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                                                                    EXHIBIT 4.20

                          FAR EAST ENERGY CORPORATION

                      NONQUALIFIED STOCK OPTION AGREEMENT

                              GENERAL INFORMATION

Name:                Nancy Williams

Award Date:          December 23, 2004

Number of Shares
Subject to Option:   25,000

Exercise Price:      $2.00

Vesting:             One fifth upon the Award Date and one fifth each
                     succeeding anniversary of the Award Date until fully vested

Expiration Date:     December 23, 2014

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                          FAR EAST ENERGY CORPORATION
                      NONQUALIFIED STOCK OPTION AGREEMENT

      THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT") is made as of
this 23rd day of December, 2004, by and between Far East Energy Corporation, a
Nevada corporation (the "CORPORATION"), and Nancy Williams ("PARTICIPANT").

      NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and of such other good and valuable consideration, the receipt, adequacy
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, do hereby agree as follows:

1.    GRANT OF OPTION.

      A. Subject to the terms and conditions hereinafter set forth, the
Corporation, with the approval and at the direction of the Compensation
Committee of the Board of Directors (the "COMMITTEE"), and the Participant
hereby acknowledge and agree that the Corporation granted to Participant, as of
the Award Date, an option to purchase up to 25,000 shares of the common stock of
the Corporation ("COMMON STOCK") at a price of U.S. $2.00 per share (as may be
adjusted in accordance with Article 5, the "EXERCISE PRICE"). Such option is
hereinafter referred to as the "OPTION," and the shares of Common Stock
purchasable upon exercise of the Option are hereinafter referred to as the
"SHARES." The Option is intended by the parties hereto to be, and shall be
treated as, a nonqualified stock option (as such term is defined under Section
422 of the Internal Revenue Code of 1986, as amended).

      B. The right to exercise 20% of the Option (or a portion thereof) shall
vest and first become exercisable on the Award Date, and an additional 20% shall
vest on each succeeding anniversary of the Award Date until all of the Option is
vested (the "VESTING DATE(S)"), so that all of the Shares subject to the Option
shall be fully vested on December 23, 2008; provided, however, that Participant
has been continuously employed or otherwise retained by the Corporation during
the period from the Award Date until the applicable Vesting Date.

2. TERMINATION OF OPTION. The Option and all rights hereunder with respect
thereto, to the extent such rights shall not have been exercised, shall
terminate and become null and void after December 23, 2014 (the "OPTION TERM").

3.    EXERCISE OF OPTION.

      A. Participant may exercise the Option with respect to all or any part of
the number of Shares then exercisable hereunder by giving the Secretary of the
Corporation written notice of intent to exercise. The notice of exercise shall
specify the number of Shares as to which Participant is exercising and the date
of exercise thereof, which date shall be not less than five (5) days after the
giving of such notice (unless an earlier time shall have been mutually agreed
upon in writing). All or any portion of the vested portion of the Option may be
exercised by Participant at any time on or before December 23, 2014.

      B. Notwithstanding anything contained in this Article 3 to the contrary,
the Option may be exercised only in compliance with all applicable securities
laws and only by (i) Participant's completion, execution and delivery to the
Corporation of a notice of exercise and, if required by the Corporation, an
"investment letter" as supplied by the Corporation and (ii) the payment to the
Corporation, as provided in Article 3D hereof, of an amount equal to the amount
obtained by multiplying the Exercise Price by the number of Shares being
purchased pursuant to such exercise as shall be specified by Participant in such
notice of exercise. Participant shall not sell, transfer, assign, pledge for a
loan, margin, hypothecate or exchange the Option or the option shares, except
pursuant to the laws of descent and except that Participant's estate, executors
or administrators, or personal or legal representatives may exercise the Option
in accordance with the terms of Article 3C hereof in the event of the death or
Disability of Participant. "DISABILITY" as used in this Agreement shall mean the
inability of Participant to substantially perform his duties under this
Agreement, as a result of a physical or mental illness or personal injury he has
incurred, as determined by an independent physician selected with the approval
of the Corporation and Participant.

