BROWNSVILLE NAVIGATION DISTRICT
THE STATE OF TEXAS  )(                           CONTRACT NO.      2823 "H"
                                                              ------------------
COUNTY OF CAMERON   )(


                                 LEASE AMENDMENT
                                 ---------------


     WHEREAS, by Lease Agreement, the BROWNSVILLE NAVIGATION DISTRICT OF CAMERON
COUNTY, TEXAS, leased and let to PENN OCTANE CORPORATION, 14.76 acres of land in
Cameron  County,  Texas;  and
     WHEREAS,  the  said  Lessee,  desires  to  increase the size of said leased
premises;  NOW  THEREFORE,
     THIS  CONTRACT  between  the  BROWNSVILLE  NAVIGATION  DISTRICT  OF CAMERON
COUNTY,  TEXAS,  herein  styled  "District" and PENN OCTANE CORPORATION, a Texas
corporation,  hereinafter  styled  "Lessee".

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

                                       1.

     The  aforesaid lease is amended so as to be increase the leased premises by
adding 16.40 acres which are described in Exhibit "A" attached hereto and made a
part  hereof  for  all  purposes.

                                       2.

     The  annual  rental shall be increased to Seventy Four Seven Hundred Eighty
Four  and  00/100  Dollars  ($74,784  00)  effective  April  15,  1997,  payable
semi-annually  in  installments  of $37,392.00 on the 15th of April and October.

                                       3.

     All other terms and provisions of said lease are continued in force.
     IN  TESTIMONY  WHEREOF,  said  BROWNSVILLE  NAVIGATION  DISTRICT OF CAMERON
COUNTY,  TEXAS,  has caused these presents to be executed by its proper officers
thereunto  duly  authorized,  and  PENN  OCTANE, CORPORATION, has executed these
presents,  this  7th  day  of  May,  1997.
                 ---           ---

                                BROWNSVILLE NAVIGATION DISTRICT OF
                                CAMERON COUNTY, TEXAS


ATTEST:                         By:  /s/ Mario Villarreal, Sr.
                                     -------------------------------------------
                                     Mario Villarreal, Sr., Chairman of the
                                     Board of Navigation and Canal Commissioners
/s/Illegible                         of the Brownsville Navigation District of
------------------------------       Cameron County, Texas
Secretary


                                 LEASE AMENDMENT
                                     Page 1
<PAGE>
                             PENN OCTANE CORPORATION

ATTEST:                         By:  /s/ J.B. Richter
                                     -------------------------------------------

/s/Illegible                         J.B. Richter - President
------------------------------
Secretary

THE STATE OF TEXAS  )(

COUNTY OF CAMERON   )(

     This  instrument  was  acknowledged  before  me on the ___ day of ________,
1997,  by  MARIO  VILLARREAL,  SR.,  in his capacity as Chairman of the Board of
Navigation  and  Canal  Commissioners  of the Brownsville Navigation District of
Cameron  County,  Texas.


                                   ---------------------------------------------
                                   Notary Public in and for the State of Texas
                                   My Commission Expires:_________________

THE STATE OF TEXAS  )(

COUNTY OF CAMERON   )(

     This instrument was acknowledged before me on the ___ day of _______, 1997,
by_______,  _________,  of PENN OCTANE CORPORATION, a __________ corporation, in
behalf  of  said  corporation.


                                   ---------------------------------------------
                                   Notary Public in and for the State of Texas
                                   My Commission Expires:_________________


                                 LEASE AMENDMENT
                                     Page 2
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT                                   No. 5907
--------------------------------------------------------------------------------
State of  California
          ------------------------------
County of Los Angeles
          ------------------------------
On  May 7, 1997 before me, Christine Marshall, Notary Public                   ,
    -----------            ----------------------------------------------------
       DATE                          NAME, TITLE, OF OFFICER - E. G.,
                                        "JANE DOE, NOTARY PUBLIC"
personally appeared  J.B. Richter                                              ,
                     ----------------------------------------------------------
                                     NAME(S) OF SIGNER(S)
[X] personally known to me - OR - [_] proved to me on the basis of satisfactory
                                        evidence  to  be  the  person(s)  whose
                                        name(s)  is/are  subscribed  to  the
                                        within instrument and acknowledged to me
                                        that  he/she/they  executed  the same in
                                        his/her/their  authorized capacity(ies),
                                        and that by  his/her/their  signature(s)
                                        on  the instrument the person(s), or the
                                        entity  upon  behalf  of  which  the
                                        person(s)  acted,  executed  the
                                        instrument.

