FARMOUT AGREEMENT



                                     BETWEEN



                           RICHFIRST HOLDINGS LIMITED



                                    ("CITIC")



                                       AND



                            PAN-CHINA RESOURCES LTD.



                                  ("PAN-CHINA")



                                       AND



                               SUNWING ENERGY LTD.



                                   ("SUNWING")



                                       AND



                               IVANHOE ENERGY INC.



                                   ("IVANHOE")



                             DATED 18TH JANUARY 2004







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                                FARMOUT AGREEMENT



THIS AGREEMENT is entered into as of the 18th day of January 2004



BETWEEN:



         RICHFIRST HOLDINGS LIMITED, a company incorporated under the laws of

         the British Virgin Islands and having an office at Room 2118 Hutchinson

         House, Harcourt Road, Hong Kong, a wholly-owned subsidiary of CITIC

         Group



         ("CITIC")



AND:



         PAN-CHINA RESOURCES LTD., a company incorporated under the laws of the

         British Virgin Islands and having an office at 19th Floor, 101-6th

         Avenue S.W., Calgary, Alberta, Canada T2P 3T4



         ("PAN-CHINA")



AND:



         SUNWING ENERGY LTD., a company incorporated under the laws of Bermuda

         and having an office at 999 Canada Place, Suite 654, Vancouver, BC,

         Canada V6C 3E1



         ("SUNWING")



AND:



         IVANHOE ENERGY INC., a company incorporated under the laws of the

         Territory of the Yukon, Canada and having an office at 999 Canada

         Place, Suite 654, Vancouver, BC, Canada V6C 3E1



         ("IVANHOE")



CITIC and Pan-China and their respective successors and permitted assigns may

sometimes individually be referred to as a "Party" and collectively as the

"Parties". Sunwing and Ivanhoe may sometimes individually be referred to as a

"Company" and be collectively referred to as the "Companies".



WHEREAS:



(A)   Ivanhoe, an Affiliate of Pan-China and China International Trust and

      Investment Corporation, an Affiliate of CITIC on November 18, 2003 signed

      a Heads of Agreement ("HEADS OF AGREEMENT") for Acquisition of Interest in

      Kongnan Contract & Options to Convert, and this Agreement is entered into

      to set out the basis on which CITIC will obtain its Participating

      Interest;



(B)   Capitalised terms used in these recitals without definition have the

      meanings assigned to them in Section 1.1 hereof;



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(C)   Pan-China is the Contractor and Operator under the Petroleum Contract that

      contemplates Development Operations and Production Operations from the

      Contract Area, located in Hebei Province, PRC (the "KONGNAN PROJECT");



(D)   Pan-China has agreed to assign to CITIC a Participating Interest in the

      Contractor's Rights and Obligations under the Petroleum Contract on the

      terms hereinafter described; and



(E)   Sunwing and Ivanhoe have each agreed to provide an option to CITIC in

      relation to converting CITIC's investment into their respective shares on

      the terms of this Agreement.



NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual

covenants and agreements herein contained, the parties hereto mutually agree as

follows:



                                     PART 1



                                 INTERPRETATION



DEFINITIONS



1.1   In this Agreement the following words and phrases have the indicated

assigned meanings:



      "AFFILIATE" means any person, partnership, joint venture, corporation or

      other form of enterprise which directly or indirectly controls, is

      controlled by, or is under common control with, a specified person. For

      purposes of the preceding sentence, "control" means possession, directly

      or indirectly of the power to direct or cause direction of management and

      policies through ownership of voting securities, contract, voting trust or

      otherwise;



      "BUSINESS DAY" means a day, other than a Saturday or Sunday, on which the

      banks in Hong Kong are open to the public for the transaction of business;



      "CITIC INTEREST" has the meaning assigned to it in Section 4.1;



      "CLOSING" shall occur at the offices of CITIC or such a place as the

      Parties agree within seven (7) Business Days of all Conditions Precedent

      having been either satisfied or waived;



      "CNPC" means China National Petroleum Corporation, a company organised

      under the laws of the PRC, and its successors and permitted assigns under

      the Petroleum Contract, and/or the laws and regulations of the PRC;



      "CNPC/PRC APPROVAL" means, individually or collectively, as the context

      requires, any approval of CNPC and/or a Governmental Authority in the PRC,

      which is a prerequisite to a particular act or omission under the terms of

      the Petroleum Contract;



      "CONDITIONS PRECEDENT" means the conditions precedent specified in Section

      4.2;



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      "CONTRACT AREA" has the meaning assigned to it in the Petroleum Contract;



      "CONTRACTOR" has the meaning assigned to it in the Petroleum Contract;



      "CONTRACTOR'S EXPENSES" means all items of outlay and expense whatsoever,

      wheresoever or howsoever incurred pursuant to the fulfilment, from time to

      time, of the Contractor's Obligations or otherwise incurred by the

      Operator in accordance with the terms of this Agreement;



      "CONTRACTOR'S OBLIGATIONS" means those covenants, liabilities and

      obligations required to be performed by the Contractor under the Petroleum

      Contract;



      "CONTRACTOR'S RIGHTS AND INTERESTS" means all of the Contractor's rights

      and interests in and to the Kongnan Project including the Contractor's

      rights and interests in the Petroleum Contract, the Contract Area, any

      Petroleum produced from the Contract Area and any assets comprising the

      Kongnan Project in which the Contractor has rights or holds an interest

      pursuant to the terms of the Petroleum Contract;



      "CONTRACTOR'S RIGHTS AND OBLIGATIONS" means, individually or collectively,

      as the context requires, the Contractor's Rights and Interests and the

      Contractor's Obligations;



      "DAGANG OILFIELD" has the meaning implied in the Petroleum Contract;



      "DEVELOPMENT COSTS" has the meaning assigned to it in the Petroleum

      Contract;



      "DEVELOPMENT OPERATIONS" has the meaning assigned to it in the Petroleum

      Contract;



      "DOLLARS" or the symbol "$" means lawful money of the United States of

      America;



      "EFFECTIVE DATE" means the date upon which CITIC gives written notice to

      Pan-China that all Conditions Precedent have either been satisfied or

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