Exhibit 4.1

                             PARTICIPATION AGREEMENT
                         EASTARM AREA, BRITISH COLUMBIA

                 THIS AGREEMENT dated the 1st day of March 2002.

BETWEEN:

            WATCH RESOURCES LTD., a body corporate, having an office at the City
      of Vancouver, in the Province of British Columbia (herein referred to as
      "Watch")

                                     - and -

            LIGHTNING ENERGY LTD., a body corporate, having an office at the
      City of Calgary, in the Province of Alberta (herein referred to as
      "Lightning")

            WHEREAS Lightning has acquired the right to earn an interest in
      certain lands and documents of title pursuant to the terms and conditions
      of the Farmout Agreement; and

            WHEREAS Watch wishes to participate with Lightning in the
      performance of its obligations under the Farmout Agreement in order to
      earn an interest in the Farmout Lands in accordance with the terms and
      conditions hereinafter set forth; and

            WHEREAS Lightning wishes to have Watch participate with it in the
      performance of its obligations under the Farmout Agreement; and

            WHEREAS Lightning has agreed to hold any interest earned by it
      pursuant to the Farmout Agreement in trust on behalf of the Parties in
      accordance with this Agreement;

            NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
      premises and the mutual covenants contained herein, the Parties covenant
      and agree with each other as follows:

1.    INTERPRETATION

      (a)   Unless the context otherwise requires, the definitions contained in
            the Famout Agreement and in Clause 101 of the Operating Procedure
            shall apply, mutatis mutandis, to this Agreement (including the
            recitals and this Clause) and the following terms shall have the
            respective meanings hereby assigned to them, namely:

            (i)   "Agreement" means this Participation Agreement together with
                  the Schedules attached thereto;

            (ii)  "Effective Date" means the effective date of the Farmout
                  Agreement, which is December 20, 2001;

            (iii) "Farmout Agreement" means that certain agreement dated
                  December 20, 2001 (including the


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                   schedules attached thereto) between Chevron Canada Resources
                   and Lightning Energy Ltd., a copy of which agreement is
                   attached hereto as Schedule "A";

            (iv)   "Farmout Lands" means the lands set forth and described in
                   the Farmout Agreement;

            (v)    "Main Agreement" means that portion of this Agreement other
                   than the Schedules;

            (vi)   "Operating Procedure" means the 1990 CAPL Operating Procedure
                   and the 1988 (1991 revised) PASC Accounting Procedure
                   attached as Schedule "B" to the Farmout Agreement.

            (vii)  or" means Chevron Canada Resources for operations pertaining
                   to the Slave Point formation in the Farmout Lands and Mutual
                   Interest Lands. Lightning may elect to operate formations
                   above the Slave Point as set forth in the Farmout Agreement;

            (viii) "Party" means a person, partnership or corporation, which is
                   bound by this Agreement;

      (b)   The headings of the Clauses of this Agreement are inserted for
            convenience of reference only and shall not in any way be used in
            the interpretation of construction thereof.

      (c)   Whenever the singular or masculine or neuter is used in this
            Agreement, the same shall be construed as meaning plural or feminine
            or body politic or corporate and vice versa as the context requires.

      (d)   The references "hereunder", "herein", and "hereof' refer to the
            provisions of this Agreement and references to Articles, Clauses,
            Subclauses, Paragraphs or Subparagraphs refer to Articles, Clauses,
            Subclauses, Paragraphs or Subparagraphs of this Agreement. Any
            reference to time shall refer to Mountain Standard Time or Daylight
            Savings Time during the respective period in which each is in force.

      (e)   All references to "dollars" or "$" herein shall refer to lawful
            currency of Canada.

      (f)   Where a term is defined herein, a capitalized derivative of such
            term shall have the corresponding meaning unless the context
            otherwise requires.

2.    SCHEDULE

      Schedule "A", which is the Farmout Agreement and all Schedules attached
      thereto and, is attached to and incorporated into this Agreement.

3.    PARTICIPATION AND EARNING

      (a)   If Lightning drills the Test Well pursuant to Clause 7 of the
            Farmout Agreement, Watch shall pay 25% of Lightning's share of the
            drilling costs, completion costs, capping costs, or abandonment
            costs associated with the Test Well to earn a 25% share of the net
            Working Interests earned by Lightning in the Farmout Lands;

      (b)   Clause 9 of the Farmout Agreement shall not apply to Watch, which
            shall have no right to participate in the Area of Mutual Interest.

      (c)   Watch shall pay 25% of the land maintenance charges payable by
            Lightning pursuant to Clause 8 of the Farmout Agreement.

4.    OPERATING PROCEDURE


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      Except as otherwise provided in this Main Agreement, as of the Effective
      Date, the Operating Procedure shall govern the relationship of the Parties
      in respect of all operations conducted on or in relation to the Farmout
      Lands.

5.    APPOINTMENT OF OPERATOR

      Chevron Canada Resources is hereby appointed initial Operator for all
      operations pertaining to the Slave Point formation in the Farmout and
      Mutual Interest Lands. Lightning may elect to operate formations above the
      Slave Point as set forth in the Farmout Agreement.

6.    INFORMATION TO JOINT-OPERATOR

      In addition to the information and data required to be provided to the
      Joint-Operator by the Operator pursuant to the Operating Procedure, the
      Operator shall supply Watch, if so requested, with the same information,
      data and reports that the Operator supplies to the Farmor under the
      Farmout Agreement with respect to the Test Well.