-----------------------------------     WITNESS my hand and official seal.
|          [SEAL OF NOTARY]       |
|       CHRISTINE J. MARSHALL     |
|          COMM. #1023317         |     /s/ Christine J. Marshall
|    Notary Public - California   |     ----------------------------------------
|        LOS ANGELES COUNTY       |               SIGNATURE OF NOTARY
|  My comm. Expires APR 17, 1993  |
-----------------------------------

------------------------------------OPTIONAL------------------------------------

Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.

     CAPACITY CLAIMED BY SIGNER         DESCRIPTION OF ATTACHED DOCUMENT

[_] INDIVIDUAL
[X] CORPORATE OFFICER
      President                             Lease Amendment
    ---------------------------------     --------------------------------------
              TITLE(S)                           TITLE OR TYPE OF DOCUMENT


[_] PARTNER(S)        [_] LIMITED
                      [_] GENERAL                           2
[_] ATTORNEY-IN-FACT                      --------------------------------------
[_] TRUSTEE(S)                                       NUMBER OF PAGES
[_] GUARDIAN/CONSERVATOR
[_] OTHER:
          ---------------------------     --------------------------------------
                                                     DATE OF DOCUMENT
    ---------------------------------

    ---------------------------------

SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
Penn Octane Corporation
-------------------------------------     --------------------------------------
                                             SIGNER(S) OTHER THAN NAMED ABOVE
--------------------------------------------------------------------------------

         (C)1993 NATIONAL NOTARY ASSOCIATION - 8236 Remmel Ave., P.O. Box 7184 -
                                                      Canoga Park, CA 91309-7184


<PAGE>
                           EXHIBIT "A" PENN OCTANE CO.
                    METES AND BOUNDS DESCRIPTION 16.40 ACRES


October 28, 1997

BEING  a 16.40 Acre Tract of land out of Share 32, Espiritu Santo Grant, Cameron
County,  Texas,  said 16.40 Acre Tract being out of the larger 462.26 Acre Union
Carbide  Tract  and said 16.40 Acre Tract being more fully described as follows:

COMMENCING  from  a  concrete  monument  found  at Corps of Engineers (U.S.E.D.)
Station 81+500 and the North 4+50 Reference Line from the original centerline of
the  Brownsville  Ship  Channel  thence  North  55  deg. 00 min. 59 sec. West, a
distance  of  1050.50 feet to a 2" pipe w/brass cap found at the intersection of
the  North  Right-of-way  line of State Highway No. 48 and the East Right-of-way
line  of  Chemical  Rd.  for the Southwest corner and PLACE OF BEGINNING of this
tract;

THENCE,  along  the East Right-of-way line of Chemical Rd. North 03 deg. 14 min.
30  sec.  West,  a  total distance of 1043.37 feet to a point on South line of a
certain  0.25  Acre  Tract (Penn Octane) for the Northwest corner of this tract;

THENCE,  along  the South line of the Penn Octane 0.25 Acre Tract, North 86 deg.
47  min.  08  sec. East, a total distance of 775.99 feet to a point found on the
West  line  of a certain 11.59 Acre Tract (Statia Terminals Southwest, Inc.) for
the  Northeast  corner  of  this  tract;

THENCE,  along  the  West line of the 11.59 Acre Tract, South 03 deg. 14 min. 55
sec. East, a total distance of 797.67 feet to a I/2" iron rod found on the North
Right-of-way  line  of  State  Highway  No.  48 for the Southeast corner of this
tract;

THENCE, along the North Right-of-way line of State Highway No. 48, South 69 deg.
14 min. 00 sec. West, a total distance of 813.86 feet to the PLACE OF BEGINNING,
containing  16.40  Acres,  more  or  less.

LR2834H.107


<PAGE>