Document:

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                                                                   Exhibit 10.17

                                  CONFIDENTIAL

                                 AMENDMENT NO. 3
                                       TO
                            MASTER LICENSE AGREEMENT

                     (formerly the Volume License Agreement)

         THIS AMENDMENT NO. 3 TO MASTER LICENSE AGREEMENT ("Amendment No. 3") is
made and entered into as of this 1st day of July, 2003 by and between Syntroleum
Corporation, a Delaware corporation ("Licensor"), and Ivanhoe Energy Inc., a
company organized under the laws of the Yukon, Canada ("Licensee").

                                    RECITALS

         A. WHEREAS, Licensor and Licensee previously entered into that certain
Volume License Agreement dated as of April 26, 2000, as amended by Amendment No.
1 to Volume License Agreement dated as of October 11, 2000 which, among other
things, changed the Volume License Agreement to a Master License Agreement.
(collectively, the "Master License Agreement") and by Amendment No. 2 dated June
1, 2002; and

         B. WHEREAS, Licensor and Licensee desire to amend certain provisions of
the Master License Agreement as set forth in this Amendment No. 3.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Amendment No. 3, the Parties agree as follows. Unless
otherwise provided in this Amendment No. 3, capitalized terms used in this
Amendment No. 3 but not defined shall have the meanings set forth in the Master
License Agreement.

         1. The definition of "Licensed Territory" at Section 1.15 of the Master
License Agreement and Section 1.16 of the Site License Agreement is amended to
read as follows:

         "LICENSED TERRITORY" means all the countries of the world and their
         respective territorial waters, including the United States of America,
         Canada, Mexico, the People's Republic of China, India, and their
         respective territorial waters, except for
<PAGE>

         any country and its territorial waters (i) that, from time to time, may
         be prohibited, or whose citizens (considered as a group) may be
         prohibited, by the United States government from receiving Licensor
         Technology or the products thereof or (ii) the inclusion of which in
         the definition of Licensed Territory is, or could in good faith be
         argued to be, prohibited by United States law, including, without
         limitation, United States Executive Orders and administrative orders,
         rules and regulations. Licensed Territory shall include territories or
         territorial waters which are the subject of official dispute between or
         among countries only if all countries claiming sovereignty, a sovereign
         right, or jurisdiction over such territories or territorial waters are
         otherwise included within the definition of such term.

         2. Paragraph 5 of Amendment No. 1 is amended to delete the final
sentence of Paragraph 5. Paragraph No. 5 shall now read as follows:

                  In consideration for the rights granted to Licensee by
         Licensor under this Amendment No. 1., Licensee shall pay Licensor a
         non-refundable amount of $7,000,000 U.S. dollars upon execution of this
         Amendment No. 1. This amount, as well as the previous payment of $3
         million under the original Volume License Agreement, dated April 26,
         2000, shall not be credited against the first $10,000,000 U.S. dollars
         in License Fees payable by Licensee to Licensor as partial
         reimbursement for the research and development costs previously
         incurred by Licensor.

         3. Section 2.01 of the Master License Agreement is hereby amended to
add the following sentence at the end of the section:

                  With respect to any Licensed Plant Licensee wishes to develop
         in India and the People's Republic of China, Licensor and Licensee
         shall develop additional procedures to protect intellectual property;
         Licensor shall have the final approval in respect of any intellectual
         property protection procedures and participants and contractors
         involved in a
<PAGE>

         Licensed Plant in those countries, which approval shall not be
         unreasonably withheld. Such participants shall not exclude China
         International Trust and Investment Corporation and national energy
         companies.

         4. Except as expressly amended by this Amendment No. 3, the Master
License Agreement is and shall remain in full force and effect in accordance
with its terms and the parties hereby ratify and reaffirm the Master License
Agreement as amended hereby.

                                       Licensor
                                       SYNTROLEUM CORPORATION

                                       By: /s/ K. R. Roberts
                                           -------------------------------------
                                           Ken Roberts, Senior Vice President

                                       Licensee
                                       IVANHOE ENERGY INC.

