January 13, 2004



FirstName LastName
Company
Company1
Address1
Address2
City , State Zip

     RE:  AMENDMENT  -  PROMISSORY NOTE ("NOTE") OF PENN OCTANE CORPORATION (THE
          "COMPANY")  CURRENTLY HELD BY YOU WITH A DUE DATE OF DECEMBER 15, 2003
          AND  RELATED  AGREEMENTS  AND  INSTRUMENTS

Dear Holder Of The Promissory Notes:

     Reference  is made to the promissory note(s) which is currently held by you
in  connection  with one or more of the following transactions with the Company:

     i.)       The  promissory  note(s)  originally  issued  by  the  Company in
               connection  with  the private placement on or around December 17,
               1999  (the  "Original  Notes"),  as  amended  (the  "Restructured
               Notes"),  and/or

     ii.)      The  promissory  note(s)  originally  issued  by  the  Company
               contemporaneously  with  the  restructuring of the Original Notes
               (the  "New  Notes").

     iii.)     The promissory note originally issued in June 2002 for $200,000
               and  December  2002  for  $300,000  (the  "Additional  Notes").

     The  Restructured  Notes,  the  New  Notes  and  the  Additional  Notes are
     collectively  referred  to  as  the  "Promissory  Notes"  and  all  of  the
     underlying  agreements  pertaining  to  the Promissory Notes, including the
     purchase  agreement,  the note agreement, the common stock purchase warrant
     agreement,  the  registration rights agreement, and all related amendments,
     if  any,  are  collectively  referred  to  as  the  "Original  Documents".

     The  Promissory  Notes,  including  unpaid interest were due and payable on
December  15,  2003.  The  Company desires to extend the payment due date on the
Promissory Notes until December 15, 2005 under the following conditions: (i) The
principal  amount  of the Promissory Notes will be due in one balloon payment on
December  15,  2005,  except that the Promissory Notes may be repaid at any time
without  penalty in whole or in part at the sole option of the Company, (ii) the
Company  will  continue  to  pay  interest  on the Promissory Notes at a rate of
16.50%  per  annum,  payable  quarterly,  (iii) The Company will also extend the
expiration  date  of  the  warrants currently held by you in connection with the
original  issuance  of  the Promissory Notes to December 15, 2008. In connection
with  the New Notes and Additional Notes, whereby the holders of those notes did
not  receive  any warrants in connection with their investment, the Company will
issue  warrants  under  the


<PAGE>
Amendment To Promissory Notes
January 13, 2004
Page 2 of 8

same  terms  and  conditions  of the warrants described herein, (iv) the Company
agrees to continue to pay you a fee equal to 1.5% of the principal amount of the
Promissory  Notes  which remain outstanding, if any, at the close of business on
December  15,  2003, March 15, 2004, June 15, 2004, September 15, 2004, December
15,  2004,  March  15,  2005, June 15, 2005, September 15, 2005 and December 15,
2005. In the case of the Additional Notes, the fee will continue to be 2.0%, (v)
the  Company  will  issue  additional  warrants to the holders of the Promissory
Notes  to  purchase  units  in Rio Vista Energy Partners L.P., provided that the
Company  successfully completes the Spin-off. The warrants will granted based on
2,500  warrants  for each $100,000 of Promissory Notes extended at the time this
Amendment  is  executed and 2,500 warrants for each $100,000 of Promissory Notes
outstanding  on  December 16, 2004, if any. The warrants will expire on December
15,  2008  and the exercise price will be based on a formula as described below,
and  (vi)  the  Company  will provide the holders of the Promissory Notes with a
letter  confirmation  from  RZB regarding RZB's agreement to refrain from taking
any  action against certain assets of the Company until all the Promissory Notes
have  been  fully  repaid  and  the Company on a good faith basis will provide a
perfected  security  interest in the US portion of its owned pipelines after the
indebtedness  of  Cowboy  and  Tanner  have  been  fully  repaid.

