REAL ESTATE LIEN NOTE

Date:  April  9,  1997

Maker:  Penn  Octane  Corporation

Maker's  Mailing  Address  (including  County):

5847  San  Felipe  Suite  3420
Houston,  Texas  77057
Harris  County,  Texas

Payee:  Lauren  Constructors,  Inc.

Place  for  Payment:  (including  county):

P.O.  Box  1761
Abilene,  Texas    79604-1761
Taylor  County,  Texas

Principal  Amount:     One Hundred Eighteen Thousand Two Hundred Forty-six and
84/100ths  Dollars  ($118,246.84)

Annual  Interest  Rate on Unpaid Principal from Date:     Twelve Percent (12%)

Annual Interest Rate on Matured, Unpaid Amounts: Eighteen Percent (18%) or the
maximum  rate  allowed  by  state  and  federal  law,  whichever  is  lower.

Terms  of  Payment (principal and interest):   Principal and interest shall be
due  and  payable  in  monthly  installments  of Thirty Thousand Three Hundred
Seventy-five  and  no/100ths Dollars ($30,375.00) or more each, payable on the
fifteenth  (15th)  calendar day of each and every calendar month, beginning on
May  15,  1997,  and  continuing regularly thereafter until August 15, 1997 on
which  last mentioned date the entire unpaid balance of principal and interest
then owing shall become immediately due and payable.  Each installment will be
applied  first to payment of accrued interest payable on the unpaid principal,
and  the  remainder  will  be  applied  to  reduction  of  principal.

Interest  shall  be  calculated  on  the  unpaid principal to the date of each
installment.  Each  payment will be credited first to the accrued interest and
then  to  reduction  of  principal.

Security  for  payment:  A  Deed  of Trust of even date herewith from Maker to
Kelly  Gill,  Trustee,  which  covers the following described property to-wit:
Maker's leasehold interest in two tracts of land in Cameron County, Texas more
particularly  described  on  Exhibit  A  attached  hereto.

This note is additionally secured by a security interest created in a security
agreement  that covers personal property and that is of even date herewith and
executed by Maker, Penn Octane Corporation as the Debtor in favor of the Payee
as  the  Secured  Party.

Maker  promises  to  pay  to  the  order of Payee at the place for payment and
according  to  the  terms of payment the principal amount plus interest at the
rates  stated  above.  All  unpaid amounts shall be due by the final scheduled
payment  date.

If  Maker  defaults  in  the payment of this note or in the performance of any
obligation  in  any  instrument  securing or collateral to it, and the default
continues  after  Payee  gives Maker notice of the default and the time within
which  it  must  be  cured, as may be required by law or by written agreement,
then  Payee  may  declare  the unpaid principal balance and earned interest on
this  note  immediately  due.  Maker  and each surety, endorser, and guarantor
waive all demands for payment, presentations for payment, notices of intention
to  accelerate  maturity,  notices  of acceleration of maturity, protests, and
notices  of  protest,  to  the  extent  permitted  by  law.

If  this  note  or  any instrument securing or collateral to it is given to an
attorney  for  collection or enforcement, or if suit is brought for collection
or enforcement, or if it is collected or enforced through probate, bankruptcy,
or  other  judicial  proceeding,  then  Maker  shall  pay  Payee  all costs of
collection  and  enforcement,  including  reasonable attorney's fees and court
costs,  in  addition to other amounts due. Reasonable attorney's fees shall be
10%  of  all  amounts  due  unless  either  party  pleads  otherwise.

Interest  on  the  debt  evidenced  by  this note shall not exceed the maximum
amount  of  nonusurious  interest that may be contracted for, taken, reserved,
charged,  or received under law; any interest in excess of that maximum amount
shall  be  credited  on  the  principal of the debt or, if that has been paid,
refunded.  On  any  acceleration or required or permitted prepayment, any such
excess  shall  be  canceled automatically as of the acceleration or prepayment
or,  if  already  paid,  credited  on  the  principal  of  the debt or, if the
principal  of the debt has been paid, refunded. This provision overrides other
provisions  in  this  and  all  other  instruments  concerning  the  debt.