                                       By: /s/ E. L. Daniel
                                           -------------------------------------
                                           E. Leon Daniel, President & CEO

<PAGE>

                         Exhibit A to Amendment Number 2

                                  ATTACHMENT 3

                           to Master License Agreement

                             LICENSE FEE CALCULATION

I.    For purposes of this Attachment 3, the following terms shall have the
      meanings ascribed thereto:

A.    "LICENSED PLANT" means the Licensed Plant in which a Site License
      Agreement for such plant is issued to and remains in the name of the
      Licensee who has executed this Agreement with Licensor and, in which the
      Participating Interest held by Licensee, or collectively by Licensee and
      any other Person who has executed a license agreement (which is applicable
      to the Licensed Plant) with Licensor, represents at least 10% of the
      entire Participating Interest not held by a governmental authority
      regardless of operatorship of the Licensed Plant.

B.    "LARGE LICENSED PLANT" means a Licensed Plant under a single Site License
      Agreement with a maximum daily design capacity, as defined in a single
      Process Design Package, of nominally 180,000 or more barrels of Synthetic
      Product per day and which may be constructed in two phases of nominally
      90,000 or more barrels per day for each phase and with the second phase
      constructed either concurrently with the first phase or in a separate
      consecutive period starting no more than 1 year following the start of
      construction of the first phase.

C.    "ROYALTY RATE" shall mean (i) the lowest royalty rate per Barrel of
      Synthetic Product accepted by Licensor for a Site License Agreement with a
      non-Affiliate for a facility of comparable size, in the Licensed
      Territory, which is not under a master preferred license agreement, during
      the twelve (12) months immediately preceding the execution date of the
      applicable Site License Agreement under this Agreement, or (ii) if no such
      Site License Agreement has been executed during the twelve (12) months
      immediately preceding, then the royalty rate per Barrel of Synthetic
      Product in the last Site License Agreement with a non-Affiliate, in the
      Licensed Territory, executed by Licensor, which is not under a master
      preferred license agreement, or (iii) if none of the foregoing applies,
      then US$0.50 per Barrel of Synthetic Product. Market Royalty Rate does not
      include the catalyst price as provided for under Section 2.03 of this
      Agreement.

D.    "BLS INDEX" shall mean the index for January of the year in question
      represented by the Producer Price Index for Industrial Commodities as
      published by the Bureau of Labor Statistics, U.S Department of Labor,
      using the year 1982 as the base index equal to 100. If, at any time, the
      above index should cease to be published, then
<PAGE>

      another suitable index published by the U.S. Government or other
      authoritative organization and generally recognized by the trade as
      authoritative with respect to changes in the U.S. of equivalent commodity
      costs shall be used.

II.   For each Site License Agreement executed under this Agreement for a
      Licensed Plant with a maximum daily design capacity, as defined by the
      Process Design Package, of less than 30,000 barrels of Synthetic Product
      per day, Licensee agrees to pay License Fees to Licensor on a prepaid
      license basis as follows.

         A.    Licensee agrees to pay Licensor a one-time, prepaid License Fee
               calculated in accordance with the following formula:

               License Fee = "C" x 350 x 7.5 x "R" wherein:

                  "C" =    the maximum daily design capacity, as defined by the
                           Process Design Package, of such Licensed Plant to
                           produce Marketable Products measured in Barrels of
                           Synthetic Product per day for which such Licensed
                           Plant is originally designed and constructed, and

                  "R" =    the Royalty Rate.

               and payable in installments as follows:

                  (i)    20% within thirty (30) days after the execution of the
                         Site License Agreement for such Licensed Plant;

                  (ii)   30% within thirty (30) days after delivery of the
                         Process Design Package or within one hundred twenty
                         (120) days after the execution of the Site License
                         Agreement for such Licensed Plant, whichever first
                         occurs;

                  (iii)  20% within thirty (30) days after the commencement of
                         field construction move-in;

                  (iv)   30% within one-hundred and twenty (120) days after the
                         Start-Up Date of the Licensed Plant or a successful
                         Performance Test as specified in the Process Guarantee
                         and Performance Test Agreement, whichever first occurs.

         B.    Notwithstanding any other provision of this Agreement, payments
               made by Licensee to Licensor under Section 5.01 of this Agreement
               and Section 5 of Amendment No. 1 to Volume License Agreement
               between Licensee and Licensor dated October 11, 2000, shall be
               fully credited against the License Fees payable by Licensee to
               Licensor under Section II.A.
<PAGE>

