FIRST AMENDMENT TO
                                   LINE LETTER


          This  FIRST  AMENDMENT TO LINE LETTER, dated as of May _____, 2000, is
between  RZB  FINANCE  LLC ("RZB") and PENN OCTANE CORPORATION (the "Borrower").


                               W I T N E S S E T H
                               -------------------


          WHEREAS, RZB and the Borrower are parties to a Line Letter dated as of
October  14,  1997  and modified by a letter dated October 21, 1999 (as amended,
the  "Line  Letter";  capitalized terms used herein having the meanings ascribed
thereto  in  the  Line  Letter  unless  otherwise  defined  herein);

          WHEREAS, the Line Letter provides for a $10,000,000 uncommitted credit
facility  (the  "Uncommitted  Credit  Facility);

          WHEREAS,  the  Borrower  as  requested  that  RZB increase the maximum
amount  of  the  Uncommitted Credit Facility, and the Borrower and RZB desire to
amend  the  Line  Letter  in  other  respects;

          NOW,  THEREFORE,  the  parties  hereto  hereby  agree  as  follows:

          SECTION  1.     AMENDMENT.
                          ----------

          1.     The  Line  Letter is hereby amended, effective on the Effective
Date  referred  to  in  Section  2  hereof,  as  follows:

          (a)     Upon  execution  and  delivery  of the Participation Agreement
between  RZB  and  Bayerische  Hypo-und Vereinsbank Aktiengesellschaft, New York
Branch  ("HVB") (the "Participation Agreement"), the Uncommitted Credit Facility
shall  increase  to  Twenty  Million  Dollars  ($20,000,000).

          (b)     Notwithstanding  the  Participation  Agreement,  the  Borrower
shall  be  permitted,  except  as  otherwise  expressly  provided  in this First
Amendment  to  Line Letter, to send all notices, request and documents solely to
RZB  and not to HVB, and to act on instruction, requests and directions from RZB
alone.  The  Borrower acknowledges that pursuant to the Participation Agreement:
(i)  each  Loan  and  L/C  shall  be made or issued (as the case may be) only if
approved by both RZB and HVB in accordance with the Participation Agreement, and
(ii)  either  RZB  or  HVB  shall have the right to cause RZB to make any demand
under  Section  4  of  the  Line Letter.  RZB hereby agrees that if the Borrower
shall  make  payment  to  RZB  in  accordance  with the Line Letter and the Loan
Documents  of  amounts payable to RZB thereunder, including, without limitation,
payments  to  RZB  which RZB is obligated to pay to HVB under the Line Letter or
the  Participation


<PAGE>
Agreement,  the  Borrower  shall  have not further obligation to HVB even if RZB
fails  to  pay  any such amount to HVB, provided that if any such payment to RZB
must  be  disgorged  or  returned by RZB in connection with any bankruptcy case,
similar  to  proceeding  or  otherwise,  the  Borrower's  obligation  shall  be
reinstated  as  if  such  returned  payment  had  never  been  paid  to  RZB.

          (c)     (i)     The  Borrower  shall  simultaneously deliver to HVB at
the  following  address  a  copy  of each request for a Loan or L/C given to RZB
pursuant  to  Section 3 of the Line Letter and all financial statements, notices
and  reports delivered to RZB pursuant to or in connection with the Line Letter:

             Bayerische  Hypo-und  Vereinsbank
             Aktiengesellschaft,  New  York  Branch
             150  East  42nd  Street
             New  York,  New  York  10017-4679
             Attn:  Mr.  John  Coussa,  Managing  Director
             Telecopies  No.  (212)  672-5592

together with all such documents and information relating to such request as HVB
shall  require.  The Borrower expressly consents to RZB's delivery to HVB of any
documents  and  information  relating  to  the  Borrower now or hereafter in the
possession  of  RZB.

          (ii)     Notwithstanding anything to the contrary contained herein, in
the  Line  Letter  or in any other Loan Document, including, without limitation,
the  General  Security Agreement dated October 17, 1997 between the Borrower and
RZB:

     (A)     Provided  that  no  Event  of Default under any Loan Document shall
have  occurred  and  be  continuing,  no event that with the giving of notice or
lapse  of  time  or  both  would  constitute such an Event of Default shall have
occurred  and  be continuing and no demand for payment of any obligations of the
Borrower  shall  have been made by RZB, RZB shall, upon request of the Borrower,
execute  and  deliver  an agreement reasonable satisfactory to RZB subordinating
RZB's  mortgage  lien  and security interest on the land, buildings and fixtures
(but  no  other  assets  contained  thereon  or  therein)  constituting  (x) the
Borrower's  terminal  in  Brownsville, Texas and (y) the Borrower's pipeline, to
any  mortgage  line and security interest of a third party unaffiliated with the
Borrower  (the  "New Lender") which secures financing provided by the New Lender
to  the Borrower after the date hereof.  Such agreement shall contain a covenant
by  the  New  Lender  to  transport  at no cost to RZB from such terminal and/or
through  such  pipeline  all  inventory  of  the  Borrower financed by RZB.  The
foregoing is not a consent by RZB to any additional financing or indebtedness of
the  Borrower.