Each  Maker  is  responsible  for  all  obligations  represented by this note.

When  the  context  requires,  singular nouns and pronouns include the plural.

                                BALLOON WARNING
This  loan is payable in full at maturity. You must repay the entire principal
balance  of  the  loan  and  unpaid  interest then due. The lender is under no
obligation  to  refinance  the  loan  at  that  time.  You will, therefore, be
required  to  make  payment  out of other assets that you may own, or you will
have  to find another lender, which may be the lender you have this loan with,
willing to lend you the money. If you refinance this loan at maturity, you may
have  to  pay  some or all of the closing costs normally associated with a new
loan  even  if  you  obtain  refinancing  from  the  same  lender.

THIS NOTE AND THE INSTRUMENTS BEING EXECUTED ALONG WITH IT REPRESENT THE FINAL
AGREEMENT  BETWEEN  THE  PARTIES  AND  MAY  NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR,  CONTEMPORANEOUS,  OR  SUBSEQUENT  ORAL  AGREEMENTS  OF  THE  PARTIES.

THERE  ARE  NO  UNWRITTEN  ORAL  AGREEMENTS  BETWEEN  THE  PARTIES.

Penn  Octane  Corporation

BY: /S/ JEROME B. RICHTER
    ---------------------
        JEROME B. RICHTER
ITS:    PRESIDENT
    ---------------------

Prepared  by:
FLEMING,  HEWITT  &  OLVERA
1175  F.  M.  802
Brownsville,  Texas  78521
File  No:  961159







                                 DEED OF TRUST

Date:  April  9,  1997

Grantor:  Penn  Octane  Corporation

Grantor's  Mailing  Address  (including  county):

5847  San  Felipe  Suite  3420
Houston,  Texas  77057
Harris  County,  Texas

Trustee:  Kelly  Gill

Trustee's  Mailing  Address  (including  county):

P.O.  Box  1761
Abilene,  Texas    79604-1761
Taylor  County,  Texas

Beneficiary:  Lauren  Constructors,  Inc.

Beneficiary's  Mailing  Address  (including  county):

P.O.  Box  1761
Abilene,  Texas    79604-1761
Taylor  County,  Texas

Note(s)
     Date:  April  9,  1997
     Amount:         One  Hundred Eighteen Thousand Two Hundred Forty-six and
                     84/100ths  Dollars  ($118,246.84)
     Maker:          Penn  Octane  Corporation
     Payee:          Lauren  Constructors,  Inc.
     Final  Maturity  Date:  August  15,  1997
     Terms  of  Payment:  As  provided  in  the  Note(s).

Property  (including  any  improvements):  Grantor's leasehold interest in two
tracts  of  land  in  Cameron  County,  Texas  described  on  Exhibit  A.

Prior  Lien(s)  (including  recording  information):  None

Other  Exceptions  to  Conveyance and Warranty:  Easements and restrictions of
record.

     For value received and to secure payment of the note, Grantor conveys the
property  to  Trustee in trust. Grantor warrants and agrees to defend title to
the  property.  If  Grantor  performs  all  the  covenants  and  pays the note
according  to  its terms, this deed of trust shall have no further effect, and
Beneficiary  shall  release  it  at  Grantor's  expense.

