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After reading through the entire EIA in search of the percentage of river flow used in SAGD and the water to oil ratio in SAGD, I did not find any specific numbers. These paragraphs from the EIA make up the core of the impact study on water:

4.10.3 Location and treatment of drilling water and production tests
All produced water, sewage water and drilling water will be segregated, stored in tanks or on site, treated, and disposed of at an official site. This will be regulated and monitored by the contractor and supervised by Environmental personnel.

4.11.3 Water Treatment
Water from the mud and floccule DEWATERING process, counterwell water, and water used to wash equipment are treated. The objective is to adjust the physio- chemical parameters such that discharges are in compliance with RAOHE environmental regulations.
The operative system consists of two vertical tanks equipped with an air hose for agitation. The treatment unit consists of a centrifuge pump and two tanks which mix the chemicals for the vertical tanks.

7.15.4.10 Management of formation waters
Formation waters must not be dumped into the environment without prior treatment, due to their high levels of salinity and the chemical residue they possess. If these enter a water body, it could cause damage to life forms in the ecosystem.
Crude produced shall be processed and, as a result, separated from formation gasses and waters. The formation water shall be passed through a water scrubber, where the remaining particles are removed from the crude and later stored in their respective tanks. Later, the formation water should be reinjected into a well designed specifically for this reason.

The EIA does not state the percentage of river flow that will be used, nor does it state the water to oil ratio in the SAGD process. In the article that states that 65% of Athabasca River drainage is from oil sands, the author also states that between 2 and 4 barrels of water are used for every barrel of oil recovered. Unfortunately I cannot find the exact ratio for the SAGD process in Pungarayacu—I find it surprising that the EIA doesn’t have this information. Rather, the EIA states that, “given the conditions that the identified activities are carried out under, the impacts on this factor are largely irrelevant.” These conditions are:

-“Inadequate disposal of solid wastes that are taken to bodies of water during the construction and operations phase.

-The presence of drilling mud, residual industrial water and residual domestic water can chemically contaminate bodies of water in the camp’s area of influence resulting from a lack of precautions in the management of liquid runoff during the drilling process.” [Environmental Impact Assessment (EIA) and Environmental Management Plan (PMA) to do Appraisal Drilling and Production Tests in Block 20 for Wells IP-13, IP-15, IP-5A and IP-5B.]

To answer your question about how much oil is recoverable, according the contract, the first three-year phase is expected to produce 30,000 barrels of crude per day. The pilot phase, which is another three years, expects to extract 60,000 barrels a day and the extraction phase, 24 years with the possibility of extension, expects between 90,000 and 120,000 barrels of oil per day.

Ivanhoe also stated in a March 13th press release that, “ENI, the Italian national oil company, is producing approximately 30,000 barrels of oil per day from the Hollin formation approximately 40 miles southeast of Block 20.”

As for Trey’s comment:
“Emily mentioned only three wells for the first three years but I believe the 23 well figure for the first phase might be more accurate. It would be hard to delineate the boundaries of the field with only three wells.”

When I went to the Ministry of the Environment in Quito they knew nothing about the possibility of exploring more than four wells in the first phase. I asked them what Ivanhoe would need to do to legally construct more than the four wells accounted for in the EIA. The ministry said that Ivanhoe would need a new environmental license and an environmental impact study. Ivanhoe has told communities in Pano and Misahualli that they will begin seismic testing for wells that are not part of the EIA. Members of Pano communities are deeply concerned about Ivanhoe’s social and environmental impact. When Ivanhoe representatives visited the community in March they told the community that they did not have a choice as to whether they entered. Community leaders are waiting to see paperwork with Ivanhoe’s permission to enter.

Word on the street:
-The town of Napo held a strike against Ivanhoe last week the day the company was set to enter with machinery. Town and community members blocked the road to the community of Ceibo where the platform will be constructed. Ivanhoe never showed up with its machinery, probably after seeing the president of the Junta Parroquial of Napo go on television announcing the protest the night before.