7.    INTEREST OF WATCH HELD IN TRUST

      Any Working Interest earned by Watch in the Farmout Lands and Title
      Documents shall be held in trust for Watch.

      As Watch's interest in the Farmout Agreement will be held in trust by
      Lightning, Lightning will, if requested by Watch, deliver any Notice of
      Independent Operations under Article X of the referenced CAPL 1990
      Operating Procedure on behalf of Watch.

8.    GOODS AND SERVICES TAX

      Lightning shall account for the Goods and Services Tax (Canada), pursuant
      to subsection 273 (1) of the Excise Tax Act, on all purchases and sales
      occurring on the Farmout Lands.

9.    FURTHER ASSURANCES

      Each Party shall from time to time and at all times do and perform all
      such further acts and execute and deliver all such further deeds,
      documents and writings, as may be reasonably required in order to fully
      perform and carry out the terms and intent of this agreement.

10.   ENTIRE AGREEMENT

      The terms of this Agreement express and constitute the entire agreement
      among the Parties and the Parties understand and agree that no implied
      covenant, condition, term, reservation or liability is created or shall
      arise by reason of this Agreement or anything herein contained.


11.   COVENANTS RUN WITH THE LAND

      All terms and provisions of this Agreement shall run with and be binding
      upon the Farmout Lands during the time hereof.


12.   ENUREMENT

      This Agreement shall be binding upon and enure to the benefit of the
      Parties hereto and their respective successors and assigns.


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13.   COUNTERPART EXECUTION

      This Agreement may be executed in separate counterparts, and when a
      counterpart has been executed by each party, all such executed
      counterparts when taken together shall constitute one Agreement.

      IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of
the day and year first above written.

                                                LIGHTNING ENERGY LTD.


                                                Per: /s/ Ken Woolner
                                                    ----------------------------

                                                Per: /s/ Kurt Molnar
                                                    ----------------------------



                                                WATCH RESOURCES LTD.


                                                Per:  /s/ Chris Wright
                                                    ----------------------------

                                                Per: /s/ Chris Cooper
                                                    ----------------------------


THIS IS THE EXECUTION PAGE ATTACHED TO AND FORMING PART OF A PARTICIPATION
AGREEMENT DATED MARCH 1, 2002, BETWEEN LIGHTNING ENERGY LTD. AND WATCH RESOURCES
LTD.


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Lightning Energy Ltd.                                                         1
Farmout Agreement
dated December 20, 2001.

Chevron Canada Resources                            ChevronTexaco
500 -Fifth Avenue S.W.
Calgary, Alberta T2P OL7
Phone (403) 234-5005
Fax (403) 234-5223

Western Canada Business Unit

December 20, 2001

Lightning Energy Ltd.
Attention: Mr. Ken S. Woolner
            CEO & Chairman
3311 Palliser Drive S.W.
Calgary, Alberta, T2V 4W9

RE: Eastarm Area, British Columbia
    Farmout Agreement
    NTS 94-H-09, Blks C & D
    Our Contract # 108496

Dear Ken,

Further to our recent discussions, this letter will set forth the terms and
conditions of the agreement reached between Chevron Canada Resources
("Chevron"), and Lightning Energy Ltd. ("Lightning") with respect to certain
lands in the captioned area:

1. Definitions

Each capitalized term used in this Head Agreement will have the meaning given to
it in the Farmout & Royalty Procedure, and, in addition:

(a)   "Area of Mutual Interest" means the area included within the red outline
      on the plat attached hereto as Schedule "D".

(b)   "Contract Depth" means a depth down to and including the lesser of 15 into
      the Slave Point formation or 2530 meters subsurface.

(c)   "Farmee" means Lightning.

(d)   "Farmor" means Chevron.

(e)   " Farmout & Royalty Procedure" means the 1997 CAPL Farmout & Royalty
      Procedure.

(f)   "Mutual Interest Lands" means any interest in any single parcel of
      petroleum and natural gas rights, where 50% or more of that parcel, by
      surface area, is within the area defined in Schedule "D".

(g)   "Operating Procedure" means the 1990 CAPL Operating Procedure and the 1988
      (1991 revised) PASC Accounting Procedure.


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(h)   "Seismic Review Database" means the Farmor's existing seismic database,
      insofar as:

      (i)   that seismic coverage pertains to the Farmout Lands and each unit of
            land on or within 1.6 kilometres thereof as measured laterally or
            diagonally; and

      (ii)  the Farmor is the proprietary owner of that seismic data or
            otherwise has the right to provide access to that seismic data to
            the Farmee on the basis set forth in this Agreement;

provided that the Seismic Review Database does not include the Farmor's
interpretations of the data in the Seismic Review Database and any seismic data
for which the Farmor is subject to a prior obligation to a third person to
maintain the confidential status of that seismic coverage.

2. Schedules

The following Schedules are attached hereto and made a part of this Agreement:

(a)   Schedule "A", which describes the Title Documents and the Farmout Lands;

(b)   Schedule "B", which describes the elections and revisions to the Operating
      Procedure;

(c)   Schedule "C", which describes the elections and revisions to the Farmout &
      Royalty Procedure;

(d)   Schedule "D", which is the Area of Mutual Interest for the Farmout Lands;

(e)   Schedule "E", which specifies the types of drilling information supplied
      by Farmee to Farmor pursuant to the Farmout & Royalty Procedure; and

(f)   Schedule "F", which specifies the types of drilling information supplied
      by Chevron to Farmor.