GRANTOR'S  OBLIGATIONS
     Grantor  agrees  to:
          1.  keep  the  property  in  good  repair  and  condition;
          2.  pay  all  taxes  and  assessments  on  the  property  when  due;
          3. preserve the lien's priority as it is established in this deed of
             trust;
          4.  maintain,  in  a  form  acceptable  to Beneficiary, an insurance
              policy  that:
               a.  covers  all  improvements for their full insurable value as
               determined  when the policy is issued and renewed, unless 
               Beneficiary approves a  smaller  amount  in  writing;
               b.  contains  an  80%  coinsurance  clause;
               c.  provides  fire  and  extended coverage, including windstorm
               coverage;
               d.  protects  Beneficiary  with  a  standard  mortgage  clause;
               e.  provides  flood  insurance at any time the property is in a
               flood  hazard  area;  and
               f.  contains  such other coverage as Beneficiary may reasonably
               require;
          5.  comply at all times with the requirements of the 80% coinsurance
          clause;
          6.  deliver the insurance policy to Beneficiary and deliver renewals
          to  Beneficiary  at  least  ten  days  before  expiration;
          7.  keep  any building occupied as required by the insurance policy;
          and
          8.  if  this  is  not  a  first  lien, pay all prior lien notes that
          Grantor  is  personally liable to pay and abide by all prior lien 
          instruments.
          9.  Furnish to noteholder by February 1st of each year, the paid tax
          receipts  for  the preceding year.  Failure to furnish paid tax 
          receipts shall constitute  default                        hereunder.
BENEFICIARY'S  RIGHTS
     1.  Beneficiary may appoint in writing a substitute or successor trustee,
succeeding  to  all  rights  and  responsibilities  of  Trustee.
     2.  If the proceeds of the note are used to pay any debt secured by prior
liens, Beneficiary is subrogated to all of the rights and liens of the holders
of  any  debt  so  paid.
     3. Beneficiary may apply any proceeds received under the insurance policy
either  to  reduce  the  note  or  to  repair  or replace damaged or destroyed
improvements  covered  by  the  policy.
     4.  If Grantor fails to perform any of Grantor's obligations, Beneficiary
may  perform  those  obligations and be reimbursed by Grantor on demand at the
place  where  the  note  is payable for any sums so paid, including attorney's
fees, plus interest on those sums from the dates of payment at the rate stated
in  the  note  for  matured, unpaid amounts. The sum to be reimbursed shall be
secured  by  this  deed  of  trust.
     5.  If  Grantor defaults on the note or fails to perform any of Grantor's
obligations or if default occurs on a prior lien note or other instrument, and
the  default  continues  after Beneficiary gives Grantor notice of default and
the  time  within  which  it  must  be  cured, as may be required by law or by
written  agreement,  then  Beneficiary  may:
          a.  declare  the unpaid principal balance and earned interest on the
note  immediately  due;
          b. request Trustee to foreclose this lien, in which case Beneficiary
or  Beneficiary's  agent shall give notice of the foreclosure sale as provided
by  the  Texas  Property  Code,  as  then  amended;  and
          c.  purchase  the  property  at any foreclosure sale by offering the
highest  bid  and  then  have  the  bid  credited  on  the  note.
TRUSTEE'S  DUTIES
     If  requested  by  Beneficiary  to  foreclose  this  lien, Trustee shall:
          1. either personally or by agent give notice of the foreclosure sale
as  required  by  the  Texas  Property  Code,  as  then  amended;
          2. sell and convey all or part of the property to the highest bidder
for  cash with a general warranty deed binding Grantor, subject to prior liens
and  to  other  exceptions  to  conveyance  and  warranty;
          3.  from  the  proceeds  of  the  sale,  pay  in  this  order:
               a.  expenses  of foreclosure, including a commission to Trustee
of  5%  of  the  bid;
               b.  to  Beneficiary,  the  full  amount of principal, interest,
attorney's  fees,  and  other  charges  due  and  unpaid;
               c.  any  amounts  required  by law to be paid before payment to
Grantor;  and