     The  holders  of  the Promissory Notes are currently aware of the Company's
efforts  to  complete the Spin-off as more fully described in the Company's Form
10-K  for  the  year  ended  July  31,  2003,  filed on November 3, 2003 and the
Company's  10-Q  for  the  quarter ended October 31, 2003, filed on December 17,
2003.  In  connection  with the Spin-off, the Company will be required to obtain
consents from the holders of the Promissory Notes to complete the Spin-off. This
amendment  will  provide  for the consent by the holders of the Promissory Notes
for  the  Company  to  complete  the  Spin-off  under  the terms described below

     The  Company  also  desires  to  remove Investec as the collateral agent in
connection with the Promissory Notes. This amendment will provide for consent by
the  holders  of  the  Promissory  Notes  for the Company to replace Investec as
collateral  agent replacing them with The Law Offices of Kevin Finck, counsel to
the  Company.

     This  amendment  will  also  provide  for  consent  by  the  holders of the
Promissory  Notes  for  the  collateral  agent  to immediately release 1,000,000
shares of common stock of the Company owned by Mr. Jerome Richter (the "Shares")
and  pledged  as  security  in  connection  with  the  Promissory Notes upon the
Company's  perfection of security interest in certain assets as described below.
The  parties  agree  to  establish a mutually agreeable escrow agent to hold the
Shares.

     For  good  and valuable consideration, the receipt and sufficiency of which
are  hereby  acknowledged,  the  Company and you hereby agree that your Original
Documents  shall  be, and hereby are, amended, effective from and after December
15,  2003,  to  the  fullest  extent  necessary  to  effectuate  the  following:


                                        2
<PAGE>
Amendment To Promissory Notes
January 13, 2004
Page 3 of 8

1.   Promissory  Notes.  The  Promissory Notes held by you are hereby amended to
     -----------------
     the full extent necessary to effectuate the following:

               (a)  Extend  the  payment  due  date  from "December 15, 2003" to
                    "December  15,  2005".
               (b)  Principal  payments  shall  be  due  on  December  15, 2005.
               (c)  The  Promissory  Notes may be repaid by the Company in whole
                    or  part  at  any  time  prior  to December 15, 2005 without
                    penalty.
               (d)  Payment  of  interest on the Promissory Notes outstanding at
                    the  rate  of  16.50%  per  annum  payable  as  follows: The
                    December  15,  2003 payment which has yet to be made will be
                    paid  on  the execution date of this Amendment and remaining
                    quarterly  interest will be paid on March 15, 2004, June 15,
                    2004, September 15, 2004, December 15, 2004, March 15, 2005,
                    June  15,  2005,  September  15, 2005 and December 15, 2005.

2.   Additional  Payment. The Company will pay to you a fee equal to 1.5% on the
     --------------------
     principal  amount of your Promissory Notes which are outstanding on each of
     the  following  dates;  December  15,  2003, March 15, 2004, June 15, 2004,
     September  15,  2004,  December  15,  2004,  March 15, 2005, June 15, 2005,
     September  15,  2005  and  December  15,  2005.  The fee will be payable in
     accordance with the interest payment dates described in 1(d) above. The fee
     is  not  due  on any principal balance which is paid down during any of the
     interim  periods.  The  fee  payable  for  the  Additional  Notes  is 2.0%.

3.   Warrants.  The  Company  will  extend the expiration date on those warrants
     ---------
     which  you  received  in  connection  with  the  original  issuance  of the
     Promissory  Notes  and  related  amendments. The current expiration date on
     those  warrants  shall be changed from "December 15, 2006" to "December 15,
     2008".

     In  connection  with the above, the Company will issue to the holder of the
     New  Notes  and  Additional  Notes  new  warrants  under the same terms and
     conditions of the warrants issued to the holders of the Restructured Notes.

