Memorandum of Understanding

This Memorandum of Understanding ("MOU") is made by and between:

SulphCo,  Inc.,  a Nevada  corporation  with  offices at 5250 Neil  Road,  Reno,
Nevada, United States of America, 89502 ("SulphCo")

And

Bechtel  Corporation,  a  Nevada  corporation  with  offices  at 3000  Post  Oak
Boulevard, Houston, Texas, United States of America, 77056 ("Bechtel").

Recitals:

A.       SulphCo is the owner of  intellectual  property rights in relation to a
         novel process for the removal of organic  sulfur  compounds from fossil
         or petroleum-derived fuel that combines oxidative  desulfurization with
         the use of ultrasound ("the Proprietary Technology").

B.       Bechtel is one of the leading engineering and construction firms in the
         world,   and  a  key  player  in  the   management  of  facilities  and
         infrastructure   providing  engineering,   procurement,   construction,
         project management and project financing services in the oil production
         and refining industry.

C.       Bechtel  and  SulphCo  have  expressed  interest  in forming a business
         relationship  with each  other  that will  allow  Bechtel  to enjoy the
         benefits of the Proprietary Technology.


Subject Matter:

1.       Bechtel will undertake a due diligence  investigation  of the Propriety
         Technology.  Such due diligence is to be completed within 30 to 60 days
         of execution of this MOU.

2.       Bechtel's due diligence  will involve an evaluation of the  Proprietary
         Technology  including  a  study  of its  practicality,  safety  and the
         economics for commercial  implementation of the Proprietary Technology.
         This will  include  an  inspection  of the  Propriety  Technology  in a
         laboratory  setting  either in the  SulphCo  facility  in Reno,  Nevada
         and/or at the University of Southern California.

3.       Bechtel will keep SulphCo informed of the progress of its due diligence
         effort with timely updates.

4.       Bechtel  acknowledges  that all  information  provided to it by SulphCo
         concerning   the   Proprietary   Technology   is  the   subject   of  a
         non-disclosure  agreement  executed  between  Bechtel  and  SulphCo  on
         December 18, 2000.

5.       If on  conclusion of its due  diligence  effort,  Bechtel is reasonably
         satisfied of the commercial  potential for the Proprietary  Technology,
         it will so notify  SulphCo and the  parties  will  commence  good faith
         negotiations to establish a business  relationship whereby Bechtel will
         a)  become   SulphCo's   exclusive   global  licensing  agent  for  the
         Proprietary  Technology,  b) develop plans for commercialization of the
         Proprietary   Technology,   and  ck)  establish   budgets  and  funding
         strategies  to  support  the   commercialization   activities  for  the
         Proprietary Technology. SulphCo retains the right to assist in sales.

6.       The  provisions of paragraph 6 above are merely a record of the present
         intentions of SulphCo and Bechtel  concerning  the  establishment  of a
         business  relationship  and not intended to  constitute a binding legal
         agreement between the parties.

7.       In consideration of Bechtel's role in managing the commercialization of
         the  Proprietary  Technology,  Bechtel will be entitled to share in the
         licensing fees generated from licensing the  Proprietary  Technology on
         an equitable basis as agreed upon by the parties.

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8.       Under no circumstances shall Bechtel or SulphCo be liable to each other
         for any consequential,  incidental or indirect damages, whether arising
         in tort, contract, strict liability,  breach of contract, or otherwise,
         and Bechtel and SulphCo hereby release each other and their affiliates,
         subsidiaries,  officers,  employees  and  agents  from all such loss or
         damage.

9.       The law of this  agreement  shall be the law of the state of Nevada and
         the parties hereby submit to the jurisdiction of the courts of Nevada.

Dated this 2nd day of January, 2001.

Signed for and on behalf of SulphCo

/s/ Mark Cullen
---------------
Mark Cullen
Chief Executive Officer

Signed for and on behalf of Bechtel

/s/ L. K. Murray
----------------
Lance Murray
Principal Vice President
Manager, Refining Center of Excellence

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