Exhibit 10.3


                              CONSULTING AGREEMENT


     THIS  CONSULTING  AGREEMENT  ("Agreement"),  effective  as of July 1,  1997
("Effective  Date"),  is by and  between  SEAGULL  ENERGY  CORPORATION,  a Texas
corporation  ("Seagull"),  and  ROBERT F. VAGT,  an  individual  who  resides in
Davidson, North Carolina ("Vagt").


                              W I T N E S S E T H :

     WHEREAS, Vagt separated from employment with Seagull on June 30, 1997; and

     WHEREAS,  Seagull  desires Vagt to perform  certain  professional  services
after the  termination of his  employment  with Seagull and Vagt is qualified by
experience and training and desires to perform such services for Seagull;

     NOW  THEREFORE,  the  parties,  in  consideration  of the mutual  promises,
covenants and obligations contained herein, do hereby agree as follows:

     1. During the term of this  Agreement,  Vagt shall serve as a consultant to
the  management  of  Seagull  with  respect to such  areas as  requested  by the
management of Seagull,  including the prosecution,  defense, or other resolution
of any  litigation,  now  pending  or future.  Further,  during the term of this
Agreement,  Vagt shall  continue  to serve as a director  of Seagull and Texneft
Inc.  ("Texneft").  It is  understood  that Vagt will be serving as President of
Davidson College during the term of this Agreement and, in using the services of
Vagt hereunder,  Seagull will exercise due regard for other commitments of Vagt.
Vagt shall  faithfully  render his best  efforts  and  professional  judgment in
performance of these services  consistent with good  consulting  practice and to
the promotion, advancement and successful conduct of the business of Seagull. In
providing such consultation,  Vagt shall provide Seagull with such of his ideas,
assessments,  and evaluations as Seagull may deem  necessary.  Vagt agrees to be
available for such meetings as Seagull deems necessary for proper  communication
of his consultation.

     2. In  consideration  for the  services  to be  rendered  pursuant  to this
Agreement, Seagull agrees to the following:

     (a) During the term of this Agreement,  Seagull shall pay Vagt on the first
day  of  each  calendar  quarter  (or  as  soon  as  administratively   feasible
thereafter), a fee to be determined based upon the following schedule:
<TABLE>
<CAPTION>

             Quarter Beginning         Quarterly Fee
<S>          <C>                         <C>

             July 1, 1997                $50,000
             October 1, 1997             $50,000
             January 1, 1998             $25,000
             April 1, 1998               $25,000
             July 1, 1998                $25,000
             October 1, 1998             $25,000
             January 1, 1999             $25,000
             April 1, 1999               $25,000
</TABLE>

     (b) The  Nonstatutory  Stock Option  Agreement dated July 9, 1992,  between
Global  Natural  Resources  Inc.  and Vagt  shall  be  amended  pursuant  to the
amendment  attached  hereto as  Exhibit A to  provide  that the  option  granted
thereunder shall be fully exercisable until June 30, 1999.
<PAGE>
     (c) The Nonstatutory Stock Option Agreement dated January 23, 1997, between
Seagull and Vagt shall be amended  pursuant to the amendment  attached hereto as
Exhibit  A to  provide  that  the  option  granted  thereunder  shall  be  fully
exercisable until June 30, 1999.

     Vagt acknowledges and hereby agrees that the compensation  payable pursuant
to this  Paragraph is for all services  rendered  pursuant to this Agreement and
that he shall  receive  no  separate  fees with  respect  to his  services  as a
director of Seagull and Texneft.  Vagt further  acknowledges  and hereby  agrees
that the  compensation  payable  pursuant  to this  Paragraph  is in lieu of his
participation in the Seagull 1997 Executive Incentive Plan.

     3.  Seagull  agrees to retain the  services of Vagt for a term of two years
beginning on the Effective Date of this Agreement;  provided,  however, that the
parties  hereto  may  terminate  Vagt's  services  prior to the end of such term
pursuant to Paragraphs (a) or (b) below.

