                                                                                                                  T88 R9 W4M
                                                                                                                                                                                                                T88 R8 W4M
                                                                                                                                                                                                                                          T88 R7 W4M
                                                                                                                                                                                                                                                           T88 R6 W4M
                                                                                                                                                                                                                                                                            T88 R5 W4M




                                                                                                                              S
                                                                                                                        LE
                                                                                                                                                                                T87 R9 W4M
                                                                                                                                                                                                              T87 R8 W4M
                                                                                                                                                                                                                                        T87 R7 W4M
                                                                                                                                                                                                                                                         T87 R6 W4M




                                                                                                               MI
                                                                                                                                                                                                                                                                           T87 R5 W4M



                                                                 T86 R13 W4M
                                                                                            T86 R12 W4M
                                                                                                                        T86 R11 W4M


                                                                                                        53                                          T86 R10 W4M
                                                                                                                                                                                T86 R9 W4M
                                                                                                                                                                                                              T86 R8 W4M
                                                                                                                                                                                                                                         T86 R7 W4M
                                                                                                                                                                                                                                                         T86 R6 W4M
                                                                                                                                                                                                                                                                          T86 R5 W4M



                                                               T85 R13 W4M
                                                                                          T85 R12 W4M
                                                                                                                   T85 R11 W4M
                                                                                                                                               T85 R10 W4M
                                                                                                                                                                            T85 R9 W4M
                                                                                                                                                                                                            T85 R9 W4M




                                                                                                               GREAT DIVIDE
                                                                                     32




                                                                                                                                                                                                                                                                                         0               6,743      13,486 20,229
           PHIE IS PRESENT                                                                                                                                                                                                                                                                                METERS

 PETRA 7/31/2008 4:07:49 PM




IVANHOE
 Energy
    Talisman Oil Sands Acquisition
Leases 10 and 6
Cdn $90 million
  Cdn $22.5 million at closing, balance financed by Talisman


Talisman rights
  back-in to 20% of acquired leases
  rights of first offer on interests in other assets IE elects to sell
  HTL Data Monitoring Agreement




  IVANHOE
     Energy
                         Lease 10
244 million barrels of contingent resource (Sproule)
   609 MMBO OBIP
   188 – 313 MMBO range, 30 – 50 MBOPD


11 sections
High quality McMurray sands
   Clean and continuous average net pay of approx 20 meters
   25 - 35 meters - initial phase
   No significant top or bottom water or top gas issues
   Average porosity: 34%, Average bitumen saturation: 79%
   Permeability: 1-10 Darcies

                           Favorable Steam-Oil-Ratio (SOR)

  IVANHOE
      Energy
                    Lease 10




             Tailings pond in distance
   Southern Northlands access road looking north



IVANHOE
 Energy
     Lease 10 Cross section




IVANHOE
 Energy
Lease 10 Continuous Net Pay Isopach




  Source: Sproule and Ivanhoe
 IVANHOE
   Energy
  Lease 10 and 6 Delineation




IVANHOE
 Energy
     2008/2009 Drilling Program




41 OSE wells
5 Water Source wells
3 Water Disposal Wells

IVANHOE
   Energy
Conceptual Lease 10 Development




IVANHOE
 Energy
Analogue: Petro-Canada’s Mackay River
              30,000 BPD SAGD Project


                          SAGD Well Pads




 Central
 Processing
 Facility




IVANHOE
   Energy
Analogue: Petro-Canada’s Mackay River
        SAGD Well Pad (20-35 acres)




 IVANHOE
   Energy
Analogue: Petro-Canada’s Mackay River
     Central Processing Facility (50 acres)




 IVANHOE
   Energy
                    Integrated HTL 30 MBOPD SAGD
                              Development
      Well Pads
                            Avg. 40 – 50 Well Pairs
20 well pairs per pad                                       Central Processing
 (20- 35 acres each)                                         Facility (50 acres)



                                                      HTL Facility
                                                       (35 acres)




      Horizontal Well                                             Oil Sands
     Pairs (2500-3000 ft)                                       Thickness (33
                                                                   – 110 ft)




         IVANHOE
              Energy
                 Lease 10: Time Required to Cash Flow
                  Generic Integrated Base Case – 40 MBOPD
                        2007   2008   2009    2010      2011    2012    2013       2014


                                      5 year window to HTL cash flow
Permitting
 SAGD DBM/FEED
 HTL BEP/FEED
 Permit Preparation
 Permit Approval                      EIA
Upstream
 Detailed Engr.
 Procurement
 Construction
 Drilling and Startup                                                  First Production

