Exhibit 10.2

                     AMENDMENT #2 TO PRODUCT SALES AGREEMENT
                     ---------------------------------------

This Amendment (herein "Amendment #2") to Product Sales Agreement is made
effective as of this 28th day of January, 2005 ("the Effective Date"), by and
between Penn Octane Corporation, a Delaware corporation ("Penn Octane"), and
Koch Hydrocarbon, LP, a Delaware limited partnership ("KHLP"),

WHEREAS, Penn Octane and KHLP entered into that certain Product Sales Agreement
dated the 9th day of December, 2003 (herein "the Agreement"), and

WHEREAS, Penn Octane and KHLP entered into an Amendment of the Agreement dated
December 17, 2004

WHEREAS, Penn Octane and KHLP wish to again amend the Agreement as of the
Effective Date of this Amendment #2.

Now therefore, in consideration of the undertakings hereinafter set forth, the
parties agree to amend the Agreement as follows;

     1.   All terms and conditions of the Agreement, as amended, shall he
          suspended effective at the end of the day on January 31, 2005, except
          with respect to obligations accrued as of such time; and the
          Agreement, as amended, shall remain suspended until the beginning of
          the day of October 1, 2005.

     2.   Beginning on April 1, 2005 and continuing to the end of the day of
          July 31, 2005, Penn Octane and KHLP or its assignee shall each
          negotiate in good faith the terms and conditions of a potential new
          agreement that, if mutually agreed upon, shall supersede and replace
          the Agreement and take effect at the beginning of the day October 1,
          2005. Nothing herein, or in the Agreement, as amended, shall require
          either Penn Octane or KHLP or its assignee to agree upon any terms or
          conditions suggested by the other.

     3.   In the event that by the end of the day of July 31, 2005 Penn Octane
          and KHLP or its assignee should be unable reach agreement on a new
          agreement to take effect at the beginning of the day on October 1,
          2005, then this Amendment and the Agreement shall terminate at the
          end of the day on July 31, 2005, and neither Party shall have further
          obligation to the other except for obligations that may have accrued
          prior to the beginning of the day of February 1, 2005.


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     4.   Paragraph 24 of the Agreement, as amended, is amended to read as
          follows:

               "Neither Party shall assign its rights or delegate its
               duties under this Agreement without the prior written
               consent of the other Party, which consent shall not be
               unreasonably withheld, conditioned, delayed or denied;
               except that KHLP may assign and/or delegate its rights and
               duties under this Agreement to Koch Supply and Trading, LP
               (KS&T) without the consent of Perm Octane. Any attempted
               assignment made in contravention of this section shall be
               void at the option of the other Party. Upon such assignment
               and delegation to KS&T, and the assumption thereof by KS&T,
               KHLP shall be discharged of its obligations hereunder,
               except for those accrued to the date of such assignment and
               delegation"

IN WITNESS WHEREOF, Perm Octane and KHLP have executed this Amendment on the
28th day of January, 2005 but effective on the Effective Date.

Koch Hydrocarbon, LP
By: NGL/GP, LLC, its general partner

By:    /s/ Mark W. Dobbins
     -----------------------------------
Printed name:    Mark W. Dobbins
               -------------------------
Its:    Sr. Vice President
      ----------------------------------

PENN OCTANE CORPORATION

By:    /s/ Jerry L. Lockett
     -----------------------------------
Printed name:    Jerry L. Lockett
               -------------------------
Its:    J.B.
      ----------------------------------


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