Exhibit
10.65





FAR EAST
ENERGY CORPORATION


SECOND
AMENDED AND RESTATED


NONQUALIFIED
STOCK OPTION AGREEMENT





Far East
Energy Corporation (the "Corporation") and Michael R.
McElwrath ("Participant") hereby agree to
amend and restate the stock option agreement previously entered into between the
Corporation and Participant on October 13, 2003,  as superseded by the
December 23, 2004 amended and restated option agreement (the "Amended Option
Agreement").  This amendment and restatement is made solely
with respect to those Options which vested after December 31, 2004 and the terms
of the Amended Option Agreement  shall remain in effect with respect
to all Options that vested prior to January 1, 2005.







General
Information





Name:
            Michael
      R. McElwrathAward
      Date:
            October
      13, 2003Number
      of Shares
              Subject
      to Amended Option:
            720,000FMV
      on Award Date:
            $1.30Exercise
      Prices:
            $0.65
      for the 2008 Option and 2009 Option
              $1.30
      for the Remaining OptionExpiration
      Dates:
            December
      31, 2008 for the 2008 Option
              
              December
      31, 2009 for the 2009 Option
              
              October
      13, 2013 for the Remaining Option



































FAR
EAST ENERGY CORPORATION


SECOND
AMENDED AND RESTATED


NONQUALIFIED
STOCK OPTION AGREEMENT








THIS SECOND AMENDED AND RESTATED
NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is made as of this
27th day of December, 2007, by and between Far East Energy Corporation, a Nevada
corporation (the "Corporation"), and Michael R.
McElwrath ("Participant").





WHEREAS, the Corporation and
the Participant previously entered into a Stock Option Agreement (the "Original Option Agreement")
dated as of October 13, 2003 (the "Award Date") setting forth the
grant of options to purchase 1,200,000 shares of common stock, par value $0.001
per share, of the Corporation (the "Common Stock") at an exercise
price per share of $0.65;





WHEREAS, the Corporation and
the Participant previously entered into an Amended and Restated Nonqualified
Stock Option Agreement (the “Amended Option Agreement”)
dated December 23, 2004, which amended, restated and superseded the Original
Option Agreement;





WHEREAS, the Participant has
entered into an Amended and Restated Employment Agreement (as amended, restated
and modified from time to time, the "Employment Agreement") dated
December 23, 2004 with the Corporation;





WHEREAS, the
Corporation  and Participant acknowledge that  480,000
options granted under the Amended Option Agreement vested on or before December
31, 2004, and that 720,000 options granted under the Amended Option Agreement
vested on or after January 1, 2005 (the "Affected
Options");





WHEREAS, the terms of the
480,000 options that vested prior to December 31, 2004 shall remain unmodified
and are governed in their entirety by the provisions of the Amended Option
Agreement;





WHEREAS, the Participant
understands that the 720,000 options that vested after December 31, 2004 are
discounted Options subject to Section 409A ("Section 409A") of the U.S.
Internal Revenue Service Code of 1986, as amended (the "Code"), and that in order to
avoid the adverse tax consequences thereunder the Affected Options must be
brought into compliance with Section 409A;





WHEREAS, the
Corporation  and Participant have elected to bring the Affected
Options into compliance by (i) establishing a payment schedule that complies
with Section 409A such that 60,000 the Affected Options will become exercisable
January 2, 2008 (the "2008
Option") and 160,000 of the Affected Options will become exercisable on
the on the first to occur of a (x) Separation from Service (as defined pursuant
to Section 409A and the Regulations issued thereunder), (y) Change in
Control  (as defined pursuant to Section 409A and the Regulations
issued thereunder) or (z) January 2, 2009 (the "2009 Option") as well as (ii)
repricing the per Share Exercise Price of 500,000 of the Affected Options from
$0.65 to $1.30, which was the fair market value of a share of Common Stock on
the date the Award was granted (the "Remaining Option");
and





WHEREAS, by executing this
Agreement, the Corporation and Participant desire to amend, replace and
supersede the Amended Option Agreement and the Employment Agreement with respect
to the Affected Options.





NOW, THEREFORE, in
consideration of the foregoing, of the mutual promises hereinafter set forth and
of such other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:





1.           Grant of Options; Defined
Terms.





A.           Capitalized
terms used herein without definition shall have the meaning ascribed to such
terms in the Employment Agreement.





B.           Participant
hereby (i) releases and surrenders to the Corporation 720,000 shares of
1,200,000 shares of Common Stock subject to the Amended Option Agreement and
(ii) acknowledges and agrees that the from and after the date hereof the Amended
Option Agreement shall represent an option to purchase, subject to the terms and
conditions of the Amended Option Agreement, up to 480,000 shares of Common
Stock.  Except as provided in this Section 1(B), the terms and
conditions of the Amended Option Agreement shall remain in full force and
effect.