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      C. In the event the Participant ceases to be an employee of the
Corporation for any reason, except due to the Participant's death or Disability,
the Option to the extent exercisable, may be exercised for three months
following termination of employment (but not beyond the Option Term). To the
extent the Option is not exercisable at the time of termination of employment,
the Option shall be immediately forfeited.

      D. In the event of the death or Disability of Participant at such time
that Participant shall possess an Option pursuant to the terms of this
Agreement, Participant, Participant's estate, executors or administrators, or
personal or legal representatives (as applicable) shall be entitled to exercise
the Option within three months following the Participant's death or Disability
(but not beyond the Option Term). Any person, other than Participant, so
desiring to exercise Participant's Option shall be required, as a condition to
the exercise of the Option, to furnish to the Corporation such documentation as
the Corporation shall deem satisfactory to evidence the authority of such person
to exercise the Option on behalf of Participant. In the event of the exercise of
such Option by Participant's estate, executors or administrators, or personal or
legal representatives, all references herein to Participant shall, to the extent
applicable, be deemed to refer to and include such estate, executors or
administrators, or personal or legal representatives, as the case may be.

      E. Notwithstanding anything contained in this Article 3 to the contrary,
the Committee or the Board of Directors of the Corporation (the "BOARD"), may,
in its sole discretion, permit the Option to vest and be exercisable in whole or
in part immediately prior to the time of a Change in Control notwithstanding
that the Option is not fully vested, and the Participant shall have the right to
exercise this Option from and after the date of the Change in Control. A "CHANGE
IN CONTROL" shall mean to have occurred at such time as either (i) any "person",
as such term is used in Section 14(d) of the Securities Exchange Act of 1934, as
amended (other than the Company, or any employee benefit plan (or related trust)
maintained or sponsored by the Company, or an entity controlled by the Company)
(a "PERSON"), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended, or any successor rule),
directly or indirectly, of fifty percent (50%) or more of the combined voting
power of the Company's outstanding voting securities then entitled to vote
generally in the election of directors (the "OUTSTANDING VOTING SECURITIES");
provided that the following shall not be deemed to result in a Change in
Control: (A) any acquisition directly from the Company; or (B) any acquisition
by merger, consolidation, share exchange or similar transaction that is not
described in clause (ii) of this Section 3E as long as no Person resulting from
such transaction obtains beneficial ownership of fifty percent (50%) or more of
the then Outstanding Voting Securities or (ii) a consolidation, share exchange
or similar transaction involving the Company in which the stockholders of the
Company immediately prior to such transaction do not own, directly or
indirectly, at least fifty percent (50%) of the Outstanding Voting Securities or
voting power of the issued and outstanding capital stock of the Company's
successor immediately after such transaction.

      F. The Exercise Price shall be paid in full by Participant for the Shares
purchased on or before the exercise date specified in the notice of exercise, at
Participant's option, in one or a combination of the following methods: (i) in
cash or by electronic funds transfer; (ii) by check payable to the order of the
Corporation; (iii) if authorized by and the Board or the Committee, by a
promissory note of the Participant; (iv) by notice and third party payment in
such manner as may be authorized by the Board or the Committee; (v) by the
delivery of shares of Common Stock of the Corporation already owned by the
Participant; or (vi) pursuant to a "cashless exercise" procedure (the "CASHLESS
EXERCISE RIGHT") pursuant to which the Participant shall surrender to the
Corporation this Option and a notice of exercise, duly completed and executed by
the Participant to evidence the exercise of the Cashless Exercise Right by
authorizing the Corporation to withhold from issuance a number of Shares
issuable upon such exercise of the Option which, when multiplied by the Fair
Market Value (as defined below) of such Shares, is equal to the aggregate
Exercise Price (and such withheld Shares shall no longer be issuable under this
Option). Shares of Common Stock used to satisfy the Exercise Price of an Option
shall be valued at their Fair Market Value on the date of exercise.

