Shell China E&P to buy Ivanhoe's stake in Zitong tight gas

Shell China Exploration & Production Co. Ltd. agreed to buy Ivanhoe Energy Inc.’s stake in a production-sharing contract for Zitong block in China’s Sichuan basin for $160 million.

Shell China Exploration & Production Co. Ltd. agreed to buy Ivanhoe Energy Inc.’s stake in a production-sharing contract for Zitong block in China’s Sichuan basin for $160 million.

Ivanhoe’s interest in the tight natural gas play is held by wholly owned subsidiary Sunwing Zitong Energy (OGJ Online, Jan. 17, 2011).

Shell China E&P signed a binding memorandum of understanding with Sunwing, and the transaction remains subject to government approvals. Closing is expected by yearend.

Ivanhoe said it decided to sell its Zitong assets to concentrate on its core business of international exploration, development, and its proprietary heavy-to-light (HTL) oil upgrading process. Sunwing has been active in China for more than 10 years.

Following closing, Shell will assume a $20 million performance bond that Ivanhoe was required to post as part of an agreement with the China National Petroleum Corp.

Ivanhoe Pres. and Chief Operating Officer David Dyck said, “We will focus our resources on our oil projects in Canada, Ecuador, Mongolia, and the Dagang project in China, as well as the commercialization of our proprietary HTL upgrading process.”

Sunwing discovered gas at two wells on Zitong block, where it owns a 90% stake. Mitsubishi Gas Chemical Co. Inc. owns the remainder.

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