The 1997 CAPL Farmout & Royalty Procedure, the 1990 CAPL Operating Procedure and
the 1988 (1991 revised) PASC Accounting Procedure are incorporated into this
Agreement by reference.

3. Seismic Review

The Farmee will have access to the Seismic Review Databasq on a work station in
the offices of the Farmor during regular office hours for a period of 6 months
from the date of execution of this Agreement, provided that the Farmee will not
have any right to obtain a copy of the data, or any portion thereof, included in
the Seismic Review Database, except to the extent agreed separately by the
Parties. As part of that review, the Farmee may temporarily merge its own
proprietary seismic data with the seismic data included in the Seismic Review
Database, provided that the Farmee is not obligated to share with the Farmor any
of its interpretations of any seismic data reviewed under this Clause. The
Farmor will provide work station access to the Farmee at no charge to the
Farmee.

4. Planninct And Implementation Of Earninq Phase Operations

A.    The Parties agree to comply with the following provisions as regards the
      manner in which their representatives will work together under this
      Agreement:

      (a)   the Parties' applicable geologists and geophysicists will work
            together on an ongoing basis as appropriate to identify prospects
            that may be drilled hereunder and other geologic features respecting
            the Farmout Lands that might be classified as prospects following
            further evaluation or the acquisition of additional data, and the
            review of drilling and testing results from the Test Well;


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      (b)   the surface landmen and other applicable representatives of the
            Parties will ensure that there is an appropriate stakeholder
            consultation plan in place to expedite surface access for
            operations;

      (c)   the applicable representatives of the Parties will consult on a
            current basis with respect to the drilling, logging and testing
            results from the Test Well;

      (d)   the applicable land representatives of the Parties will consult as
            and when appropriate with respect to land opportunities associated
            with operations being conducted under this Article, including,
            without limitation: (i) strategies for the posting of open Crown
            rights within the Area of Mutual Interest; (ii) strategies for the
            negotiation of agreements with third parties holding lands of
            interest to the Parties within the Area of Mutual Interest; (iii)
            strategies under existing agreements with third parties as regards
            any applicable independent operations notices and rights of first
            refusal; and (iv) strategies to enable the Parties to optimize the
            Farmout Lands that they may retain under the Title Documents;

      (e)   the applicable operations and facilities engineering representatives
            of the Parties will consult as appropriate to plan well tie-ins and
            equipment purchases in order to obtain production of Petroleum
            Substances at the earliest appropriate date from the Test Well if it
            is capable of production in commercial quantities; and

      (f)   the applicable representatives of the Parties will consult about
            Equipping and a development plan respecting the Test Well providing
            that has discovered Petroleum Substances.

Notwithstanding the expectations noted in this Subclause, it is not the
expectation of either Party that personnel working on operations being conducted
under this Agreement will be dedicated exclusively to those operations.

B.    Notwithstanding the sharing of information on the basis set forth in this
      Agreement, each Party acknowledges that the sharing of information
      hereunder is intended to facilitate operations, and is not intended to
      replace or limit a the Farmee's independent review and evaluation of those
      operations. Lightning acknowledges that it retains the primary
      responsibility for the evaluation of all investment opportunities
      identified hereunder. Each Party releases the other Party and each of its
      directors, officers, agents and employees from any losses and liabilities
      it incurs or suffers as a result of the use or reliance on advice,
      information and materials pertaining to the Farmout Lands and operations
      or activities conducted hereunder that were provided to it by (or on
      behalf of) the other Party prior to or under this Agreement, including,
      without limitation, any evaluations, projections, reports and interpretive
      or non-factual materials prepared by the other Party or otherwise in its
      possession. The foregoing release shall not apply if the other Party has
      acted fraudulently.

5.    Operator During Earning Phase

A.    Chevron will operate the operations pertaining to the Slave Point
      formation in the Farmout and Mutual Interest Lands. Lightning may elect to
      operate formations above the Slave Point formation by written notice to
      Chevron at least 30 days prior to the construction of the surface access
      for that well.

B.    Chevron will conduct any operation described in the preceding Subclause as
      Lightning's agent and any such operation will be deemed to be conducted by
      Lightning for the purposes of the Farmout & Royalty Procedure. Chevron
      will conduct any such operation on behalf of Lightning on the following
      basis:

      (a)   the Parties will consult fully with respect to such operation, on
            the basis provided in Clause 4;

      (b)   all charges will be handled on the same basis as is provided under
            the Accounting Procedure, as if the operation otherwise were a joint
            operation operated by Chevron, including, without limitation, the
            restrictions on direct charges respecting project personnel and
            overhead;

      (c)   Chevron will not be entitled to any additional fee as remuneration
            for the conduct of any such operation,


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            even though the overhead recovery under the preceding Paragraph is
            unlikely to enable it to attain full cost recovery;

