[Crown Asphalt Products Company Logo]


                       VIA FEDERAL EXPRESS

October 1, 1998


Mr. Burt M. Cormany
Santa Maria Refining Corporation
1660 Sinton Road
Santa Maria, California 93455

     Re: Processing Agreement Renewal

Dear Mr. Cormany:

Reference is made to the Processing Agreement dated May 1, 1995
between Santa Maria Refining Corporation (SMRC), Saba Petroleum
Company and Petro Source Refining Corporation ("the Agreement").
Paragraph 1.a. of the Agreement provides that Petro Source may
request an extension of the term of the Agreement by giving SMRC
written notice at least sixty (60) days prior to the end of the
Primary Term.

As you are aware, Crown Asphalt Distribution l.l.c. (CAD)
purchased all of the asphalt marketing and distribution assets of
Petro Source, including the Agreement, effective July 2, 1998.
CAD's business is managed and operated by Crown Asphalt Products
Company (CAPCO). This letter will serve as a written request that
the Agreement be extended for an additional one year term through
December 31, 1999.

If you have any questions please do not hesitate to contact me.


Sincerely,


Jay Mealey
Manager, Crown Asphalt Distribution l.l.c.

cc:  Illyas Chaudhary - Saba Petroleum Company
     Bill Kraemer - MCNIC
     Lorin Patterson - Ray Quinney & Nebeker


                   PROCESSING AGREEMENT

     This Processing Agreement ("Agreement") is made and entered
     into on the 1st day of May, 1995, by and between PETRO
     SOURCE REFINING CORPORATION, a Utah corporation ("Petro
     Source") and SANTA MARIA REFINING COMPANY, a California
     corporation ("SMRC"), and SABA PETROLEUM COMPANY ("SABA") a
     Colorado corporation.

                          R E C I T A L S

     WHEREAS,  SMRC is the owner and operator of the Santa  Maria
Refinery located in Santa Maria, California (the "Refinery"); and

     WHEREAS,  Petro  Source  is  a marketer  of  crude  oil  and
refined  products,  with  access from time  to  time  to  certain
volumes  of crude oil which it desires that SMRC process  at  the
Refinery; and

     WHEREAS, SMRC desires to process said crude oil on the
terms and conditions herein; and

     WHEREAS, SABA is the parent company and sole shareholder  of
SMRC  and  desires  to assure Petro Source of SMRC's  performance
hereunder; and

     WHEREAS,  SABA  has or controls crude oil production,  which
is either available for sale, or could become available for sale,
that  SABA  desires  to  sell to Petro Source  and  Petro  Source
desires to purchase from SABA.

     NOW  THEREFORE in consideration of the mutual  promises  set
forth  herein,  and  other good and valuable  consideration,  the
parties hereto agree as follows:

1.   Term of The Agreement

     a.   This Agreement shall be effective as of the 1st day of May,
          1995 (the "Effective Date'), and, subject to other provisions
          contained herein, shall remain in effect until December 31, 1998
          ( the "Primary Term"). Petro Source may request, by written
          notice given at least sixty (60) days prior to the end of the
          Primary Term or any subsequent renewal term, that this Agreement
          remain in effect for an additional one (1) year term. If SMRC
          denies Petro Source's request for a renewal term at the end of
          the Primary Term, and only for the denial of Petro Source's
          request for a renewal at the end of the Primary Term, SMRC shall
          pay Petro Source, on the date that this Agreement terminates,
          $100,000.
     b.   In the event that this Agreement terminates or expires under
          the provisions of paragraph I a. and Petro Source has a
          contractual commitment for refined product that had been entered
          into prior to the termination or expiration of this Agreement
          then, at Petro Source's request, SMRC shall hold the inventory
          necessary to fulfill the contractual commitment until Petro
          Source requests delivery of such inventory.  Petro Source shall
          pay, on a monthly basis, SMRC's operating expenses incurred for
          handling, storage and delivery of the refined product for the
          contractual commitment.

          Petro  Source understands that SMRC may be required  to
          relocate  the  refined  product to  other  tankage  for
          various  reasons.  Petro Source's  inventory  will  not
          materially  limit SMRC's use of the Refinery,  however,
          SMRC  shall  not  commingle the retained  Petro  Source
          inventory  with third party inventories  without  Petro
          Source's  prior approval; such approval  shall  not  be
          unreasonably withheld.

2.   Feedstock Processing
     a.   Petro Source shall deliver, or caused to be delivered,
          Feedstock to SMRC for processing at the Refinery. "Feedstock"
          means crude oils or other liquid hydrocarbons of the types listed
          in Exhibit "A", attached hereto and incorporated herein, which
          may be amended from time to time upon the agreement of the
          parties.  The amended list of crude oil and other liquid
          hydrocarbon types shall be set forth in writing and shall be
          incorporated into this Agreement.
     b.   The amount of Feedstock delivered shall be at Petro Source's
          sole discretion. SMRC agrees to process all quantities of
          Feedstock delivered by Petro Source for processing, up to the
          maximum thruput capability of the Refinery.  SMRC agrees to
          dedicate 100% of the capacity of the Refinery to the processing
          of the Feedstock delivered by Petro Source.  The parties
          acknowledge that it is the intent of this Agreement to develop
          opportunities for Local Sales (defined in paragraph 3) and to
          satisfy that intent the parties agree that the asphalt produced
          from 50% of the first 90,000 barrels of Feedstock, delivered each
          month, shall be allocated to Local Sales ("Allocated Asphalt").
          If Petro Source, after reasonable efforts to market the Allocated
          Asphalt to Local Sales, and after consulting with SMRC, elects to
          market Allocated Asphalt as Export Sales (defined in paragraph
          3), then Petro Source may market the Allocated Asphalt as Export
          Sales.