               d.  to  Grantor,  any  balance.
GENERAL  PROVISIONS
     1. If any of the property is sold under this deed of trust, Grantor shall
immediately  surrender possession to the purchaser. If Grantor fails to do so,
Grantor  shall  become  a tenant at sufferance of the purchaser, subject to an
action  for  forcible  detainer.
     2. Recitals in any Trustee's deed conveying the property will be presumed
to  be  true.
     3.  Proceeding  under this deed of trust, filing suit for foreclosure, or
pursuing  any  other  remedy  will  not  constitute  an  election of remedies.
     4.  This  lien  shall  remain superior to liens later created even if the
time of payment of all or part of the note is extended or part of the property
is  released.
     5.  If any portion of the note cannot be lawfully secured by this deed of
trust,  payments  shall  be  applied  first  to  discharge  that  portion.
     6.  Grantor  assigns  to  Beneficiary  all sums payable to or received by
Grantor from condemnation of all or part of the property, from private sale in
lieu  of condemnation, and from damages caused by public works or construction
on  or  near  the  property.  After deducting any expenses incurred, including
attorney's  fees,  Beneficiary  may  release  any remaining sums to Grantor or
apply  such  sums  to  reduce  the  note.  Beneficiary shall not be liable for
failure  to  collect  or  to  exercise  diligence in collecting any such sums.
     7. Grantor assigns to Beneficiary absolutely, not only as collateral, all
present  and  future  rent  and  other  income and receipts from the property.
Leases  are  not assigned. Grantor warrants the validity and enforceability of
the  assignment.  Grantor may as Beneficiary's licensee collect rent and other
income  and  receipts  as  long as Grantor is not in default under the note or
this  deed  of trust. Grantor will apply all rent and other income and receipt
to  payment of the note and performance of this deed of trust, but if the rent
and other income and receipts exceed the amount due under the note and deed of
trust,  Grantor  may  retain the excess. If Grantor defaults in payment of the
note or performance of this deed of trust, Beneficiary may terminate Grantor's
license  to collect and then as Grantor's agent may rent the property if it is
vacant and collect all rent and other income and receipts. Beneficiary neither
has  nor  assumes  any other obligations as lessor or landlord with respect to
any  occupant  of  the property. Beneficiary may exercise Beneficiary's rights
and  remedies  under this paragraph without taking possession of the property.
Beneficiary shall apply all rent and other income and receipts collected under
this  paragraph  first to expenses incurred in exercising Beneficiary's rights
and remedies and then to Grantor's obligations under the note and this deed of
trust  in  the order determined by Beneficiary. Beneficiary is not required to
act  under  this paragraph, and acting under this paragraph does not waive any
of  Beneficiary's  other rights or remedies. If Grantor becomes a voluntary or
involuntary bankrupt, Beneficiary's filing a proof of claim in bankruptcy will
be  tantamount  to  the  appointment  of  a  receiver  under  Texas  law.
     8.  Interest  on  the debt secured by this deed of trust shall not exceed
the  maximum amount of nonusurious interest that may be contracted for, taken,
reserved,  charged,  or  received  under  law;  any interest in excess of that
maximum  amount shall be credited on the principal of the debt, or if that has
been  paid, refunded. On any acceleration or required or permitted prepayment,
any  such  excess  shall  be  canceled automatically as of the acceleration or
prepayment  or,  if already paid, credited on the principal of the debt or, if
the  principal  of  the debt has been paid, refunded. This provision overrides
other  provisions  in  this  and  all  other  instruments concerning the debt.
     9.    When  the context requires, singular nouns and pronouns include the
plural.
     10.  The  term  "note"  includes  all sums secured by this deed of trust.
     11.  This  deed  of  trust  shall  bind,  inure to the benefit of, and be
exercised  by  successors  in  interest  of  all  parties.
     12.  If  Grantor  and  Maker  are not the same person, the term "Grantor"
shall  include  Maker.
     13. Grantor represents that this deed of trust and the note are given for
the  following  purposes:

The  note  is  given  in full satisfaction of any amounts that Grantor owes to
Thomas G. Janik & Associates, Inc. as evidenced by an Affidavit for Mechanic's
and  Materialman's  Lien  dated  May 9, 1994 and recorded in Volume 2894, Page
142,  of  the  Official  Records  of  Cameron  County,  Texas.

The  note  is given in full satisfaction of any amounts Grantor owes to Lauren
Constructors,  Inc.  as  evidenced  by  an  Affidavit  of  Mechanic's  and
Materialman's  Lien dated  May 19, 1994 and recorded in Volume 2912, Page 112,
of  the  Official  Records  of  Cameron  County,  Texas.

Penn  Octane  Corporation

BY: /S/ JEROME B. RICHTER   ITS: PRESIDENT
    ---------------------        ----------------------
    JEROME B. RICHTER


                               (ACKNOWLEDGMENT)
State  of  California
County  of  San Mateo

     This  instrument  was  acknowledged  before  me  on  the 9th day  of
April,  1997,  by,  Jerome B. Richter, President of Penn Octane Corporation on
behalf  of  Penn  Octane  Corporation.

                                   /S/ R. SMITH
                                   ---------------------------------
                                       R. SMITH
                                   Notary  Public,  State  of  California
                                   [NOTARY SEAL]


AFTER RECORDING RETURN TO:  PREPARED BY:
FLEMING, HEWITT & OLVERA    FLEMING, HEWITT & OLVERA
1175 F. M. 802              1175 F. M. 802
Brownsville, Texas 78521    Brownsville, Texas 78521
                            File Number: 961159






                             SECURITY AGREEMENT

Date:  April  9,  1997

Debtor:  Penn  Octane  Corporation

Debtor's  Mailing  Address:

5847  San  Felipe  Suite  3420
Houston,  Texas  77057

Secured  Party:  Lauren  Constructors,  Inc.

Secured  Party's  Mailing  Address:

P.O.  Box  1761
Abilene,  Texas    79604-1761
Taylor  County,  Texas

Classification  of  Collateral:  general  intangibles

Collateral  (including  all  accessions):

all  of the interest of Debtors in any and all funds received from litigation,
arbitration,  and/or settlement regarding claims against International Bank of
Commerce,  less  attorney's  fees,  costs  and expenses and any amounts due to
International  Bank  of  Commerce.

Obligation:

     Note:

          Date:                    April  9,  1997
          Amount:      One Hundred Eighteen Thousand Two Hundred Forty-six and
                       84/100ths  Dollars  ($118,246.84)
          Maker:          Penn  Octane  Corporation
          Payee:          Lauren  Constructors,  Inc.
          Final  Maturity  Date:  August  15,  1997
          Terms  of  Payment:  (optional):

     Other  Obligation:

Debtor's  Representation  Concerning  Location  of  Collateral  (optional):

     Subject  to the terms of this agreement, Debtor grants to Secured Party a
security interest in the collateral and all its proceeds to secure payment and
performance of Debtor's obligation in this security agreement and all renewals
and  extensions  of  any  of  the  obligation.

DEBTOR'S  WARRANTIES

     1.     Financing Statement. Except for that in favor of Secured Party, no
financing  statement  covering  the  collateral is filed in any public office.
     2.         Ownership. Debtor owns the collateral and has the authority to
grant  this  security  interest.  Ownership  is  free  from any setoff, claim,
restrictions,  lien,  security  interest,  or encumbrance except this security
interest  and  liens  for  taxes  not  yet  due.
     3.     Fixtures and Accessions. None of the collateral is affixed to real
estate,  is an accession to any goods, is commingled with other goods, or will
become  a  fixture,  accession,  or part of a product or mass with other goods
except  as  expressly  provided  in  this  agreement.
     4.         Financial Statements. All information about Debtor's financial
condition  provided  to  Secured Party was accurate when submitted, as will be
any  information  subsequently  provided.

