<PAGE>
                                                                    EXHIBIT 10.4



THIS OPTION AND THE LIMITED LIABILITY COMPANY INTERESTS PURCHASABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

                              UNIT PURCHASE OPTION

                            Void after July 10, 2006

Option No. 1                                                      July 10, 2003


         FOR VALUE RECEIVED and pursuant to the terms of a letter agreement
dated November 29, 2002, between Shore Capital LLC and Penn Octane Corporation,
a Delaware corporation ("Penn Octane"), and a resulting employment agreement
dated May 13, 2003, between Penn Octane and Richard Shore, Jr., the undersigned,
Penn Octane, hereby certifies that Shore Capital LLC (the "Holder"), or assigns,
is entitled, subject to the terms set forth below, to purchase from Penn Octane
after the date (the "Distribution Date") Penn Octane completes the distribution
(the "Distribution") to its stockholders of all of the outstanding common units
of Rio Vista Energy Partners L.P., a Delaware limited partnership ("Rio Vista"),
and before 5:00 P.M. New York time, on July 10, 2006 (the "Expiration Date") 25%
of the outstanding Units (as defined below) of Rio Vista GP LLC, a Delaware
limited liability company (the "Company") for a purchase price per Unit (the
"Exercise Price") equal to the number of Units to be purchased divided by the
pro rata portion of the tax basis capital of Rio Vista immediately following the
Distribution.


         As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

         (a) The term "Company" includes any corporation that shall succeed to
or assume the obligations of the Company.

         (b) The term "Exercise Price" shall have the meaning ascribed to such
term in the first paragraph hereof.

         (c) The term "Limited Liability Company Agreement" shall mean the
Amended and Restated Limited Liability Company Agreement of the Company dated
__________, 2003.

         (c) The term "Purchase Price" shall mean the amount equal to the
product of the Exercise Price and the number of Units to be purchased upon the
full exercise of this Option.

         (d) The term "Units" shall have the meaning ascribed to such term in
the Limited Liability Company Agreement.

         1. Exercise of Option. This Option may be exercised in full by the
Holder hereof at any time after the Distribution Date and before the Expiration
Date by surrender of this Option,



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with the form of subscription, addendum agreement to the limited liability
company agreement of the Company and the Voting Agreement attached hereto duly
executed by such Holder, to the Company and Penn Octane at their respective
principal offices, accompanied by payment of the Purchase Price. The Purchase
Price shall be paid by cash or check payable to the order of Penn Octane
Corporation.

         2. When Exercise Effective. The exercise of this Option shall be deemed
to have been effected immediately prior to the close of business on the business
day on which this Option is surrendered as provided in Section 1 and the
documents referenced in Section 1 are duly executed and delivered as provided in
Section 1, and at such time the Holder shall be deemed to be the record holder
of such Units for all purposes.

         3. Delivery on Exercise. As soon as practicable after the exercise of
this Option in full, and in any event within ten (10) business days thereafter,
Penn Octane at its expense (including the payment by it of any applicable issue
taxes) will cause to be delivered to the holder hereof a certificate or
certificates for the number of Units to which such holder shall be entitled on
such exercise.

         4. Investment Intent. Unless a current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), shall be in effect
with respect to the securities to be purchased upon exercise of this Option, the
Holder hereof, by accepting this Option, covenants and agrees that, at the time
of exercise hereof, and at the time of any proposed transfer of securities
acquired upon exercise hereof, such Holder will deliver to the Company and Penn
Octane a written statement that the securities acquired by the Holder are for
such Holder's own account, and are not acquired with a view to, or for sale in
connection with, any distribution thereof (or any portion thereof) except
pursuant to current registration statement under the Securities Act or an
available exemption from registration.

         5. Transfer. This Option is not transferable without the prior written
consent of Penn Octane.

         6. No Rights or Liability as a Member. This Option does not entitle the
Holder hereof to any voting rights or other rights as a Member (as defined in
Limited Liability Company Agreement). No provisions hereof and no enumeration
herein of the rights or privileges of the Holder hereof shall give rise to any
liability of such holder as a Member of the Company. The Units to be purchased
pursuant to this Option are subject to the terms of the Limited Liability
Company Agreement. The Holder shall not be deemed to be a Member and shall not
have any rights of a Member or rights of an assignee from a Member with respect
to, any Units subject to this Option unless and until the Holder has satisfied
all requirements for exercise of this Option pursuant to its terms. Before
receiving the Units subject to this Option, the Holder shall take such action
and execute such documents as the Company and Penn Octane may require to become
a Member of the Company.