3.   Processing Fee and Payment Thereof
     a.   SMRC shall be entitled to a monthly processing fee (the
          "Processing Fee") which is the sum of 50% of Local Profit, plus
          50% of Export Profit. Notwithstanding the foregoing to the
          contrary, SMRC shall receive no portion of the profit from the
          sale of Export Sales asphalt products which are modified or
          blended with other materials by Petro Source, or its agents,
          after the asphalt products are removed from the Refinery.
     b.   "Local Profit" means Local Sales Revenue less Local Cost(s)
          as determined in accordance with generally accepted accounting
          principles ("GAAP").
          i.   "Local Sales Revenues" means, on a process month basis, all
               revenue received and retained (i.e., not subject to being
               returned due to events such as, but not limited to, offsets,
               accounting corrections, settlements and preference actions in
               bankruptcy) from Local Sales.
        ii.  Local Sales" means sales of the following products: (1)
             asphalt which was produced at the ' Refinery from Feedstock
             supplied by Petro Source and delivered to an application site in
             the State of California; (2) asphalt which was processed at the
             Refinery from Feedstock supplied by Petro Source and which was
             modified by polymiers at the Refinery, regardless of application
             location, and (3) a prorated portion of the light products
             attributable to the volume of Feedstock from which Local Sales
             described in subparagraph (1) and (2) hereof were derived.
       iii. "Local Cost(s)" means, the sum of Petro Source's Local
            Marketing Cost(s), SMRC Reimbursable Variable Cost(s) (defined in
            paragraph 5) allocable to Local Sales, SMRC Reimbursable Fixed
            Cost(s) (as defined in paragraph 5), Local Inventory and
            Receivable Carrying Cost(s); and Local Cost(s) Carry Forward.
       iv.  "Petro Source's Local Marketing Cost(s)" means on a process
            month basis, all cost(s), losses (including hedging losses net of
            gains) and expenses incurred by Petro Source in making related
            Local Sales Revenue, including, but not limited to, the direct
            out-of-pocket cost(s) of selling, documenting, handling, storing,
            developing, testing, transporting and installing product; cost(s)
            associated with collection of receivables related to Local Sales
            (including, but not limited to, demerits and bad debt), cost(s)
            of goods sold, and any environmental excise tax, (including, but
            not limited to, Superfund excise tax) on petroleum processing.
            The parties hereto acknowledge that in accordance with the
            regulations pertaining to the Superfund excise tax that SMRC, as
            owner and operator of the Refinery, is required to remit the
            Superfund excise tax to the federal government.
       v.   "Local Inventory and Receivable Carrying Cost(s)" means the
            portion of interest, at the rate charged to Petro Source under
            its bank credit facility, incurred to purchase and hold inventory
            and receivables pending payment; and letters of credit cost(s)
            which are reasonably allocable to Local Sales.
      vi.  If Local Sales Revenue less Local Cost(s) is a negative
           number, that number will first be applied as a reduction to
           Export Profit and if Export Profit is insufficient to absorb the
           entire amount, any remaining amount will be carried forward and
           treated as a Local Cost(s) in future months until it is
           extinguished or until this Agreement expires or is terminated by
           Petro Source ("Local Cost(s) Carry Forward").