      (d)   Lightning will advance 100% of the costs to be paid by Chevron in a
            particular calendar month for an operation conducted on Lightning's
            behalf hereunder on or before the later of 20 days following receipt
            of Chevron's itemized written estimate of those costs or the 15'"
            day of that month, provided that Subclause 503(c) of the Operating
            Procedure (Advance Of Costs) will apply, mutatis mutandis, to
            adjustments to this estimate and that Paragraphs 505(b)(i)-(iii) of
            the Operating Procedure (Operator's Lien) will apply, mutatis
            mutandis, to any such amount that is not paid when due;

      (e)   daily drilling reports for an Earning Well will include estimates of
            daily and cumulative costs incurred for that well, provided that
            Chevron will provide notice to Lightning if Chevron incurs or
            expects to incur expenditures for that well that exceed the total
            amount estimated in the applicable AFE by more than 10% including in
            that notice Chevron's estimate of the forecast costs of that well
            and the reasons for the forecast overexpenditure, and Chevron will
            thereafter provide estimates of forecast costs of that Earning Well
            on a weekly basis;

      (f)   weekly estimates of cumulative costs will be provided to Lightning
            for any seismic program conducted by Chevron under this. Clause,
            provided that Chevron will provide notice to Lightning if Chevron
            incurs or expects to incur expenditures for that program that exceed
            the total amount estimated in the applicable AFE by more than 10%
            including in that notice Chevron's estimate of the forecast costs of
            that program and the reasons for the forecast overexpenditure, and
            Chevron will thereafter provide estimates of forecast costs of that
            program on a weekly basis;

      (g)   supporting billing information will be on such basis as the
            accounting representatives of the Parties may agree;

      (h)   Lightning will have audit rights on the same basis as is provided
            under the Accounting Procedure, as if that operation otherwise were
            conducted for the joint account thereunder;

      (i)   data to be provided to Lightning with respect to each such operation
            will be on such basis as the Parties agree, provided that
            information for an Earning Well will, as a minimum, include the
            drilling information provided on Lightning's well information
            requirement sheet attached as Schedule "F"; and

C.    Insofar as the Farmor is acting as agent for the Farmee, Article 10.00 of
      the Farmout & Royalty Procedure will be deleted and replaced by the
      following:

      "Except to the extent that the Operating Procedure becomes effective
      between the Farmor and the Farmee hereunder, the Farmee will:

      (a)   be liable to the Farmor for all losses, costs, damages and expenses
            whatsoever (whether contractual or otherwise) that the Farmor may
            suffer, sustain, pay or incur; and in addition

      (b)   indemnify and hold harmless the Farmor and its directors, officers,
            agents and employees against all actions, causes of action,
            proceedings, claims, demands, losses, costs, damages and expenses
            whatsoever that may be brought against or suffered by the Farmor,
            its directors, officers, agents and employees or that they may
            sustain, pay or incur;

      insofar as they are a direct result of: (i) any act or omission (whether
      negligent or otherwise) of the Farmee with respect to operations or
      activities conducted by it or on behalf of it hereunder; (ii) a breach of
      a provision herein by the Farmee; or (iii) the wilful or wanton misconduct
      of the Farmee, its employees, agents or contractors. Costs described in
      this Clause will include reasonable legal costs on a solicitor-client
      basis. Notwithstanding the


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      foregoing, the Farmee's liability and indemnity to the Farmor otherwise
      arising pursuant to this Paragraph will not apply insofar as the loss is
      the direct result of the gross negligence or wilful or wanton misconduct
      of the Farmor acting as agent for the Farmee, except insofar as the loss
      was the direct result of an act or omission of the Farmor done in
      accordance with the specific written instructions of the Farmee."

For clarity, insofar as the Farmee is acting on its own behalf and except to the
extent that the Operating Procedure becomes effective between the Farmor and the
Farmee, the provisions of Article 10.00 of the Farmout and Royalty Procedure
shall continue to apply.

6. Test Well

Chevron, on behalf of theFarmee, shall Spud the Test Well or before March 1,
2002 at a-31-D/94-H-9 on the Farmout Lands subject to ground conditions, surface
access, regulatory approval and availability of suitable equipment. Chevron will
drill the Test Well to Contract Depth and Complete, cap or Abandon the Test Well
at the sole cost, risk and expense of the Farmee.

7. Test Well Earning

A.    Subject to Article 3.00 of the Farmout & Royalty Procedure, the Farmee
      shall earn to the base of the deepest formation logged and penetrated by
      the Test Well:

      (a)   100% of the Farmor's Working Interst in the Test Well Spacing Unit,
            subject to the Overriding Royalty, the right of conversion in
            Article 6.00 of the Farmout & Royalty Procedure and Subclause B of
            this Clause; and

      (b)   50% of the Farmor's Working Interest in the balance of the Farmout
            Lands.

Notwithstanding the previous portion of this Clause, if a loss of circulation
occurs while drilling in circumstances in which the Test Well is not drilled
deeper, Farmee shall earn to the deepest formation penetrated by the Test Well.

B.    The provisions of the Operating Procedure pertaining to any "production
      facility' (as defined in the Operating Procedure) will apply to the
      acquisition, construction or installation of any such production facility
      during the period in which the Farmor retains the right to convert its
      Overriding Royalty to a Working Interest under Paragraph A (a) of this
      Clause, as if the Farmor had elected to convert to its Working Interest in
      the Test Well Spacing Unit under Article 6.00 of the Farmout & Royalty
      Procedure. Nothing in this Clause will restrict the ability of the Farmor
      to propose operations with respect to a production facility under the
      Operating Procedure.

