EMPLOYMENT AGREEMENT





              THIS AGREEMENT made as of the 15th day of May 2006





BETWEEN:



                  IVANHOE ENERGY INC., a corporation  continued under the laws

                  of the Yukon Territory,  having an office at Suite 654 - 999

                  Canada Place, Vancouver,  British Columbia,  Canada, V6C 3E1



                  (the "COMPANY")



AND:



                  JOSEPH I. GASCA

                  (the "EXECUTIVE")





WHEREAS:



A.   the Company is an international oil and gas company;



B.   the Executive has extensive  experience in the  international oil and gas

     industry;



C.   the Company wishes to have the Executive serve as the President and Chief

     Operating Officer of the Company; and



D.   the  parties  hereto wish to enter into this  agreement  to set forth the

     terms and  conditions  applicable  to the  employment of the Executive in

     such capacity.



NOW  THEREFORE  THIS  AGREEMENT   WITNESSES  that  the  parties   hereto,   in

consideration  of the premises and of the respective  covenants and agreements

on the part of those herein contained,  do hereby covenant each with the other

as follows:





                                    PART 1

                        DEFINITIONS AND INTERPRETATION



DEFINITIONS



1.1      In this  Agreement,  the  following  terms  shall  have the  meanings

         ascribed thereto:



         "AGREEMENT"  means this  agreement and all  amendments  made to it by

         written agreement between the Company and the Executive;



         "BOARD" means the board of directors of the Company;



         "BUSINESS DAY" means a day other than  Saturday,  Sunday or statutory

         holiday in British Columbia;



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                                    - 2 -





         "CHANGE OF CONTROL" means an event occurring  after the  Commencement

         Date pursuant to which:



         (a)      a   merger,   amalgamation,    arrangement,   consolidation,

                  reorganization  or transfer takes place in which  securities

                  of the  Company  possessing  more  than  50%  of  the  total

                  combined  voting power of the Company's  outstanding  voting

                  securities  are  acquired  by a person or persons  different

                  from the persons holding those voting securities immediately

                  prior  to such  event,  and  the  composition  of the  Board

                  following  such  event  is such  that the  directors  of the

                  Company prior to the transaction constitute less than 50% of

                  the Board membership following the event;



         (b)      any person,  or any combination of persons acting jointly or

                  in   concert  by  virtue  of  an   agreement,   arrangement,

                  commitment   or   understanding   acquires,    directly   or

                  indirectly, 50% or more of the voting rights attached to all

                  outstanding voting securities; or



         (c)      any person,  or any combination of persons acting jointly or

                  in   concert  by  virtue  of  an   agreement,   arrangement,

                  commitment   or   understanding   acquires,    directly   or

                  indirectly, the right to appoint a majority of the directors

                  of the Company; or



         (d)      the Company sells, transfers or otherwise disposes of all or

                  substantially  all of its  assets,  except that no Change of

                  Control will be deemed to occur if such sale or  disposition

                  is made to a subsidiary or subsidiaries of the Company.



         "DISABILITY"  means a physical or mental  incapacity of the Executive

         that  has  prevented  the  Executive   from   performing  the  duties

         customarily  assigned  to the  Executive  for one  hundred and eighty

         (180)  days,  whether  or not  consecutive,  out of any  twelve  (12)

         consecutive  months and that in the opinion of the Board is likely to

         continue; and



INTERPRETATION



1.2      For the purposes of this  Agreement,  except as  otherwise  expressly

         provided:



         (a)      "THIS  AGREEMENT"   means  this  Agreement,   including  the

                  schedules  hereto,  and not any particular part,  section or

                  other portion hereof,  and includes any agreement,  document

                  or instrument  entered into,  made or delivered  pursuant to

                  the terms  hereof,  as the same may,  from time to time,  be

                  supplemented or amended and in effect;



         (b)      all  references  in this  Agreement to a designated  "part",

                  "section"  or  other   subdivision  or  to  a  schedule  are

                  references  to  the  designated  part,   section,  or  other

                  subdivision of, or schedule to, this Agreement;



         (c)      the words "hereof",  "herein",  "hereto" and "hereunder" and

                  other words of similar  import refer to this  Agreement as a



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                                    - 3 -





                  whole  and not to any  particular  part,  section  or  other

                  subdivision or schedule unless the context or subject matter

                  otherwise requires;

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