Ivanhoe Energy, through its subsidiary Sunwing Energy, has started drilling its first exploration well on the company's 900,000-acre Zitong Block in China's natural gas-rich Sichuan Basin.

Sunwing has a 100% working interest in a 30-year production-sharing contract with China National Petroleum Corporation (CNPC), signed in September 2002, to commercially develop the Zitong Block.

Sunwing will receive approximately 75% of the net project revenues before payout and around 45% after payout. PetroChina Company Limited, a subsidiary of CNPC, may elect to participate through a working interest of up to 51% in any development of the project.

The well is expected to take 60 days to drill to a target depth of 8,700 feet. A seismic program has been completed and a second exploratory well is planned for later this year.

The Sichuan Basin, in southwestern China approximately 930 miles southwest of Beijing, is the country’s largest gas-producing region – with a natural gas resource potential estimated by Chinese officials to be 260 trillion cubic feet.