8. Land Maintenance Charges

A.    The Farmee will, on a quarter section by quarter section basis with
      respect to the Farmout Lands, reimburse the Farmor for:

      (a)   100% of the Farmor's Working Interest share of the rentals,
            applicable thereto, as calculated on a per diem basis; and

      (b)   100% of the Farmor's Working Interest share of the security and
            penalties applicable thereto (if any);

      during the period between the Effective Date and the date upon which the
      Farmee earns a Working Interest in those lands or its right to earn a
      Working Interest therein is terminated. The Farmor may invoice the Farmee
      for the full amount of the rentals applicable to that portion of the
      Farmout Lands in which the Farmee has the right to earn a Working Interest
      as those rentals become payable to the lessor of the relevant Title
      Document, in which event the per diem calculation described above will be
      made after the Farmee has earned a Working


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      Interest in that portion of the Farmout Lands, or its right to earn a
      Working Interest has been terminated. The Farmee will pay amounts invoiced
      to it by the Farmor under this Clause within thirty (30) days of receiving
      that invoice, subject always to the Lightning Energy Ltd. Farmout
      Agreement dated December 20, 2001.

      Farmee's right to question the accuracy of that billing. The Farmor will
      pay amounts payable to the Farmee by the Farmor as a result of that
      calculation within thirty (30) days of the date of that earning or
      termination. The Parties will share rentals applicable to Farmout Lands
      earned by the Farmee hereunder in proportion to their Working Interests
      therein, notwithstanding any stratigraphic earning restrictions herein.

B.    Those of the Title Documents held as British Columbia drilling licence(s)
      may be extended for a further 1 year period following the expiry of the
      primary term upon payment of a higher rental for that extension year. The
      Parties will exercise their rights under the Regulations to obtain this
      extension for the applicable portions of the Farmout Lands, except insofar
      as: (i) the Parties otherwise agree; (ii) a Party surrenders its rights in
      those Farmout Lands; or (iii) a portion of those Farmout Lands must be
      included in a lease selection in order to commence production from a well
      drilled hereunder. For the purposes of Paragraph 1010(a)(iv) of the
      Operating Procedure (Exception To Clause 1007 Where Well Preserves Title),
      the date a forfeiture would occur under such a Title Document will be the
      last day of that 1 year extension.

9. Area Of Mutual Interest

A.    Article 8.00 of the Farmout & Royalty Procedure will be in effect for the
      Area of Mutual Interest from the Effective Date until the end of the
      twelfth month following the drilling rig release date of the Test Well.
      Subject to that Article, the Parties will have the right to participate in
      an acquisition of Mutual Interest Lands in the following percentages:
      Chevron 50.00% Lightning 50.00%.

B.    Prior to Spudding an Earning Well, Chevron will, following consultation
      with Lightning, request applicable governmental authorities to offer at a
      Crown sale undisposed petroleum and natural gas rights within the Area of
      Mutual Interest that are being evaluated by that well to the extent that
      the Parties agree is appropriate in the circumstances. Chevron will
      request that those rights be offered for sale on a date as near as
      feasible following the anticipated drilling rig release date of that
      Earning Well.

10. Operating Procedure

A.    The Operating Procedure will apply to those Farmout Lands earned by Farmee
      hereunder, subject to Clause 17.01 of the Farmout & Royalty Procedure
      (Application Of Farmout & Royalty Procedure) and the provisions of this
      Clause. Chevron shall be the initial Operator under the Operating
      Procedure for the Test Well and all other wells drilled for the Joint
      Account to evaluate the Slave Point or deeper formations, provided Chevron
      will be responsible for the maintenance and administration of the Title
      Documents, and, insofar as is required for the performance of those
      duties, that Party will have the same rights and obligations as the
      Operator under the Operating Procedure. Subject to the rights of
      conversion in Article 6.00 of the Farmout & Royalty Procedure for
      Subclause 7A(a), the Parties' initial Working Interests in the Farmout
      Lands earned by Farmee hereunder shall be split Lightning 50.00%, and
      Chevron 50.00%.

B.    If the Farmee proposes the drilling of a joint well on any earned Farmout
      Lands through an operation notice issued under Article X of the Operating
      Procedure then the Farmor shall have a one time election within the same
      response period as provided for under the Operating Procedure for that
      operation notice, to convert its Working Interest in the balance of the
      earned Farmout Lands, excluding the Test Well Spacing Unit that has not
      yet been Abandoned, to the Overriding Royalty on the same basis as
      provided in Article 5.00 of the Farmout & Royalty Procedure, regardless of
      whether Clause 1007 of 1010 of the Operating Procedure would otherwise
      apply to an election by the Farmor not to participate in that well. The
      Overriding Royalty shall be non-convertible and will be calculated on the
      Working Interest then held by the Farmor in the Farmout Lands. This
      election is in addition to the elections provided for in Article X of the
      Operating Procedure. The Farmor's election under this Clause


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      will be effective as of the date of the Farmor's receipt of the Farmee's
      operation notice. If the Farmee fails to spud the additional well on or
      before the 90th day after the date the Farmee issued that operation
      notice, the Farmee will be deemed not to have issued that operation
      notice, and the Farmor's election hereunder will be void for that
      particular operation notice.

