[UNION CARBIDE LOGO]        INTERNAL CORRESPONDENCE             [LOGO]
                          UCAR PIPELINE INCORPORATED
                        UCAR LOUISIANA PIPELINE COMPANY


820 GESSNER  SUITE 600                                   HOUSTON, TEXAS 77024


=============================================================================

                                               May  21,  1997


Mr.  Jerry  Richter
Penn  Octane  Corporation
900  Veterans  Boulevard;  Suite  240
Redwood  City,  CA    94063

               Subject:       Amendment to the Ella-Brownsville Pipeline Lease
                              ------------------------------------------------

Dear  Jerry,

In  accordance with our recent discussions, we propose that the Pipeline Lease
agreement  between  Seadrift Pipeline Corporation ("Seadrift") and Penn Octane
Corporation  ("POC")  dated  September  1,  1993,  covering  the  lease of the
Ella-Brownsville Pipeline, be amended as follows, effective as of the day that
Seadrift  notifies  POC  in  writing  of  the  completion  of  the  pipeline
enhancements  referred to in Section 5.2 below, or April 1, 1998, whichever is
earlier.

1.          Section  II.  -  "TERM  OF  AGREEMENT":
            --------------------------------------

Add  two  (2)  new  sentences  to  Paragraph  2.1  as  follows:

"The  Term of this Agreement shall be extended through March 31, 2013.  In the
event  that Seadrift has not exercised its option to transport ethane prior to
the  end  of  the Term as specified in Section 4.3, then Seadrift and POC will
negotiate  in  good  faith  for  a period not to exceed ninety (90) days in an
effort  to  seek an extension of this Agreement under mutually agreeable terms
and  conditions."

2.          Section  III  -  "TERMINATION":
            ------------------------------

     Section  III  shall  be  deleted  in  its  entirety.

3.          Section  IV  -  "USE":
            ---------------------

     a.)    Paragraph  4.1:    The words "refined petroleum products" shall be
            --------------
inserted  in  the second line of the paragraph immediately preceding first use
of  the  word  "propane".

     b.)   Paragraph 4.1:  At the end of the first paragraph of Paragraph 4.1,
           -------------
add  the  following  sentence:   "For the purposes of this Agreement, "refined
petroleum  products" are defined as gasoline, kerosene, jet fuel, diesel fuel,
and  home  heating  oil."

c.)    Paragraph  4.1:    Add  the  following new paragraphs to Paragraph 4.1:
       --------------

     "POC  shall  take  all  necessary  precautions  and install all necessary
equipment  to  ensure  that  there  will be no comingling of refined petroleum
products  with the HD-5 Propane contained in Seadrift's Ella-Seadrift Pipeline
or  its  Markham  propane storage facility.  POC shall release, indemnify, and
hold harmless Seadrift for any costs, damages, liability, claims, and expenses
(including  attorneys'  fees)  in  the  event  of  any  such  occurrence.

          Prior  to the commencement of POC transporting any refined petroleum
products  in the pipeline facilities, POC shall ensure that the facilities and
products  are  in  compliance  with  all  of  Seadrift's  health,  safety, and
environmental  policies,  procedures  and  regulations including any necessary
risk  reviews.  If such review indicates that the pipeline requires additional
facilities  and  equipment  to  achieve  such  compliance,  then  POC shall be
responsible  for  funding  and  installing such facilities and equipment costs
prior  to  the  transport  of any refined petroleum products.  If POC fails to
fund  and  install such facilities and equipment, then Seadrift shall have the
option  to  terminate  this  Agreement  upon  giving  notice  thereof to POC."

d.)          Paragraphs  4.3  &  4.4:
             -----------------------

          Paragraphs  4.3  and  4.4  as originally written shall be deleted in
their  entirety.

d.)          Paragraph  4.3:
             --------------
     Replace  Paragraph  4.3  with  the  following:

     "4.3    Ethane  Transportation  Option:  Seadrift shall have the right to
             ------------------------------
require  POC,  upon  eighteen  (18) months prior written notice by Seadrift to
POC, to transport ethane in the Ella-Brownsville Pipeline from the terminus of
such  Pipeline  in  the vicinity of Brownsville, Texas, to its interconnection
with  Seadrift's  LaGloria  Ethane  Pipeline in the vicinity of the Exxon King
Ranch  Gas  Plant,  Kingsville,  Texas.    The  commencement  of  such  ethane
transportation  may be required to begin at any time after the last day of the
seventh  (7th)  contract  year  from the effective date of this Amendment, and
such  Seadrift  option  shall  remain in effect for the remainder of the Term.