 c.   "Export Profit" means Export Sales Revenue less  Export
          Cost(s) as determined in accordance with GAAP.
          i.   "Export Sales Revenue" means, on a process month basis, all
               revenue received and retained from Export Sales, less $25 per ton
               for each ton of processed asphalt sold. Notwithstanding the
               foregoing to the contrary, if Petro Source could have supplied an
               Export Sale from another source, with such other source at a
               lower cost(s) than the effective cost(s) Petro Source incurs by
               supplying such sale with asphalt from the Refinery, such $25
               shall be increased by the difference in the cost(s) of the two
               sources of supply.
         ii.   "Export Sales" means sales of the following products: (1)
               asphalt which was produced at the Refinery from Feedstock
               supplied by Petro Source and delivered to an application site
               outside of the State of California, except when such asphalt has
               been modified with polymers at the Refinery, and (2) a prorated
               portion of the light products attributable to the volume of
               Feedstock from which Export Sales described in subparagraph (1)
               hereof were derived.
          iii. "Export Cost(s)" means, the sum of Petro Source's Export
               Marketing Cost(s), SMRC Reimbursable Variable Cost(s) allocable
               to Export Sales, Export Inventory and Receivable Carrying Cost(s)
               and any Remote Terminal Cost(s).
          iv.  "Petro Sources Export Marketing Cost(s)" means on a process
               month basis, all cost(s), losses (including hedging losses net of
               gains) and expenses incurred by Petro Source in making related
               Export Sales Revenue, including, but not limited to, the direct
               out-of-pocket cost(s) of selling, documenting, handling, storing,
               developing, testing, transporting and installing product; cost(s)
               associated with collection of receivables related to Export Sales
               (including, but not limited to, demerits and bad debt), cost(s)
               of goods sold, and any environmental excise tax (including, but
               not limited to, Superfund excise tax) on petroleum processing.
          v.   "Export Inventory and Receivable Carrying Cost(s)" means
               portion of interest incurred to purchase and hold inventory and
               receivables pending payment; and letters of credit cost(s) which
               are reasonably allocable to Export Sales. 
          vi.  "Remote Terminal Cost(s)" means a thruput cost(s) of $15.00
               per ton for each ton of asphalt sold as an Export Sale to cover
               use of asphalt terminaling facilities of Petro Source and its
               affiliates only when such asphalt actually passes through such
               terminaling facility. Such Remote Terminal Cost(s) is to be
               adjusted for inflation on an annual basis using the percentage
               increase in the U.S. Department of Commerce's Consumer Price
               Index.
     d.   Within thirty-five (35) days after the end of a process
          month, Petro Source shall provide SMRC a monthly statement (the
          "Monthly Statement") identifying Local, Profit, Export Profit,
          Local Inventory and Receivable Carrying Cost(s), Export Inventory
          and Receivable Carrying Cost(s), Petro Source's Local Marketing
          Cost(s) and Petro Source's Export Marketing Cost(s); reflecting
          how SMRC's compensation was calculated. Petro Source shall pay
          SMRC any Processing Fee due monthly, based upon the Monthly
          Statement.
     e.   Within one hundred twenty (120) days of the date SMRC
          receives the Monthly Statement, SMRC shall promptly notify Petro
          Source of any dispute with the Monthly Statement or a portion
          thereof. After that one hundred twenty (120) days has passed, the
          Monthly Statement shall be deemed correct and final as to any
          allocation or determination made by Petro Source in the Monthly
          Statement's preparation, and SMRC shall have rel6sed and waived
          all rights concerning the undisputed portions of the Monthly
          Statement concerning such allocations or determinations. Any
          errors, omissions or changes in accruals not dependent on Petro
          Source's judgment, or any adjustments made by third parties, may
          be made at any time within a two (2) year period after the month
          of delivery of the Monthly Statement, and all payments are
          subject to subsequent adjustment for such items.
4.   Reimbursable Cost(s)
     a.   SMRC shall pay all direct out-of-pocket cost(s) reasonably
          and necessarily incurred by SMRC to process Feedstock, which may
          be reimbursed by Petro Source (the "Reimbursable Cost(s)"). For
          all purposes hereunder, Reimbursable Cost(s) shall not include
          capital cost(s), depreciation, amortization, environmental
          remediation, administration, management higher than plant
          manager, property damage to the refinery, or cost(s), if any,
          which are the result of SMRC's or a third party's negligence.
     b.   "SMRC Reimbursable Variable Cost(s)" means the Variable
          Cost(s) incurred by SMRC in carrying out SMRC's obligations under
          this Agreement, which have been approved in advance of being
          incurred. SMRC Reimbursable Variable Cost(s) shall be allocated
          between Local Cost(s) and Export Cost(s) based upon the ratio of
          Local Sales asphalt volume and Export Sales asphalt volume to the
          total asphalt sales volume. "SMRC Reimbursable Fixed Cost(s)"
          means those Reimbursable Cost(s) other than SMRC Reimbursable
          Variable Cost(s).
     c.   SMRC shall prepare and present to Petro Source on the 15th
          of each month an estimate of SMRC's Reimbursable Variable Cost(s)
          and Reimbursable Fixed Cost(s) to be reasonably and necessarily
          incurred by SMRC to process the Feedstock ("Monthly Budget").
          Petro Source shall review the Monthly Budget and shall advise
          SMRC which items on the Monthly Budget Petro Source agrees to
          reimburse pursuant to this Agreement.
     d.   Petro Source shall prepare and present to SMRC on the 15th
          of each month an estimate of Petro Source's Local Marketing
          Cost(s) and Petro Source's Export Marketing Cost(s) to be
          reasonably and necessarily incurred by Petro Source to acquire
          the Feedstock and to market the refined product processed
          pursuant to the terms of this Agreement ("Monthly Marketing
          Budget"). SMRC and Petro Source shall review the Monthly
          Marketing Budget and shall determine jointly which items shall be
          accepted as Petro Source's Local Marketing Cost(s) and Petro
          Source's Export Marketing Cost(s), for purposes of this
          Agreement.
     e.   SMRC shall submit to Petro Source each Monday a summary of
          all Reimbursable Cost(s) which are due, payable, and shall be
          paid by SMRC during the following seven days with the associated
          documentation of the Reimbursable Cost(s).  Petro Source shall
          review the summary of Reimbursable Cost(s) and the associated
          documentation and if the same is acceptable Petro Source shall
          transfer to SMRC, by wire, an amount, as determined by this
          Agreement,. equal to the accepted Reimbursable Cost(s).
     f.   SMRC shall provide Petro Source notice, as soon as
          reasonably possible, of any SMRC's Reimbursable Fixed Cost(s)
          account (e.g., contract labor, chemicals, etc.) which is expected
          to exceed the amount shown for such cost(s) in the Monthly Budget
          by more than 10% ("Fixed Cost(s) Over Budget"). Petro Source,
          upon review of Fixed Cost(s) Over Budget, shall have the sole
          discretion to approve or disapprove the Fixed Cost(s) Over
          Budget. Only those Fixed Cost(s) Over Budget which Petro Source
          receives notice of and approves shall be subject to reimbursement
          by Petro Source under this Agreement.
     5.   Taxes and Tariffs
          SMRC  shall be responsible for and pay or cause to  be  paid
          all  taxes and tariffs imposed upon SMRC with respect to the
          performance by SMRC of its operations and obligations  under
          this Agreement and Petro Source shall be responsible for and
          pay  all  taxes and tariffs imposed upon Petro  Source  with
          respect to the performance of its operations and obligations
          hereunder.