11. Restriction On Additional Drilling

During the period that the Farmee has the right to earn a Working interest in
the Farmout Lands, no Party may propose to drill an additional well pursuant to
the Operating Procedure upon the Farmout Lands or any Mutual Interest Lands
acquired jointly until such time as the Farmee has earned pursuant to Clause 7,
and Chevron has provided all relevant well information including complete
production tests and well pressure build-ups for the Test Well to the Farmee.
Notwithstanding this Clause, additional wells may be drilled hereunder prior to
the Farmee earning pursuant to Clause 7 if the Parties mutually consent and
agree to amend this Clause.

12. Farmee Obligated to Carry Insurance

The provisions of Clause 1.02 of the Farmout & Royalty Procedure are
incorporated by reference and shall apply mutafis mutandis to operations
conducted by the Farmee or by Chevron as agent of the Farmee with respect to the
Farmout Lands. In addition to the policies of insurance contained in subclause
311A of the Operating Procedure that are required under Clause 1.02 of the
Farmout & Royalty Procedure, the Farmee shall obtain and maintain for its sole
account and expense wild well or blow out insurance covering costs to redrill,
costs to drill any required relief wells, costs to make wells safe, seepage and
pollution, contamination, containment and clean-up and joint venture contingent
liability of not less than $5,000,000.00 per occurrence.

13. Production Volumes Delivered to Chinchaga Gas Plant

The Parties will give due consideration to the use of the Chinchaga Gas Plant
for the processing of natural gas from the Farmout Lands. Depending on the
specifications of the natura' gas proposed to be delivered to the Chinchaga Gas
Plant, Enerpro, as a subsidiary to the Farmor, will make all reasonable efforts
on an economic basis to facilitate the production of natural gas through its
facility. Tne terms of this arrangement for the use of those facilities will be
addressed in more detail in a separate agreement to be entered into between
Enerpro and Farmee in due course

14. Construction of New Facilities

A.    The obligations in this Clause will apply to any new facility intended to
      handle Petroleum Substances if that new facility is beyond Equipping and
      is not a production facility (as defined in the Operating Procedure). If a
      Party intends to construct, acquire or install a new facility for the
      storage, treating, gathering, transportation or processing of Petroleum
      Substances, that Party will allow the other Party to participate in that
      facility opportunity in accordance with such agreement as the Parties may
      negotiate at the time. If a Party chooses not to participate in that
      opportunity and its share of Petroleum Substances uses that facility, that
      use is subject to the negotiation of a separate fee arrangement at the
      time.

B.    If the Farmee makes arrangements to have its share of Petroleum Substances
      transported, processed or stored at a third party owned Facility, it will
      advise the Farmor of the terms of that arrangement, and, at the Farmor's
      request, will include the Farmor's Working Interest share of the Petroleum
      Substances in its arrangement with the third party. The Farmor will not be
      considered as failing to take in kind under the Operating Procedure to the
      extent that the Farmor's Petroleum Substances are handled under any such
      arrangement

15. Public Announcements

The Parties will cooperate with each other when releasing to third parties
information concerning this Agreement and operations conducted hereunder. A
Party will provide the other Party with a draft of all press releases and other
releases


                                       96
<PAGE>

of information for dissemination to the public a sufficient time prior to its
release to enable the other Party to review that draft and provide any comments
it may have. That release is subject to the prior written consent of the other
Party, which consent may not be unreasonably withheld or delayed. However,
nothing in this Clause will prevent a Party from providing any information to
any governmental agency, any regulatory authority or to the public, insofar only
as is required by the Regulations or securities laws or stock exchange
requirements applicable to that Party.

16. Limitation of Actions Clause

The Parties agree that the 2 year period for seeking a remedial order under
section 3(1)(a) of the Limitations Act (Alberta), as amended, for any claim (as
defined in that Act) arising in connection with this Agreement is extended to:

      (a)   for claims disclosed by an audit, 2 years after the time this
            Agreement permitted that audit to be performed; or

      (b)   for all other claims, 4 years.

This Clause will continue to apply following earning under the Farmout & Royalty
Procedure and any application of the Operating Procedure.

If Lightning agrees that the above terms and conditions accurately reflect our
agreement, kindly sign and return one copy of this Agreement to the undersigned.

Yours truly,


CHEVRON CANADA ~URCES


/s/ Susan Potter
-----------------------------

Susan Potter
Senior Landman
Western Canada Business Unit


UNDERSTOOD, ACCEPTED AND AGREED TO this 7th day of February, 2002


LIGHTNING ENERGY LTD.


Name: /s/ Ken Woolner
     --------------------------

Title: President and C.E.O.



                                       97
<PAGE>

Lightning Energy Ltd.
Farmout Agreement
dated December 20, 2001.

                                  SCHEDULE "A"
 to an Agreement dated December 20, 2001 between Chevron Canada Resources, and
                             Lightning Energy Ltd.

