PIPE
      GAS FRANCHISE AGREEMENT FOR
      PEI COUNTRY

     

    Construction
      Bureau of Pei Country

    Beijing
      Zhong Ran Wei Ye Gas Co., Ltd.

    July
      22, 2005 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF
      CONTENTS

    


    
      	
              Chapter
                1 

            	 	
              General

            
	 	 	 
	
              Chapter
                2 

            	 	
              Definitions

            
	 	 	 
	
              Chapter
                3 

            	 	
              Grant
                and Cancellation of Franchise

            
	 	 	 
	
              Chapter
                4 

            	 	
              Termination
                of Franchise Agreement

            
	 	 	 
	
              Chapter
                5 

            	 	
              Construction,
                Maintenance and Upgrade of Gas Facilities

            
	 	 	 
	
              Chapter
                6 

            	 	
              Security
                of Gas Supply

            
	 	 	 
	
              Chapter
                7 

            	 	
              Quality
                and Service Standards

            
	 	 	 
	
              Chapter
                8 

            	 	
              Fees

            
	 	 	 
	
              Chapter
                9 

            	 	
              Rights
                and Obligations

            
	 	 	 
	
              Chapter
                10 

            	 	
              Breach
                of Agreement

            
	 	 	 
	
              Chapter
                11 

            	 	
              Force
                Majeure

            
	 	 	 
	
              Chapter
                12 

            	 	
              Settlement
                of Disputes

            
	 	 	 
	
              Chapter
                13 

            	 	
              Miscellaneous
                Provisions

            
	 	 	 
	
              Chapter
                14 

            	 	
              Applicable
                Law

            
	 	 	 
	
              Chapter
                15 

            	 	
              Appendix

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Chapter 1
      General

     

    
      	
              1.1

            	
              In
                order to regulate pipe gas franchise operation in Pei
                Country, to strengthen market supervision, to safeguard public interests
                and public security, both parties agree to enter into this Agreement
                in
                Pei Country, Xuzhou City, Jiangsu Province on this day of July
                22, 2005 through
                legal procedure, pursuant to Administrative
                Measures on the Franchise Operation of Municipal Public Utilities
                by
                the Ministry of Construction and administrative regulations for municipal
                public utilities in Pei Country. 

            


    

    


    
      	
              1.2

            	
              This
                Agreement is signed by and between the Construction Bureau of Pei
                Country
                (hereinafter referred to as Party A), entrusted by Pei Country Municipal
                Government (entrustment shall take two forms: 1. regulative document
                issued by Pei Country Municipal Government, and 2. authorization
                letter
                signed by Pei Country Municipal Government on matters in this agreement)
                and Beijing Zhong Ran Wei Ye Gas Co., Ltd. (hereinafter referred
                to as
                Party B)

            


    

    


    Party
      A:
      Construction Bureau of Pei
      Country

    Legal
      address: No. 7, Zhengyang Street

    Legal
      representative: Zhao Junjie (Director)

    


    Party
      B:
      Beijing Zhong Ran Wei Ye Gas Co., Ltd.

    Legal
      address: Caizhiguoji Building No.
      18
      Zhongguancundong Street, Haidian
      District

    Registration
      No.: 019475

    Legal
      representative: Liu Yuchuan (Board Chairman)

    


    
      	
              1.3

            	
              The
                principles of franchising:

            


    

     

    Both
      parties agree to comply with the following principles:

     

    
      	 	
              (1)

            	
              openness,
                equality, justice and priority of public
                interests.

            


      	 	 	 


    

    
      	 	
              (2)

            	
              compliance
                with Chinese laws.

            


      	 	 	 


    

    
      	 	
              (3)

            	
              in
                accordance with urban planning and gas
                planning.

            


      	 	 	 


    

    
      	 	
              (4)

            	
              providing
                users with high quality services, and reasonable price of gas
                supplies.

            


      	 	 	 


    

    
      	 	
              (5)

            	
              ensuring
                safe and stable supply of pipe gas; improving management performance
                and
                technical level.

            


      	 	 	 


    

    
      	 	
              (6)

            	
              effective
                use of clean energy; promoting sustainable development of gas
                industry.

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Chapter
      2
Definitions

     

    For
      the
      purposes of this Agreement,
      the following terms and phrases shall have the meaning and interpretation given
      herein.

    


    2.1
      “China” means the People’s Republic of China, not excluding Hongkong SAR, Macao
      SAR and Taiwan Region for the purpose of this Agreement only

    


    2.2
      “Laws” means any applicable Chinese laws, administrative regulations, regional
      regulations, autonomous regulations and separate regulations, rules, judicial
      interpretation and other legally biding regulative documents. 

    


    2.3
“Gas”
      means LPG, natural gas, artificial coal gas and other gas fuels for civil,
      commercial and industrial use.

    


    2.4
“Pipe
      Gas” means gas provided to users through pipelines.

    


    2.5
“Pipe
      Gas Operation” means operation of pipe gas supply and related
      services.

    


    2.6
      “Pipeline Network” means principal pipelines, branch pipelines and community
      pipelines that are used to transit gas, regulator stations/boxes at the joint
      of
      pipelines and auxiliary facilities.

    


    2.7
      “Municipal Pipe Gas Facilities” means all the gas pipeline facilities outside
      the red line of municipal planning.

    


    2.8
      “Community Pipe Gas Facilities” means all the gas pipeline facilities within the
      red line of municipal planning.