     (B)     In the event the Borrower intends to obtain additional financing or
incur  additional  indebtedness, the Borrower shall notify RZB and request RZB's
consent.  RZB  agrees  to  consider  such  request,  but  the Borrower expressly
acknowledges  and  agrees  that:  (x)  RZB shall have such sole discretion after
consultation  with HVB to grant or deny such consent or impose conditions on the


<PAGE>
grant  of such consent, (y) so long as the Participation Agreement is in effect,
RZB cannot grant such consent without HVB's approval and (z) neither RZB nor HVB
has  committed  or  agreed  to  grant  such  consent,  and such consent shall be
effective  only  if  in  writing  and  executed  by  RZB.

     (d)  The following is added after Section 5 of the Line Letter:

          "All  payments  of  principal,  interest, and other sums in connection
with  this  letter  agreement,  the  Loans  and  L/C's  or  in  respect  of  the
participation  of  HVB shall be made by the Borrower to RZB or by RZB to HVB, as
applicable, free and clear of, and without deduction or withholding for, any and
all  present and future taxes, levies, duties or withholdings of any kind or, if
any  deduction  or  withholding  from  any amount payable hereunder or under any
other  Loan  Document or in respect of the participation of HVB or in connection
herewith  or therewith shall be legally required, such amount shall be increased
by the Borrower as may be necessary so that after making all required deductions
or  withholdings  (including deductions or withholdings applicable to additional
amounts payable under this paragraph 5) RZB or HVB shall receive an amount equal
to the amount to would have received had no such deductions or withholdings been
required.  The  Borrower  shall  pay to RZB promptly upon HVB's request, and RZB
shall  promptly  pay to HVB, any amount payable to HVB pursuant to the preceding
sentence,  but  RZB  shall have no liability to pay any such increased amount to
HVB  which  is  not  received  by  RZB  from  the  Borrower."

          (e)     Section  9  (c) of the Line Letter is amended by (i) adding in
the  section  line,  after  "RZB",  the  words "and HVB", and (ii) adding in the
fourth  line,  after  "Note,"  the  words  "The  Participation  Agreement,".

          (f)     Section  9  (d)  of  the  Line Letter is hereby amended in its
entirety  to  read  as  follows:

               "(d)     (i)     If  RZB  or  HVB  shall have determined that the
applicability  of  the  any  law,  rule,  regulation  or  guideline (domestic or
foreign)  adopted  (whether  before  or  after  the  date hereof) pursuant to or
arising  out  of  the  July  1988  report  of  the  Basle  Committee  on Banking
Regulations  and  Supervisory  Practices  entitled "International Convergence of
Capital  Measurement  and  Capital  Standards",  or  the adoption after the date
hereof  of  any  other law, rule, regulations or guideline (domestic or foreign)
regarding  capital  adequacy,  or  any changes in any of the foregoing or in the
enforcement  or  interpretation or administration of any of the foregoing by any
court  or  any governmental authority, central bank or comparable agency charged
with  the enforcement or interpretation or administration thereof, or compliance
by  RZB  or  HVB or any corporation or other entity which directly or indirectly
controls  RZB  or  HVB  (each  such  corporation  or other entity is hereinafter
referred  to  as a "Controlling Person") (or any lending office of RZB or HVB or
any  Controlling  Person),  with  any  request  or  directive  regarding capital
adequacy  (whether or not having the force of law) of any such court, authority,
central  bank or comparable agency, has or would have the effect of reducing the
rate  of return on RZB's or HVB's (as the case may be) capital or on the capital
of a Controlling Person, if any, as a consequence of its issuance or maintenance


<PAGE>
of any L/C or its obligations (if any) under this Agreement or the Participation
Agreement  to  a  level  below  that which RZB or HVB or such Controlling Person
could  have  achieved but for such applicability, adoption, change or compliance
(taking  into consideration RZB's or HVB's (as the case may be) policies and the
policies  of  such  Controlling  Person  with respect to capital adequacy) by an
amount deemed by RZB or HVB to be material, then, upon demand by RZB or HVB, the
                                            -----
Borrower  shall  pay  to  RZB  from time to time as specified by RZB or HVB such
additional  amount  or amounts as will compensate RZB or HVB or such Controlling
Person for any such reduction suffered.  Any such amount paid to RZB relating to
HVB or a Controlling Person of HVB shall be promptly paid by RZB to HVB pursuant
to  the  Participation  Agreement  between  them.

