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EXHIBIT 10.1
 
                              EMPLOYMENT AGREEMENT
 
THIS AGREEMENT is made December 4, 1996
 
BETWEEN:
 
         TRANSGLOBE ENERGY CORPORATION
         a corporation established under the laws of British Columbia
 
         ("Company")
 
AND:
 
         ROSS CLARKSON of Suite 2226 -- 246 Stewart Green S.W.,
         Calgary, Alberta
 
         (the "President")
 
RECITALS:
 
A.  Ross Clarkson is currently a director of the Company and has agreed to
become the President and Chief Executive Officer of the Company; and
 
B.  The Board of Directors of the Company ("Board") has approved that
appointment on the terms set out below:
 
AGREEMENTS:
 
For good and valuable consideration, the receipt and sufficiency of which each
party acknowledges, the parties agree as follows:
 
1.     APPOINTMENT
 
1.1    Beginning December 4, 1996 the Company will employ Ross Clarkson as its
President and Chief Executive Officer.
 
1.2    The appointment will continue until November 30, 1998 unless sooner
terminated as provided in this Agreement.
 
2.     RESPONSIBILITIES
 
2.1    The President will diligently and faithfully devote all of his working
time and attention exclusively to the business of the Company and to the
performance of his duties and responsibilities to the utmost of his ability, and
will at all times use his best efforts to promote the interests of the Company.
 
2.2    Without first obtaining written permission from the Company, the
President will not enter into the service of, be employed by, or otherwise
engaged in any capacity by any person, firm or corporation other than the
Company.
 
2.3    The President will have the authority, subject always to general or
specific instructions and directions of the Board of Directors of the Company,
to manage the business of the Company, except for matters required by law to be
done by the Board of Directors and the shareholders.
 
2.4    The President will conform to all lawful direction of the Board and
comply with the Articles of the Company.
 
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3.     FIDUCIARY DUTY
 
3.1    The President acknowledges that he has a fiduciary relationship with the
Company, whereby he has an absolute duty of trust and fidelity to the Company,
to act loyally and with the utmost good faith exclusively in the best interests
of the Company and to avoid any conflict of interest.
 
3.2    (a)  The President acknowledges that as the President and Chief Executive
            Officer, and in any other position as the President may hold, the
            President will acquire information about certain matters and things
            which are confidential to the Company, and which information is the
            exclusive property of the Company.
 
       (b)  The President acknowledges the information as referred to in (a)
            above could be used to the detriment of the Company. Accordingly,
            the President undertakes not to disclose any of it to any third
            party either during the term of his employment except as may be
            necessary in the proper discharge of his employment under this
            Agreement, or after the term of his employment, however caused,
            except with the written permission of the Company.
 
       (c)  The President acknowledges and agrees that without prejudice to any
            other rights of the Company, in the event of his violation or
            attempted violation of any of the covenants contained in (a) and (b)
            above, an injunction or any other like remedy shall be the only
            effective remedy to protect the Company's rights and property as set
            out in (a) and (b) above, and that an interim injunction may be
            granted immediately on the commencement of any suit.
 
3.3    At the end of the President's employment, he will immediately return to
the Company or any of its subsidiaries all documents, papers, materials and
other property of or relating to the affairs of the Company which may then be in
his possession or under his control.
 
4.     REMUNERATION
 
4.1    From December 4, 1996 the Company will pay to the President an annual
salary of $120,000 (Cdn.) which will be paid in equal monthly instalments in
arrears of $10,000 each.
 
5.     INSURANCE BENEFITS
 
5.1    The Company will enrol the President in the medical and dental insurance
programs presently in force for employees of the Company.
 
5.2    The Company will pay all premium costs for the benefits described in
Section 5.1.
 
6.     VACATION
 
6.1    In addition to statutory holidays, the Company will provide the President
with an annual paid vacation of 30 working days each year, to be taken when he
deems appropriate in consideration of the Company's operational requirements.
 
6.2    If the President does not use all of his vacation entitlement in a given
year, he may accumulate it and use it in a subsequent year. If the President has
unused vacation entitlement to his credit when this Agreement is ended, he will
be paid its equivalent cash value.
 