         C.    In the event the actual production capacity of any Licensed
               Plant, under II.A. above, is determined to have either exceeded
               the original maximum daily design capacity established in its
               Site License Agreement or is increased through major equipment
               modification, by more than five percent (5%) or by more than 500
               barrels per day, at any time after the Start-up Date, Licensee
               shall pay Licensor an additional License Fee, on a prepaid basis,
               equal to the difference between (a) the prepaid License Fee as
               would have been calculated with the higher production capacity
               for such Licensed Plant substituted for "C" in the calculation
               method set forth in II.A. above, and (b) the License Fee as would
               have been calculated for such Licensed Plant by the method set
               forth in II.A. above using the original maximum daily design
               capacity established in each Site License Agreement. The
               incremental License Fee due will be reduced by any previous
               incremental adjustments. Such additional License Fee shall be
               payable within thirty (30) days after the end of the calendar
               year in which such increase in production capacity of such
               Licensed Plant occurs. Incremental License Fees for increased
               production capacity in any Licensed Plant shall not be due if the
               increased production capacity is the result of the initial use of
               Licensee Patent Rights or Licensee Technical information. The
               total cumulative incremental capacity adjustments under each Site
               License Agreement will be limited to 50 percent of the initial
               maximum daily capacity under such Agreement.

         D.    Upon payment of all fees due under the Site License Agreement for
               each Licensed Plant under this Section II, Licensee shall be
               deemed to have acquired a fully paid license for such Licensed
               Plant up to the original maximum daily design capacity or any
               adjusted daily design capacity made under the provisions of
               Section II.B. above. Any additional incremental increases in the
               Licensed Plant capacity will be subject to additional License
               Fees as calculated under incremental adjustments pursuant to this
               Section II.

III.  For each Site License Agreement executed under this Agreement for a
      Licensed Plant with a maximum daily design capacity, as defined in the
      Process Design Package, equal to or more than 30,000 barrels but less than
      nominally 180,000 barrels of Synthetic Product per day, Licensee agrees to
      pay License Fees to Licensor as follows.

         A.    PREPAID LICENSE FEE.

               1. Licensee agrees to pay Licensor a one-time, prepaid License
               Fee calculated in accordance with the following formula:

               License Fee = "C" x 350 x 7.5 x "R" x .50 wherein:

                  "C" =    the maximum daily design capacity, as defined by the
                           Process Design Package, of such Licensed Plant to
                           produce Marketable Products measured in Barrels of
                           Synthetic Product per day for
<PAGE>

                           which such Licensed Plant is originally designed and
                           constructed, and

                  "R" =    the Royalty Rate.

               and payable in installments as follows:

                  (i)    20% within thirty (30) days after the execution of the
                         Site License Agreement for such Licensed Plant;

                  (ii)   30% within thirty (30) days after delivery of the
                         Process Design Package or within one hundred twenty
                         (120) days after the execution of the Site License
                         Agreement for such Licensed Plant, whichever first
                         occurs;

                  (iii)  20% within thirty (30) days after the commencement of
                         field construction move-in;

                  (iv)   30% within one-hundred and twenty (120) days after the
                         Start-Up Date of the Licensed Plant or a successful
                         Performance Test as specified in the Process Guarantee
                         and Performance Test Agreement, whichever first occurs.

               2. Notwithstanding any other provision of this Agreement,
               payments made by Licensee to Licensor under Section 5.01 of this
               Agreement and Section 5 of Amendment No. 1 to Volume License
               Agreement between Licensee and Licensor dated October 11, 2000,
               shall be credited against the License Fee payments due by
               Licensee to Licensor under Section III.A.1. at the rate of up to
               50%, such that the Licensor shall receive a cash payment of at
               least 50% of the scheduled installment payment under Section
               III.A.1.

               3. In the event the actual production capacity of any Licensed
               Plant for which a prepaid License Fee has been paid under Section
               III.A. above is determined to have exceeded the original maximum
               daily design capacity established in its Site License Agreement
               by more than five percent (5%) or by more than 500 barrels per
               day, at any time after the Start-up Date, Licensee shall pay
               Licensor an additional License Fee, on a prepaid basis, equal to
               the difference between (a) the prepaid License Fee as would have
               been calculated with the higher production capacity for such
               Licensed Plant substituted for "C" in the calculation method set
               forth in II.A. above, and (b) the License Fee as would have been
               calculated for such Licensed Plant by the method set forth in
               Section III.A. above using the original maximum daily design
               capacity established in each Site License Agreement. Such
               additional License Fee shall be payable within thirty (30) days
               after the end of the calendar year in which such increase in
               production capacity of such Licensed Plant occurs. Incremental
               License Fees for increased production capacity in any Licensed
<PAGE>

               Plant shall not be due if the increased production capacity is
               the result of the initial use of Licensee Patent Rights or
               Licensee Technical information. The total cumulative incremental
               capacity adjustments under each Site License Agreement will be
               limited to 50 percent of the initial maximum daily capacity under
               such Agreement.