Upon  Seadrift  exercising  its  option as above,POC shall transport ethane at
Seadrift's  request  in quantities up to 4,000 barrels per calendar day in the
eighth (8th)contract year from the effective date of this Amendmentthrough the
tenth  (10th)  contract  year from the effective date of this Amendment and in
quantities  up  to  10,000  barrels  per  calendar  day in the eleventh (11th)
contract  year  from  the  effective  date  of  this  Amendment  through  the 
fifteenth (15th) contract year from the effective date of this Amendment.  The
transportation  of  such  ethane  volumes shall take precedence over all other
uses  by  POCincluding,  but  not  limited  to,  other  products  potentially
transported  by  POC  in  batch  operating the pipeline.  In no instance shall
Seadrift  be  required  to receive transported ethane from POC at the LaGloria
Pipeline  connection  point  at delivery rates in excess of 10,000 barrels per
calendar  day.

If  Seadrift  exercises  its  option  to  require  POC to transport ethane for
Seadrift  as  specified  in  this  paragraph,  and  the  subsequent  ethane
transportation  reduces POC's ability to transport propane to Brownsville to a
volume  less than 6,000 BBLS per day, then the Fixed Annual Fee paid by POC to
Seadrift  as  specified in Paragraph 7.1 shall be reduced in direct proportion
to  such  difference  in  volume  transported  for  each  such  period.

Seadrift  shall pay to POC 1.5 /gal. for all ethane volumes transported by POC
for  Seadrift.   Both parties acknowledge that it is expected that in no event
shall  the total of all ethane transportation fees paid by Seadrift to POC for
any  contract  year  exceed  the total of all fees as specified in Section VII
paid  by  POC to Seadrift for the same contract year.  However, if at any time
it  is  anticipated  that the total of Seadrift's payments is likely to exceed
POC's  total  payments,  then  both  parties  shall negotiate in good faith to
achieve  a  mutually  agreeable  resolution."

e.)          Paragraph  4.4:    Replace  paragraph  4.4  with  the  following:
             --------------

          "4.4   PROPANE SUPPLIES FROM THE ELLA-SEADRIFT PIPELINE:  Subject to
                 ------------------------------------------------
the  satisfactory  completion  of  the  Pipeline  System  enhancements  and
integrations specified in Section V below, Seadrift shall accept quantities of
propane  from  POC  injected into the Ella-Seadrift Pipeline and exchange such
product  to  POC  at  the  terminus  of  the  Ella-Brownsville Pipeline in the
vicinity  of  Brownsville,  Texas."

4.          Section  V  -  "FACILITIES":
            ---------------------------

          a.)        The sole existing paragraph in the Agreement shall remain
unchanged  except  it  shall  be  numbered  "5.1".

          b.)       The following paragraphs shall be added to this section V:

               "5.2  - PIPELINE SYSTEM ENHANCEMENTS:  In order for POC to have
                       ----------------------------
access to potential propane pipeline exchange supplies north of the Exxon King
Ranch  Gas  Plant,  and  to  have access to Seadrift's Markham propane storage
facility and to make the pipeline by-directional, enhancement modifications to
and  integration  of  the  Ella-Brownsville  and  Ella  Seadrift Pipelines are
required.

     Such  system  enhancements and integration (including but not necessarily
limited  to  piping,  meters, valves, analyzers, and pumps) shall be funded by
POC,  but  in  no  event shall the collective cost of such enhancements exceed
$5,000,000.    Seadrift  shall  provide  to POC a description of the necessary
enhancements  and  a  projection of the associated costs of such enhancements.
POC  shall  have  the  right  to  review  such enhancements to ensure they are
appropriate  for  the  purposes intended.  Seadrift, or a contractor approved 
by  Seadrift,  shall  perform all facility enhancement work in accordance with
Seadrift standards as per paragraph 5.1.  If Seadrift reasonably believes that
the projected costs of such enhancements will exceed $5,000,000, then Seadrift
and  POC  shall attempt to agree upon the allocation of such excess costs.  If
no  agreement  can be reached within 60 days, then POC shall have the right to
fund  the  excess costs or any combination of enhancements which do not exceed
$5,000,000.   In no event shall Seadrift be required, absent its agreement, to
fund  any amount whatsoever.  In no event does Seadrift warrant the fitness or
workmanship  of the enhancements, but Seadrift will pass on to POC the benefit
of  such warranties, if any, obtained from contractors up to the amount funded
by  POC.

               5.3 - OPTIONAL PUMP ADDITIONS:  In addition to the enhancements
                     -----------------------
specified  in Paragraph 5.2 above, either party shall have an on-going option,
for  the  remainder  of  the  Term,  to  fund  additional  pumping and related
facilities  at  any  point along the Ella-Brownsville Pipeline to increase the
effective  capacity  of  such  pipeline.

