By OGJ editors
HOUSTON, Nov. 21 -- Peak production will be considerably less than originally anticipated at the start of the Dagang oil field project in China, said Ivanhoe Energy Inc., Vancouver, BC.
Ivanhoe is operator with 60% working interest in two blocks divided into six areas that total 22,400 acres at Dagang in the Bohai Bay basin 200 km southeast of Beijing.
Recent wells drilled in the northern areas "experienced reservoir quality, thickness, and productivity that were below our expectations," the company said.
After the quarter that ended June 30, 2005, the company revised downward its internal estimate of proved reserves and said its 2005 yearend independent reserves report will confirm the revisions or revise the figures further.
In early November, Ivanhoe said its production for the quarter ended Sept. 30 was 39% higher than that for the quarter ended June 30.
However, it had drilled no wells on the northern blocks in the quarter ended Sept. 30, moved to temporarily cease drilling at Dagang before the end of 2005, suspended talks to obtain a loan for field development, and wrote off an $857,000 origination fee.
Water injection and a successful frac program will continue, but Dagang was the main factor in the company's net loss having deepened in the third quarter compared with the second quarter of 2005, the company said.
Ivanhoe said its 2005 capital outlay is expected to fall $36.3 million short of the original $79 million budget, mainly due to the Dagang drilling reduction and plans to farm out a second well at another project in China, Zitong.
Dagang produces 30-35° gravity oil from an estimated 394 million bbl of oil in place at about 10,500 ft on the blocks.
Ivanhoe placed the first well on production in early 2004 and had 41 wells producing or available for production at Sept. 30. Yearend 2004 output was 1,655 b/d from 22 wells. The blocks also have 82 previously drilled wells that Ivanhoe has been reworking. PetroChina Ltd. buys the crude oil.
Ivanhoe in 2003 projected that production from the 30-year, $176 million project would peak at 14,000 b/d based on an oil price of $26/bbl.
