FPUSO PRODUCES & UPGRADESHEAVY OIL OFFSHORE

SBM Offshore and Ivanhoe Energy have united in an exclusive worldwide strategic alliance to commercialize an offshore Floating Production, Upgrading, Storage, and Offloading facility. The vessel integrates Ivanhoe’s proprietary and patented Heavy to Light (HTL™) process into the topsides of a conventional FPSO.

This innovative solution will significantly improve the economic viability of offshore heavy oil by partially upgrading it at the well site and creating a synthetic crude oil which is more valuable to international refineries. The upgraded product has a low viscosity and can be transported without diluent or heat. Synergies between HTL and conventional FPSO operations make this upgrading process uniquely feasible for offshore deployment.

Global energy use continues to rise as the world’s easily accessible oil resources are depleted. To satisfy future demand, ad-ditional heavy oil and extra heavy oil (<10° API) resources will need to be developed. The development of offshore heavy oil resources is currently limited to 12° API minimum, and sub 10° API is not possible with existing technology. Although heavy oil has been exploited onshore for sev-eral decades, new drilling techniques and production technologies have only recently opened many of the offshore heavy oil res-ervoirs to feasible development. However, these heavy oil resources require large

amounts of energy to produce and are difficult to transport after dewatering. Once to market, the oil sells at a heavily discounted price. To transport heavy oil (<13° API), a light oil must typically be brought offshore and blended with the heavy oil so that the lower viscosity product can be shipped to International refineries. The FPUSO is a novel solution for these offshore heavy oil challenges. The FPUSO is cost-effective, efficient and an environmentally sound way to create greater economic value from heavy oil. HTL partially upgrades the heavy oil by

reducing viscosity, increasing API gravity and removing contaminants. The upgraded oil is much more valuable than raw heavy oil. Also, the HTL product oil can be transported without addition of light oil therefore eliminating the cost of transport-ing and storing the light oil offshore. The FPUSO is energy self-sufficient, by-products from upgrading are converted in-situ to a valuable source of energy that is utilized onboard the ship and at the well sites for both control and also for powering subsea Electrical Submerged Pumps (ESPs), if required.

The Offshore Heavy Oil Opportunity

The FPUSO integrates two processes, crude treating and oil upgrading, such that an optimum degree of synergy is achieved. Sharing process functions and components keeps facilities within the safety limitations of typical ship-shaped FPSO units. To minimize CAPEX and the delivery time, the FPUSO concept centers on a converted tanker which will receive heavy crude oil produced from subsea wells or re-

mote wellhead platforms and then process the oil onboard in conventional treating facilities. The dewatered and degassed heavy oil will then be forwarded to the HTL pre-frac-tionation system where light diluent used to facilitate flow assurance and dewatering is recovered and returned to the upstream process or wellhead. Heavy residue from the prefraction-

ation system is upgraded in the HTL reactor to produce a lighter and stable synthetic crude oil product (SCO). HTL is a net producer of energy that provides steam and electrical power to completely support the FPUSO operation itself, as well to supply electricity demands of ESPs or subsea pumps.

FPUSO = FPSO + HTL

Heavy Oil Production with FPUSO

500 billionbarrels ofrecoverableheavy oil arelocated offshore

Ivanhoe’s proprietary, patented HTL process is a thermal conversion upgrad-ing process that operates at low pressure. It does not require a catalyst or consume hydrogen for hydroprocessing. The core of the HTL process is a closed loop of very hot fluidized sand which circulates between a reactor and a reheater. In the reactor, the hot sand and feedstock are rapidly contacted. Processing times are only a few seconds, selectively converting the heaviest part of the oil, thus generating high liquid yield of high quality, stable synthetic crude oil (SCO).

A thin film of coke remains on the sand particles and is removed through combustion in the reheater. By-product coke is completely consumed within the HTL process itself. Heat from coke combustion is used to sustain the upgrading reaction and excess energy is converted to steam. The excess energy is utilized in the FPUSO and at the well heads. HTL uses standard, non-licensed processing units, and is a simplified version of a conventional refining process known as fluid catalytic cracking.

The weight and size of equipment, as well as capital intensity, operating costs, and operating synergies make HTL very attractive for integration into an FPSO. When processing extra heavy crude oils with an 8° to 10° API gravity, HTL produces a synthetic crude oil of 18° to 20° API. The synthetic crude oil has a very low viscosity so it can be readily pumped and transported without diluent. The HTL synthetic crude oil, which contains a significant amount of high value gas oils, is valued on a par with light crudes, such as Brent.

HTL: Creating High-Value Upgraded Crude Oil

Heavy Oil vs Upgraded SCO Properties

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Convert Low Value Heavy Oil to High Value SCO

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HTL converts low value resid into high value VGO and distillate. This significantly increases the market value of the product.

HTL eliminates transportation constraints bygreatly lowering viscosity.Heavy Oil Viscosity = 20,000 cSt @ 40˚CHTL SCO Viscosity = 30 cSt @ 40˚C

The FPUSO combines the offshore operational experience of SBM -- owner and operator of the largest FPSO fleet in the world -- with Ivanhoe Energy’s HTL upgrading technology and expertise in heavy oil field production. SBM and Ivanhoe have completed extensive engineering and operations studies to validate the technical and economic feasibility of an FPUSO. The studies verified that HTL and production facilities will fit within the available deck space of a VLCC. Additionally, the studies

have concluded that there is a sound business case for the FPUSO facility. The FPUSO significantly improves upon the viability of offshore heavy oil and extra heavy oil development, and is particularly well suited toward resources which possess the following characteristics:• OilwithAPIsoflessthan10°to

approximately 18° to 20°• Oilcontainsmorethan35%byvolume

of vacuum distillation residue (boiling point >1,000°F)

• Oilhasaminimumviscosityof4,000cSt

at 20°C (no maximum limit)• Recoverablereservessupportaheavy

oil processing capacity of 30,000 bbl/day – 60,000 bbl/day per FPUSO .

The FPUSO offers a unique new opportunity to the offshore industry - a stand-alone solution to produce heavy oil and extra heavy oil fields, sub 12° API, and at the same time significantly upgrade the crude oil value.

For more information and details about HTL, please visit www.ivanhoeenergy.com or call 713 830 4200.

Combining Innovative Forces

SBM Offshore

T +1 281 848 6000W www.sbmoffshore.comE FPSOhtl@sbmoffshore.com HTL

TMAn Ivanhoe Energy Innovation Ivanhoe Energy Houston Office:

#2000, 1111 Bagby StreetHouston, TexasUSA 77002

W www.ivanhoeenergy.comE info@ivanhoeenergy.com

T +1 713 830 4200F +1 713 658 0791

FPUSO PRODUCES & UPGRADESHEAVY OIL OFFSHORE