      G. The "FAIR MARKET VALUE" shall be determined as follows:

            (a) if the security at issue is listed on a national securities
      exchange or admitted to unlisted trading privileges on such an exchange or
      quoted on either the National Market System or the Small Cap Market of the
      automated quotation service operated by The Nasdaq Stock Market, Inc., the
      Fair Market Value shall be the last reported sale price of that security
      on such exchange or system on the day for which the Fair Market Value is
      to be determined or, if no such sale is made on such day, the average of
      the highest closing bid and lowest asked price for such day on such
      exchange or system; or

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            (b) if the security at issue is not so listed or quoted or admitted
      to unlisted trading privileges, the Fair Market Value shall be the average
      of the last reported highest bid and lowest asked prices quoted on the
      Electronic Bulletin Board operated by The Nasdaq Stock Market, Inc., or,
      if not so quoted, then by the National Quotation Bureau, Inc. on the last
      business day prior to the day for which the Fair Market Value is to be
      determined; or

            (c) if the security at issue is not so listed or quoted or admitted
      to unlisted trading privileges and bid and asked prices are not reported,
      the Fair Market Value shall be determined in such reasonable manner as may
      be prescribed from time to time by the Board.

      H. Upon the exercise of all or any portion of the Option by Participant,
or as soon thereafter as is practicable, the Corporation shall issue and deliver
to Participant (or to any broker or, if acceptable to the Corporation, to any
other person designated by Participant) a certificate or certificates evidencing
such number of Shares as Participant has elected to purchase. Such certificate
or certificates shall be registered in the name of Participant (or the
designated broker or other person) and, if applicable, shall bear an appropriate
investment warranty legend, any legend required by an applicable securities law,
rule or regulation and, if applicable, a legend referring to the restrictions
provided hereunder and any legend required by applicable law. Upon the exercise
of the Option and the issuance and delivery of such certificate or certificates,
Participant (or the person to whom such stock certificates are registered) shall
have all the rights of a stockholder with respect to such Shares and to receive
all dividends or other distributions paid or made with respect thereto. In the
event that the capital stock of the Corporation is converted in whole or in part
into securities of any other entity, a determination as to whether the
securities of the other entity so received (if any) shall be subject to the
restrictions set forth in this Agreement shall be made solely by the other
entity.

4. RIGHTS PRIOR TO EXERCISE. Participant shall have no equity interest in the
Corporation or any voting, dividend, liquidation or dissolution rights with
respect to any capital stock of the Corporation solely by reason of having an
Option or having executed this Agreement. Prior to the exercise of all or a
portion of the Option, as set forth in Article 3A hereof, and the issuance and
delivery of a certificate or certificates evidencing the Shares purchased
pursuant to the exercise of all or a portion of such Option, Participant shall
have no interest in, or any voting, dividend, liquidation or dissolution rights
with respect to, the Shares, except to the extent that Participant has exercised
all or a portion of such Option and has been issued and received delivery of a
certificate or certificates evidencing the Shares purchased pursuant to such
exercise.

5.    ADJUSTMENT OF PURCHASE AND NUMBER OF SHARES.

      A. ADJUSTMENT. The number and kind of securities purchasable upon the
exercise of this Option and the Exercise Price shall be subject to adjustment
from time to time upon the happening of certain events as follows:

            (a) Reclassification, Consolidation or Merger. At any time while
      this Option remains outstanding and unexpired, in case of (i) any
      reclassification or change of outstanding securities issuable upon
      exercise of this Option (other than a change in par value, or from par
      value to no par value per share, or from no par value per share to par
      value or as a result of a subdivision or combination of outstanding
      securities issuable upon the exercise of the Option), (ii) any
      consolidation or merger of the Corporation with or into another
      corporation (other than a merger with another corporation in which the
      Corporation is a continuing corporation and which does not result in any
      reclassification or change, other than a change in par value, or from par
      value to no par value per share, or from no par value per share to par
      value, or as a result of a subdivision or combination of outstanding
      securities issuable upon the exercise of this Option), or (iii) any sale
      or transfer to another corporation of the property of the Corporation as
      an entirety or substantially as an entirety, the Corporation, or such
      successor or purchasing corporation, as the case may be, shall without
      payment of any additional consideration therefore, execute a new Option
      providing that the holder of this Option shall have the right to exercise
      such new Option (upon terms not less favorable to the holder than those
      then applicable to this Option) and to receive upon such exercise, in lieu
      of each share of Common Stock theretofore issuable upon exercise of this
      Option, the kind and amount of shares of stock, other securities, money or
      property receivable upon such reclassification, change, consolidation,
      merger, sale or transfer. Such new Options shall provide for adjustments
      which shall be as nearly equivalent as may be practicable to the
      adjustments provided for in this Section 5A. The provisions of this

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      Section 5A(a) shall similarly apply to successive reclassifications,
      changes, consolidations, mergers, sales and transfers.

            (b) Subdivision or Combination of Shares. If the Corporation at any
      time while this Option remains outstanding and unexpired, shall subdivide
      or combine its capital stock, the Exercise Price shall be proportionately
      reduced, in case of subdivision of such shares as of the effective date of
      such subdivision, or, if the Corporation shall take a record of holders of
      its capital stock for the purpose of so subdividing, as of such record
      date, whichever is earlier, or shall be proportionately increased, in the
      case of combination of such shares, as of the effective date of such
      combination, or, if the Corporation shall take a record of holders of its
      capital stock for the purpose of so combining, as of such record date,
      whichever is earlier.

            (c) Stock Dividends. If the Corporation at any time which this
      Option is outstanding and unexpired shall pay a dividend in shares of, or
      make other distribution of shares of, its capital stock, then the Exercise
      Price shall be adjusted, as of the date the Corporation shall take a
      record of the holders of its capital stock for the purpose of receiving
      such dividend or other distribution (or if no such record is taken, as at
      the date of such payment or other distribution), to that price determined
      by multiplying the Exercise Price in effect immediately prior to such
      payment or other distribution by a fraction (i) the numerator of which
      shall be the total number of shares of capital stock outstanding
      immediately prior to such dividend or distribution, and (ii) the
      denominator of which shall be the total number of shares of its capital
      stock outstanding immediately after such dividend or distribution. The
      provisions of this Section 5A(c) shall not apply under any of the
      circumstances for which an adjustment is provided in Section 5A(a) or
      5A(b).

            (d) Liquidating Dividends, Etc. If the Corporation at any time while
      this Option is outstanding and unexpired makes a distribution of its
      assets to the holders of its capital stock as a dividend in liquidation or
      by way of return of capital or other than as a dividend payable out of
      earnings or surplus legally available for dividends under applicable law
      or any distribution to such holders made in respect of the sale of all or
      substantially all of the Corporation's assets (other than under the
      circumstances provided for in the Sections 5A(a) through (c)), the holder
      of this Option shall be entitled to receive upon the exercise hereof, in
      addition to the shares of Common Stock receivable upon such exercise, and
      without payment of any consideration other than the Exercise Price, an
      amount in cash equal to the value of such distribution per share of Common
      Stock multiplied by the number of shares of Common Stock which, on the
      record date for such distribution, are issuable upon exercise of this
      Option (with no further adjustment being made following any event which
      causes a subsequent adjustment in the number of shares of Common Stock
      issuable upon the exercise hereof), and an appropriate provision therefor
      should be made a part of any such distribution. The value of a
      distribution which is paid in other than cash shall be determined in good
      faith by the Board.