          (ii)     If  any  change  in  law,  rule,  regulations  or  guideline
(domestic  or  foreign)  or in the enforcement, interpretation or administration
thereof  by  any court or any governmental authority, central bank or comparable
agency  charged  with  the interpretation or administration thereof shall at any
time  (A)  impose,  modify  or  deem  applicable any reserve, special deposit or
similar  requirement (including, without limitation, pursuant to Regulation D of
the  Board of Governors of the Federal Reserve System) against letters of credit
issued  by  RZB or participation therein purchased by HVB or (B) subject letters
of  credit  issued  by  RZB  or  participation  therein  purchased by HVB to any
assessment or other cost imposed by the Federal Deposit Insurance Corporation or
any successor thereto or (C) impose on RZB or HVB any other or similar condition
regarding  this  Agreement  or  any  L/C  or  the  Participation  Agreement, the
obligations  (if  any)  of  RZB  hereunder  or  the obligations of HVB under the
Participation  Agreement  and the result of any event referred to in clause (A),
(B)  or  (C)  above  shall be to increases the cost to RZB or HVB of agreeing to
issue,  issuing  or  maintaining  or  confirming  any  L/C or making, funding or
maintaining  (or  agreeing  to  fund  or  maintain) drawings under any L/C or of
participating  in  any  L/C  or  to reduce any accounts receivable by RZB or HVB
hereunder  or by HVB under Participation Agreement by an amount which RZB or HVB
shall  deem  to  be  material  (Which increase in cost or reduction shall be the
result  of the reasonable allocation by RZB or HVB of the aggregate of such cost
increases or reductions resulting from such events), then, upon demand by RZB or
                                                     ----
HVB,  the Borrower shall pay to RZB from time to time as specified by RZB or HVB
(as  the  case may be), such additional amount or amounts as will compensate RZB
or  HVB  (as  the  case  may  be)  for such increased cost from the date of such
change.  Any  such  amount paid to RZB relating to HVB shall be promptly paid by
RZB to HVB pursuant to the Participation Agreement between them.  The Borrower's
obligation  to  pay  compensation  contained  in  the  subsection  (ii) shall be
applicable  as  well  to  any  amount  RZB may be obligated to pay any financial
institution  which  confirms or advises any L/C and which incurs or is subjected
to  any  increased  cost  or  reduction of amounts receivable as a result of the
imposition,  modification  or applicability of any such reserve, special deposit
or  similar requirement, the subjecting of L/C's to any such assessment or other
costs,  or  the  imposition  of  any  such  other  or  similar  condition.


          (iii)     The  provisions  of  this  subsection  (d) shall survive the
termination  of  this  Agreement.


<PAGE>
          (iv)     RZB or HVB shall notify the Borrower within 3 months after it
becomes  aware of its right to claim any amount under paragraphs (d) (i) or (ii)
above,  provided  that (A) if such lender fails to so notify the Borrower within
        --------
such  3  month period, such lender shall not be entitled to claim any additional
amounts  pursuant  to  this  subsection for any period ending on a date which is
prior  to  3  months  before  such  notification  plus  any additional period of
retroactive  effect  of  the  law,  rule, regulation or guideline referred to in
paragraph  (d)  (i)  or  (ii)  above, and (B) neither RZB nor HVB shall have any
right  to  assert  a claim for any amount under paragraphs (d) (i) or (ii) after
the  date  which  is 3 months after payment in full of all Loans, obligations in
respect  of  L/C's  and  other obligations hereunder and the termination of this
Agreement."

          (e)     The  following  new Section 9 (j) is added to the Line Letter:

          "(j)     No  Claim  may  be  made  by the Borrower or any other person
against RZB or HVB or the officers, directors, employees or agents of RZB or HVB
for  any  special, indirect, punitive or consequential damages in respect of any
claim  for breach of contract or any other theory of liability arising out of or
related  to  the transactions contemplated by this Agreement, any obligations of
the  Borrower  and/or  any  of  the  collateral,  or  any act, omission or event
occurring  in connection therewith, and the Borrower hereby waives, releases and
agrees  not  to  sue  upon  any  claim  for  any  such  damages."

          (f)     The following is added to the end of Section 9 (f) of the Line
Letter:

          "HVB  shall  have  a  right  of  set-off and banker's lien to the same
extent  as  if its participation under the Participation Agreement were a direct
loan  to  the  Borrower."