6.   Discontinuance of Operations
     a.   Notwithstanding any provision contained herein  to  the
          contrary, in the event and at any time that Petro Source
          determines, in its sole judgment, that it would be more efficient
          or economical to discontinue processing Feedstock Petro Source
          shall give SMRC ten (10) days written notice to place the
          Refinery in a Warm/ldle mode; or, thirty (30) days written notice
          to place the Refinery in a Shutdown mode.
     b.   "Shutdown" means the Refinery is not staffed or operated for
          processing any Feedstock, nor is it capable of processing
          Feedstock without a delay, and no heat is being supplied to the
          asphalt product tanks.
     c.   "Warm/Idle" means the Refinery is not currently processing
          any Feedstock but is staffed and is capable of processing
          Feedstock without delay and the asphalt product tanks are kept
          hot and available for daylight loading in order to remove
          inventory.
     d.   If Petro Source requests that the Refinery be placed on a
          Warm/Idle mode, then Petro Source will pay SMRC the Reimbursable
          Cost(s) hereunder during the period the Refinery is in Warm/Idle
          mode.  If Petro Source requests that the Refinery return to full
          operation after being placed on Warm/Idle mode, SMRC shall have
          at least ten (10) days to return the Refinery to full operation
          after receipt of such notice. During the period in which the
          Refinery has been placed on a Warm/Idle mode, liquidation of
          inventory shall bear the same processing fee as the operating
          mode.
     e.   If Petro Source requests that the Refinery be placed on a
          Shutdown mode, then Petro Source may pay SMRC a flat fee of
          $20,000 per month, prorated as necessary from the date of notice,
          ("Shutdown Fee") to keep this Agreement in force and effect.  The
          Shutdown Fee shall be due and payable as of the 1st day of the
          month following the month in which the request to place the
          refinery in Shutdown mode was placed by Petro Source and the
          Refinery was actually placed in Shutdown mode. If Petro Source
          does not pay the Shutdown Fee, then SMRC shall have the right to
          terminate this Agreement.  If Petro Source requests that the
          Refinery return to full operation after being placed on Shutdown
          mode, SMRC shall have at least thirty (30) days to return the
          Refinery to full operation after receipt of such notice. During
          the time in which the Refinery is in a Shutdown mode, SMRC shall
          not be obligated to accept deliveries into the Refinery or be
          required to deliver product to Petro Source from the Refinery. 
     f.   If at any time Petro Source determines that the profit
          margin for Local Sales on a per barrel basis is less than 75
          cents per barrel, but more than 25 cents per barrel, based upon
          forecast and estimates provided by SMRC and Petro Source, Petro
          Source shall notify SMRC of the estimated profit margin and then
          for the period for which the profit calculation is made, SMRC and
          Petro Source shall share equally in the risk of the profit
          margin. SMRC shall, after receiving a copy of the profit
          calculation and notice from Petro Source that the profit margin
          is less than 75 cents per barrel but more than 25 cents per
          barrel, have three (3) days to reject its shared participation in
          the risk of the profit margin for the period for which the.
          profit calculation is made. If SMRC rejects participation the
          Refinery shall be operated in a Shutdown mode.  If SMRC does not
          reject the participation, but Petro Source later determines that
          the profit margin calculated for the period has fallen below 25
          cents per barrel, Petro Source shall notify SMRC of the change in
          the estimated profit margin and SMRC shall move the Refinery
          operations to the Warm/Idle or Shutdown mode as directed by Petro
          Source.