6.3    The Company may require the President to use up unused vacation
entitlement.
 
7.     EXPENSES AND ALLOWANCES
 
7.1    The Company will reimburse the President for all reasonable expenses
incurred by him in connection with the Company's business, in accordance with
its applicable policies.
 
7.2    The Company will pay for the President's reasonable travelling and
accommodation expenses to travel from Calgary to Vancouver and reside in
Vancouver while on the Company's business.
 
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7.3    The Company will reimburse the President for all reasonable costs
associated with the relocation of the President to Vancouver from Calgary,
Alberta, which may include, without limitation, moving expenses, temporary hotel
expenses, legal fees and realty commissions.
 
7.4    The Company will pay for the cost of membership dues to a club intended
for business purposes up to a maximum of $1,000 per year.
 
7.5    The Company will, subject to insurability, secure and pay the premiums
for a life insurance policy on the President's life in an amount of not less
than one year's salary in which the President's estate will be named as the
beneficiary.
 
8.     SHARE OPTIONS
 
8.1    In addition to the fixed compensation set out in Section 4, the President
will be entitled to an option to purchase up to 200,000 common shares in the
capital of the Company.
 
8.2    The exercise price of the optioned shares will be market price calculated
in accordance with the policies and rules of the Vancouver Stock Exchange.
 
9.     BONUSES
 
9.1    The Company will pay to Ross Clarkson in consideration of his agreeing to
become the president of the Company the amount of $15,000 on January 2, 1997.
 
9.2    (a)  The Company will issue to the President as a performance bonus, in
            the form of fully-paid common shares of the Company, upon the
            Company's Cash Flow reaching specified amounts as follows:
 
            (i)   $3,000,000   --  10,000 common shares;
            (ii)  $8,000,000   --  a further 20,000 common shares; and
            (iii) $12,000,000  --  a further 30,000 common shares;
 
       (b)  "Cash Flow" is defined as gross income measured on an annualized
            basis for 2 consecutive quarterly financial periods as shown in the
            Company's financial statements.
 
10.    ENDING
 
10.1   The Company may end this Agreement and the President's employment at any
time for just cause, without any notice and without any liability to the
President.
 
10.2   The Company may end this Agreement and the President's employment at any
time without just cause by giving written notice to the President, and the
Company will pay to the President a retiring allowance in an amount equal to 24
months of his then current monthly salary.
 
10.3   (a)  The President may end this Agreement and his employment, without
            further liability to the Company, by giving 30 days written notice
            of resignation to the Board of Directors, which the Company may
            waive in whole or in part.
 
       (b)  If the Board does not have a majority of its members comprised of
            Dr. Harold Laycraft, Erwin Noyes, and others whose election was
            proposed by them, the President may, within 6 months after that
            event, elect to end this Agreement and his employment and the
            Company will pay to the President a retiring allowance in an amount
            equal to 24 months of his then current salary.
 
10.4   If the President should die during the term of this Agreement the Company
will pay to his estate an amount equal to 6 months of his then current salary
and the current period or periods for exercising any unexercised options under
Section 8 will be extended for a period ending 6 months after his death and may
be exercised by his executor or administrator.
 
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10.5   If this Agreement is ended and the President's employment is terminated
(except for cause) any options granted to him under Section 8 but not yet
exercised may be exercised at any time within 2 years after the date of the
termination; if terminated for cause any unexercised option will automatically
terminate.
 
10.6   The President acknowledges that the arrangements described in this
Section 9 are fair and reasonable and constitute the Company's sole obligation
to provide notice of termination, severance pay or related compensation.
 
10.7   Regardless of how this Agreement and the President's employment is ended,
Section 3 will remain in effect after it is ended.
 
11.    NON-COMPETITION
 
11.1   (a)  The President agrees with and for the benefit of the Company that
            for a period of 6 months from the date of termination of the
            President's employment, however caused, he will not for any reason,
            be engaged in a business which directly competes with the business
            of the Company.
 