     (a) Seagull shall have the right to terminate  Vagt's  services  under this
Agreement at any time for any of the following reasons:

     (i) Upon Vagt's death;

     (ii) Upon Vagt's becoming  disabled as such term is defined under Seagull's
          long-term disability plan;

     (iii)For cause,  which for purposes of this Agreement  shall mean a finding
          by the Board of  Directors of Seagull of Vagt's  gross  negligence  or
          wilful  misconduct  in  the  rendering  of  services  required  of him
          pursuant to this  Agreement or Vagt's final  conviction of a felony or
          of a misdemeanor involving moral turpitude;

     (iv) For  Vagt's  material  breach  of  any  material   provision  of  this
          Agreement,  which,  if  correctable,  remains  uncorrected for 30 days
          following written notice of such breach to Vagt by Seagull; or

     (v)  For any other reason whatsoever in the sole discretion of the Board of
          Directors of Seagull.

     (b) Vagt  shall  have the  right  to  terminate  his  services  under  this
Agreement at any time for any of the following reasons:

     (i)  For  Seagull's  material  breach  of any  material  provision  of this
          Agreement,  which,  if  correctable,  remains  uncorrected for 30 days
          following written notice of such breach to Seagull by Vagt; or

     (ii) For any other reason whatsoever in the sole discretion of Vagt.

     (c) If Seagull or Vagt desires to terminate  Vagt's  services  hereunder at
any time prior to the expiration of the term of this  Agreement,  it or he shall
do so by giving  written  notice to the other party that it or he has elected to
terminate  Vagt's  services  hereunder and stating the effective date and reason
for such  termination;  provided  that no such  action  shall alter or amend any
other provisions hereof or rights arising hereunder.
<PAGE>
     (d) In the event that Vagt's services are terminated by Seagull as provided
in (a) above prior to the expiration of the term of this  Agreement,  then, upon
such  termination,  the  compensation  payable  pursuant to Paragraph 2(a) shall
terminate  contemporaneously with the termination of such services,  except that
if such  termination  shall be  pursuant  to (a)(i),  (a)(ii)  or  (a)(v),  such
compensation shall continue for the balance of the term of this Agreement.

     (e) In the event that Vagt's services are terminated by Vagt as provided in
(b) above prior to the expiration of the term of this Agreement, then, upon such
termination, the compensation payable pursuant to Paragraph 2(a) shall terminate
contemporaneously  with the  termination of such  services,  except that if such
termination shall be pursuant to (b)(i),  such  compensation  shall continue for
the balance of the term of this Agreement.

     4.  All  reasonable   out-of-pocket   expenses  incurred  by  Vagt  in  the
performance of his services  hereunder and properly accounted for shall be borne
by Seagull. If not paid directly by Seagull, Vagt shall be reimbursed by Seagull
for the cost of such expenses.

     5. Vagt acknowledges that Seagull's business is highly competitive and that
Seagull's  methods,  strategies,   books,  records,  and  documents,   Seagull's
technical  information  concerning  its  products,   equipment,   services,  and
processes,  procurement procedures and pricing techniques,  and the names of and
other  information  (such as credit and  financial  data)  concerning  Seagull's
customers,   business   affiliates,   affairs,   and   operations  all  comprise
confidential   business   information   and/or  trade   secrets   ("Confidential
Information")  of Seagull  which are  valuable,  special,  and unique  assets of
Seagull  which  Seagull uses in its business to obtain a  competitive  advantage
over its  competitors  which do not know or use this  information.  Vagt further
acknowledges  that  protection  of Seagull's  Confidential  Information  against
unauthorized  disclosure  and  use  is of  critical  importance  to  Seagull  in
maintaining  its  competitive  position.  Accordingly,  Vagt hereby agrees that,
notwithstanding  any  other  provisions  of  this  Agreement  other  than  those
contained in the following sentences, he will not at any time during the term of
this Agreement make any unauthorized disclosure of any Confidential  Information
of Seagull or make any unauthorized  use thereof.  However,  Vagt's  obligations
under this paragraph shall not extend to:

     (a)  Information  which is or  becomes  a part of the  public  domain or is
available to the public by publication or otherwise without disclosure by Vagt;

     (b)  Information  which was within  Vagt's  knowledge or in his  possession
prior to his initial employment by Seagull;

     (c) Information which,  either prior or subsequent to Seagull's  disclosure
to Vagt, was disclosed to Vagt, without an obligation of  confidentiality,  by a
third party who did not acquire such  information,  directly or indirectly  from
Vagt,  Seagull,  or  from  any  third  party  who  is  under  an  obligation  of
confidentiality; or

     (d) Any disclosure of Confidential Information by Vagt which is required by
law,  including  deposition or trial testimony by Vagt pursuant to subpoena.  If
Vagt is requested or required (by oral questions, interrogatories,  requests for
information  or documents,  subpoena,  civil  investigative  demand,  or similar
process) to disclose any  Confidential  Information,  Vagt will promptly  notify
Seagull of such request or  requirements so that Seagull may seek an appropriate
protective order or waive compliance with the provisions of this Agreement.
<PAGE>
     Vagt  acknowledges  and agrees that money  damages  would not be sufficient
remedy for any breach of this Paragraph concerning  Confidential  Information by
Vagt, and Seagull shall be entitled to seek specific  performance and injunctive
relief as remedies for such breach or threatened  breach,  as well as reasonable
and  necessary  attorneys'  fees,  experts'  fees,  and  costs  incurred  in the
connection  with such breach or threatened  breach.  Such remedies  shall not be
deemed the exclusive remedies for such a breach by Vagt but shall be in addition
to all remedies available at law or in equity to Seagull, including the recovery
of damages from Vagt. For purposes of this Paragraph, Seagull shall be construed
to include any parent, subsidiary, or other affiliate of Seagull.

     6. Seagull shall, without further remuneration to Vagt, own, be entitled to
possession  of, and have the right to use,  publish,  and  disclose any results,
reports,  product,  or data  developed by Vagt during the course of his services
hereunder, but identification of Vagt with such results,  reports, or data shall
not be made without Vagt's express consent.

     7. As part of the  consideration  for the  compensation  to be paid to Vagt
pursuant to Paragraph 2 hereunder; to protect the trade secrets and confidential
information of Seagull and its affiliates  that have been and will in the future
be disclosed or  entrusted  to Vagt,  the business  good will of Seagull and its
affiliates  that has been and will in the future be  developed  in Vagt,  or the
business  opportunities  that have been and will in the future be  disclosed  or
entrusted to Vagt by Seagull and its affiliates;  and as an additional incentive
for  Seagull  to enter  into  this  Agreement,  Seagull  and  Vagt  agree to the
noncompetition obligations hereunder. Vagt shall not, directly or indirectly for
Vagt or for others, in any geographic area or market where Seagull or any of its
affiliates  are  conducting any business as of the Effective Date or have during
the previous twelve months conducted such business:

     (a) engage in any  business  competitive  with the  business  conducted  by
Seagull;

     (b) except as required in his capacity as a director of Monterey Resources,
Inc.,  render  advice or services to, or  otherwise  assist,  any other  person,
association,  or entity who is engaged,  directly or indirectly, in any business
competitive  with  the  business  conducted  by  Seagull  with  respect  to such
competitive business; or