                   See attached Eastarm Area, British Columbia


                                       98
<PAGE>

                         Eastarm Area, British Columbia
<TABLE>
<CAPTION>
   --------------------------------------------------------------------------------------------------------------------------
   Land Description           Party    Document Type &   File      Document         Document     Disposition   Miscellaneous
                                           Number       Number  Effective Date    Expiry Date     Mechanism
   --------------------------------------------------------------------------------------------------------------------------
   <S>                       <C>        <C>            <C>       <C>               <C>               <C>         <C>
   094-H-09 BILK C Units     Chevron     Provincial    107268    Nov/19/1997       Nov/18/2002       n/a         LOR - Crown
   40, 50, 60, 70              100%      Drilling
   PNG from Base of                     Licence No.
   Bluesky-Gething-                        48331
   Dunlevy to Basement
   094-H-09 BLK D Units
   31, 41, 51, 61
   PNG from Base of
   Bluesky-Gething-
   Dunlevy to Basement
   094-H-09 BLK D Units
   32, 33, 42, 43, 52,
   53, 62, 63
   PNG from Surface to Basement
   excluding
   NG in Blues and Gethin zones
   ---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      99
<PAGE>

Lightning Energy Ltd.
Farmout Agreement
dated December 20, 2001.

                                   SCHEDULE"B"
  to an Agreement dated December 20,2001 between Chevron Canada Resources, and
                             Lightning Energy Ltd.

                          1990 CAPL OPERATING PROCEDURE

I.    Insurance (Clause 311): A subject to Clause 12 of the Head Agreement

II.   Marketing Fee (Clause 604): A

III.  Casing Point Election (Clause 903): A

IV.   Penalty for Independent Operations (Clause 1007): (a)(iv) Development
      Wells 300% (b)(iv) Exploratory Wells 500%

V.    Title Preserving Well (Clause 1010(a)(iv)): 365 days subject to Subclause
      8B of the Head Agreement

VI.   Addresses for Notices (Clause 2202):

Chevron Canada Resources                  Lightning Energy Ltd.
500 - 5th Avenue S.W.                     3311 Palliser Drive S.W.
Calgary, Alberta                          Calgary, Alberta
T2P 01-7                                  T2V 4W9
Attention: Land Manager                   Attention: Chairman and CEO

VII.  Dispositions of Interests (Clause 2401): B

VIII. Recognition Upon Assignment (Clause 2404): N/A (Replaced with 1993 CAPL
      Assignment Procedure)

1988 PASC Accounting Procedure (Feb. 1991 Revised)

I.    Operating Advances (Clause 105): proportionate share of 10%

II.   Approvals (Clause 110): 2 or more parties totalling 50

III.  Labour (Clause 202b):

(1)   shall_____ shall not |X|

(2)   shall_____ shall not |X|

IV.   Employee Benefits (Clause 203(B)): 25%

V.    Warehouse Handling (Clause 217(a)(1)):

25% for tubular goods 50.8 mm (2") and over and other items with new price over
$5.000.00; 5% of the cost of all other material.

VI. Overhead:

      1.    Clause 302

            (a)   For each Exploration Project:

                  (1) 5% of first $50.000.00

                  (2) 3% of next $100.000.00

                  (3) 1% of cost exceeding (1) and (2)

            (b)   For each Drilling Well:

                  (1) 3% of first $50.000.00

                  (2) 2% of next $100.000.00

                  (3) 1% of cost exceeding (1) and (2)


                                      100
<PAGE>

Lightning Energy Ltd.
Farmout Agreement
dated December 20, 2001.

            (c)   For each Construction Project:

                  (1) 5% of first $50.000.00

                  (2) 3% of next $100.000.00

                  (3) 1% of cost exceeding (1) and (2)

            (d)   For Operation and Maintenance:

                  (1) 10% of the cost; and

                  (2) $150.00 per producing well per month

                  (3) $ flat rate per month for producing, injection and water
                        source operations.

                  Will________will not |X|

VII.  Pricing of Joint Material Purchases. Transfers and Dispositions:

      $25.000.00 for requiring approval

VIII. Periodic Inventory (Clause 501):

      At 5 year intervals.


                                      101
<PAGE>

Lightning Energy Ltd.                                                         12
Farmout Agreement
dated December 20, 2001.

                                   SCHEDULE"C"
  to an Agreement dated December 20,2001 between Chevron Canada Resources and
                             Lightning Energy Ltd.

         1997 CAPL Farmout & Royalty Procedure Elections and Amendments

1.    Effective Date (Subclause 1.01(f)) - December 20, 2001

2.    Payout (Subclause 1.01(t), if Article 6.00 applies) - Alternate A - |X|*

                                            Alternate B -

      * Include at the end of Alternate 1.01(t)A the following: for the purposes
      of calculating the proceeds of sale from or allocated to the Farmee's
      share of production of natural gas from an Earning Well, that production
      will be deemed to be sold by the Farmee at a price of not less than the
      greater of its "corporate average price" or 75% of the Market Price.

      Alternate B options, if applicable - ______m^3 of Equivalent Production
      and _____years.

3.    Incorporation Of Clauses From 1990 CAPL Operating Procedure (Clause 1.02)

(i) Insurance (311) Alternate A - |X| Subject to Clause 12 of the Head Agreement

                              Alternate B - ______

4.    Article 4.00 (Option Wells) will _____/will not |X| apply.

5     Article 5.00 (Overriding Royalty) will |X| /will not _____apply.

6.    Quantification Of Overriding Royalty (Subclause 5.01 A, if applicable)

            (i) Crude oil (a)  -  Alternate - 2
                               -  If Alternate - 1 applies, ____%
                               -  If Alternate 2 applies, 23.8365, min. 5% max.
                                  15%

            (ii) Other (b)     -  Alternate - 1
                               -  If Alternate 1 applies, 15%
                               -  If Alternate 2 applies, - in (i) and - in (ii)

7.    Permitted Deductions (Subclause 5.048, if applicable) - Alternate - 2

      If Alternate 2 applies, "...not be greater than 40% of the Market
      Price..."