Downstream
 Detailed Engr.
 Procurement
 Construction
                                                                            First Upgraded
 Commissioning
                                                                                Product



             IVANHOE
                   Energy
       HTL Economics - Athabasca

Value-add represented by integrating HTL with SAGD
Athabasca case (high capital cost)
All key value drivers come into play:
   Thermal
   Diluent avoidance
   High differentials
   Scale

Lease 10 Example


  IVANHOE
     Energy
   AMEC - HTL Capital Costs by Location
            30 MBOPD Brownfield (3Q/07)


Athabasca       $26,550 / bbl
Belridge, CA    $16,225 / bbl
USGC            $14,750 / bbl
South America   $14,103 / bbl




   IVANHOE
       Energy
                                       HTL Integration Reduces Volatility
                                                    Nov. 2004 – Aug. 2007 - Athabasca

  Reflective Standalone SAGD Netback                                                                                       Reflective Integrated HTL™ Netback
        $80                                                                                                              $80



        $70                                                                                                              $70



        $60                                                                                                              $60



        $50                                                                                                              $50
US$/b




                                                                                                                 US$/b
        $40                                                                                                              $40



        $30                                                                                                              $30



        $20                                                                                                              $20



        $10                                                                                                              $10


                                                                         EBITDA Per Barrel
        $0                                                                                                               $0
         Nov-04   Feb-05 May-05 Aug-05   Nov-05 Feb-06 May-06 Aug-06     Nov-06   Feb-07 May-07 Aug-07                    Nov-04   Feb-05 May-05 Aug-05   Nov-05 Feb-06 May-06 Aug-06   Nov-06   Feb-07 May-07 Aug-07

   SAGD EBITDA         Royalties APO     Natural Gas Costs   SAGD Fixed Op Ex     Diluent   Heavy Differential                     HTL EBITDA    Royalties APO   HTL Op Ex   SAGD Fixed Op Ex      HTL Discount



                       Source : Tristone Capital

                           IVANHOE
                                       Energy
Comparative Economics - Assumptions

HTL facility                  30,000 BPD
First Production              5 yrs
Peak Rate                     30,000 bbl/d
Steam Oil Ratio               2.8
After Tax Discount Rate       8.0%
Exchange Rate (CDN$/US$)      0.95 / 1.0
HTL Product Discount to WTI   12.0%
HTL Yield                     81%
HTL CAPEX (US$/bbl)           26,550
LLB discount to WTI           32%
Oil to Gas Price Ratio        8.0
Condensate Premium to WTI     108%

IVANHOE
    Energy
IVANHOE
 Energy
IVANHOE
 Energy
IVANHOE
 Energy
 Integrated SAGD/HTL – 32% lower CO2 emissions*




* On a Total Life Cycle Basis

       IVANHOE
            Energy                                48
                Project Execution
Upstream Team - Calgary
  Core team of petroleum engineers / geologists located in
  Bakersfield, transitioning to Calgary
  Staff additions in Calgary
    • marketing, regulatory and geology
    • hired from firms such as Petro-Canada and Synenco


Downstream Team – Houston
  Silverman (ex KBR), Pelham (ex ConocoPhillips)
  Tier 1 contractor: AMEC London


  IVANHOE
     Energy
                    Summary

HTL Testing completed
AMEC ready for full scale design
High quality Athabasca oil sand asset in place
Initial CA$ 88 MM funding completed
Execution of first integrated HTL project under way
International heavy oil opportunities being advanced
Leadership and corporate structure for execution in place


 IVANHOE
    Energy
          Canadian Embassy, Tokyo
              August 1, 2008

IVANHOE
 Energy
                      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 concerning Ivanhoe Energy's preliminary agreement with Talisman to acquire all of
Talisman's working interest in three oil sand leases (leases 10, 50 and 6), the conditions of the closing of the
transactions contemplated by the preliminary agreement, Ivanhoe Energy's ability to obtain the financing
necessary to pay the portion of the purchase price not financed by Talisman, Ivanhoe Energy's plan to
establish its first integrated HTL heavy-oil project on Lease 10, the anticipated production capacity of the
proposed HTL plant, the anticipated quantities of recoverable barrels of bitumen from leases 10 and 50 and
other statements which are not historical facts. When use 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 result to differ from these forward-looking
statements include the possibility that the company will be unable to raise financing or that the conditions of
the closing of the transaction are not fulfilled, 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 form the Athabasca
bitumen test may not have the product qualities anticipate, market acceptance of the HTL technology may
not be as anticipate, 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 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.

           IVANHOE
                 Energy

								
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