7.   Refinery Operations
     a.   SMRC shall operate the Refinery during the term of this
          Agreement in a prudent and workmanlike manner, and in accordance
          with generally accepted industry standards.  SMRC will provide
          the capital necessary to ready the Refinery to a safe and
          efficient operating condition. If the parties agree that capital
          improvements at the Refinery are mutually advantageous, the
          parties will negotiate to amend this Agreement to take into
          account the mutually desired capital improvements. All capital
          improvements at the Refinery shall remain the property of SMRC,
          except and unless, Petro Source elects to pay for the capital
          improvement and Petro Source demonstrates that such capital
          improvement can be removed without damage to Refinery property.
          SMRC shall have the option to purchase all capital improvements
          paid for by Petro Source at a mutually agreed upon price.
     b.   SMRC shall provide laboratory personnel which shall be 
          responsible for determining daily that products produced and
          stored by SMRC for Petro Source under this Agreement comply with
          product specifications as identified in Exhibit "B", as amended
          from time to time. Should Petro Source desire to amend the
          Exhibit "B", by adding a new product specification, Petro Source
          shall first provide the specification to SMRC, with data on the
          Feedstock Petro Source plans to provide in order to make the
          product specified, and SMRC shall have up to fifteen (15) days to
          inform Petro Source as to SMRC's ability to produce the requested
          products according to the specifications. If SMRC is unable to
          produce the requested product according to the specification, it
          shall notify Petro Source of such inability and SMRC shall have
          no obligation to produce the requested products. If SMRC has
          notified Petro Source that it can produce the specification, and
          SMRC fails to produce products meeting the specifications in
          Exhibit "B", Petro Source shall have the right to terminate this
          Agreement upon thirty (30) days written notice. SMRC shall not be
          reimbursed for any Reimbursable Cost(s) during any periods in
          which it was unable to produce products meeting Exhibit "B"
          specifications.
     c.   SMRC will, at all times, be the operator of and remain in 
          control of the Refinery. All actions with respect to the
          operation of the Refinery shall be undertaken by SMRC.  Petro
          Source shall in no way operate or control the operation of the
          Refinery.

8.   Refinery Operation Reports
     a.   Petro Source and SMRC recognize that Petro Source shall
          require certain daily data and information on the performance of
          the Refinery and quality and quantity of products produced so
          that Petro Source can assess the continuing economic viability of
          the processing arrangement contemplated in this Agreement. SMRC
          will provide reasonable reports to Petro Source as to SMRC's
          operations and production, including an inventory and laboratory
          product quality report and other reports which allow Petro Source
          to monitor variances from anticipated thruput during a month,
          operating difficulties and other changes.
     b.   As soon as possible after the end of each calendar month,
          but in no event later than the 10th day of each month, SMRC shall
          prepare and furnish to Petro Source an inventory report for the
          preceding month which sets out preceding month's quantity of
          Feedstock received from Petro Source and type, quality and
          quantity of refined products redelivered to Petro Source, and the
          type, quality and quantity of refined products SMRC held in
          storage for Petro Source at the end of the preceding month (the
          "Inventory Report").
     c.   Petro Source and SMRC shall develop mutually acceptable
          accounting information and documentation procedures which allow
          for the administration of this Agreement. These procedures may
          include, but not be limited to, the exchange of daily receipt and
          delivery tickets, of daily and monthly plant and product
          performance data, and of necessary process and technical
          information. Petro Source shall supply to SMRC refined products
          delivery tickets for SMRC's use in the transfer of refined
          products at the Refinery, and these receipt tickets are to be
          forwarded to Petro Source on a daily basis. For receipt of
          Feedstock at the Delivery Point (defined in paragraph 11), SMRC
          shall use SMRC custody transfer tickets.

9.   Nominations

        On  or  before  the  20th of each month, Petro  Source  will
     notify SMRC in writing of the following: (a) the anticipated
     base  thruput  volume  of Feedstock to  be  run  during  the
     upcoming month; (b) whether the refined product therefrom is
     expected to be "Local Sales" or "Export Sales"; and (c)  the
     anticipated profitability from Local Sales. SMRC understands
     that these are estimates and forecasts and that Petro Source
     is  not  warranting  that  the actual  results  will  be  as
     forecasted.  In  a  like manner, Petro  Source  may  acquire
     Feedstocks  and sell products during a month for which  such
     acquisitions and sales had not been forecasted.

10.  Refinery Access

     SMRC  hereby  grants to Petro Source and its representatives
     the  continuing  right  of access to the  Refinery  for  the
     purpose  of  (a) reviewing and monitoring SMRC's performance
     under  this  Agreement; (b) taking such security precautions
     as  Petro Source may deem advisable in an effort to minimize
     any  potential Feedstock or refined product losses; and  (c)
     performing any obligations Petro Source may have  under  the
     terms of this Agreement.

