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EXHIBIT 10.3
 
                         TRANSGLOBE ENERGY CORPORATION
 
                               STOCK OPTION PLAN
                              DATED APRIL 16, 1997
                          AS AMENDED OCTOBER 17, 1997
 
1.     PURPOSE.  The purpose of this Stock Option Plan (the "Plan") is to
advance the interests of TransGlobe Energy Corporation ("TransGlobe") and its
shareholders by enhancing the ability of TransGlobe to attract and retain the
best available talent and to encourage the highest level of performance by
senior officers, key employees, directors and consultants through ownership of
common shares ("Common Shares") in TransGlobe.
 
2.     ADMINISTRATION.  The Plan will be administered by the Board of Directors
of TransGlobe (the "Board"). The Board may delegate the administration of the
Plan to a committee, in which case all references to the "Board" hereunder will
refer to the committee, except only the Board of Directors may allot shares and
specify the price at which they are to be issued. The Board will have authority,
consistent with the Plan:
 
       (a)  to issue options granted in accordance with the formula set forth in
            this Plan;
 
       (b)  to prescribe the form of certificate evidencing grants of options to
            Canadian optionees and the form of agreement evidencing grants of
            options to US optionees and any other instruments required under the
            Plan and to change such forms from time to time;
 
       (c)  to adopt, amend and rescind rules and regulations for the
            administration of the Plan, provided however, that except as
            specified in Section 5(d), no amendment which would increase the
            maximum number of Common Shares for which options may be granted
            will be made by the Board without the approval of shareholders and
            regulatory authorities under the Securities Laws, as defined below;
            and
 
       (d)  to interpret and administer the Plan and to decide all questions and
            settle all controversies that may arise in connection with the Plan,
            all of which decisions of the Board will be final and conclusive.
 
3.     COMPLIANCE WITH LAWS.  Transactions under the Plan are intended to comply
with all relevant provisions of law, including, without limitation, the United
States Securities Act of 1933 and the regulations thereunder, all applicable
conditions of Rule 16b-3 or its successors under Section 16 of the United States
Securities Exchange Act of 1934, the Securities Act and the regulations
thereunder of the province in which TransGlobe is resident and the provinces in
which optionees may reside, and the requirements of The Alberta Stock Exchange
(the "ASE"), The Toronto Stock Exchange (the "TSE"), the Nasdaq Stock Market,
Inc. ("NASDAQ"), and any other stock exchange or market upon which the Common
Shares may then be listed or quoted (together, the "Applicable Laws"). To the
extent any provision of the Plan or action by the Board fails to so comply, it
will be deemed null and void, to the extent permitted by law and deemed
advisable by the Board.
 
TransGlobe will not be obligated to issue and deliver any Common Shares pursuant
to the exercise of any option until, in the opinion of TransGlobe's counsel, all
Applicable Laws have been complied with. Without limiting the generality of the
foregoing, TransGlobe may require from the person exercising the option such
investment representation, undertaking or agreement, if any, as counsel for
TransGlobe may consider necessary in order to comply with the Applicable Laws.
 
4.     ELIGIBILITY.  The Board may from time to time authorize the grant of
options to anyone who is at the time of such authorization:
 
       (a)  a senior officer or key employee ("Employee") of TransGlobe or any
            subsidiary of TransGlobe ("Subsidiary"), meaning any corporation,
            partnership, joint venture or other entity in which
 
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            TransGlobe owns or controls, directly or indirectly, not less than
            50% of the total voting power or equity interests, and includes a
            subsidiary of a subsidiary;
 
       (b)  subject to the Applicable Laws, a person providing ongoing
            consulting services (a "Consultant") to TransGlobe or a Subsidiary;
            or
 
       (c)  a member of the Board of Directors of TransGlobe or of a Subsidiary.
 