C.           Subject
to the terms and conditions hereinafter set forth, the Corporation, with the
approval and at the direction of the Compensation Committee of the Board of
Directors (the "Committee") of the
Corporation, and the Participant hereby acknowledges and agrees that the
Corporation granted to Participant, as of the Award Date, 720,000 Options to
purchase shares of Common Stock of the Corporation in accordance with the terms
of the Amended Option Agreement which are now covered by this
Agreement:





(i)           the
2008 Option and the shares of Common Stock purchasable upon exercise of the 2008
Option (the "2008 Option
Shares") at a price of U.S.$0.65 per share (as may be adjusted in
accordance with Article 5, the "2008 Option
Price");





(ii)           the
2009 Option and the shares of Common Stock purchasable upon exercise of the 2009
Option, (the "2009 Option
Shares") at a price of U.S.$0.65 per share (as may be adjusted in
accordance with Article 5, the "2009 Option Price");
and





(iii)           the
Remaining Option and the shares of Common Stock purchasable upon exercise of the
Remaining Option (the "Remaining Option Shares") at a
price of U.S.$1.30 per share (as may be adjusted in accordance with Article 5,
the "Remaining Option
Price").





The 2008
Option Shares, the 2009 Option Shares and the Remaining Option Shares are also
hereinafter referred to as the "Shares."  Each
Affected Option is intended by the parties hereto to be, and shall be treated
as, a nonqualified stock option (as such term is defined under Section 422 of
the Code.  Each of the 2008 Option Price, the 2009 Option Price and
the Remaining Option Price are also hereinafter referred to as an "Exercise Price."





D.           As
of the date of this Agreement, the Affected Options are fully (100%)
vested.





2.           Termination of Affected
Options.





A.           To
comply with Section 409A, the 2008 Option and all rights hereunder with respect
thereto may not be exercised until a fixed date, January 2, 2008, and to the
extent such rights shall not have been exercised, shall terminate and become
null and void after December 31, 2008 (the "2008 Option
Term").





B.           To
comply with Section 409A, the 2009 Option and all rights hereunder with respect
thereto may not be exercised until the first to occur of (i) the Participant’s
“Separation from Service” as such term is defined under Section 409A and the
Regulations issued thereunder, (ii) a “Change of Control” as such term is
defined under Section 409A and the Regulations issued thereunder and (iii)
January 2, 2009 and to the extent such rights shall not have been exercised,
shall terminate and become null and void after December 31, 2009 (the "2009 Option
Term").





C.           To
comply with Section 409A, the Remaining Option and all rights hereunder with
respect thereto, to the extent such rights shall not have been exercised, shall
terminate and become null and void after October 13, 2013 (the "Remaining Option
Term").





Each of
the 2008 Option Term, the 2009 Option Term and the Remaining Option Term are
also hereinafter referred to as an "Option Term," and collectively
as the "Option
Terms."





3.           Exercise of
Option.





A.           Participant
may exercise the Affected Options with respect to all or any part of the number
of Shares then exercisable hereunder by giving the Secretary of the Corporation
written notice of intent to exercise.  The notice of exercise shall
specify the number of Shares as to which Participant is exercising and the date
of exercise thereof, which date shall be not less than five (5) days after the
giving of such notice (unless an earlier time shall have been mutually agreed
upon in writing).   All or any portion of the 2008 Option may be
exercised by Participant at any time beginning on January 2, 2008 and ending on
December 31, 2008.  All or any portion of the 2009 Option may be
exercised by Participant at any time beginning on January 2, 2009 and ending on
December 31, 2009.  All or any portion of the Remaining Option may be
exercised by Participant at any time on or before October 13, 2013.





B.           Notwithstanding
anything contained in this Article 3 to the contrary, each Affected Option may
be exercised only in compliance with all applicable securities laws and only by
(i) Participant’s completion, execution and delivery to the Corporation of a
notice of exercise and, if required by the Corporation, an "investment letter"
as supplied by the Corporation and (ii) the payment to the Corporation, as
provided in Article 3D hereof, of an amount equal to the amount obtained by
multiplying the Exercise Price of such Affected Option by the number of Shares
being purchased pursuant to such exercise as shall be specified by Participant
in such notice of exercise.