DEBTOR'S  COVENANTS

     1.          Protection  of  Collateral. Debtor will defend the collateral
against  all  claims and demands adverse to secured Party's interest in it and
will  keep  it free from all liens except those for taxes not yet due and from
all security interests except this one. The collateral will remain in Debtor's
possession  or  control  at  all  times, except as other wise provided in this
agreement.  Debtor  will maintain the collateral in good condition and protect
it  against  misuse,  abuse, waste, and deterioration except for ordinary wear
and  tear  resulting  from  its  intended  use.
     2.          Insurance.  Debtor  will insure the collateral in accord with
Secured  Party's  reasonable  requirements  regarding  choice  of  carrier,
casualties  insured  against, and amount of coverage. Policies will be written
in  favor  of Debtor and Secured Party according to their respective interests
or  according to Secured Party's other requirements. All policies will provide
that Secured Party will receive at least ten days' notice before cancellation,
and  the  policies or certificates evidencing them will be provided to Secured
Party  when  issued.  Debtor  assumes  all  risk  of  loss  and  damage to the
collateral  to  the  extent  of  any  deficiency in insurance coverage. Debtor
irrevocably  appoints Secured Party as attorney-in-fact to collect any return,
unearned  premiums,  and  proceeds  of  any insurance on the collateral and to
endorse  any  draft  or  check  deriving from the policies and made payable to
Debtor.
     3.        Secured Party's Costs. Debtor will pay all expenses incurred by
Secured  Party  in obtaining, preserving, perfecting, defending, and enforcing
this  security  interest  or the collateral and in collecting or enforcing the
note.  Expenses  for  which  Debtor is liable include, but are not limited to,
taxes, assessments, reasonable attorney's fees and other legal expenses. These
expenses  will  bear  interest  from the dates of payments at the highest rate
stated  in  notes that are part of the obligation, and Debtor will pay Secured
Party  this  interest  on  demand  at a time and place reasonably specified by
Secured  Party. These expenses and interest will be part of the obligation and
will  be  recoverable  as  such  in  all  respects.
     4.         Additional Documents. Debtor will sign any papers that Secured
Party  considers  necessary  to  obtain,  maintain,  and perfect this security
interest  or  to  comply  with  any  relevant  law.
     5.     Notice of Changes. Debtor will immediately notify Secured Party of
any  material  change  in the collateral; change in Debtor's name, address, or
location;  change  in  any  matter warranted or represented in this agreement;
change  that  may  affect  this  security  interest; and any event of default.
     6.          Use and Removal of Collateral. Debtor will use the collateral
primarily according to the stated classification unless Secured Party consents
otherwise  in  writing. Debtor will not permit the collateral to be affixed to
any  real  estate,  to become an accession to any goods, to be commingled with
other  goods,  or to become a fixture, accession, or part of a product or mass
with  other  goods  except  as  expressly  provided  in  this  agreement.
     7.          Sale.  Debtor will not sell, transfer, or encumber any of the
collateral  without  the  prior  written  consent  of  Secured  Party.

RIGHTS  AND  REMEDIES  OF  SECURED  PARTY

     1.         Generally. Secured Party may exercise the following rights and
remedies  either  before  or  after  default:
          a.          take  control  of  any  proceeds  of  the  collateral;
          b.       release any collateral in Secured Party's possession to any
debtor,  temporarily  or  otherwise;
          c.       take control of any funds generated by the collateral, such
as  refunds  from  and  proceeds  of  insurance,  and  reduce  any part of the
obligation accordingly or permit Debtor to use such funds to repair or replace
damaged  or  destroyed  collateral  covered  by  insurance;  and
          d.     demand, collect, convert, redeem, settle, compromise, receipt
for,  realize on, sue for, and adjust the collateral either in Secured Party's
or  Debtor's  name,  as  Secured  Party  desires.
     2.        Insurance. If Debtor fails to maintain insurance as required by
this  agreement or otherwise by Secured Party, then Secured Party may purchase
single-interest  insurance  coverage  that will protect only Secured Party. If
Secured  Party  purchases this insurance, its premiums will become part of the
obligation.