5.     SHARES SUBJECT TO THE PLAN
 
       (a)  Subject to adjustment as provided in Section 5(d):
 
            (i)   the aggregate number of Common Shares to be issued from time
                  to time upon the exercise of options granted under the Plan
                  will not exceed 1,117,037 Common Shares;
 
            (ii)  no single officer, employee, or director of TransGlobe will
                  hold options for more than 5% of the issued and outstanding
                  Common Shares;
 
            (iii) the aggregate number of Common Shares to be issued upon the
                  exercise of options granted under the Plan to Consultants from
                  time to time will not exceed 2% of the issued and outstanding
                  Common Shares; and
 
            (iv)  no single Consultant will be granted options for more than 1%
                  per year of the issued and outstanding Common Shares.
 
       (b)  If any option granted under the Plan terminates or is cancelled
            without having been exercised in full, the number of Common Shares
            unpurchased as to which such option was not exercised will be
            available for future grants within the limits set forth in Section
            5(a).
 
       (c)  No fractional Common Shares will be issued under this Plan.
 
       (d)  In the event of a stock split, consolidation or reclassification or
            other change in TransGlobe's capital, other than an issue of Common
            Shares or by way of stock dividend, the number and exercise price of
            options will be adjusted by the Board to preserve the rights of the
            participants in this Plan substantially proportionate to those
            existing prior to such event.
 
6.     TERMS AND CONDITIONS OF OPTIONS.  All options granted under the Plan will
be subject to the following terms and conditions:
 
       (a)  The per-share exercise price of each option granted will be not less
            than the market value (the "Market Value") of a Common Share on the
            date an option is granted, which Market Value will be determined as
            follows:
 
            (i)   if the Common Shares are listed or quoted on any established
                  stock exchange or market, including without limitation the TSE
                  or the ASE, the NASDAQ National Market or The NASDAQ Small Cap
                  Market, the Market Value will be no less than the higher of
                  the last sale prices of a Common Shares at the close of
                  business on the last trading day preceding the date on which
                  such option is granted; and
 
            (ii)  in the absence of an established market for the Common Shares,
                  the Market Value will be determined in good faith by the
                  Board.
 
       (b)  The latest date on which an option may be exercised will be the
            fifth anniversary of the date the option was granted.
 
       (c)  50% of the options granted to each optionee under the Plan will
            become vested and exercisable on the six-month anniversary of the
            grant date, or at such other time as may be established by the Board
            at the time of the grant, and the balance on the first anniversary
            of the grant date.
 
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       (d)  Any exercise of an option must be in writing, signed by the proper
            person and delivered or mailed to TransGlobe, accompanied by any
            documents required by the Board and payment in full as provided
            below for the number of Common Shares for which the option is
            exercised.
 
       (e)  The price of Common Shares purchased on the exercise of an option
            must be paid in full by cash, bank draft or money order payable to
            the order of TransGlobe.
 
       (f)  No option or any interest therein will be transferable or assignable
            otherwise than by will or pursuant to the laws of succession.
 
       (g)  An optionee will have no rights as a shareholder of TransGlobe with
            respect to any Common Shares covered by any option until such time
            as and to the extent only that such option has been exercised.
 
       (h)  If any optionee ceases to be eligible for a grant of options under
            this Plan for any reason (a "Termination"), except the death of an
            optionee or by reason of retirement pursuant to an established
            retirement policy of the Board, all options granted to the optionee
            under the Plan and then held by the optionee will, to the extent
            such options were exercisable immediately prior to Termination,
            continue to be exercisable by the optionee for a period of 30 days
            following Termination or until the expiration date of the option if
            earlier.
 
      (i)   If Termination is by reason of retirement pursuant to an established
            retirement policy of the Board, all options held by the retiring
            optionee will become vested and exercisable, to the extent not
            already vested and exercisable, immediately prior to retirement, and
            they continue to be exercisable until their original expiration
            date.
 
      (j)   In the event of the death of an optionee all options granted to the
            optionee under the Plan and held by the optionee immediately before
            death will, to the extent such options were exercisable at that
            time, continue to be exercisable by the legal representative of the
            optionee for a period of 6 months following the death of the
            optionee or until the expiration date of the option if earlier.
            After such time, the options will terminate.
 