      B. NOTICE OF ADJUSTMENTS. Whenever any of the Exercise Price or the number
of shares of Common Stock purchasable under the terms of this Option at that
Exercise Price shall be adjusted pursuant to Section 5A hereof, the Corporation
shall promptly make a certificate signed by its Chief Executive Officer,
President or a Vice President and by its Treasurer or Assistant Treasurer or its
Secretary or Assistant Secretary, setting forth in reasonable detail the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis upon which the
Board made any determination hereunder), and the Exercise Price and number of
shares of Common Stock purchasable at that Exercise Price after giving effect to
such adjustment, and shall promptly cause copies of such certificate to be
mailed (by First Class and Postage Prepaid) to the registered holder of this
Option.

6. HEADINGS. The headings and other captions contained in this Agreement are for
convenience of reference only, and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.

7. ENTIRE AGREEMENT. This Agreement sets forth all of the promises, agreements,
conditions, understandings, warranties and representations between the parties
hereto with respect to the Shares, and there are no promises, agreements,
conditions, understandings, warranties or representations, oral or written,
express or implied, between them with respect to the Shares other than as set
forth herein. Any and all prior agreements between the parties hereto with
respect to any stock acquisition rights regarding the Shares are hereby revoked.
This Agreement is, and is intended by the parties to be, an integration of any
and all prior agreements or understandings, oral or written, with respect to the
Option and the Shares.

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8. NOTICES. Any and all notices provided for herein shall be sufficient if in
writing, and sent by hand delivery, by an overnight delivery service that
produces a signed receipt evidencing delivery or by certified or registered mail
(return receipt requested and first class postage prepaid), in the case of the
Corporation, to its principal office, and in the case of Participant, to
Participant's address as shown on the Corporation's records.

9. INVALID OR UNENFORCEABLE PROVISIONS. The provisions of this Agreement shall
be deemed severable, and the invalidity or unenforceability of any one or more
of the provisions hereof shall not affect the validity and enforceability of the
other provisions hereof. Participant agrees that the breach or alleged breach by
the Corporation of (a) any covenant contained in another agreement (if any)
between the Corporation and Participant or (b) any obligation owed to
Participant by the Corporation, shall not affect the validity or enforceability
of the covenants and agreements of Participant set forth herein.

10. MODIFICATIONS. No change or modification of this Agreement shall be valid
unless the same is in writing and signed by the parties hereto; provided,
however, that Participant hereby covenants and agrees to execute any amendment
to this Agreement which shall be required or desirable (in the opinion of the
Corporation or its counsel) in order to comply with any rule or regulation
promulgated or proposed under the Internal Revenue Code of 1986, as amended, by
the Internal Revenue Service.

11. GOVERNING LAW. The validity, construction, interpretation and effect of this
Agreement shall exclusively be governed by and determined in accordance with the
laws of Texas (other than the conflicts-of-law or choice-of-law rules thereof),
except to the extent preempted by federal law, which solely to the extent of
such preemption shall govern. Venue shall lie only in the State and Federal
Courts in and for the County of Harris, Texas, as to all disputes arising under
this Agreement, and such venue is hereby consented to by the Corporation and
Participant.

12. COUNTERPARTS. This Agreement may be executed in counterparts, each of which,
when taken together, shall constitute one original agreement.

                            [SIGNATURE PAGE FOLLOWS.]

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      IN WITNESS WHEREOF, the Corporation has caused its duly authorized officer
to execute and attest to this Agreement, and to apply the corporate seal hereto,
and Participant has placed his or her signature hereon, effective as of this
23rd day of December, 2004.

                                    CORPORATION:

                                    FAR EAST ENERGY CORPORATION

                                    By: /s/ Michael R. McElwrath
                                        ----------------------------------------
                                        Michael R. McElwrath, Chairman and Chief
                                        Executive Officer

                                    PARTICIPANT:

                                    By: /s/ Nancy Williams
                                        ----------------------------------------
                                        Nancy Williams

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