C.           Within
three years following Participant’s termination of employment, Participant or
Participant’s estate, executors or administrators, or personal or legal
representatives, as the case may be, shall be entitled to exercise any Affected
Options  that are or become exercisable within three years following
Participant's termination of employment (but not beyond any Option Term) and all
such Affected Options not excised within such three year period shall be
forfeited.  Any person, other than Participant, so desiring to
exercise Participant's Affected Options shall be required, as a condition to the
exercise of the Affected Options, to furnish to the Corporation such
documentation as the Corporation shall deem satisfactory to evidence the
authority of such person to exercise the Affected Options on behalf of
Participant.  In the event of the exercise of such Affected Options by
Participant's estate, executors or administrators, or personal or legal
representatives, all references herein to Participant shall, to the extent
applicable, be deemed to refer to and include such estate, executors or
administrators, or personal or legal representatives, as the case may
be.





D.           Each
Exercise Price shall be paid in full by Participant for the Shares purchased on
or before the exercise date specified in the notice of exercise, at
Participant's option, in one or a combination of the following
methods:  (i) in cash or by electronic funds transfer; (ii) by check
payable to the order of the Corporation; (iii) if authorized by the Board of
Directors of the Corporation (the "Board"), or the Committee, by
a promissory note of the Participant; (iv) by notice and third party payment in
such manner as may be authorized by the Board or the Committee; (v) by the
delivery of shares of Common Stock of the Corporation already owned by the
Participant; or (vi) pursuant to a "cashless exercise" procedure (the "Cashless Exercise Right")
pursuant to which the Participant shall surrender to the Corporation such
Affected Option and a notice of exercise, duly completed and executed by the
Participant to evidence the exercise of the Cashless Exercise Right by
authorizing the Corporation to withhold from issuance a number of Shares
issuable upon such exercise of such Affected Option which, when multiplied by
the Fair Market Value (as defined below) of such Shares, is equal to the
aggregate Exercise Price of such Affected Option (and such withheld Shares shall
no longer be issuable under such Option).  Shares of Common Stock used
to satisfy the Exercise Price of an Affected Option shall be valued at their
Fair Market Value on the date of exercise.





E.           The
"Fair Market Value"
shall be determined as follows:





(a)  if
the security at issue is listed on a national securities exchange or admitted to
unlisted trading privileges on such an exchange or quoted on either the National
Market System or the Small Cap Market of the automated quotation service
operated by The Nasdaq Stock Market, Inc., the Fair Market Value shall be the
last reported sale price of that security on such exchange or system on the day
for which the Fair Market Value is to be determined or, if no such sale is made
on such day, the average of the highest closing bid and lowest asked price for
such day on such exchange or system; or





(b)  if
the security at issue is not so listed or quoted or admitted to unlisted trading
privileges, the Fair Market Value shall be the average of the last reported
highest bid and lowest asked prices quoted on the Electronic Bulletin Board
operated by The Nasdaq Stock Market, Inc., or, if not so quoted, then by the
National Quotation Bureau, Inc. on the last business day prior to the day for
which the Fair Market Value is to be determined; or





(c)  if
the security at issue is not so listed or quoted or admitted to unlisted trading
privileges and bid and asked prices are not reported, the Fair Market Value
shall be determined in such reasonable manner as may be prescribed from time to
time by the Board.





F.           Upon
the exercise of all or any portion of an Affected Option by Participant, or as
soon thereafter as is practicable, the Corporation shall issue and deliver to
Participant (or to any broker or, if acceptable to the Corporation, to any other
person designated by Participant) a certificate or certificates evidencing such
number of Shares as Participant has elected to purchase.  Such
certificate or certificates shall be registered in the name of Participant (or
the designated broker or other person) and, if applicable, shall bear an
appropriate investment warranty legend, any legend required by an applicable
securities law, rule or regulation and, if applicable, a legend referring to the
restrictions provided hereunder and under the Employment Agreement and any
legend required by applicable law.  Upon the exercise of an Affected
Option and the issuance and delivery of such certificate or certificates,
Participant (or the person to whom such stock certificates are registered) shall
have all the rights of a stockholder with respect to such Shares and to receive
all dividends or other distributions paid or made with respect
thereto.  In the event that the capital stock of the Corporation is
converted in whole or in part into securities of any other entity, a
determination as to whether the securities of the other entity so received (if
any) shall be subject to the restrictions set forth in this Agreement shall be
made solely by the other entity.





4.           Rights
Prior to Exercise.   Participant
shall have no equity interest in the Corporation or any voting, dividend,
liquidation or dissolution rights with respect to any capital stock of the
Corporation solely by reason of having an Affected Option or having executed
this Agreement.  Prior to the exercise of all or a portion of the
Affected Options, as set forth in Article 3A hereof, and the issuance and
delivery of a certificate or certificates evidencing the Shares purchased
pursuant to the exercise of all or a portion of such Affected Options,
Participant shall have no interest in, or any voting, dividend, liquidation or
dissolution rights with respect to, the Shares, except to the extent that
Participant has exercised all or a portion of such Affected Options and has been
issued and received delivery of a certificate or certificates evidencing the
Shares purchased pursuant to such exercise.