7.     ADDITIONAL PROVISIONS CONCERNING U.S. OPTIONEES.
 
       (a)  Options granted to an Employee subject to personal income tax under
            the United States Internal Revenue Code (the "Code"), (such Employee
            referred to in this Section as a "U.S. Employee") will be Incentive
            Stock Options as that term is defined in the Code.
 
       (b)  Options granted to an optionee who is subject to personal income tax
            under the Code who is not an Employee will not be Incentive Stock
            Options, and any written agreement with such an optionee for a grant
            of options under the Plan will state that the options granted
            thereunder are Non-Qualifying Stock Options for U.S. income tax
            purposes.
 
       (c)  In addition to the terms and conditions of options granted under the
            Plan listed in Section 6 above, options granted to a U.S. Employee
            will be subject to the following terms and conditions:
 
            (i)   options will be designated in the written option agreement
                  between the U.S. Employee and TransGlobe as Incentive Stock
                  Options; and
 
            (ii)  if the U.S. Employee is directly or indirectly the beneficial
                  owner of 10% or more of the combined voting power of all
                  classes of shares in the capital of TransGlobe or a Subsidiary
                  at the time an option is granted to the U.S. Employee, the
                  exercise price of such option will be equal to at least 110%
                  of the Market Value of TransGlobe's Common Shares.
 
       (d)  If a U.S. Employee is granted options under the Plan, the written
            option agreement with the U.S. Employee will contain
            acknowledgements by the U.S. Employee that:
 
            (i)   notwithstanding a designation of options granted to a U.S.
                  Employee as Incentive Stock Options, to the extent that the
                  aggregate Market Value of the Common Shares subject to
 
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                  options which are exercisable for the first time by any U.S.
                  Employee during any calendar year exceeds US$100,000, such
                  excess options will not be treated as Incentive Stock Options;
                  and
 
            (ii)  in order for options granted under the Plan to be treated as
                  Incentive Stock Options:
 
                  A.   Common Shares purchased on the exercise of an option must
                       not be sold or otherwise disposed of within 2 years from
                       the date the option was granted, or within 1 year from
                       the date the option was exercised; and
 
                  B.   the U.S. Employee must maintain his status as a U.S.
                       Employee at all times during the period beginning on the
                       date the option is granted and ending on the date 30 days
                       before the date the option is exercised.
 
       (e)  The acknowledgement of the U.S. Employee in (d)(ii)B above does not
            confer upon the U.S. Employee any right with respect to continuation
            of his employment relationship with TransGlobe, nor will it
            interfere in any way with TransGlobe's right to terminate his
            employment relationship at any time, with or without cause.
 
8.     TAX CONSEQUENCES OF PLAN.  Notwithstanding Section 7, TransGlobe does not
assume responsibility for the income or other tax consequences for optionees or
persons eligible under the Plan and they are advised to consult with their own
tax advisors.
 
9.     EFFECT OF CERTAIN CORPORATE TRANSACTIONS.  In the event of a
consolidation or merger in which TransGlobe is not the surviving company, or in
the event its outstanding shares are converted into securities of another entity
or exchanged for other consideration, or in the event of an offer for Common
Shares being made by a third party that constitutes a take-over bid as that term
is defined in the Securities Act (Alberta) or would constitute a take-over bid
as that term is defined in the Securities Act (Alberta) but for the fact that
the offeree is not in Alberta, all outstanding options will immediately vest,
provided, however, that if such transaction does not close, all such options
will be deemed not to have vested.
 
10.    TERM OF PLAN.  The Plan will become effective upon the earlier to occur
of its adoption by the Board of Directors [April 16, 1997] or its approval by
the shareholders of TransGlobe at a general meeting and shall terminate ten
years thereafter.
 
11.    AMENDMENTS TO PLAN.  Amendments to the Plan, from time to time, will
become effective on the date of the approval of such amendments by the Board
subject to approval of such amendments by securities regulators under the
Applicable Laws, or ratification by the shareholders of TransGlobe at a general
meeting, as may be required.
 
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