4.   Issuance  of  Rio  Vista  Warrants.  In  the  event  that  the  Spin-off is
     -----------------------------------
     successfully  completed  by  the Company (see 9. below), the Company agrees
     that  the  holders  of  the  Promissory  Notes shall be entitled to receive
     warrants  to  purchase  units  of  Rio  Vista under the following terms and
     conditions:

          a.   Holder of the Promissory Notes shall be entitled to receive 2,500
               warrants  to  purchase  units  of Rio Vista for every $100,000 of
               principal  of  Promissory  Notes  extended,

          b.   Holder  of  the  Promissory Notes shall be entitled to receive an

                                        3
<PAGE>
Amendment To Promissory Notes
January 13, 2004
Page 4 of 8

               additional  2,500  warrants  to  purchase  units of Rio Vista for
               every  $100,000  of  principal of Promissory Notes outstanding at
               December  16,  2004,
          c.   Exercise  price  of  all  warrants  will be based on the 1st qtly
               distribution  paid  by  Rio  Vista,  annualized, to provide a 20%
               yield  (example:  Dividend $.25. Annualized $1.00, Exercise price
               $5.00),
          d.   The  expiration  date  of  warrants  will  be  December 15, 2006,
          e.   The  warrants will be callable by Rio Vista in the event that the
               annualized  current  dividend  provides  a 10% yield based on the
               average  common  unit  trading  price  for  30  consecutive days,
          f.   Issuance of the warrants herein are only required if Rio Vista is
               successfully  Spun-off. No additional obligation from the Company
               to  the  holder  of  the Promissory Notes if the Company does not
               complete  the  Spin-off  of  Rio  Vista,

5.   RZB  Subordination.  You hereby agree that the attached draft subordination
     -------------------
     letter  from  RZB  is satisfactory (see Exhibit A) in connection with RZB's
     agreement  to  refrain from taking any action against certain assets of the
     Company  until  all  the  Promissory  Notes  have  been  fully  repaid

6.   Agreement  Not To Pledge Assets: The Company agrees that it will not pledge
     ---------------------------------
     any of its assets before or after the Spin-off occurs nor will it allow Rio
     Vista  to  pledge any of its assets without the consent of the Borrower and
     the  holders  of  the Replacement Notes. The Company further agrees that it
     will  on a good faith basis provide the holders of the Promissory Notes and
     the  Replacement  Notes  a perfected security interest in the US portion of
     its  owned  pipelines,  except  that  such perfection will not be attempted
     until the Cowboy and Tanner obligations have been fully repaid, expected to
     be  no  later  than  March 31, 2004. The Company is not responsible for any
     consents  which  cannot  be  obtained  in  connection with such perfection.

7.   Collateral  Agent.  Investec  will  no  longer serve as collateral agent in
     ------------------
     connection with the Promissory Notes and be replaced by "The Law Offices of
     Kevin  Finck"

8.   Release  of  Collateral.  Upon  the  perfection  of  the  security interest
     -----------------------
     described  in  6. above, the holders of the Promissory Notes hereby consent
     to the immediate release of 1,000,000 shares of common stock of the Company
     owned  by  Mr.  Jerome  Richter  (the  "Shares")  and pledged as additional
     security  in  connection  obligations  owing  by  the  Company  under  the
     Promissory  Notes.  In  addition, the parties agree to determine a mutually
     agreeable escrow agent to retain custody of the Shares during the time that
     the  Promissory  Notes  are  outstanding.

9.   Consent  to Spin-off. The holders of the Promissory Notes hereby consent to
     ---------------------
     the  Company completing the Spin-off as more fully described in the Form 10
     filed  by  Rio  Vista  Energy  Partners L.P. ("Rio Vista") with the SEC, as
     amended,  and


                                        4
<PAGE>
Amendment To Promissory Notes
January 13, 2004
Page 5 of 8

     as  described  in the Company's Form 10-K for the year ended July 31, 2003,
     and  Form  10-Q  for  the  quarter ended October 31, 2003 provided that the
     Spin-off  provides  for  the  following:

          a.   The  Company or Rio Vista Energy Partners L.P. ("Rio Vista") will
               be  prohibited from entering into any further agreement to pledge
               any of its pipeline or terminal assets until the Promissory Notes
               have  been  paid  in  full
          b.   Rio  Vista  will  guaranty performance under the Promissory Notes
          c.   Rio  Vista  will  be  prohibited  from  making  any distributions
               ("Distributions")  to unitholders to the extent that any payments
               required  as  of the date of the Distribution have not been made.
          d.   The form of providing for the above conditions will be documented
               by  the  Company  on  a  good  faith  basis