11.  Feedstock Delivery, Refined Products Re-Delivery and Risk of
     Less
     a.   All  deliveries  of Feedstock by Petro Source  to  SMRC
          hereunder shall be made at the Delivery Point. "Delivery Point"
          means the truck unloading flange at the Refinery or such other
          delivery points as may be mutually agreed upon by Petro Source
          and SMRC. Petro Source shall have custody and control of the
          Feedstock, and shall be responsible for any loss or damage
          thereto at all times prior to the passage of such Feedstock
          through the Delivery Point at the Refinery. SMRC shall have
          custody and control of, and bear all risk of loss for, and damage
          by and to the Feedstock delivered by Petro Source hereunder upon
          passage of such Feedstock through the Delivery Point.  SMRC shall
          have custody and control of, and bear all risk of loss for, and
          damage by and to the refined products delivered by Petro Source
          hereunder upon passage of such refined products through the
          Delivery Point.
     b.   SMRC shall be responsible for any loss of, or damage or
          injury to all refined, or partially refined product processed
          from the Feedstock until the refined products are redelivered to
          Petro Source at the Redelivery Point.  "Redelivery Point" means
          the outlet flange of the Refinery or such other redelivery point
          as may be mutually agreed upon by Petro Source and SMRC.  Petro
          Source shall have custody and control of the refined products,
          and shall be responsible for any loss or damage thereto, after
          the passage of such refined products through the Redelivery
          Point.
     c.   Notwithstanding the foregoing to the contrary, the parties      
          hereto acknowledge and agree that refineries, under normal
          operations, experience loss of product due to the refining
          process ("loss"). The parties, acknowledge and agree that the
          "loss" can be influenced by the composition of feedstocks and the
          methods used to process, blend and transport the feedstocks and
          finished products. SMRC agrees to incorporate all loss control
          procedures mutually acceptable to both parties. Any "loss" of
          product or feedstock resulting from normal operations and
          mutually accepted loss control procedures shall be shared equally
          by both parties. SMRC shall be responsible for loss of feedstock
          or finished product resulting from negligence or failure to
          follow mutually acceptable loss control procedures. SMRC shall
          submit to Petro Source by the 5th day of each calendar quarter,
          commencing after the first full calendar quarter that this
          Agreement is in effect, a report showing loss for the quarter.
          SMRC shall within ten (10) days of the report, remit to Petro
          Source a sum equal to the volume of loss due to negligence or 
          failure to follow mutually acceptable loss control procedures
          times the weighted average feedstock cost(s) for the calendar
          quarter.

12.  Title   to   Feedstock,  Plant  Fill  and  Refined  Products
     Inventory

     Petro  Source  shall at all times retain full  and  complete
     title and ownership of all of the Feedstock, Plant Fill  and
     refined   products   processed  from   Feedstock   delivered
     hereunder.  SMRC will return to Petro Source such Feedstock,
     Plant  Fill and/or the refined product upon demand,  without
     right of set off.  "Plant Fill" means inventory contained in
     the process unit, process piping and tank bottoms.

13.  Current Refinery Inventory

    SMRC  shall  provide a gauge sheet which shall  set  forth  a
    description  of  the  quantity tank  heel  level  as  of  the
    effective date of this Agreement. This gauge sheet  shall  be
    attached  hereto as Exhibit "C" and incorporated  herein  for
    all  purposes.  Petro Source shall purchase  the  tank  heels
    shown in Exhibit "C" for $1 per barrel. At the expiration  of
    this Agreement and after Petro Source has removed all of  its
    inventory  from the tanks located at the Refinery SMRC  shall
    purchase such quantity at $1 per barrel.

14.  Representations and Warranties of Petro Source

     Petro  Source  represents and warrants with respect  to  the
     Feedstock  delivered  to the Refinery hereunder,  that  such
     Feedstock  is  of a type set forth in Exhibit  "A"  attached
     hereto,   including  any  amendments  thereto.   EXCEPT   AS
     PROVIDED  BY THE FOREGOING, PETRO SOURCE DOES NOT  MAKE  ANY
     REPRESENTATION  OR  WARRANTY,  EXPRESSED  OR  IMPLIED,  WITH
     RESPECT   TO  THE  FEEDSTOCK  DELIVERED,  INCLUDING  WITHOUT
     LIMITATION,  ANY  WARRANTY AS TO FITNESS  FOR  A  PARTICULAR
     PURPOSE.   SMRC shall have the right to reject any Feedstock
     which  it  deems  unsuitable due  to  refinery  designs  and
     operating  parameters, except where the Feedstock  is  of  a
     type  set  forth  in  Exhibit "A",  however,  all  Feedstock
     accepted by SMRC for processing shall be deemed to be  of  a
     type  set  forth  in Exhibit "A." Acceptance for  processing
     occurs  when SMRC accepts delivery of the Feedstock  at  the
     Delivery Point.