     (c) induce any  employee of Seagull or any of its  affiliates  to terminate
his or her employment with Seagull or such affiliates,  or hire or assist in the
hiring of any such employee by any person, association, or entity not affiliated
with Seagull.
<PAGE>
     These  noncompetition  obligations  shall  apply  during  the  term of this
Agreement  regardless of the termination of Vagt's  services  hereunder prior to
the end of such term. Vagt  understands  that the restrictions set forth in this
Paragraph may limit Vagt's ability to engage in certain  businesses  anywhere in
the world during the period provided for above, but acknowledges  that Vagt will
receive  sufficiently  high  remuneration  under this  Agreement to justify such
restriction. Vagt acknowledges that money damages would not be sufficient remedy
for any breach of this  Paragraph  by Vagt,  and  Seagull  shall be  entitled to
enforce the provisions of this Paragraph by terminating  any payments then owing
to Vagt under this  Agreement  and/or to  specific  performance  and  injunctive
relief as remedies for such breach or any threatened breach. Such remedies shall
not be deemed the exclusive  remedies for a breach of this Paragraph,  but shall
be in  addition  to all  remedies  available  at law or in  equity  to  Seagull,
including  without  limitation,  the  recovery  of damages  from Vagt and Vagt's
agents  involved in such breach and remedies  available  to Seagull  pursuant to
other  agreements with Vagt. It is expressly  understood and agreed that Seagull
and Vagt consider the restrictions  contained in this Paragraph to be reasonable
and necessary to protect the proprietary  information of Seagull.  Nevertheless,
if any of the aforesaid restrictions are found by a court having jurisdiction to
be  unreasonable,  or overly broad as to  geographic  area or time, or otherwise
unenforceable,  the parties intend for the restrictions  therein set forth to be
modified  by such  court  so as to be  reasonable  and  enforceable  and,  as so
modified by the court, to be fully enforced.

     8. As part of the  consideration  for the  compensation  to be paid to Vagt
pursuant to Paragraph 2 and as an additional incentive for Seagull to enter into
this Agreement, Vagt hereby agrees to execute a release, in the form established
by Seagull, releasing Seagull, its shareholders,  partners, officers, directors,
employees  and  agents  from any and all  claims  and from any and all causes of
action of any kind or  character,  including  but not  limited  to all claims or
causes of action arising out of Vagt's employment with Seagull or his separation
therefrom.

     9. Vagt is engaged by Seagull  only for the  purposes and to the extent set
forth in this Agreement, and his relationship to Seagull hereunder is that of an
independent  contractor.  Nothing in this  Agreement  is  intended  to create an
employer/employee  relationship  between Seagull and Vagt or to allow Seagull to
exercise  control or direction  over the manner or method by which Vagt performs
the  services  which are the  subject  matter of this  Agreement.  Vagt shall be
responsible  for  payment  of  all  income,  self-employment,   or  other  taxes
attributable  to all  compensation  paid  hereunder by Seagull to Vagt, and Vagt
agrees to hold Seagull harmless for withholding or payment of such taxes.

     10. For purposes of this  Agreement,  notices and all other  communications
provided  for herein  shall be in writing  and shall be deemed to have been duly
given when personally  delivered or when mailed by United States,  registered or
certified  mail,  return receipt  requested,  postage  prepaid,  if addressed as
follows:
<PAGE>

         If to Seagull, to:                  Seagull Energy Corporation
                                             1700 First City Tower
                                             1001 Fannin
                                             Houston, Texas  77002
                                             Attention: Chairman of the Board

         If to Vagt, to:                     Mr. Robert F. Vagt
                                             Davidson College
                                             410 N. Main Street
                                             Davidson, North Carolina 28036

or such  other  addresses  as  either  party  may  furnish  to the other in 
writing, in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.

     11. This  Agreement  is entered  into under and shall be  governed  for all
purposes by the laws of the State of Texas.

     12. No failure  by either  party  hereto at any time to give  notice of any
breach by the other party of, or to require  compliance  with,  any condition or
provision of this  Agreement  shall be deemed a waiver of similar or  dissimilar
provisions or conditions at the same time or at any prior or subsequent time.

     13. If a court of competent  jurisdiction  determines that any provision of
this   Agreement  is  invalid  or   unenforceable,   then  the   invalidity   or
unenforceability   of  that   provision   shall  not  affect  the   validity  or
enforceability  of  any  other  provision  of  this  Agreement,  and  all  other
provisions shall remain in full force and effect.

     14. This  Agreement  may be executed in one or more  counterparts,  each of
which  shall  be  deemed  to be an  original,  but all of  which  together  will
constitute one and the same Agreement.