5.           Adjustment of Purchase and
Number of Shares.





A.           Adjustment.  The
number and kind of securities purchasable upon the exercise of an Affected
Option and the Exercise Price of such Affected Option shall be subject to
adjustment from time to time upon the happening of certain events as
follows:





(a)           Reclassification,
Consolidation or Merger.  At any time while an Affected Option
remains outstanding and unexpired, in case of (i) any reclassification or change
of outstanding securities issuable upon exercise of an Affected Option (other
than a change in par value, or from par value to no par value per share, or from
no par value per share to par value or as a result of a subdivision or
combination of outstanding securities issuable upon the exercise of such
Option), (ii) any consolidation or merger of the Corporation with or into
another corporation (other than a merger with another corporation in which the
Corporation is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value per share, or from no par value per share to par value, or as a
result of a subdivision or combination of outstanding securities issuable upon
the exercise of such Option), or (iii) any sale or transfer to another
corporation of the property of the Corporation as an entirety or substantially
as an entirety, the Corporation, or such successor or purchasing corporation, as
the case may be, shall without payment of any additional consideration
therefore, execute new Affected Options providing that the holder of these
Affected Options shall have the right to exercise such new Affected Options
(upon terms not less favorable to the holder than those then applicable to these
Affected Options) and to receive upon such exercise, in lieu of each share of
Common Stock theretofore issuable upon exercise of these Affected Options, the
kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, sale or
transfer.  Such new Affected Options shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 5A.  The provisions of this Section 5A(a)
shall similarly apply to successive reclassifications, changes, consolidations,
mergers, sales and transfers.





(b)           Subdivision or Combination
of Shares.  If the Corporation at any time while an Affected
Option remains outstanding and unexpired, shall subdivide or combine its capital
stock, the Exercise Price of such Affected Option shall be proportionately
reduced, in case of subdivision of such shares as of the effective date of such
subdivision, or, if the Corporation shall take a record of holders of its
capital stock for the purpose of so subdividing, as of such record date,
whichever is earlier, or shall be proportionately increased, in the case of
combination of such shares, as of the effective date of such combination, or, if
the Corporation shall take a record of holders of its capital stock for the
purpose of so combining, as of such record date,  whichever is
earlier.





(c)           Stock
Dividends.  If the Corporation at any time which an Affected
Option is outstanding and unexpired shall pay a dividend in shares of, or make
other distribution of shares of, its capital stock, then the Exercise Price of
such Affected Option shall be adjusted, as of the date the Corporation shall
take a record of the holders of its capital stock for the purpose of receiving
such dividend or other distribution (or if no such record is taken, as at the
date of such payment or other distribution), to that price determined by
multiplying the Exercise Price of such Affected Option in effect immediately
prior to such payment or other distribution by a fraction (i) the numerator of
which shall be the total number of shares of capital stock outstanding
immediately prior to such dividend or distribution, and (ii) the denominator of
which shall be the total number of shares of capital stock outstanding
immediately after such dividend or distribution.  The provisions of
this Section 5A(c) shall not apply under any of the circumstances for which an
adjustment is provided in Section 5A(a) or 5A(b).





(d)           Liquidating Dividends,
Etc.  If the Corporation at any time while an Affected Option
is outstanding and unexpired makes a distribution of its assets to the holders
of its capital stock as a dividend in liquidation or by way of return of capital
or other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Corporation’s assets
(other than under the circumstances provided for in the Sections 5A(a) through
(c)), the holder of such Affected Option shall be entitled to receive upon the
exercise hereof, in addition to the shares of Common Stock receivable upon such
exercise, and without payment of any consideration other than the Exercise Price
of such Option, an amount in cash equal to the value of such distribution per
share of Common Stock multiplied by the number of shares of Common Stock which,
on the record date for such distribution, are issuable upon exercise of such
Affected Option (with no further adjustment being made following any event which
causes a subsequent adjustment in the number of shares of Common Stock issuable
upon the exercise hereof), and an appropriate provision therefor should be made
a part of any such distribution.  The value of a distribution which is
paid in other than cash shall be determined in good faith by the
Board.





