Ivanhoe Energy's proprietary heavy oil to light oil (HTL) upgrading technology is designed to cost effectively process heavy oil in the field and provide a stable, significantly upgraded synthetic oil product along with by-product energy which can be used to generate steam or electricity. Analysis shows that HTL can virtually eliminate cost exposure to natural gas and diluent and capture the majority of the heavy to light price differential for oil producers. HTL accomplishes this at a much smaller scale and at reduced per barrel capital costs compared with established competing technologies.

The HTL petroleum processing represents the application of a commercially proven technology to a new feedstock. Ensyn Group, Inc. initially developed the technology in the early 1980s and has applied it commercially for over 15 years in the biomass (wood) industry. Seven commercial Ensyn biomass processing facilities are in operation in the United States and Canada, with a major expansion recently completed in Canada. Ensyn initiated petroleum processing in 1997.

A petroleum pilot plant built in 1998 has been used for testing crude oil from around the world. In December, 2004, Ensyn initiated operations at a 1,000-barrel-per-day commercial demonstration plant in the San Joaquin Valley in southern California.

Ivanhoe and Ensyn merged on April 15, 2005, and Ivanhoe gained full ownership of the petroleum upgrading technology for the development of heavy oil reserves around the world. Ensyn Group spun off its existing biomass processing business, Ensyn Renewables Inc., to its shareholders prior to the closing of this transaction.

Since the commissioning of its commercial demonstration facility (CDF) for upgrading heavy oil in early 2005, Ivanhoe Energy has tested a number of crude oils and vacuum tower bottoms feedstocks. Analysis of CDF performance shows that the HTL process is capable of delivering high yields of significantly upgraded product. The HTL process significantly reduces or eliminates most contaminants and the product typically meets pipeline specifications without further treatment. CDF run analysis validates data obtained in over 90 pilot scale experiments. Results of CDF runs, including plant performance data, CDF feedstock and synthetic product properties are presented.

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