         B.    RUNNING ROYALTY LICENSE FEES.

               1. In addition to the prepaid License Fee payable by Licensee to
                  Licensor in accordance with Paragraph A above, Licensee agrees
                  to pay Licensor, on or before thirty (30) days after the end
                  of each calendar month, a monthly running royalty license fee
                  based on the actual operation of the Licensed Plant and
                  calculated in accordance with the following formula:

                  Monthly Running Royalty License Fee =
                     "MP" x ("R" x .50) x "BLS"

                  wherein:

                     "MP" =   the total monthly production in Barrels of
                              Synthetic Product during a calendar quarter as
                              measured in a manner specified in the Process
                              Design Package,

                     "R" =    the Royalty Rate, and

                     "BLS" =  the factor equal to (a) the BLS Index for the
                              calendar year in which the payment is being made
                              divided by (b) the BLS Index applicable as of the
                              Effective Date of the Master License Agreement.

IV.   For each Site License Agreement executed under this Agreement for a Large
      Licensed Plant, Licensee agrees to pay License Fees to Licensor as
      follows:

      1.    FIRST PHASE

            A.    PREPAID LICENSE FEE

                  25% of the Prepaid License Fee for the first nominal 90,000
                  barrels per day of a Large Licensed Plant ("First Phase") will
                  be paid in accordance with the installment payment schedule
                  set forth in Section III.A. above

                  AND
<PAGE>

            B.    RUNNING ROYALTY LICENSE FEES

                  The remaining License Fee in respect to the First Phase of a
                  Large Licensed Plant, will be paid, on or before thirty (30)
                  days after the end of each calendar month, as a running
                  royalty license fee ("First Phase Running Royalty License
                  Fee") per barrel of actual production of Marketable Products
                  for the life of the project. The First Phase Running Royalty
                  License Fee rate, will be equal to 75% of the standard Royalty
                  Rate for a Licensed Plant current at the time of execution of
                  the Site License Agreement and escalated annually thereafter
                  based upon the Bureau of Labor Statistics published inflation
                  index, calculated as follows:

                  FirstPhase Running Royalty License Fee =
                      "MP x ("R" x 0.75) x "BLS"

                  Wherein:

                     "QP" =   total monthly production in Barrels of Marketable
                              Products during a calendar month

                     "R" =    the Royalty Rate

                     "BLS" =  the factor equal to (a) the BLS index for the
                              calendar year in which the payment is being made
                              divided by (b) the BLS Index applicable as of the
                              Effective Date of the Master License Agreement.

      2.    SECOND PHASE

            For the second nominal 90,000 barrels per day minimum or more for
            the Large Licensed Plant under the same Site License Agreement
            referenced above ("Second Phase") that will be included in a
            combined design with the First Phase as a single project for
            purposes of preparation of the Process Design Package, with the
            Second Phase constructed either concurrently with the First Phase or
            in a separate consecutive period starting no more than 1 year
            following the start of construction of the First Phase, the License
            Fee associated with the Second Phase of the Large Licensed Plant
            shall be paid as follows:

            A.    PREPAID LICENSE FEES

                  25% of the Prepaid License Fee for the Second Phase will be
                  payable in installments as follows:

                  (i) 50% at the closing of the financing on the First Phase
                  with respect to a Large Licensed Plant covered by a Site
                  License (Financial Closing)

                  (ii) 20% within thirty (30) days after the commencement of
                  field construction move-in; and
<PAGE>

                  (iii) 30% at the satisfactory Performance Test of the Second
                  Phase of the Large Licensed Plant.

                  AND

            B.    RUNNING ROYALTY LICENSE FEES

                  The remaining License Fee in respect to the Second Phase of
                  the Large Licensed Plant, will be paid, on or before thirty
                  (30) days after the end of each calendar month, as a running
                  royalty license fee ("Second Phase Running Royalty License
                  Fee") per barrel of actual production of Marketable Products
                  for the life of the project. The Second Phase Running Royalty
                  License Fee rate, will be equal to 50% of the standard Royalty
                  Rate for the Licensed Plant current at the time of execution
                  of the Site License Agreement and escalated annually
                  thereafter based upon the Bureau of Labor Statistics published
                  inflation index, calculated as follows:

                  Second Phase Running Royalty License Fee =
                     "MP x ("R" x 0.50) x "BLS"

                  Wherein:

                     "MP" =   total monthly production in Barrels of Marketable
                              Products during a calendar month

                     "R" =    the Royalty Rate

                     "BLS" =  the factor equal to (a) the BLS index for the
                              calendar year in which the payment is being made
                              divided by (b) the BLS Index applicable as of the
                              Effective Date of the Master License Agreement.