15.  Representation and Warranties of Petro Source
     a.   SMRC represents and warrants to Petro Source that it has
          operated and shall continue to operate the Refinery throughout
          the term of this Agreement in a prudent, workmanlike manner in
          accordance with generally accepted industry standards and in
          compliance with all applicable federal, state and local laws,
          rules, regulations and requirements, including, without
          limitation, all federal, state and local laws; rules, regulations
          and requirements.
     b.   SMRC represents and warrants that SMRC has, at its own
          expense, repaired and otherwise brought the Refinery to a state
          of operational readiness so that it can safely and efficiently
          process the Feedstock.
     c.   SMRC represents and warrants that SMRC will hire, supervise,         
          and maintain a qualified staff of refinery operators, and will
          operate the facility in a workmanlike, safe and economic manner
          to refine Feedstock delivered to the refinery by Petro Source.
     d.   SMRC represents and warrants that all Feedstock accepted by 
          SMRC for processing can be processed within the Refinery's design
          and operating parameters.
     e.   SMRC represents and warrants that it will not (1) allow
          either feedstock or refined products, owned by SMRC or third
          parties, to be stored at the Refinery; (2) commingle Petro
          Source's Feedstock or refined product inventory with any
          inventory owned by SMRC or third parties; and (3) allow liens or
          other encumbrances, other than those liens shown in Exhibit "U',
          attached hereto and incorporated herein, to become affixed either
          to Petro Source's Feedstock or refined product inventory.
     f.   SMRC represents and warrants that (1) SMRC is the lawful
          owner of and has good and indefeasible title to the Refinery and
          has the full right and authority to operate the same; (2) no 
          litigation is pending or, to the knowledge of SMRC, threatened,
          wherein a claim of title is asserted to the Refinery adverse to
          SMRC's title to the same; (3) all taxes assessed against the
          Refinery and all liabilities incurred by SMRC have been paid; (4)
          there are no liens or security interests, other than those liens
          and security interests represented in Exhibit "D" hereto, of any
          nature encumbering the Refinery; and (5) that no additional liens
          or security interests shall be permitted without the express
          written consent of Petro Source.

16.  Indemnity and Insurance
     a.   SMRC shall be responsible for and shall defend, indemnify
          and hold harmless Petro Source from and against any and all
          claims, demands, losses, judgments, awards, liabilities,
          expenses, clean-up orders and cost(s), and suits, whether
          groundless or not, from environmental claims, damage, litigation,
          penalties, or citations; for bodily injury, sickness, disease or
          death; for contamination of, damage to, or destruction of
          property (real or personal); and for loss of or damage to natural
          resources, resulting directly or indirectly from the ownership
          and/or operation of the Refinery by SMRC, whether such claims,
          demands, losses, judgments, awards, liabilities, expenses, clean-
          up orders and cost'(s), or suits arose before or after the
          Effective Date.
     b.   SMRC agrees to obtain and furnish certificates of insurance
          which will evidence to Petro Source public liability insurance
          covering the Refinery and SMRCs activities therein contemplated
          hereunder with limits of not less than FIVE MILLION AND NO/100
          DOLLARS ($5,000,000.00), with respect to bodily injury or death
          to any person or persons for any one event or occurrence and not
          less than FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) with
          respect to property damage in any one event or occurrence.  Petro
          Source agrees that the foregoing policy may be in the nature of
          blanket coverage including the Refinery as one of several
          properties covered thereby.
     c.   Petro Source shall be responsible for and shall defend,
          indemnify and hold harmless SMRC from and against any and all
          claims, demands, losses, judgments, awards, liabilities,
          expenses, clean-up orders and cost(s), and suits, whether
          groundless or not, for bodily injury, sickness, disease or death
          resulting solely from acts of negligence, gross negligence, or
          willful misconduct on the part of Petro Source, its employees or
          agents.

17.  Purchases and Sales of SABA Crude
     a.   SABA shall offer to sell to Petro Source all crude  oil
          produced in California within a twenty five (25) mile radius of
          the Refinery,. which is owned or controlled by SABA which is
          either available for sale or could become available for sale upon
          notice to third parties. SABA shall provide Petro Source notice
          of the availability of such crude oil thirty (30) days prior to
          the availability of such for purchase. Whenever there is crude
          oil production which is owned or controlled by SABA, such
          production is either available for sale, or could become
          available for sale with the giving of notice, Petro Source will
          have the right, but not the obligation, to purchase such crude
          oil.
     b.   With respect to SABA's heavy crude oil, Petro Source may
          purchase such oil at the volumetric weighted average of third
          party purchases of similar type and term, at the lease, adjusted
          for gravity and quality differentials. If no third party
          purchases exist, then the arithmetic average of Texaco, Unocal
          and EOTT's posting for crude oil of a similar type and term
          adjusted for gravity and quality differentials will be used. Such
          purchase of heavy crude oil shall be based upon the terms and
          conditions contained in the contract entered into between Petro
          Source and SABA attached hereto and incorporated herein as
          Exhibit "E."
     c.   With respect to SABA's light crude oil, Petro Source will
          have the right to purchase such crude oil by matching any bona
          fide third party offer received by SABA for such production at
          the time such production is available for purchase. Petro Source
          shall, within twenty (20) days, after receipt of SABA's notice of
          a bona fide third party offer for SABA's light crude oil, inform
          SABA as to whether Petro Source will exercise its option to
          purchase such light crude oil. Such purchase of light crude oil
          shall be based upon Petro Source's general terms and conditions.