EVENTS  OF  DEFAULT

     Each  of  the  following  conditions  is  an  event  of  default:
     1.          if  Debtor  defaults  in timely payment or performance of any
obligation, covenant, or liability in any written agreement between Debtor and
Secured  Party  or  in  any  other  transaction  secured  by  this  agreement;
     2.     if any warranty, covenant, or representation made to Secured Party
by  or  on  behalf of Debtor proves to have been false in any material respect
when  made;
     3.        if a receiver is appointed for Debtor or any of the collateral;
     4.      if the collateral is assigned for the benefit of creditors or, to
the  extent permitted by law, if bankruptcy or insolvency proceedings commence
against or by any of these parties: Debtor; any partnership of which Debtor is
a  general  partner;  and  any  maker,  drawer, acceptor, endorser, guarantor,
surety,  accommodation party, or other person liable on or for any part of the
obligation;
     5.          if  any  financing statement regarding the collateral but not
related  to  this  security  interest and not favoring Secured Party is filed;
     6.          if  any  lien  attaches  to  any  of  the  collateral;
     7.       if any of the collateral is lost, stolen, damaged, or destroyed,
unless  it is promptly replaced with collateral of like quality or restored to
its  former  condition.

REMEDIES  OF  SECURED  PARTY  ON  DEFAULT

     During  the  existence of any event of default, Secured Party may declare
the  unpaid principal and earned interest of the obligation immediately due in
whole  or  part,  enforce the obligation, and exercise any rights and remedies
granted  by  chapter  9  of  the  Texas  Business and Commerce Code or by this
agreement,  including  the  following:
     1.       require Debtor to deliver to Secured Party all books and records
relating  to  the  collateral;
     2.     require Debtor to assemble the collateral and make it available to
Secured  Party  at  a  place  reasonably  convenient  to  both  parties;
     3.          take possession of any of the collateral and for this purpose
enter  any  premises where it is located if this can be done without breach of
the  peace;
     4.          sell, lease, or otherwise dispose of any of the collateral in
accord with the rights, remedies, and duties of a secured party under chapters
2  and  9  of  the  Texas  Business  and  Commerce Code after giving notice as
required  by  those  chapters;  unless  the  collateral  threatens  to decline
speedily  in  value, is perishable, or would typically be sold on a recognized
market, Secured Party will give Debtor reasonable notice of any public sale of
the  collateral  or  of  a  time  after  which it may be otherwise disposed of
without  further  notice  to  Debtor;  in  this  event,  notice will be deemed
reasonable  if  it  is  mailed,  postage  prepaid,  to  Debtor  at the address
specified  on  this  agreement at least ten days before any public sale or ten
days  before the time when the collateral may be otherwise disposed of without
further  notice  to  Debtor;
     5.          surrender  any insurance policies covering the collateral and
receive  the  unearned  premium;
     6.          apply  any  proceeds from disposition of the collateral after
default  in  the  manner  specified  in  chapter  9  of the Texas Business and
Commerce Code, including payment of Secured Party's reasonable attorney's fees
and  court  expenses;  and
     7.          if  disposition  of  the  collateral  leaves  the  obligation
unsatisfied,  collect  the  deficiency  from  Debtor.