      3.    Accumulated credits, if any, to which Licensee is entitled against
            the License Fee under the Site License may be applied at Financial
            Closing and any remaining credits may be applied the thirty (30)
            days after commencement of field construction move-in.

V.    All payments required hereunder shall include a statement showing the
      details supporting the calculation of the License Fees being paid.
      Licensee shall keep accurate and complete records of all natural gas
      feedstock processed (volume and composition) and all Synthetic Product
      produced at and either used internally within or removed from each
      Licensed Plant to enable verification of statements and
<PAGE>

      payments rendered to Licensor hereunder. Licensee agrees to permit
      Licensor, at Licensor's expense, to inspect such records on reasonable
      notice and at reasonable intervals during normal business hours to verify
      the license fees paid and payable under this Agreement.

VI.   If the Licensee can not achieve financing on commercially reasonable terms
      for the Licensed Plant or if the project is terminated for any reason
      prior to such time, Licensee shall retain 25% of the License Fee payments
      made to Licensor for the project up to that date and the remaining 75%
      shall be credited to any future Licensed Plant that is initiated within 15
      years from the Effective Dates of the Master License Agreement.<PAGE>
                                                                   Exhibit 10.18

                     SETTLEMENT AGREEMENT AND MUTUAL RELEASE

      This Settlement Agreement and Mutual Release ("Agreement") by and between
Aera Energy, LLC ("Aera") and Ivanhoe Energy (USA) Inc. ("Ivanhoe") is entered
into as of the last date of the signatures below.

                                    RECITALS

      Ivanhoe is the successor-in-interest to the rights and obligations of
Diatom Petroleum Incorporated in the agreement entitled "Exploration Agreement
Dated May 1, 1998 by and Between Aera Energy LLC and Diatom Petroleum,
Incorporated ("Exploration Agreement"). The Exploration Agreement provides, in
relevant part, that Aera and Diatom [Ivanhoe] will enter into Joint Operating
Agreements for each well the parties agree to drill.

      On or about July 17, 2001, Ivanhoe and Aera signed a Joint Operating
Agreement entitled "Model Form Operating Agreement/Northwest Lost Hills 1-22
Spacing Unit/Operating Agreement Dated January 1, 2001 ("Joint Operating
Agreement") Pursuant to the terms of the Joint Operating Agreement, Aera is the
operator and Ivanhoe is one of several non-operator participants in the
exploration of the Northwest Lost Hills 1-22 Well (the "Well"). Ivanhoe's
working interest share in the Well, before payout, was and is 41.6357%.

      On or about May 21, 2003, Aera served on Ivanhoe, and filed with the
American Arbitration Association, a Notice of Intention to Arbitrate: Northwest
Lost Hills 1-22 Well Dispute ("Notice of Intention"). In the Notice of
Intention, Aera alleges, in summary, that Ivanhoe failed to pay amounts that
Ivanhoe was obligated to pay under the Joint Operating Agreement. Ivanhoe
disputes the claims made by Aera in the Notice of Intention, on the basis that
among other things, Aera failed to provide and obtain Ivanhoe's approval on
original or supplemental Authorities for Expenditures. for drilling of the Well.
Aera's claims against Ivanhoe for monies owed by Ivanhoe to Aera under the Joint
Operating Agreement through August 30, 2003, including any claim or defense
relating to the NWLH 1-22 Well that Aera has asserted, orally or in writing,
whether before or after commencement of the arbitration, and including any claim
or defense that Aera might have asserted against Ivanhoe in the arbitration with
regard to such monies owed through August 30, 2003, shall be referred to
collectively herein as the "Aera Claims." Ivanhoe's claims in rebuttal to the
Aera Claims, including any claim or defense relating to the NWLH 1-22 Well that
Ivanhoe has asserted, orally or in writing, whether before or after commencement
of the arbitration, and including any claim or defense that Ivanhoe might have
asserted against Aera in the arbitration with regard to such monies owed through
August 30, 2003, shall be referred to collectively herein as the "Ivanhoe
Claims." From time to time herein, the "Aera Claims" and "Ivanhoe Claims" are
collectively referred to as the "Dispute."