          SECTION  2.  EFFECTIVENESS  OF  AMENDMENT.
                       -----------------------------

          This  First  amendment  shall  become  effective  on  the  date  (the
"Effective Date") on which the following conditions precedent shall be fulfilled
to  the  satisfaction  of  RZB:

          RZB  shall  have  received  this  First Amendment duly executed by all
parties  hereto,  a  replacement  Promissory  Note  in  the  maximum  amount  of
$20,000,000,  amendments  to  the  Deeds  of  Trust  previously  executed by the
Borrower  reflecting  the  increase in the Uncommitted Credit Facility, and such
corporate  authorization  documents  a  RZB  may  request.


          SECTION  3.  EFFECT  OF AMENDMENT; RATIFICATION: REPRESENTATIONS; ETC.
                       ---------------------------------------------------------


               (a) On and after the date hereof, when counterparts of this First
Amendment  shall  have  been  executed  by  all  parties  hereto, (i) this First


<PAGE>
Amendment  shall  be  a part of the Line Letter, (ii) all references to the Line
Letter  in the Line Letter and the other Loan Documents shall be deemed to refer
to  the Line Letter as amended by this First Amendment, and (iii) the term "this
Agreement"  and  the  words "hereof", "herein", "hereunder" and words of similar
import,  as  used  in  the  Line  Letter,  shall mean the Line Letter as amended
hereby.

               (b)     Except  as  expressly  set  forth  herein,  this  First
Amendment  shall  not constitute an amendment, waiver or consent with respect to
any  provision  of  the  Line Letter, as amended hereby, and the Line Letter, as
amended  hereby,  and all other Loan Documents are hereby ratified, approved and
confirmed  in all respects.  The Borrower expressly acknowledges and agrees that
it  has  no  defense,  counterclaim,  right  of  setoff or the claim under or in
connection with the Line Letter or the Loan Documents as of the date hereof that
would  reduce  or  impair  its  obligations  thereunder.

               (c)     In  order  to  induce  RZB  to  enter  into  this  First
Amendment,  the  Borrower  represents  and warrants to RZB that before and after
giving  effect  to  the  execution  and  delivery  of  this  First  Amendment:

               (i)     the  representations  and warranties set forth in section
                       8 of the line letter and in the other Loan Documents  are
                       true  and correct.

               (ii)    no  Event of Default under the General Security Agreement
                       executed  by  the Borrower, event under Section 13 of the
                       Continuing  Agreement  for Letters  of Credit executed by
                       the  Borrower or event or condition that, with the Giving
                       of  notice  or  passage of time or both, would constitute
                       such an event of Default  or  other  event  has  occurred
                       and  is  continuing.

               (iii)   This First Amendment has  been  duly  authorized  by  all
                       necessary corporate action of the Borrower, has been duly
                       executed and delivered by the Borrower and is  the  valid
                       and  binding obligation of the Borrower, enforceable  in
                       accordance  with  its  terms.

          SECTION  4.  NEW  YORK  LAW.
                        --------------

          This  First  Amendment  shall  be  construed  in  accordance  with the
governed  by the laws of the State of New York, with out regard to the conflicts
of  laws  principles  of  said  State.

          SECTION  5.  SEVERABILITY.
                       -------------

          If  any  provision  hereof  is  invalid  and  unenforceable  in  any
jurisdiction,  then,  to  the  fullest  extent  permitted  by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible, and (ii) the invalidity or unenforceability
of  any  provision  hereof  in any jurisdiction shall not affect the validity or
enforceability  of  such  provision  in  any  other  jurisdiction.

          SECTION  6.  COUNTERPARTS.
                       -------------

          This  First  Amendment  may  be  executed  by  the  parties  hereto
individually  or  in any combination, in one or more counterparts, each of which
shall be an original and all of which shall together constitute one and the same
amendment.  Signatures  of  the  parties  may  appear  on separate counterparts.

          IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  First
Amendment  to  be  duly  executed  as  of  the day and year first above written.


                                                  PENN  OCTANE  CORPORATION

                                                  By:
                                                     ---------------------------


                                                  By:
                                                     ---------------------------


                                                  RZB  FINANCE  LLC

                                                  By:
                                                     ---------------------------

                                                  By:
                                                     ---------------------------

          The  undersigned has executed the Guaranty and Agreement dated October
14,  1997  (the  "Guaranty").  The  undersigned hereby consents to the foregoing
First  Amendment, ratifies the Guaranty executed by him and confirms that all of
his  obligations  under  such  Guaranty  are  and shall remain in full force and
effect, notwithstanding such First Amendment, and shall apply to all obligations
and liabilities under the Line Letter and the Loan Documents, as amended by such
First  Amendment.



                                                  ------------------------------
                                                  Jerome  Richter


<PAGE>