OREANDA-NEWS. January 17, 2012. Ivanhoe Energy (IE.TO: Quote) said it will sell its stake in the Zitong natural gas project to a unit of Royal Dutch Shell (RDSa.L: Quote) for about USD 160 million in cash, to focus on oil exploration projects.

Shares of the Canadian heavy oil producer rose 15.5 percent to CAD 1.34 in early trade on Wednesday on the Toronto Stock Exchange.

The company's Sunwing Zitong Energy unit will sell its interest in the Zitong block in China's Sichuan Basin to Shell's Chinese unit, to focus on its oil projects in Canada, Ecuador, Mongolia and China.

Sunwing, which discovered gas at two of its wells at the Zitong Block, owns a 90 percent stake in the project with Mitsubishi Gas Chemical Company Inc (4182.T: Quote) owning the rest.

Under the deal, Ivanhoe will receive a payment of up to USD 85 million as reimbursement for past qualified and recoverable costs incurred and up to USD 75 million on closing of the transaction.

Shell will also assume the USD 20 million bond that Ivanhoe was supposed to post to the China National Petroleum Corporation (CNPC), as part as part of completion of a supplementary agreement, the company said in a statement.

The deal, for which UBS is the financial adviser to Ivanhoe Energy, is expected to close on December 31, 2012.