18.  Force Majeure

     Each   party  shall  be  excused  for  delay  in  performance
     hereunder when and to the extent that performance is  delayed
     (a)  by  any  cause reasonably beyond such party's reasonable
     control,  or  (b) by fire, explosion, riots,  strikes,  labor
     disputes,  breakdown  of machinery or equipment,  compliance, 
     voluntary   or  involuntary,  with  any  law,  order,   rule,
     regulation,  recommendation  or  request,  whether  valid  or
     invalid,  of any governmental agency or authority  of  person
     purporting  to  act thereunder, shortage or  failure  of  the
     usual  means of transportation of Feedstocks and/or  products
     to  be delivered and/or received hereunder, inability for any
     reason  to  obtain Feedstock and/or materials to be  used  in
     the   manufacture,  transportation,  refining,  handling   or
     storage  thereof, low or curtailment of Feedstock  production
     or loss or failure of product margin or markets.

19.  Guaranty

     SABA  hereby  guarantees to Petro Source,  all  payment  and
     performance obligations of SMRC hereunder.
     
20.  Confidentiality

     SMRC  and Petro Source both agree and acknowledge that Petro
     Source  possesses  considerable  knowledge  and  information
     about  the  Feedstock and refined products market  which  is
     confidential and should remain confidential. SMRC agrees  to
     be  bound  by  the  terms contained in  the  Confidentiality
     Agreement  which is attached hereto and incorporated  herein
     as Exhibit "F."
     
21.  Audits

    Each  party will maintain books and records evidencing  their
    performance hereunder. Such records shall be retained for  at
    least two (2) years following the date on which the books  or
    records  are  prepared. Upon seven (7) days  written  notice,
    either  party  shall have the right, at its own  expense  and
    during  reasonable  business hours, to audit  the  books  and
    records  of  .the  other  party to the  extent  necessary  to
    verify  performance  hereunder.  Prior  to  commencing   such
    audit,  the  auditing  party  and its  representatives  shall
    agree  to  maintain  the confidentiality of  any  information
    disclosed to the auditor during such audit.
    
22.  Notices

     Except  as  herein otherwise provided, any notice,  request,
     demand, statement or bill provided for in this Agreement, or
     any  notice  which either party may desire to  give  to  the
     other,  shall be in writing and shall be considered as  duly
     delivered  when  hand delivered or mailed by  registered  or
     Certified Mail, Return Receipt Requested, to the post office
     address  of  the  parties hereto, as the  case  may  be,  as
     follows:

       Petro Source:    Petro Source Refining Corporation
                        9801 Westheimer., Suite 900
                        Houston, Texas 77042
                        Attention: Harvey H. Cody III

                         Petro Source Refining Corporation
                         136 East South Temple, Suite 800
                         Salt Lake City, Utah 84111
                         Attention:  Brent Stromberg

       SMRC:             Santa Maria Refining Company
                         1660 Sinton Road
                         Santa Maria, California 93455
                         Attention:  Burt M. Cormany

       SABA:             SABA Petroleum Company
                         17512 Von Karman
                         Irving, California 92714
                         Attention:  Ilyas Chaudhary

or to such other address as either party shall designate by
formal written notice.

23.  Assignment and Severability

     This  Agreement  shall  not be assignable  by  either  party
     hereto  without the express written consent  of  the  other,
     which   consent   shall   not  be   unreasonably   withheld.
     Otherwise, the terms and conditions hereof shall  extend  to
     and  be  binding  upon  the  parties  and  their  respective
     successors  and assigns.  The invalidity or unenforceability
     of  any  provision of this Agreement shall  not  affect  the
     validity and enforceability of any other provision, and each
     provision of this Agreement shall be enforced to the maximum
     extent permitted by applicable law.

24.  Choice of Laws, Jurisdiction and Venue

     This Agreement shall be governed and construed in accordance
     with the laws of the State of California, without regard  to
     any  conflict  of  laws or provisions which might  otherwise
     cause  another  jurisdiction's laws to apply. The  exclusive
     jurisdiction and venue for any action brought in  connection
     with  this  Agreement shall be the state or  federal  courts
     located in Orange County, California.

25.  Relationship of Parties

    It  is  not  the  purpose or intention of this  Agreement  to
    create,  and  this Agreement should. never  be  construed  as
    creating,  a  joint  venture, agency,  partnership  or  other
    relationship  whereby either of the parties hereto  shall  be
    liable  for  the acts, either of commission or omission,  the
    other party hereto.

26.  Rules and Regulations

     All  of the terms and conditions of this Agreement shall  be
     subject   to  the  applicable  laws,  statutes,  directives,
     orders,   rules   and   regulations  of   all   governmental
     authorities having jurisdiction hereof.

27.  Entirety of Contract

     This Agreement contains all the terms and provisions between
     the  parties concerning the subject matter hereof,  and  any
     prior or contemporaneous agreement or understanding, whether
     written or oral, is void. All amendments or changes in  this
     Agreement  shall be made only in writing by duly  authorized
     representatives of the parties.

     IN  WITNESS  WHEREOF, the parties hereto have executed  this
Agreement as of the day first above written.

PETRO SOURCE REFINING CORPORATION

Name: A. Howard McCollum
Title: Sr. Vice President


SANTA MARIA REFINING COMPANY

Name: Burt M. Corman
Title: President


SABA PETROLEUM COMPANY
Name: Ilyas Chaudhary
Title: President & CEO