     If  Seadrift  with ninety (90) days prior written notice to POC exercises
its  option  to  increase  the Pipeline capacity to transport ethane by adding
pumps  and  provides  the funds for such additions, then Seadrift shall retain
the  sole  access to the resultant increase in pipeline capacity.  If POC with
ninety  (90)  days  prior  written  notice to Seadrift exercises its option to
increase  pipeline  capacity  by  adding pumps and provides the funds for such
additions,  then POC shall retain the sole access to the resultant increase in
pipeline capacity, except to the extent that Seadrift may choose to fund up to
50%  of  such costs and retain access to a proportional share of the resultant
increase  in  pipeline  capacity.    Seadrift  or  a contractor as approved by
Seadrift,  shall  perform  all  pump addition work in accordance with Seadrift
standards  as  per  Paragraph 5.1., and on the same "no warranty" basis as per
Paragraph  5.2.

               5.4 - PROPANE STORAGE:  As a result of the system enhancements,
                     ---------------
POC  shall,  subject  to  this paragraph, have access to the use of Seadrift's
propane  storage  well  located  in the vicinity of Markham, Texas.  POC shall
have the right to nominate up to 500,000 barrels of such storage space subject
to,  in  Seadrift's  sole  discretion:  (1)  space being available and (2) the
hydraulic  and  logistics capabilities and limitations of the system which are
in  effect  at the time of POC's desire to utilize such storage space.  Within
thirty 30 days of the beginning of each contract year, POC shall nominate such
storage  space  desired  for  the  subsequent  contract  year.  Seadrift shall
respond  within  thirty  (30)  days and inform POC of the amount of space that
Seadrift  can  allocate to POC as above.  Seadrift shall have no obligation to
terminate  other users to accommodate POC's request for storage space.  During
the first contract year from the effective date of this Amendment, the minimum
nominated Storage Space shall be 0, and for each contract year thereafter, the
minimum  nominated  Storage  Space  shall  be  200,000  Barrels.

     The  normal, random errors associated with the metering of propane to and
from  POC  and other users will accumulate over time in the storage well.  If,
upon  emptying  the storage well for maintenance, or as a result of its use by
POC and others, there is a difference between the calculated inventory and the
actual  inventory, then Seadrift shall determine the share that POC shall bear
of  such gain or loss in relation to POC's actual use of the well and pipeline
facilities  proportionately  to  that  of  others."


5.          SECTION  VII  -  "FEES":
            -----------------------

(a)        In Paragraph 7.1 strike out "$550,000" and replace with "$900,000".

(b)          Add  to  Paragraph  7.1  the  additional  Paragraphs  as follows:

     "In  recognition of the requirement for POC to provide funds for pipeline
system  enhancements,  Seadrift  shall waive a portion of the fixed annual fee
for  a  period  of  two  years,  as  follows:

<TABLE>
<CAPTION>

                                                             Fee Waived
                                                             -----------
<S>                                                          <C>
1st Contract Year from the effective date of this Amendment  $   250,000

2nd Contract Year from the effective date of this Amendment  $   125,000
</TABLE>


If,  at  the  end  of  either  of  the  first  two (2) contract years from the
effective  date  of  this  Amendment,  Seadrift  determines  that  the
Ella-Brownsville  Pipeline  has  been  operated at or above 12,000 barrels per
Calendar  Day  for the year, then POC shall pay to Seadrift the portion of the
fixed  fee  that  had  been  waived  by  Seadrift  for such period, as above."

(c)          Strike  Paragraph 7.2 and replace with new paragraphs as follows:

               "7.2  -  VARIABLE  FEES  -  Propane Thruput and Exchanges - POC
                        ------------------------------------------------
agrees  to  pay to Seadrift the following fees in addition to the Fixed Annual
Fee  specified  above:

<TABLE>
<CAPTION>

                               Variable Fee Structure
                               ----------------------

     PRODUCT  MOVEMENT  -LOCATIONS                              FEES  -    /GAL.
     -----------------------------                              ----------------
         FROM                     TO
---------------------  --------------------                     
<S>                    <C>                   <C>
(1)  Exxon King Ranch  Brownsville Terminal                 1.0 /Gal.
    Gas Plant                                (for all quantities in excess of 6,000
    Connection                                              Bbls/Day)
</TABLE>


     The  thruput  rates  in excess of 6,000 Bbls./Day to be used to calculate
the  fees to be paid by POC to Seadrift in item (1) above, shall be determined
by  averaging  the  daily  rates  each  calendar quarter during the Term.  For
billing purposes, the monthly invoice shall reflect the average daily rate for
such  month;  however, at the end of each quarter, billing adjustments will be
made to reflect the quarterly average if different than the respective monthly
averages.

(2)  Supply Points     Brownsville Terminal      1.5 /Gal.
     North of Exxon                          (from 1st Barrel)
     King Ranch Gas
     Plant Connection

[Propane  movements  are  subject to (1) space available and (2) the hydraulic
and  logistic  capabilities  of  the  system.]