-The SAGD or HTL process still has not occurred at the Nueva Esperanza well, putting the process behind schedule. According to locals, the company is waiting for funds to be able to continue with the process. Some have said that the oil there is too heavy and is, therefore, not commercially viable but results from the chemical testing of the crude samples from the site still have not returned.

-Ivanhoe has guaranteed 90% employment of natives in each well site. However, Ivanhoe contracted out to Ecuadorian companies for the construction, drilling and transportation at well sites. It is up to these companies to employ locals. In Nueava Esperanza the security guards at the well site were hired from Quito because the company said the Kichwa people of Cotundo/Nueva Esperanza lacked experience. In Napo, for example, the contracted company Comasey, which will employ workers for various activities, has allotted 34 jobs. But at least 25 of these jobs are for specialized engineers, who come from outside of the province.

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Replies to This Discussion

Emily:

The 65% draw down of the Athabasca river drainage is difficult to compare to this project. There are enormous strip mining projects along with many SAGD projects throughout that area. Strip mining uses more water per barrel of oil produced than SAGD. Water usage is a factor in that area as I mentioned earlier. I think when the figure surfaces on the Pungarayacu water usage, IMO, it will be a very small portion of the river drainage in that area - but I have nothing to back-up that opinion. I was hoping you would come across that figure in the study.

I'll see if I can come up with the source of the 23 permitted wells. I might be confusing it with the Ivanhoe's Canadian Project but I don't believe I am.

Ivanhoe, or most likely the organization that Ivanhoe has contracted for community relations, apparently isnot doing a good job in communicating to the local population the time-line for this project. I suspect the process is in-fact on schedule. I'm guessing that the locals haven't been told or don't understand when they realistically can expect to see SAGD and HTL development. I don't know the SAGD development time-line but I would assume it would not even begin until all the evaluation wells are drilled, analyzed and the phase one field delineated. The HTL unit will likely take 18 - 24 months to build and its construction timeline will be coordinated with the SAGD field development.

Heavy oil is why Ivanhoe is developing this field. The Pungaraycu was discovered some thirty years ago but it has sat dormant because of its extremely heavy oil making it uneconomical to produce. That is where Ivanhoe's HTL (Heavy to Light) technology comes into play and why Ecuador needs Ivanhoe rather than some other company to develop this field.

I can't address the issue of contracting with Ecuadorian companies verses employing the local natives other than it would be unrealistic for Ivanhoe to hire and manage a local work force at this phase of the operations. Ivanhoe has made guarantees to the Ecuadorian government to employee some of the local labor but I wouldn't think it would be 90% - maybe the 90% is Ecuadorian citizens rather than the local people. As you mentioned, many of these jobs require specialized skills sets and training that Ivanhoe is unlikely to find in the local area population. Once again, this is only my opinion.
Emily: Something that just came across the wire. Thought you might find it of interest.


Ivanhoe Energy commits up to one million dollars in aid
for flood victims in Ecuador’s Napo Province

QUITO, ECUADOR – (April 15, 2010) – Robert Friedland, President and CEO of
Ivanhoe Energy Inc. (TSX: IE; NASDAQ: IVAN) and David Martin, President and CEO of
Ivanhoe Energy Latin America, announced today that Ivanhoe Energy has pledged up to
$1.0 million in aid for victims of torrential rains and flooding in Ecuador’s Napo Province.
Several communities within the boundaries of Ivanhoe Energy’s Pungarayacu heavy oil
project are covered by a state of emergency declared by the Ecuadorean government
last week after rivers flooded, reportedly destroying food crops and more than 100
houses, and directly affecting more than 3,500 people, according to estimates by
government agencies.
“The government is clearing roads and repairing bridges to restore transportation
corridors, and Ivanhoe is supporting relief efforts and helping direct aid to people in the
communities who have had homes destroyed or damaged by the heaviest rains reported
in decades, and who are struggling to protect families and rebuild their livelihoods,” Mr.
Martin said.
Carlos Espinoza, General Manager and legal representative of Ivanhoe Energy Ecuador
Inc., will personally present a letter of commitment to Mr. Jorge Glass, Minister of
Strategic Areas for the Government of Ecuador, on behalf of Ivanhoe Energy.

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