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<PAGE>

      Without admitting any liability or fault, and to avoid the expense and
uncertainties of litigation, the parties wish to settle the Dispute, and agree
as follows:

                             SETTLEMENT AND RELEASE

      1. IVANHOE'S AGREEMENT TO PAY.

      Ivanhoe agrees to pay to Aera, in the manner set forth in Paragraph 2, all
unpaid costs invoiced by Aera to Ivanhoe through August 30, 2003 regarding the
Well, which unpaid costs total $2,875,010.60, (Attachment 1), less 20% of the
rig standby and rental costs incurred beginning October 31, 2002 and ending
August 11, 2003, which rig standby and rental costs total $131,552.53,
(Attachment 2), for an agreed total settlement sum of $2,743.458.07 (the
"Settlement Amount").

      The Settlement Amount includes the sum of $499,628.00 advanced by Aera to
Ivanhoe pursuant to that certain letter agreement between Aera and Ivanhoe dated
August 19, 2002 (Attachment 3).

      2. PAYMENT SCHEDULE.

      On or about September 9, 2003, Ivanhoe tendered to Aera, as partial
payment of the Settlement Amount due under this Agreement, the sum of
$1,500,000.00, receipt of which is acknowledged. Ivanhoe will pay the balance of
the Settlement Amount ($1,243,458.07) to Aera on or before December 1, 2003,
absent a written agreement to extend such payment deadline.

      3. BUSINESS MEETING.

      Aera will promptly schedule a business meeting with Ivanhoe on or before
November 17, 2003 to discuss Aera's progress and future plans regarding several
prospects pursuant to the Exploration Agreement. All information shared in the
meeting is confidential. The prospects that will be discussed in the proposed
meeting are:

      o     Amethyst Prospect (technical status);

      o     A third party prospect near and adjacent to the Diamond Prospect
      (brief review);

      o     Belgian Anticline Prospect (technical status);

      o     North West Lost Hills 1-22 Well completion and testing-timing
      (possible third party deal).

                                     2 of 7
<PAGE>

      Aera will conduct the meeting in good faith. Provided the meeting is held,
Ivanhoe's obligation to perform any obligation under this Agreement is not
otherwise affected by (1) anything that occurs or does not occur at the meeting,
(2) disagreement between Aera and Ivanhoe with respect to any subject matter
addressed at the meeting, (3) either party's perception concerning whether the
meeting was complete, satisfactory, successful or unsuccessful, or (4) any other
aspect of, or opinion or conclusion drawn by either party regarding, the
meeting.

      In the event that the meeting is not held by November 17, 2003, or any
other agreed upon extended time period, Aera will promptly refund to Ivanhoe the
sum of $1,500,000.00, together with simple interest at the legal rate from the
date of last signature hereinbelow. Aera is then entitled to reinstate the
arbitration referred to above, without prejudice, and either party may assert
whatever claims or defenses either party may have as if this Agreement had never
been entered into by the parties.

      4. CONFESSION OF JUDGMENT.

      Concurrently with the execution of this Agreement, Ivanhoe will execute a
Confession of Judgment Statement and Attorney's Declaration in Support of
Statement Confessing Judgment, in the forms attached collectively as Attachment
4 ("Judgment Documents"). Aera can not file or record the Judgment Documents
unless and until Ivanhoe fails to timely pay the balance of the Settlement
Amount as required under Paragraph 2. In the event that Ivanhoe fails to timely
pay the balance of the Settlement Amount as required under Paragraph 2, then
Aera may file the Judgment Documents and obtain, by ex parte application to the
Kern County Superior Court if necessary, judgment against Ivanhoe as set forth
in the Judgment Documents, minus any payments made and including interest.
Should the Judgment Documents be rejected by the Clerk of the Court for any
reason, or should the Court decline to enter judgment in Aera's favor on such
documents, then Ivanhoe will fully cooperate in providing Aera, or the Court,
with such different or additional documents as may prove necessary in order to
have the judgment entered, consistent with the purposes of this Agreement. Aera
may then record and enforce the judgment against Ivanhoe in the manner and to
the extent allowed by law.