     15. This Agreement and the rights and obligations of the parties  hereunder
are personal,  and neither this Agreement nor any right,  benefit, or obligation
of either party hereto shall be subject to voluntary or involuntary  assignment,
alienation, or transfer,  whether by operation of law or otherwise,  without the
prior written consent of the other party.

     16. This  Agreement  represents  the entire  agreement  between the parties
hereto  with  respect to the  matters  covered  herein  and may not be  changed,
altered, or modified in any respect except by an instrument in writing signed by
both the parties hereto.

     IN WITNESS  WHEREOF,  Seagull has caused this Agreement to be duly executed
by one of its officers  thereunto  duly  authorized  and Vagt has executed  this
Agreement,  effective as of the day and year first above written. SEAGULL ENERGY
CORPORATION
 
                                       By:_____________________________________



                                          _____________________________________
                                            ROBERT F. VAGT


<PAGE>
 
                                  AMENDMENT TO
                      NONSTATUTORY STOCK OPTION AGREEMENTS



     WHEREAS,  SEAGULL ENERGY CORPORATION ("Seagull") has previously adopted the
SEAGULL  ENERGY  CORPORATION  1995  OMNIBUS  STOCK PLAN (the "1995  Plan")  and,
pursuant  to the  Agreement  and Plan of  Merger  by and  among  Seagull  Energy
Corporation,  GNR Merger  Corporation and Global Natural Resources Inc. dated as
of July 22,  1996 (the  "Merger  Agreement"),  has  assumed  the GLOBAL  NATURAL
RESOURCES INC. 1992 STOCK OPTION PLAN (the "1992 Plan"); and

     WHEREAS,   on  July  9,  1992,  ROBERT  F.  VAGT  ("Vagt")  was  granted  a
nonstatutory  stock  option to purchase  450,000  shares of the common  stock of
GLOBAL NATURAL  RESOURCES  INC. under the 1992 Plan,  which option was converted
into an  option  to  purchase  396,000  shares of the  common  stock of  Seagull
pursuant to the Merger  Agreement,  and which  option is  currently  outstanding
under the 1992 Plan and is evidenced by a  Nonstatutory  Stock Option  Agreement
(the "1992 Agreement"); and

     WHEREAS,  on January 23, 1997, Vagt was granted a nonstatutory stock option
to purchase  20,000  shares of the common stock of Seagull  under the 1995 Plan,
which option is currently  outstanding under the 1995 Plan and is evidenced by a
Nonstatutory Stock Option Agreement (the "1997 Agreement"); and

     WHEREAS,  in  conjunction  with,  and as part of the  consideration  for, a
consulting  agreement by and between Seagull and Vagt for consulting services to
be provided  during the period  beginning on July 1, 1997 and ending on June 30,
1999,  Seagull  desires  to amend  the  1992  Agreement  and the 1997  Agreement
(jointly, the "Agreements") in certain respects;

     NOW, THEREFORE, the Agreements shall be amended as follows, effective as of
June 30, 1997:

     1. The option  outstanding under the 1992 Agreement shall be exercisable in
full by Vagt,  his estate or the person who acquires  such option by will or the
laws of descent and distribution, at any time on or before June 30, 1999.

     2. The vesting schedule contained in the 1997 Agreement shall be waived and
the option  outstanding  under such  Agreement  shall be  exercisable in full by
Vagt,  his estate or the person who acquires  such option by will or the laws of
descent and distribution, at any time on or before June 30, 1999.

     3.  As  amended  hereby,  the  Agreements  are  specifically  ratified  and
reaffirmed.

     IN WITNESS  WHEREOF,  the  Company  has caused  this  amendment  to be duly
executed by one of its officers thereunto duly authorized, and Vagt has executed
this amendment, effective as of June 30, 1997.

                                           SEAGULL ENERGY CORPORATION



                                           By:_________________________________


                                              _________________________________
                                               ROBERT F. VAGT