         7. Damages. Penn Octane recognizes and agrees that the Holder hereof
will not have an adequate remedy if Penn Octane fails to comply with the terms
of this Option and that damages will not be readily ascertainable, and Penn
Octane expressly agrees that, in the event of such failure, it shall not oppose
an application by the Holder of this Option or any other person




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entitled to the benefits of this Option requiring specific performance of any
and all provisions hereof or enjoining the Penn Octane from continuing to commit
any such breach of the terms hereof.

         8. Notices. All notices and other communications required or permitted
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by first class mail, or (c) by a recognized
overnight delivery service (with charges prepaid), addressed (1) if to the
Holder of this Option, at such Holder's address as it appears in the records of
Penn Octane (unless otherwise indicated by such Holder), (2) if to Penn Octane,
at its office at 77-530 Enfield Lane, Building D, Palm Desert, CA 92211,
Attention: Chief Executive Officer, or at such other address as Penn Octane
shall have furnished to the Holder of the Option in writing or (3) if to the
Company, at its office at 820 Gessner Road, Suite 1285, Houston, Texas 77024 or
at such other address as the Company or Penn Octane shall have furnished to the
Holder of the Option in writing


         9. Payment of Taxes. Penn Octane shall pay all transfer taxes and other
governmental charges (not including state and federal income taxes) that may be
imposed in respect to the issue or delivery of the Units purchased upon the
exercise of this Option. At the time this Option is exercised, in whole or in
part, or at any time thereafter as requested by Penn Octane, Holder hereby
authorizes withholding from payroll and any other amounts payable to Holder, and
otherwise agrees to make adequate provision for, any sums required to satisfy
the federal, state, local and foreign tax withholding obligations of Penn Octane
or an affiliate, if any, which arise in connection with this Option. This Option
is not exercisable unless the tax withholding obligations of Penn Octane and/or
any affiliate are satisfied. Accordingly, Holder may not be able to exercise
this Option when desired even though this Option is vested, and Penn Octane
shall have no obligation to issue a certificate for such Units or release such
Units from any escrow provided for herein.


         10. Governing Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Option and the
attachments hereto shall be governed by, and construed in accordance with, the
laws of the State of Texas without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas. In furtherance of the foregoing, the internal law
of the State of Texas shall control the interpretation and construction of this
Option (and all attachments hereto), even though under that jurisdiction's
choice of law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.

         11. Consent to Jurisdiction.

                  (a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Texas state court or federal court o the United States of
America sitting in Houston, Texas, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby or for recognition or enforcement of any
judgment relating thereto, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect




                                       3
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of any such action or proceeding may be heard and determined in such Texas state
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto 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.

                  (b) Each of the parties hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Option or the
transactions contemplated hereby in any Texas state or federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

                  (c) Each party to this Option irrevocably consents to service
of process in the manner provided for notices in Section 8. Nothing in this
Option will affect the right of any party to this Option to serve process in any
other manner permitted by law.

         12. Waiver of Jury Trial.

                  (a) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS OPTION IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS OPTION OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

                  (b) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER VOLUNTARILY, AND (iv) IT
HAS BEEN INDUCED TO ENTER INTO THIS OPTION BY, AMONG OTHER THINGS, THE MUTUAL
WAIVER AND CERTIFICATIONS IN THIS SECTION 12.

         13. Miscellaneous. This Option and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Option are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.

                                       PENN OCTANE CORPORATION



                                       By:
                                          -------------------------------------
                                       Name:
                                            -----------------------------------
                                       Title:
                                             ----------------------------------




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                                       ACKNOWLEDGED AND AGREED TO WITH
                                       RESPECT TO ITS RIGHTS AND
                                       OBLIGATIONS HEREUNDER:

                                       SHORE CAPITAL LLC

                                       By:
                                          -------------------------------------
                                       Name:
                                            -----------------------------------
                                       Title:
                                             ----------------------------------




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<PAGE>



                             ATTACHMENT A TO OPTION

                              FORM OF SUBSCRIPTION

                    (TO BE SIGNED ONLY ON EXERCISE OF OPTION)



         To:      PENN OCTANE CORPORATION


         The undersigned, the holder of the within Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder, 25% of the outstanding Units of RIO VISTA GP LLC and
herewith makes payment of $___________ therefor,


         and requests that the certificates for such units be issued in the name
of, and delivered to the undersigned, whose address is__________________________
_____________________________________.


                                        ---------------------------------------
                                        (Signature must conform in all respects
                                        to name of holder as specified on the
                                        face of the Option)

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

                                        ---------------------------------------
                                        Address

         Dated:
                 ----------------




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<PAGE>


                             ATTACHMENT B TO OPTION

               ADDENDUM AGREEMENT TO THE LIMITED LIABILITY COMPANY
                          AGREEMENT OF RIO VISTA GP LLC








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                             ATTACHMENT C TO OPTION

                                VOTING AGREEMENT










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