10.  Philadelphia Brokerage Corporation. In connection with the restructuring of
     -------------------------------------
     the  Promissory Notes, the Company has agreed to pay Philadelphia Brokerage
     Corporation  a  fee  of  1.5%  of  the  total  amount  of  Promissory Notes
     restructured  and the total amount of Replacement Notes issued (see below).
     In  addition,  Philadelphia  Brokerage  Corporation  will  receive  10,000
     warrants  to  purchase  units  in  Rio  Vista at the time this Amendment is
     executed and 10,000 additional warrants on December 16, 2004 (or a pro rata
     portion thereon based on the remaining principal amount of Promissory Notes
     and Replacement Notes outstanding at December 16, 2003 and the total amount
     of  Promissory  Notes  and  Replacements  at  the  time  this  amendment is
     executed.  The  terms  and  conditions  of the warrants will be the same as
     those  issued  to  the  holders  of the Promissory Notes as described in 4.
     above.

11.  Declining  Noteholders.  Notwithstanding anything to the contrary contained
      -----------------------
     in  your  Original Documents, you hereby agree that, to the extent that any
     other holders of the Promissory Notes do not agree to this amendment letter
     by  December  13,  2003  (collectively,  the  "Declining  Promissory
     Noteholders"),  the  Company  shall  be  entitled  to  repay such Declining
     Promissory  Noteholders  all amounts owing by the Company to such Declining
     Promissory  Noteholders  under their respective Original Documents without,
     by  virtue  thereof,  in any way breaching or otherwise being in default of
     any  of  your  Original Documents. Any such amounts paid, shall be excluded
     from the definition of "Financing" provided for in your Original Documents.

     In addition to the above, to the extent that any amounts are required to be
     repaid  in connection with Declining Noteholders, you hereby agree to allow
     the  Company to obtain additional financing (the "Replacement Notes") equal
     to the amount of Promissory Notes repaid to the Declining Noteholders under
     the  same


                                        5
<PAGE>
Amendment To Promissory Notes
January 13, 2004
Page 6 of 8

     terms and conditions outlined in this Amendment, except that the holders of
     the  Replacement Notes shall not be entitled to receive any warrants in the
     Company  which  were  issued  in connection with the Restructured Notes. In
     addition,  you  agree  that  the  holders  of  the  Replacement Notes shall
     participate  pari-pasu  with  any  collateral granted to the holders of the
     Promissory  Notes.


     If  you  are  in  agreement with the terms of this amendment letter, please
indicate  so  by  signing  below  and faxing an executed copy to Ian Bothwell at
(760)  772-8588  no  later  than  the  close  of  business  on January 16, 2004.



Very truly yours,

Penn Octane Corporation



By: __________________________________
Its: Vice President and Chief Financial Officer


                                        6
<PAGE>
     The  undersigned holder of the Promissory Note and other Original Documents
referred  to  in this amendment letter hereby acknowledges his/her/its agreement
to  all of the provisions of this amendment letter and intention to be so bound.
The  undersigned  also  agrees to keep the contents of this amendment letter and
any documents or discussions regarding the same strictly confidential and not to
use  the  same for any purpose pending public disclosure thereof by the Company;
provided,  however, that the undersigned may consult with his, her or its agents
and  advisors  with  respect  to  the  transactions  contemplated hereby and, in
connection  therewith,  disclose the terms and contents of this amendment letter
and  any  other  documents  relating  to  the  subject matter thereof or hereof.