(3)  Brownsville  Markham Storage               0.5 /Gal.
     Terminal                              (from 1st Barrel)


(4)  Brownsville  Partner Locations             1.5 /Gal.
     Terminal     Along Ella-Seadrift P/L  (from 1st Barrel)


[Propane  movements  are  subject to (1) space available and (2) the hydraulic
and  logistic  capabilities  of  the  system.]


(5)  Markham Storage  Partner Locations            1.5 /Gal.
                      Along Ella Seadrift P/L  (from 1st Barrel)

(6)  Markham Storage  Brownsville Terminal         2.0 /Gal.
                                               (from 1st Barrel)


               7.3   VARIABLE FEES - Refined Petroleum Products Transportation
                     ---------------------------------------------------------
-  In  addition  to  the  Fixed  Annual  Fee specified above, POC shall pay to
Seadrift  for  all  refined  petroleum  products  transported  through  the
Ella-Brownsville  Pipeline  a  fee of 0.5 /Gal. for thruput rates in excess of
6,000  Bbls./Day.    The  thruput rates to be used to calculate the fees to be
paid  by  POC to Seadrift shall be determined by averaging the daily rates for
the  sum  of refined petroleum products and propane originating at or south of
the  Exxon  King  Ranch  Gas Plant connection each calendar quarter during the
Term.    For  billing  purposes, the monthly invoice shall reflect the average
daily  rate  for  such  month;  however,  at  the end of each quarter, billing
adjustments  will  be  made to reflect the quarterly average if different than
the  respective  monthly  averages.



<PAGE>
               7.4    STORAGE  FEES
                      -------------

                    (1)    Annual  Storage  Fee    -  In addition to the Fixed
                           --------------------
Annual Fee specified above, POC shall pay to Seadrift an annual storage fee as
follows,  based  on  the  quantity  of space nominated by POC and agreed to by
Seadrift  in  Paragraph  5.4  below,  or  the actual volume used, whichever is
greater:


Storage Volume                Storage Fee
-------------------------  ------------------
                                 $/Year
                           ------------------

0 - 350,000 Barrels        $     1.50/Bbl.
                            (From 1st Barrel)

350,001 - 500,000 Barrels  $     1.25/Bbl.
                            (From 1st Barrel)


                    (2)    Excess  Thruput Fee  -  POC shall pay to Seadrift a
thruput  fee of $0.25 per barrel for each barrel of propane redelivered to POC
from  storage  in  excess  of the agreed to storage quantity for each contract
year.

               7.5    INVOICING AND PAYMENT - On or before the fifth (5th) day
                      ---------------------
of  each  month,  Seadrift shall bill POC for the monthly portion of the Fixed
Annual  Fee,  the storage fee and the variable fees, if any.  All fees are due
and  payable  to  Seadrift  within ten (10) days from receipt of invoice.  POC
shall  make  no  deduction,  offset, or witholding from the amount billed.  If
payment  is  not  received  within ten (10) days from the date of invoice, the
amount  billed  shall,  from the date of the invoice until paid, bear interest
calculated  at  an  annual  rate  equal  to  the  "prime  rate" of interest as
published  in  the Wall Street Journal plus two (2) percent, provided that, if
such  interest  rate  exceeds the highest lawful rate, then interest hereunder
shall  be  calculated  at  the  highest  lawful  rate.


6.          SECTION  VIII  -  OPERATING PRESSURE - Amend this Section VIII. By
striking  "1200"  in  line  2  and  replacing  it  with "1800 in lieu thereof.


7.     SECTION XIX - "NOTICES": - Replace the notification information for POC
       -----------------------
with  the  following:

                           "Penn Octane Corporation
                       900 Veterans Boulevard; Suite 240
                            Redwood City, CA  94063
                             Attn:  Jerry Richter
                             Fax:  (415)368-1505"



<PAGE>


Except  as  specifically  changed  by  this  Amendment,  the  Ella Brownsville
Pipeline  Lease  agreement dated September 1, 1993 shall remain unchanged, and
in  full  force  and  effect.

To  make this amendment a matter of record, please indicate your acceptance of
the  foregoing  by  signing  the enclosed duplicate copy of this letter in the
space  provided  below  and  returning that copy to us.  The other copy is for
your  files.


ACCEPTED  AND  AGREED  THIS
29TH  DAY  OF MAY,  1997


PENN OCTANE CORPORATION   SEADRIFT PIPELINE CORPORATION

By /S/ JEROME B. RICHTER  By /S/ D.J. GRIFFITHS
   ---------------------     ---------------------------
     (Signature)                    (Signature)
     JEROME B. RICHTER              D. J. Griffiths
   ---------------------  ------------------------------
     (Print Name)                   (Print Name)
Title   President         Title      Director
  ---------------------   ------------------------------