EXHIBIT 10.4


[PETROGEN LOGO APPEARS HERE] PETROGEN


                                                               September 3, 2003

THE ADAMS FEE PROPERTIES, INC. (AFPI)
______________________________
1609 North L Street,
Midland, Texas 79701
Attention: Mr. Gary Garlitz

Dear Gary,
Re: MEMORANDUM OF UNDERSTANDING WITH PETROGEN INTERNATIONAL LTD. (Petrogen)

Thank you very much for taking the time to speak with Bill  Kerrigan  and myself
this past week  during our visit with you and Jane at your home in  Midland;  we
greatly  appreciate  your  consideration  in regard to  Petrogen's  interest  to
develop the Adams Ranch prospect as described in our Memorandum of Understanding
(MOU) of August 4th, 2003.

This  letter is to advise you that  Petrogen  is  electing  to proceed  with the
development of the Lease as per the terms set forth in the MOU, as well as those
other terms as we discussed during our visit with you last week.

We have  included a list of those items we discussed in our meeting with you for
your review and approval as follows:

     1. Petrogen will drill the first deep test to the Ellenberger  formation on
        or before January 1st, 2004;  this deep test earns Petrogen the right to
        fully develop the property as follows:

           a) all deep  wellbore  locations  available  upon  the  entire  9,000
              acre prospect
           b) all  shallow  wellbore  locations  over the area of 2,900 acres

     2. AFPI agrees to deliver to Petrogen a 100%  working  interest  (WI) - 75%
        net revenue interest (NRI) lease and merchantable  title on the Property
        on a well-by-well basis.

     3. Petrogen will convey a 15% Carried Working Interest  "through the tanks"
        to AFPI upon every wellbore drilled.

     4. Petrogen will convey an additional 10% Carried Working Interest "through
        the  tanks"  to AFPI  upon  every  wellbore  drilled  after it each said
        wellbore  has  generated  $500,000.00  of  revenues  to the  benefit  of
        Petrogen.

     5. Petrogen  will  drill no less than  four (4) deep  wells per year on the
        property to retain its right to continue deep well developments upon the
        property.

     6. Petrogen  will drill no less than four (4) shallow wells per year on the
        property to retain its right to continue shallow well  developments upon
        the property.

     7. It is agreed  between  AFPI and  Petrogen  that there are as many as two
        horizons within all of the potential shallow wellbore locations that may
        produce  marketable  quantities of hydrocarbons.  To that end,  Petrogen
        must produce  hydrocarbons  from one of or both of those horizons within
        the  designated  wellbore  spacing  unit upon the same on the  following
        schedule:

           a) production  from horizon 1: wellbore  spacing unit is held by
              production for the life of the well.
           b) production from horizon 2: the same wellbore spacing unit held by
              production from horizon 1 shall only be available to Petrogen to
              produce potential hydrocarbons from horizon 2, if said production
              from horizon 2 commences within one (1) calendar year after
              production


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              has commenced from horizon 1. Wellbore  spacing unit respective of
              horizon 2 is held by production for the life of the well
              thereafter.

           c) If Petrogen does not produce  hydrocarbons from horizon 2 within
              the specified time periods as noted, it shall lose its right to
              produce  from horizon 2,  allowing  AFPl the right to convey the
              lease for horizon 2 upon that wellbore  spacing unit to a third
              party of its choosing.

     8. It is agreed  between AFPI and Petrogen  that there are as many as three
        horizons  within all of the potential  deep wellbore  locations that may
        produce  marketable  quantities of hydrocarbons.  To that end,  Petrogen
        must  produce  hydrocarbons  from one of,  two of or all  three of those
        horizons  within the designated  wellbore  spacing unit upon the same on
        the following schedule:

           a) production  from  horizon  1:  wellbore  spacing  unit  is held by
              production
           b) production from horizon 2: the same wellbore  spacing unit held by
              production  from  horizon 1 shall only be available to Petrogen to
              produce potential  hydrocarbons from horizon 2, if said production
              from  horizon 2  commences  within  one (1)  calendar  year  after
              production  has commenced  from horizon 1.  Wellbore  spacing unit
              respective of horizon 2 is held by production  for the life of the
              well thereafter.
           c) Production from horizon 3: the same wellbore  spacing unit held by
              production  from  horizon 2 shall only be available to Petrogen to
              produce potential  hydrocarbons from horizon 3, if said production
              from  horizon 3  commences  within  one (1)  calendar  year  after
              production  has commenced  from horizon 2.  Wellbore  spacing unit
              respective of horizon 3 is held by production  for the life of the
              well thereafter.
           d) If Petrogen  does not  produce  hydrocarbons  from  horizon 2 or 3
              within the  specified  time  periods  as noted,  it shall lose its
              right to produce from horizon 2 or 3,  allowing  AFPI the right to
              convey the lease for horizon 2 and/or 3 upon that wellbore spacing
              unit to a third party of its choosing.

     9. The size of all wellbore spacing units as noted shall be designated by
        the Texas Railroad Commission.

If the details  listed herein meet with your approval,  please  indicate so with
your  signature  in  the  space  provided  below  and  return  by  facsimile  to
604-605-1139  at your  earliest  convenience.  At such time of  receipt  of your
signed  approval,  we shall  instruct our  attorney's  to commence  drafting the
formal agreement for your review as soon as practicable thereafter.

Kind regards,                     Agreed to and accepted on September 3, 2003 by

Petrogen, Inc.                         _________________________________________
Sacha H. Spindler                      Adams Fee Properties, Inc. - Gary Garlitz
President, CEO