8.    Article 6.00 (Conversion Of Overriding Royalty) - will |X| / will not -
      apply.

      If Article 6.00 applies, conversion to 50% of Working Interest in
      Subclause 6.04A.

9.    Article 8.00 (Area Of Mutual Interest) - will |X| /will not - apply.

10.   Reimbursement Of Land Maintenance Costs (Clause 11.02) - will /will not *
      apply.

      *Subject to Clause 8 of the Head Agreement


                                      102
<PAGE>

Lightning Energy Ltd.                                                         13
Farmout Agreement
dated December 20, 2001.

                                  SCHEDULE "D"
 to an Agreement dated December 20, 2001 between Chevron Canada Resources, and
                             Lightning Energy Ltd.

                  See Attached Plat for Area Of Mutual Interest


                                      103
<PAGE>

[GRAPHIC OMITTED]


                                      104
<PAGE>

Lightning Energy Ltd.                                                         14
Farmout Agreement
dated December 20, 2001.

                                  SCHEDULE "E"
 to an agreement dated December 20, 2001 between Chevron Canada Resources, and
                             Lightning Energy Ltd.

               CHEVRON WELL DATA REQUIREMENT SHEET - FARMOUT WELLS

1.      INFORMATION REQUIRED PRIOR TO DRILLING

        -SURVEY PLAT                                                        2
        -WELL LICENSE                                                       2
        -DRILLING PROGRAM (including drilling days and cost curves)         2
        -GEOLOGICAL PROGRAM                                                 2

2.      NOTICES REQUIRED

        -24 HOURS' NOTICE OF INTENT TO SPUD
        -24 HOURS' NOTICE OF INTENT TO LOG, CORE, TEST, OR CONDUCT ANY
        NON-ROUTINE OPERATIONS
        -IMMEDIATE NOTICE OF ANY OIL OR GAS SHOW
        -48 HOURS' NOTICE OF INTENT TO ABANDON. APPROVAL TO ABANDON WILL BE
        GRANTED ONLY AFTER CHEVRON HAS EVALUATED ONE RESISTIVITY LOG AND ONE
        POROSITY LOG REPRESENTING THE ENTIRE OPEN HOLE INTERVAL.

3.      INFORMATION REQUIRED DURING DRILLING

        -DAILY 8:30 A.M. TELEPHONE/FAX DRILLING REPORTS                     YES
        -DAILY/WEEKLY DRILLING TOUR REPORTS                                 2
        -DAILY/WEEKLY LITHOLOGY (CORE AND SAMPLE DESCRIPTIONS)              2
        -DRILL STEM TEST REPORTS                                            2

4.      INFORMATION REQUIRED REGARDING GEOLOGY

        -ACCESS TO CORE                                                     YES
        -ACCESS TO OPERATOR'S SAMPLES                                       YES
        -LITHOLOGY LOG & WELL SUMMARY REPORT                                2
        -CORE AND SAMPLE DESCRIPTIONS, AND DISK                             2
        -OIL, WATER, GAS AND CORE ANALYSES                                  2
        -FINAL DST REPORTS AND CHARTS (paper and digital)                   2
        -LOGS (FIELD AND FINAL PRINTS), AND LAS DISK                        2
        -DIRECTIONAL SURVEY AND LAS DISK                                    2
        -FINAL MUD LOG AND DIGITS IN ASCII FORMAT, OR                       2
        TOTAL GAS DETECTOR DATA AND DIGITS
        -POWERLOG DISK, IF APPLICABLE                                       1

5.      INFORMATION REQUIRED DURING COMPLETION

        -COMPLETION PROGRAM                                                 2
        -COMPLETION REPORTS (DAILY)                                         2
        -BOTTOM HOLE PRESSURE REPORTS                                       2
        -AOFP AND IP REPORTS                                                2
        -ALL REGULATORY GOVERNMENT REPORTS                                  2
        -FINAL COMPLETION OR ABANDONMENT REPORTS                            2

6.      CONTACTS

        DAILY DRILLING REPORTS TO:   Vicky Dickson -        Fax 234-5512
                                                            Phone 234-5573
ON CALL:

Primary Contact:                     Darcy Deibert -        Cellular 651-8169
                                                            Home 225-1431
                                                            Office 234-5356

Secondary Contact:                   Rick Schmidtke -       Cellular 651-8167
                                                            Home 272-6457
                                                            Office 234-5776

MAIL THE ABOVE DATA TO THE ATTENTION OF: VICKY DICKSON, 500 5th Avenue S.W.,
Calgary, T2P OL7


                                      105
<PAGE>

Lightning Energy Ltd.
Farmout Agreement
dated December 20, 2001.

                                 SCHEDULE "F" .
  to an agreement dated December 20,2001 between Chevron Canada Resources, and
                             Lightning Energy Ltd.

               Lighning's Well Requirement Sheet attached hereto.


                                      106