      5. NO APPEAL FROM JUDGMENT.

      Ivanhoe acknowledges and agrees that the Aera Claims which are settled and
resolved by this Agreement, and upon which the judgment described in Paragraph 4
would be based, are claims which are subject to contractual arbitration under
the provisions of the EA and/or the JOA, and subject to the provisions of
California Code of Civil Procedure section 1280 et seq. Accordingly, and in
recognition of the fact that such judgment would be entered by confession of
judgment, Ivanhoe acknowledges and agrees that Ivanhoe has, or would have, no
right of appeal from such judgment; nevertheless,

                                     3 of 7
<PAGE>

Ivanhoe hereby surrenders and waives any and all rights of appeal from such
judgment that Ivanhoe may arguably have, on any ground whatsoever.

      6. IVANHOE RELEASE.

      Ivanhoe, on its behalf and on behalf of each of its subsidiaries,
stockholders, divisions, successors, predecessors, assignees, and affiliated or
related corporations and companies, past and present, and each of them, releases
and discharges Aera, and each of its subsidiaries, stockholders, divisions,
successors, predecessors, assignees, and affiliated or related corporations and
companies, past and present, from the Ivanhoe Claims.

      7. AERA RELEASE.

      Aera on its behalf and on behalf of each of its subsidiaries,
stockholders, divisions, successors, predecessors, assignees, and affiliated or
related corporations and companies, past and present, and each of them, releases
and discharges Ivanhoe, and each of its subsidiaries, stockholders, divisions,
successors, predecessors, assignees, and affiliated or related corporations and
companies, past and present, from the Aera Claims.

      8. CALIFORNIA CIVIL CODE SECTION 1542 WAIVER.

THE PARTIES ACKNOWLEDGE THAT THEY ARE FAMILIAR WITH SECTION 1542 OF THE
CALIFORNIA CIVIL CODE, WHICH READS AS FOLLOWS:

      A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
      KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
      RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
      SETTLEMENT WITH THE DEBTOR.

      THE PARTIES ACKNOWLEDGE THAT THEY ARE GENERALLY RELEASING UNKNOWN CLAIMS
      AND WAIVE ALL RIGHTS THEY HAVE OR MAY HAVE UNDER CIVIL CODE SECTION 1542
      OR UNDER ANY OTHER STATUTE OR COMMON LAW PRINCIPLE OF SIMILAR EFFECT.

      9. POST-AUGUST 30, 2003 CLAIMS AND DEFENSES RESERVED.

      The parties acknowledge and agree that the matters released herein include
only claims and defenses pertaining to costs and expenses for the Well that
became due up to and including August 30, 2003; and, that none of the releases,
waivers covenants and other provisions of this Agreement shall limit, impair or
otherwise affect any claim or defense that may exist or may later arise
regarding Well costs and expenses that first

                                     4 of 7
<PAGE>

became due after August 30, 2003 or any claim concerning the drilling, or
negotiations for the drilling, of future prospects.

      10. FINANCIAL AUDIT.

      Upon Ivanhoe's payment in full to Aera of the Settlement Amount, whether
through Ivanhoe's performance of the payment provisions of Paragraph 2 or
through payment or enforcement of judgment pursuant to Paragraph 4, Ivanhoe may
conduct a financial audit of any cost or expense relating to the Well from its
inception; provided, however, that such audit will not include any claim or
issue included in the Dispute. Such financial audit will be conducted in
accordance with the terms of the "Accounting Procedure Joint Operations,"
attached as Exhibit "C" to the Joint Operating Agreement.

      11. TERMINATION OF ARBITRATION.

      Promptly upon execution of this Agreement by both parties, Aera will send
a letter to the American Arbitration Association withdrawing Aera's Notice of
Intention and terminating the pending arbitration, subject to renewal as
provided in Paragraph 3.

      12. NO ASSIGNMENT.

      The parties represent that there has been no assignment, sale, or
transfer, by operation of law or otherwise, of any claim, right, or interest
released and that each of the parties has the authority and right to settle,
compromise, and release any claim, right, or interest released.

      13. REPRESENTATIONS AND WARRANTIES.

      The parties represent as follows:

         A. The parties have been represented by counsel of their choice
throughout the negotiations which preceded the execution of this Agreement and
in connection with the preparation and execution of this Agreement. The parties
agree that they have executed this Agreement voluntarily, without coercion or
duress of any kind, and on the advice of their independent counsel.

