DOW JONES NEWSWIRESBy Edward Welsch
Of DOW JONES NEWSWIRES
OTTAWA (Dow Jones)--Ivanhoe Energy Inc. (IVAN) said Wednesday that an improvement in its proprietary heavy crude oil upgrading technology will make it more cost-efficient and scalable.
Calling the improvement a "major technical breakthrough," Ivanhoe Chief Technology Officer Michael Silverman said during a conference call with investors after the market close that there would be less need to process heavy crude through Ivanhoe's unique heated-sand refinery reactors more than once, improving both the cost and potential scale of the technology.
"It means we can build larger," Silverman said. "Before, if we were limited at a particular project to 20,000 barrels ... we can now get another 40% to 50% in capacity."
Ivanhoe announced the improvements earlier Wednesday, and shares closed up 11% at $2.17 on the Nasdaq. In after-hours trading, shares jumped an additional 29% to $2.79.
In a separate announcement after the market close, Ivanhoe said an independent review confirmed a best estimate of 6.4 billion barrels of oil in place in Ivanhoe's Pungarayacu oil field, located near the Ecuadorian capital of Quito. Ivanhoe intends to start drilling in its Pungarayacu field in two months, and to start oil production in early 2010.
Ivanhoe is small player focused on its patents and technological expertise, and is seeking a strategic partnership with a large, deep-pocketed developer to fund the exploitation of the Pungarayacu field and its Tamarack field in Canada's Athabasca oil sands, which Ivanhoe expects to start drilling this winter and to start producing by 2014.
Ivanhoe Chief Executive Robert Friedland said during the call that Ivanhoe is engaged in ongoing discussions with several large public and private oil companies, and that its recent technical improvements could make the company more attractive to potential partners.
Rather than using more expensive catalysts to break down heavy oil, Ivanhoe's Heavy-to-Light technology combines heated sand with heavy oil or oil sands in a closed loop, separating it into lighter, more valuable products that can flow more easily through pipelines. It also produces enough energy from burning the byproducts of the separation process to fuel both the reactor and the drilling process, Silverman said. The HTL process recovers about 82% of a barrel of heavy crude into a salable product, he said.
The recent improvements reduce the amount of heavy oil residue remaining after a single cycle of oil through the HTL process to less than 7% from 40%, Silverman said, reducing the need to rerun the oil through the process and reducing the overall size and cost of HTL facilities. Ivanhoe executives said they would be able to provide more details about the new technology in coming months after the patenting process is complete.
-By Edward Welsch, Dow Jones Newswires; 613-237-0669; edward.welsch@dowjones.com