DECEMBER  1,  1998

                             AMENDED PROMISSORY NOTE

                            Redwood City, California

     FOR  VALUE  RECEIVED,  PENN OCTANE CORPORATION, a Delaware corporation (the
"Borrower"),  promises  to pay to the order of CASTLE ENERGY CORPORATION, or its
assigns ("Holder"), at the office of the Borrower in Redwood City, California or
such other place as Holder may designate in writing at least three business days
prior  to  the  date  fixed  for  such  payment, the entire principal sum of ONE
MILLION  DOLLARS ($1,000,000), together with interest thereon, on the earlier of
(i)  June  30,  1999,  (ii)  a  date  determined by the Borrower within ten (10)
business  days of the closing date of any raising of debt or equity financing of
the  Borrower, resulting in net proceeds to the Borrower in excess of $2,250,000
or  (iii)  the  occurrence  of  an Event of Default hereunder (collectively, the
"Maturity  Date"),  at  which  time  all  principal  and  any accrued and unpaid
interest  thereon  shall  be  due  and  owing.

     This  Amended Note was issued under and is entitled to the benefits of that
certain  Rollover  and  Assignment  Agreement  dated as of December 1, 1998 (the
"Rollover  Agreement") by and among the Borrower and the Lenders as set forth in
Schedule  I of the Agreement.  All capitalized terms used herein and not defined
-----------
shall  have  the  meanings  ascribed  to  them  in  the  Rollover  Agreement.

     This Amended Note shall accrue interest from the date hereof at the rate of
ten  percent  (10%)  per annum, payable on December 31, 1998, March 31, 1999 and
June  30,  1999  (or  the Maturity Date, if earlier).  Upon the occurrence of an
Event  of Default (as defined herein), all amounts owing under this Amended Note
shall  become  immediately  due and payable and interest shall accrue thereon at
the  default  interest  rate  of twelve percent (12%) per annum until the entire
principal  balance  of  this  Amended Note and all interest accrued hereon shall
have  been  paid  in  full  and  the  Holder  may exercise all of its rights and
remedies  under  the  Rollover  Agreement  and  all  other documents executed or
delivered  in  connection  therewith  and/or  applicable  law.  Payment  of this
Amended Note may be enforced by suit or other process of law.  This Amended Note
may  be prepaid at any time prior to maturity without penalty in an amount equal
to  the principal amount hereof plus interest thereon to the date of prepayment.

     The  Borrower shall pay the sum of $41,917.81 to the Holder on December 11,
1998,  which  sum  represents accrued and unpaid interest to December 1, 1998 on
the  Original  Note  (the  "Original  Note  Interest").

     All  payments  hereunder  shall  be  payable  in lawful money of the United
States.

       The  Borrower shall be in default hereunder upon the occurrence of any of
the  following  events of default ("Events of Default"):  (i) the failure by the
Borrower  to pay the Original Note Interest when due hereunder; (ii) the failure
by the Borrower to make any payment (other than the Original Note Interest) when
due  hereunder  and  such  failure shall have continued for a period of ten (10)
days; (iii) the commencement by the Borrower of a voluntary case in a bankruptcy
or  insolvency  proceeding  or  the  entry  of  a  decree or order by a court of
competent  jurisdiction  adjudicating the Borrower a bankrupt or the appointment
of a receiver or trustee of the Borrower upon the application of any creditor in
an insolvency or bankruptcy proceeding or other creditor's suit; (iv) a petition
for  reorganization, liquidation or arrangement filed against the Borrower under
the  Federal  bankruptcy  laws  and  such petition shall not have been dismissed
within thirty (30) days after it was filed; (v) an assignment for the benefit of
creditors by the Borrower; (vi) the occurrence of any event of default under the

<PAGE>
terms  of  any  indebtedness  of  the  Borrower  for borrowed money in excess of
$50,000;  (vii)  the  existence  of  any  final,  non-appealable judgment on any
Amended Note or any final, non-appealable judgment in excess of $50,000 against,
or any attachment of material property, of the Borrower; or (viii) the breach of
any  representation,  warranty  or  covenant  (other  than  as  described in the
preceding  clauses (i) through (vii)) of Borrower in the Rollover Agreement, the
Assignment  of  Judgment or Collateral Agreement, and, if such breach is capable
of  cure,  the  failure  of  the Borrower to cure such breach within a period of
fifteen  (15)  days.

     If  any  pament owing under this Amended Note is not paid when due, whether
at  maturity  or  by  acceleration  or otherwise, the Borrower agrees to pay all
reasonable costs of collection and such costs shall include, without limitation,
all  costs, attorneys' fees and expenses incurred by Holder hereof in connection
with  any  insolvency,  bankruptcy,  reorganization,  arrangement  or  similar
proceedings  involving  Borrower, or involving any endorser or guarantor hereof,
which  in  any  way  affects  the  exercise  by  Holder hereof of its rights and
remedies  under  this  Amended  Note.

     If  any  payment remains owing under this Amended Note after June 30, 1999,
the  Holder  thereof  shall  have  certain  conversion rights in respect of such
Amended  Note  as  set  forth  in  Section  7A  of  the  Rollover  Agreement.

     Presentment,  demand,  protest, notice of protest, dishonor and non-payment
of  this  Amended  Note  and  all  notices  of  every  kind  are  hereby waived.

     The  terms  "Borrower"  and  "Holder"  shall  be construed to include their
respective  heirs,  personal representatives, successors, subsequent holders and
permitted  assigns.

     No  delay  on the part of the Holder in the exercise of any right or remedy
shall  operate  as a waiver thereto, and no single or partial exercise by Holder
of  any  right  or  remedy  shall  preclude  the further exercise thereof or the
exercise  of  any  other  right  or  remedy.

     Any  provision  in  this  Amended  Note  that  is  held  to be inoperative,
unenforceable,  voidable  or  invalid  in  any  jurisdiction  shall,  as to that
jurisdiction,  be  ineffective, unenforceable, void or invalid without affecting
the  remaining  provisions  in  any  other  jurisdiction,  and  to  this end the
provisions  of  this  Amended  Note  are  declared  to  be  severable.

     This  Amended  Note shall be governed by, and construed in accordance with,
the  laws  of  the  State  of  New  York  without  giving effect to such state's
conflicts of law provisions.  Each of the parties hereto irrevocably consents to
the  jurisdiction and venue of the federal and state courts located in the State
of  New  York,  County  of  New  York.

<PAGE>
     IN  WITNESS WHEREOF, and intending to be legally bound hereby, the Borrower
has caused this Amended Note to be executed by its duly authorized officer as of
the  date  first  above  written.


                                          PENN  OCTANE  CORPORATION


Attest:                                   By:
                                             -------------------------
                                             Jerome  B.  Richter
________________________________________     Chairman,  President  and
Title:  ________________________________     Chief  Executive  Officer

<PAGE>