Strategic Developement Alliance Letter Agreement

SUNWING ENERGY LTD.
C/O CODAN SERVICES LIMITED
CLARENDON HOUSE
2 CHURCH STREET, P.O. BOX 1022
HAMILTON HM1 1, BERMUDA


September 26, 2002 CITIC ENERGY INC. c/o Room 2118 Hutchinson House 10 Harcourt Road Hong Kong


Dear Sirs:


RE: STRATEGIC DEVELOPMENT ALLIANCE


This letter is intended to reflect our recent discussions and, when executed and delivered by each of us (execution and delivery by Sunwing Energy Ltd. deemed made upon sending out this letter), will constitute a binding agreement ( the "Agreement") between Sunwing Energy Ltd. ("Sunwing") and CITIC ENERGY INC., a company incorporated under the laws of British Virgin Islands ("CITIC") in respect of the matter more particularly described below.


The background to our Agreement is as follows:


(A) CITIC is a wholly-owned subsidiary of CITIC International Holdings
Limited, which in turn is a wholly-owned subsidiary of China
International Trust & Investment Corporation, a trust and investment
company that reports directly to the State Council of the People's
Republic of China ("PRC");


(B) the PRC government has expressed support for the Kyoto Protocol and for
the overall objective of reducing air pollution in Chinese cities as a
matter of priority;


(C) the PRC government is a net importer of oil and it is a matter of
strategic national importance to protect and enhance the supply of oil
diversify sources of energy.


(D) Sunwing is a wholly-owned subsidiary of Sunwing Holding Corporation
which in turn is a wholly-owned subsidiary of Ivanhoe Energy Inc., a
Canadian public company that has international investments and contacts
in the oil and gas industry;


(E) PRC and Canada have traditionally enjoyed strong business ties and
excellent trade relations;


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(F) Sunwing has the ability to assist CITIC in fulfilling its strategic
objectives of the identifying and acquiring interests in key
international oil and gas development projects and introducing proven,
advanced oil and gas development and production technology to the
domestic oil and gas industry in the PRC;


(G) CITIC has the ability to assist SUNWING in fulfilling its strategic
objectives of increasing its profile in Asian capital markets, gaining
access to significant financing opportunities and financing
opportunities and obtaining a listing on the Hong Kong Stock Exchange;
and


(H) in view of their respective objectives and abilities, a strategic
alliance between Sunwing and CITIC offers significant potential
benefits to both parties and their respective parent companies.


Based on the foregoing, we confirm the terms of our Agreement as follows:


1. SUNWING OBJECTIVES


The parties acknowledge that Sunwing's key corporate development
objectives ( the "Sunwing Objectives") are as follows:


(a) to raise Sunwing's profile and to enhance Sunwing's
credibility among Asian institutional investors and in Asian
capital markets generally; and


(b) to list Sunwing's ordinary shares on the Hong Kong Stock
Exchange.


2. CITIC OBJECTIVES


The parties acknowledge that CITIC's key strategic objectives (the
"CITIC Objectives") are as follows:


(a) to acquire interests in one or more international oil and gas
development projects; and


(b) to introduce "gas-to-liquids" technology and other advanced
technology oil and gas innovations to the domestic oil and gas
industry in the PRC.


3. RECIPROCAL SERVICES


Sunwing hereby engages CITIC, and CITIC agrees, to provide advice,
assistance, expertise and other services (collectively, the "CITIC
Services") to Sunwing in connection with Sunwing's pursuit of the
Sunwing Objectives. CITIC hereby engages Sunwing, and Sunwing agrees,
to provide advice, assistance expertise and other services (the
"Sunwing Services") to CITIC in connection with CITIC's pursuit of the
CITIC Objectives. The specific nature and scope of the CITIC Services
and the Sunwing


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Services will be as agreed from time to time between Sunwing and CITIC
and will be tailored to expedite the timely achievement of the Sunwing
Objectives and the CITIC Objectives, respectively.


4. YUDONG PRODUCTION SHARING CONTRACT


As part of the CITIC Services, CITIC shall use its best efforts,
industrial expertise and PRC government contacts to support Sunwing's
efforts to sign and obtain all necessary PRC governmental approvals
for, a production sharing contract (the "Yudong PSC") with China
National Petroleum Corporation and/or PetroChina Company Limited
relating to the Yudong Block located in Eastern Chongqing Municipality,
PRC. As soon as practical after the Agreement comes into effect, CITIC
and Sunwing shall establish a new company ("Newco") under the laws of
the British Virgin Islands that the parties will use as the corporate
vehicle for signing and performing the Yudong PSC. The parties shall
procure Newco to issue and allot a total of 100 ordinary shares at par
value of US$1.00 each, which shall be owned by CITIC as to 30 shares
("CITIC's Newco Shares") and by Sunwing as to 70 shares.


5. PUT AND CALL OPTIONS FOR THE CITIC'S NEWCO SHARES


The parties hereby irrevocably grant each other the following shares
exchange options with respect to CITIC's Newco Shares:


(a) CITIC shall have an option (the "CITIC Put Option") to
transfer to Sunwing, and Sunwing shall accept, unencumbered
legal and beneficial title to all of CITIC's Newco Shares in
exchange for Sunwing shares, which Sunwing shall issue and
allot, that will represent 20% of the total number of shares
in the capital of Sunwing issued immediately after completion
of the share exchange (and if Sunwing shall have more than one
class of shares ...