Ivanhoe Energy merges subsidiary with PanAsian petroleum to gain more exposure to Asian oil market
Ivanhoe Energy (TSX: IE, NASDAQ: IVAN) took further steps towards its goal of setting up a major Asia-focused business by merging its wholly owned subsidiary Sunwing Energy Ltd with PanAsian Petroleum, which holds exclusive rights to oil Block XVI in Mongolia’s Nyalga basin.
Ivanhoe will issue three million common shares to complete the merger, which will not involve any cash payments to PanAsian’s principals, whose corporate structure and contractual relationship with the Petorleum Authority of Mongolia will stay unchanged.
“Mongolia represents ideal growth potential for Sunwing Energy... Mongolia's vast sedimentary basins have been significantly underexplored and Block XVI, in particular, has been identified as offering highly prospective development potential,” said Ivanhoe Energy’s Co-Chairman A. Robert Abboud.
Ivanhoe also said that Sunwing contemplated a listing on a major Asian stock exchange.
Sunwing, which has a 15 year history of oil and gas exploration and production in China and has three production-sharing agreements with Petrochina, currently produces 1,800 barrels of light oil per day in China’s Hebei province. The company also operates a gas exploration block in Sichuan province.
The Nyalga basin is reported to possess many of the characteristics of interior rift basins that produce light oil east and south of Nyalga and in northern China, including Petrochina’s Tamsag project and Sinopec’s Zuunbayan project and its 980 MMbbl (million barrel) discoveryin China’s inner Mongolia. The merger transaction will ensure access to 458 km (kilometres) of 2D seismic data over the Kherulen sub-basin within the Nyalga basin. The new seismic data has already helped identify 19 leads in the sub-basin’s southwestern area.
The merger is taking place amid what Ivanhoe called “sharply increasing interest by foreign investors in Mongolia’s petroleum sector” following recent oil discoveries and investment agreements, including those concluded by Ivanhoe and its partner Rio Tinto (LSE: RIO) for the multi-billion dollar development of the Oyu Tolgoi copper-gold complex in the south of the country.
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