GENERAL  PROVISIONS

     1.       Parties Bound. Secured Party's rights under this agreement shall
inure  to the benefit of its successors and assigns. Assignment of any part of
the  obligation  and  delivery  by Secured Party of any part of the collateral
will  fully  discharge  Secured Party from responsibility for that part of the
collateral. If Debtor is more than one, all their representations, warranties,
and  agreements  are  joint  and  several.  Debtor's  obligations  under  this
agreement  shall  bind  Debtor's  personal  representatives,  successors,  and
assigns.
     2.          Waiver. Neither delay in exercise nor partial exercise of any
Secured  Party's  remedies  or  rights  shall  waive further exercise of those
remedies  or  rights.  Secured  Party's failure to exercise remedies or rights
does  not  waive  subsequent  exercise  of  those  remedies or rights. Secured
Party's  waiver of any default does not waive further default. Secured Party's
waiver  of any right in this agreement or of any default is binding only if it
is  in  writing.  Secured  Party  may  remedy  any default without waiving it.
     3.          Reimbursement.  If  Debtor  fails  to perform any of Debtor's
obligations,  Secured Party may perform those obligations and be reimbursed by
Debtor  on demand at the place where the note is payable for any sums so paid,
including  attorney's  fees  and  other legal expenses, plus interest on those
sums  from  the  dates  of payment at the rate stated in the note for matured,
unpaid  amounts.  The  sum  to be reimbursed shall be secured by this security
agreement.
     4.          Interest  Rate. Interest included in the obligation shall not
exceed  the maximum amount of nonusurious interest that may be contracted for,
taken,  reserved,  charged,  or  received under law; any interest in excess of
that  maximum  amount shall be credited to the principal of the obligation or,
if  that has been paid, refunded. On any acceleration or required or permitted
prepayment  of the obligation, any such excess shall be canceled automatically
as  of  the  acceleration  or  prepayment or, if already paid, credited on the
principal  amount of the obligation or, if the principal amount has been paid,
refunded.  This  provision  overrides  other  provisions in this and all other
instruments  concerning  the  obligation.
     5.       Modifications. No provisions of this agreement shall be modified
or  limited  except  by  written  agreement.
     6.          Severability.  The  unenforceability of any provision of this
agreement  will  not  affect  the  enforceability  or  validity  of  any other
provision.
     7.     After-Acquired Consumer Goods. This security interest shall attach
to  after-acquired  consumer  goods  only  to  the  extent  permitted  by law.
     8.          Applicable Law. This agreement will be construed according to
Texas  laws.
     9.         Place of Performance. This agreement is to be performed in the
county  of  Secured  Party's  mailing  address.
     10.          Financing  Statement.  A  carbon,  photographic,  or  other
reproduction  of  this  agreement  or  any  financing  statement  covering the
collateral  is  sufficient  as  a  financing  statement.
     11.          Presumption of Truth and Validity. If the collateral is sold
after  default,  recitals  in the bill of sale or transfer will be prima facie
evidence  of  their truth, and all prerequisites to the sale specified by this
agreement  and  by  chapter  9 of the Texas Business and Commerce Code will be
presumed  satisfied.
     12.        Singular and Plural. When the context requires, singular nouns
and  pronouns  include  the  plural.
     13.          Priority  of Security Interest. This security interest shall
neither  affect  nor  be  affected  by  any  other  security  for  any  of the
obligation. Neither extensions of any of the obligation nor releases of any of
the  collateral will affect the priority or validity of this security interest
with  reference  to  any  third  person.
     14.         Cumulative Remedies. Foreclosure of this security interest by
suit  does not limit Secured Party's remedies, including the right to sell the
collateral  under  the  terms of this agreement. All remedies of Secured Party
may  be  exercised  at  the  same or different times, and no remedy shall be a
defense  to  any  other. Secured Party's rights and remedies include all those
granted by law or otherwise, in addition to those specified in this agreement.
     15.       Agency. Debtor's appointment of Secured Party as Debtor's agent
is  coupled  with  an  interest  and  will  survive  any disability of Debtor.
     16.          Attachments  Incorporated.  The  addendum indicated below is
attached  to  this  agreement  and  incorporated  into  it  for  all purposes:

     Addendum  relating  to  instruments


Penn  Octane  Corporation

BY: /S/ JEROME B. RICHTER   ITS: PRESIDENT
    ---------------------        ----------------------
    JEROME B. RICHTER


                               (ACKNOWLEDGMENT)
State  of  California
County  of  San Mateo

     This  instrument  was  acknowledged  before  me  on  the 9th day  of
April,  1997,  by,  Jerome B. Richter, President of Penn Octane Corporation on
behalf  of  Penn  Octane  Corporation.

                                   /S/ R. SMITH
                                   ---------------------------------
                                       R. SMITH
                                   Notary  Public,  State  of  California
                                   [NOTARY SEAL]

PREPARED  BY:

FLEMING,  HEWITT  &  OLVERA
File  Number:  961159