         B. None of the parties has made any statement or representation
regarding any fact relied upon in entering into this Agreement, and the parties
do not rely upon any statement, representation or promise of any of the parties
in executing this Agreement, or in making the settlement, except as expressly
stated in this Agreement. They further agree that the consideration recited in
this Agreement is the sole and only consideration for this Agreement, and no
representations, promises, or inducements have been made by any party or its
officers, employees, agents or attorneys thereof other than those appearing in
this Agreement. This Agreement contains the entire agreement and understanding
concerning settlement of the Dispute and supersedes and replaces all prior

                                     5 of 7
<PAGE>

negotiations of proposed agreements, written or oral, if any, and may be
modified or amended only by a writing signed by all of the parties.

         C. The parties have read this Agreement and understand its contents.

         D. The parties are aware that they may discover claims or facts in
addition to or different from those they now know or believe to be true with
respect to the Dispute. Nevertheless, the parties intend fully, finally and
forever to settle and release all such matters and all claims regarding the
Dispute which currently exist. In furtherance of such intention, the releases
will remain in effect as full and complete releases of the Dispute
notwithstanding the discovery or existence of any additional or different claims
or facts.

         E. In entering into this Agreement and the settlement provided for
herein, the parties assume the risk of any misrepresentation, concealment or
mistake. If the parties should subsequently discover that any fact relied upon
by them in entering into this Agreement was untrue, or that any fact was
concealed from them, or that their understanding of the facts or the law was
incorrect, the parties shall not be entitled to any relief in connection
therewith, including, without limitation on the generality of the foregoing, any
alleged right or claim to set aside or rescind this Agreement. This Agreement is
intended to be and is final and binding, regardless of any claims of
misrepresentation, concealment of fact, or mistake of law or fact.

         F. Each party has cooperated in the drafting and preparation of this
Agreement. This Agreement is to be interpreted in accordance with the plain
meaning of its terms and not strictly for or against any party. The terms of
this Agreement are enforceable pursuant to California law.

         G. Should any provision or part of a provision of this Agreement be
held invalid, the invalidity does not affect other provisions of the Agreement
which can be given effect without the invalid provision, and to this end the
provisions of this Agreement are severable.

         H. The persons who have executed this Agreement on behalf of the
parties are duly authorized and have the full power and authority of the parties
to do so.

      14. NO ADMISSION.

      The parties acknowledge and agree that this Agreement is entered into as
part of a compromise and settlement of disputed claims. The parties further
acknowledge and agree that the acceptance of the Agreement is not an admission
of any fact, matter or thing. Neither this Agreement nor any of its terms shall
be offered or received as evidence in any proceeding in any forum as an
admission of any liability or wrongdoing

                                     6 of 7
<PAGE>

on the part of any person released by this Agreement except a proceeding related
to this Agreement.

      15. ATTORNEY'S/EXPERT'S FEES, COSTS.

      In the event that any action, suit, or other proceeding (including any and
all appeals or petitions therefrom) is instituted to remedy, prevent, or obtain
relief from a breach of this Agreement, or arising out of or related to this
Agreement, the prevailing party shall recover all reasonable attorney's and
experts' fees and costs, in addition to any other relief to which that party may
be entitled. Provided, however, that Aera shall not be entitled to recover such
fees and costs incurred, if any, in the entry and enforcement of judgment
pursuant to Paragraph 4 hereinabove.

Dated: November 4, 2003             Ivanhoe Energy (USA) Inc.
       ----------------

                                    By:  /s/ E. L. Daniel
                                         ----------------------------------
                                    Its: President & CEO
                                         ----------------------------------

Dated: November 5, 2003             Aera Energy, LLC
       ----------------

                                    By:  /s/ Van N. Schultz
                                         ----------------------------------
                                         VAN N. SCHULTZ
                                    Its: Senior Vice President
                                         ----------------------------------
                                         Strategic Development & Innovation
                                         ----------------------------------

APPROVED AS TO FORM AND CONTENT:
-------------------------------

Dated: 11-5-03                      LeBeau-Thelen, LLP
       -------

                                    By:  /s/ Nile Kinney
                                         ----------------------------------
                                         J. NILE KINNEY
                                         Attorneys for Aera Energy, LLC

Dated: Nov. 4, 2003                 Klein, DeNatale, Goldner,
       ------------                 Cooper, Rosenlieb & Kimball, LLP.

                                    By: /s/ Jean M. Stroud
                                        -----------------------------------
                                        JEAN M. STROUD
                                        Attorneys for Ivanhoe Energy (USA) Inc.

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