       (b)  The President further agrees that, during employment pursuant to
            this Agreement and for a period of 6 months following termination of
            employment, however caused, he will not hire or take away or cause
            to be hired or taken away any employee of the Company or, following
            termination of the President's employment, any employee who was in
            the employ of the Company during the 6 months preceding termination.
 
12.    DIRECTOR'S LIABILITY INSURANCE/INDEMNITY
 
12.1   The Company will diligently pursue the obtaining of directors and senior
officers insurance and secure such insurance so long as its cost is not, in the
Board's opinion, excessive.
 
12.2   The Company will indemnify the President in respect of his actions or
omissions as the President and a director of the Company to the extent set out
in Part 22 of the Articles of the Company to the extent permitted by law.
 
13.    COMPANY'S PROPERTY
 
13.1   The President acknowledges that all items of any and every nature or kind
created or used by the President under this Agreement, or furnished by the
Company to the President, and all equipment, credit cards, books, records,
reports, files, manuals, literature, confidential information or other materials
shall remain and be considered the exclusive property of the Company at all
times and shall be surrendered to the Company, in good condition, promptly on
the termination of the President's employment irrespective of the time, manner
or cause of the termination.
 
14.    ASSIGNMENT OF RIGHTS
 
14.1   The rights which accrue to the Company under this Agreement shall pass to
its successors or assigns. The rights of the President under this Agreement are
not assignable or transferable in any manner.
 
15.    NOTICES
 
15.1   (a)  Any notice required or permitted to be given to the President shall
            be sufficiently given if delivered to the President personally or if
            mailed by registered mail to the President's address last known to
            the Company.
 
       (b)  Any notice required or permitted to be given to the Company shall be
            sufficiently given if mailed by registered mail to the Company's
            Head Office at its address last known to the President.
 
16.    GOVERNING LAW
 
16.1   This Agreement shall be construed in accordance with the laws of the
Province of British Columbia.
 
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17.    INDEPENDENT LEGAL ADVICE
 
17.1   Each of the Company and the President hereby confirm and acknowledge that
they have sought independent legal advice with respect to their respective
rights and obligations arising from this Agreement and each such party does
further confirm and acknowledge with the understanding that each such party is
relying upon such representations in entering into this Agreement, that this
Agreement constitutes a legal, binding agreement, enforceable as against each
such party in accordance with its terms.
 
18.    DISPUTE RESOLUTION
 
18.1   Before initiating any legal proceedings, the parties will attempt to
resolve all disputes concerning the interpretation, application or enforcement
of any term of this Agreement by mediated negotiation, and will use their best
efforts to resolve any dispute through mediation.
 
18.2   If a dispute between the parties concerning the interpretation,
application or enforcement of any term of this Agreement is not resolved by
mediation within 90 days after one party notifies the other in writing of an
intention to mediate the dispute, the parties will submit the matter to binding
arbitration, pursuant to the provisions of the Commercial Arbitration Act of
British Columbia, and the parties hereby irrevocably authorize any arbitrator
who may be appointed to endeavour to mediate the resolution of the dispute
before rendering a binding award.
 
19.    ENTIRE AGREEMENT
 
19.1   This Agreement contains the entire agreement between the parties with
respect to the President's employment, and cancels and supersedes all prior
agreements between them, and no amendment or variation of the terms of this
Agreement will be effective or binding unless made in writing and signed by both
of them.
 
20.    REGULATORY APPROVAL
 
20.1   The option to purchase shares in Section 8 and the issue of shares under
Section 9.2 are subject to acceptance by the Vancouver Stock Exchange and any
other applicable regulatory authority and are subject to compliance by the
Company with all applicable securities legislation.
 
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      TO EVIDENCE THEIR AGREEMENT the parties have executed this document on the
dates appearing below.
 
TRANSGLOBE ENERGY CORPORATION
 
Per:
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    Authorized Signatory
 
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    Authorized Signatory
 
Date:
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ROSS CLARKSON                                    WITNESS:
 
                                                 Signature:
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Date:                                            Print Name:
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