FirstName LastName
Company
Company1


By: __________________________________

Its: _________________________________

Date:_________________________________

Promissory Note Amount: $ Note Amt
                         -----------


Name and Telephone Number of Holder:

____________________________________

____________________________________

____________________________________


<PAGE>
Amendment To Promissory Notes
January 13, 2004
Page 8 of 8

EXHIBIT A - DRAFT

This  letter will confirm that RZB Finance LLC ("RZB") agrees to subordinate its
liens and security interests in all of Penn Octane Corporation's (the "Company")
assets,  personal  property,  fixtures,  intangibles  and  property constituting
Collateral (as defined in the General Security Agreement between the Company and
RZB),  except for (i) cash held in the Company's accounts at RZB, (ii) inventory
of  every  type  and  description,  whether  raw, in process or finished and all
documents,  documents  of  title  and  receipts  covering  any inventory and all
products  and  proceeds  thereof;  (iii) accounts, accounts receivable, contract
rights,  general  intangibles,  payment  intangibles,  tax  refund  claims,
instruments, promissory notes, chattel paper, supporting obligations, letters of
credit  and letter-of-credit rights and other rights to payment of money and all
products  and  proceeds  thereof; (iv) the Seadrift lease dated October 2003, as
amended,  modified  or  supplemented  from  time  to time; (v) the Company's LPG
supply  agreements and all rights and remedies relating thereto and (vi) the PMI
agreements,  as  to  all  of  the  foregoing  items  in  clauses (i) through and
including  (vi),  whether  now  owned or hereafter acquired and wherever located
(all  such  property,  except  the property described in clauses (i) through and
including  (vi),  the  "Subordinated  Collateral").

Accordingly, RZB consents that the Subordinated Collateral can be pledged by the
Company  to  the  Company's existing creditors (which shall be deemed to include
those creditors which may substitute as note holders in connection with existing
indebtedness, and the holders of any indebtedness incurred to refinance existing
indebtedness)  and  RZB  agrees  that  it  shall not take any action which would
prevent  such  creditors (the "Senior Creditors") from foreclosing and enforcing
liens  superior  to RZB in such Subordinated Collateral in the event the Company
is  in  default  under  the  related  indebtedness.

Except  as  expressly  set forth herein, nothing contained herein shall limit or
affect  any  of  RZB's  rights  or  remedies  against  the  Company.

This  agreement  shall  be governed by the laws of the State of New York without
regard  to  principles  of  conflicts  of  law.  Unless  the  context  otherwise
requires, all terms used herein which are defined in the Uniform Commercial Code
of  the State of New York as in effect from time to time shall have the meanings
therein  stated.  The  subordination  contained  herein  is conditioned upon the
parties submitting and consenting to the exclusive jurisdiction of the Courts of
the  State  of  New  York  located  in  New York County and of the United States
District  Court  for  the  Southern  District of New York in connection with any
action  or  proceeding  under,  arising from or relating to this Agreement.  The
subordination  contained  herein is conditioned upon the parties waiving, to the
fullest  extent they may effectively do so, the defense of an inconvenient forum
to  the  maintenance  of  such action or proceeding.  Each of the parties agrees
that  a  final judgment in any such action or proceeding shall be conclusive and
may  be  enforced in other jurisdictions by suit on the judgment or in any other
manner  provided  by law.  The Senior Creditors and RZB hereby IRREVOCABLY WAIVE
TRIAL  BY  JURY  IN  ANY  ACTION OR PROCEEDING ARISING UNDER OR RELATING TO THIS
AGREEMENT.

The  subordination contained herein is conditioned upon the Senior Creditors not
challenging  or  disputing  (a)  the  validity,  perfection or priority of RZB's
security interest in any Collateral (other than Subordinated Collateral), or (b)
any  relief requested by RZB to protect or realize on its Collateral (other than
Subordinated  Collateral)  in  any  bankruptcy  case with respect to the Company
including, without limitation, any cash collateral order or debtor-in-possession
financing.

This  agreement  is  solely  for the benefit of RZB and the Senior Creditors and
their successors and assigns and no other person shall have any right or benefit
under  or  because  of  the  existence  of  this  Agreement.

The  Senior Creditors shall permit use of any collateral subject to their senior
security  interest  for storage, processing, transportation or delivery of RZB's
collateral  for  a  period  of 60 days after notice from the Senior Creditors or
their  representative to RZB of the beginning of such 60-day period, all without
charge,  cost  or  expense  to  RZB.


<PAGE>