B.           Notice
of Adjustments.   Whenever any of the Exercise Price of an
Affected Option or the number of shares of Common Stock purchasable under the
terms of such Affected Option at that Exercise Price shall be adjusted pursuant
to Section 5A hereof, the Corporation shall promptly make a certificate signed
by its Chief Executive Officer, President or a Vice President and by its
Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis upon which the Board made any
determination hereunder), and the Exercise Price and number of shares of Common
Stock purchasable at that Exercise Price after giving effect to such adjustment,
and shall promptly cause copies of such certificate to be mailed (by First Class
and Postage Prepaid) to the registered holder of such Option.





6.           Headings.   The
headings and other captions contained in this Agreement are for convenience of
reference only, and shall not be used in interpreting, construing or enforcing
any of the provisions of this Agreement.





7.           Entire
Agreement.  This Agreement,
together with the Employment Agreement, sets forth all of the promises,
agreements, conditions, understandings, warranties and representations between
the parties hereto with respect to the Affected Options and the Shares, and
there are no promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, between them with respect
to the Affected Options and the Shares,  other than as set forth
herein and in the Employment Agreement.  Any and all prior agreements
between the parties hereto with respect to any stock acquisition rights
regarding the Affected Options and the Shares are hereby
revoked.  This Agreement, together with the Employment Agreement, is,
and is intended by the parties to be, an integration of any and all prior
agreements or understandings, oral or written, with respect to the Affected
Options and the Shares.





8.           Notices.   Any and all
notices provided for herein shall be sufficient if in writing, and sent by hand
delivery, by an overnight delivery service that produces a signed receipt
evidencing delivery or by certified or registered mail (return receipt requested
and first class postage prepaid), in the case of the Corporation, to its
principal office, and in the case of Participant, to Participant's address as
shown on the Corporation's records.





9.           Invalid
or Unenforceable Provisions.   The
provisions of this Agreement shall be deemed severable, and the invalidity or
unenforceability of any one or more of the provisions hereof shall not affect
the validity and enforceability of the other provisions
hereof.  Participant agrees that the breach or alleged breach by the
Corporation of (a) any covenant contained in another agreement (if any) between
the Corporation and Participant or (b) any obligation owed to Participant by the
Corporation, shall not affect the validity or enforceability of the covenants
and agreements of Participant set forth herein.





10.           Modifications.   No change
or modification of this Agreement shall be valid unless the same is in writing
and signed by the parties hereto; provided, however, that
Participant hereby covenants and agrees to execute any amendment to this
Agreement which shall be required or desirable (in the opinion of the
Corporation or its counsel) in order to comply with any rule or regulation
promulgated or proposed under the Code by the Internal Revenue
Service.





11.           Incorporation
of Employment Agreement by Reference.  The Options
granted under the Amended Option Agreement were granted pursuant to the terms of
the Employment Agreement, the terms of which are incorporated herein by
reference, however, notwithstanding the forgoing, the provisions of this
Agreement shall control with respect to the Affected Options.  To the
extent that any conflict may exist between Section 2(B) or Section 12 of this
Agreement and any term or provision of the Employment Agreement, Section 2(B) or
Section 12, as the case may be, of this Agreement shall control.





12.           Change of
Control.  To the extent the
2009 Option shall become exercisable pursuant to a Change in Control the
definition of a “Change of Control” for the 2009 Option shall be the definition
set forth under Section 409A and the Regulations issued thereunder.





13.           Governing
Law.  The validity,
construction, interpretation and effect of this Agreement shall exclusively be
governed by and determined in accordance with the laws of Texas (other than the
conflicts-of-law or choice-of-law rules thereof), except to the extent preempted
by federal law, which solely to the extent of such preemption shall
govern.  Venue shall lie only in the State and Federal Courts in and
for the County of Harris, Texas, as to all disputes arising under this
Agreement, and such venue is hereby consented to by the Corporation and
Participant.





14.           Counterparts.  This Agreement
may be executed in counterparts, each of which, when taken together, shall
constitute one original agreement.





15.           Amendment
and Restatement.  This Agreement
constitutes an amendment, modification and restatement of the Amended Agreement
solely with respect to the Affected Options and this Agreement contains the
entire understanding between the parties hereto and supersedes the Amended
Option Agreement with respect to the Affected Options.





[SIGNATURE
PAGE FOLLOWS.]











IN WITNESS WHEREOF, the
Corporation has caused its duly authorized officer to execute and attest to this
Agreement, and to apply the corporate seal hereto, and Participant has placed
his or her signature hereon, effective as of the date first written
above.





CORPORATION:





FAR
EAST ENERGY CORPORATION








By: /s/ Randall D.
Keys


Randall
D. Keys, Chief Financial Officer








PARTICIPANT:








By: /s/ Michael R.
McElwrath


Michael
R. McElwrath