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Will Ivanhoe Energy Rise to Power Again?
By Jon A. Nones
17 Jan 2006 at 09:53 PM EST
ASPEN (ResourceInvestor.com) -- In late 2004, Ivanhoe Energy merged with Ensyn Group acquiring its heavy oil upgrading technology. Today, Ivanhoe announced that this technology was successfully tested at its Commercial Demonstration Facility - the first of its kind in the world. Bang! The company’s stock soared by almost 57%.
Resource Investor spoke directly with Ivanhoe Vice President Ed Veith at the International Oil & Gas Investor Forum about what this new technology could mean for Ivanhoe and the oil market. So listen up, energy buffs, because this could have major implications – with Shell and ExxonMobil for starters.
“There is a widening differential between heavy and light [crudes],” said Veith. “The world is definitely getting heavier.”
According to a company press release today, Ivanhoe’s revolutionary field-located heavy oil upgrading facility has successfully achieved a number of important performance goals during an extended test run last week.
The heavy oil upgrading technology has four key competitive advantages, according to the company:
It is field-located and effective at a relatively small minimum scale of 10,000 to 15,000 barrels per day;
The value of the upgraded liquid product means the producer is able to capture the majority of the price differential between heavy and light crude oil;
The upgraded product is easily transported by pipeline without the need for light blend oils; and
The process generates significant on-site excess energy, replacing natural gas for production of steam and/or power used in heavy-oil recovery.
Veith walked Resource Investor through each advantage and the potential affect on the market – with special attention to no. 4.
Small Scale Production
Because of the high costs to pull, transport and ultimately convert heavy crude to usable light crude, small-scale producers often struggle with costs. This new technology makes the process profitable for these small-scale producers, Veith said.
The company said it plans to begin testing crudes from some potential partners with an initial focus on heavy crudes from California and Western Canada, including bitumen from Canada’s Athabasca Tar Sands region, according to the release.
Although Ivanhoe has no current partners or projects in Athabasca, Veith said this could change shortly.
“We’re talking with potential partners in the Athabasca Tar Sands region,” Veith confirmed.
According to Veith, the price differential between heavy and light crude is currently about $12 a barrel in California. In Canada, it’s roughly $20 per barrel.
“Our technology eliminates this differential…it takes the lion’s share of it and gives it back to the producer,” said Veith.
As most of us know, in order to successfully transport heavy crude through pipelines, light blend oils, or diluents, must be utilized. This is the second most expensive cost in heavy crude processing and can amount to a substantial overhead, Veith said.
However, because the heavy crude is converted to light crude on site, this cost can be removed. The technology thus allows for cheaper, more efficient transportation, added Veith.
And now to the most expensive cost in processing heavy crude – natural gas.
With natural gas prices currently as high as $9.10 per million Btu, heavy crude and tar sands producers are fighting to curb this increasing cost. It might even be safe to say, the company who can limit or substitute the use of natural gas, could be set to take home all the marbles.
According to Veith, Ivanhoe has succeeding in doing just that. The company’s new heavy crude facility only uses a minimal amount of natural gas for initial start up. The heat is sustained by combustion of the coke by-product, said Veith.
“We burn the coke for energy instead of natural gas,” he said.
This process has a heavy-to-light conversion yield of 81%-95%. In Athabasca’s case, it can generate 82% yield, Veith said.
Testing last week also confirmed flue gas sulphur capture, heavy metals capture and acidity reduction, according to the company. One more step closer to operational status. According to Veith, some local majors have expressed interest.
The facility is located in Aera Energy’s Belridge heavy oil field near Bakersfield, California. Aera is owned by affiliates of Shell and ExxonMobil, who “are very interested” in the technology, said Veith.
“We’re negotiating a 10,000-15,000 barrel per day plant with Shell and Exxon,” said Veith.
Share Price Activity
Shares of Ivanhoe [Nasdaq:IVAN; TSX:IE] closed today at $2.38 - up 86 cents or 56.58% on Nasdaq.
However the shares are still off their 52-week high of $3.34 reached in March last year, and way off the high of $6.95 in November 2003. Ivanhoe shares have traded as low as 99 cents in the last year.
Could this be the start of Ivanhoe’s rise to power again? Based on today’s market reaction, good tidings may indeed lie ahead.
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All Hail... - Posted by TTTCS, 19 January 2006
BMD IVAN IE - stock symbols USA Canada