    


    2.9
      “User-Affected-Projects” means occurrence of any of the following situations (1)
      the suspense of gas supply or substantial decrease of gas pressure affecting
      over 200 households, lasting more than 48 hours; (2) affecting traffic of
      vehicles and pedestrians on major and minor trunk roads for over 48 hours;
      (3)
      affecting the use of other public facilities.

    


    2.10
“Gas
      Emergencies” means all incidents related to pipe gas that requires urgent and
      irregular response, such as gas explosion, combustion and leak.

    


    2.11
      “Franchise” means Party B’s exclusive right authorized by Party A of
      constructing, operating and maintaining the pipe gas facilities, supplying
      customers with gas through pipeline, providing charged fix service on pipe
      gas
      facilities in the authorized area during its operation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    2.12
      “Force Majeure” means events and situation which are unforeseeable, unavoidable
      or insurmountable. With this precondition, Force Majeure shall include but
      not
      be limited to: 

     

    (1)
      lightening, earthquake, volcano eruption, land slide, flood, storm, tsunami,
      typhoon, tornado or draught;

     

    (2)
      epidemic disease and plague;

     

    (3)
      war,
      invasion, armed conflict or act of foreign enemy, use of military power, riot
      or
      terrorism;

     

    (4)
      strike across an industry, a city, a region or a country;

     

    (5)
      decrease of gas-supply quality or deduction of gas-supply amount which is not
      caused by Party B.

     

    2.13
      “Day,
      Month, Quarter, Year” means calendar day, month, quarter and year. 

     

    Chapter
      3
      Grant and Cancellation of Franchise

     

    3.1
      Grant
      of Franchise

    


    (1)
      This
      Agreement is hereby signed between Party A and Party B;

     

    (2)
      Party
      A shall issue Franchise Authorization Letter to Party B within 5 days after
      the
      sign of this Agreement and announce the authorization to the
      public.

    


    3.2
      Performance Guarantee

    


    Party
      B
      shall provide a Performance Guarantee issued by a financial agency in good
      credit standing within 20 days following the signing, so as to ensure the
      implementing the obligations under this Agreement.

     

    The
      amount of guarantee shall be RMB one million.

    


    3.3
      Franchise Term

    


    The
      franchise granted under this Agreement shall be for a term of 30 years, starting
      on July 22, 2005 and ending on July 22, 2035.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    3.4
      Franchise Location

    


    The
      franchise granted under this Agreement shall be within the Zaoqiang Municipal
      Administrative Region.

    


    3.5
      Scope
      of Franchise 

    


    The
      scope
      of franchise granted under this Agreement include: constructing, managing and
      operating natural gas projects, LPG projects and auxiliary facilities; providing
      related rescue and rush-repair services; constructing and operating gas
      stations; sales of gas; gas supply and sales services for industrial,
      commercial, public construction, residential and transportation
      uses.

    


    3.6
      Transfer and Pledge of Franchise 

    


    Any
      franchise and other related rights granted under this Agreement cannot in any
      event be sold, transferred, leased, assigned or disposed of to a third party
      unless otherwise agreed between Party A and Party B, during the franchise
      term.

    


    3.7
      Cancellation of Franchise 

    


    Party
      A
      has the right to terminate the Franchise Agreement granted to Party B and take
      over it upon occurrence of any of the following situations:

     

    (1) Disposition
      of the franchise by transfer, lease, lien and etc.;

     

    (2) Pledging
      the Company assets without authorization;

     

    (3) Mismanagement
      that causes serious quality and safety accidents and seriously affects the
      public interest; 

     

    (4) Unauthorized
      and arbitrary termination and suspension of operation that affects the public
      interest and safety; and

     

    (5) Other
      situations as specified under the applicable laws, regulations and
      rules.

     

    Chapter
      4
      Termination of Franchise Agreement

     

    4.1
      Expiration
      of the Franchise Agreement

    


    The
      Franchise Agreement shall terminate automatically upon the expiration date
      of
      the franchise term.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    4.2
      Termination of the Agreement

    


    (1)
      In
      the case of Force Majeure or as deemed necessary by one party, both Parties
      shall negotiate to terminate this Franchise Agreement prior to the expiration
      date, and sign a Termination Agreement. Without agreement through consultation,
      no party shall terminate this Franchise Agreement unilaterally prior to the
      expiration date.

     

    (2)
      Both
      parties shall terminate this Franchise Agreement upon the cancellation of
      franchise.

    


    4.3
      Termination Date of the Franchise Agreement

    


    (1)
      the
      expiration date of the Franchise Agreement

     

    (2)
      the
      effective date of the termination

     

    (3)
      the
      cancellation date of Franchise

    


    4.4
      Termination Agreement

    


    (1)
      If
      the Franchise Agreement shall be terminated due to the expiration, both parties
      shall sign a Termination Agreement through negotiation completed 180 days prior
      to the expiration date.

     

    (2)
      If
      the Franchise Agreement shall be terminated due to the cancellation of
      Franchise, both parties shall sign a Termination Agreement 180 days prior to
      the
      termination date.

    


    4.5
      Guidelines on the ownership and disposition of assets

    


    (1)
      The
      ownership of assets belongs to the investor.

     

    (2)
      Assets disposition shall be based on the evaluation of Party B’s assets made by
      the intermediary agency approved by both parties.

     

    (3)
      When
      Party B’s franchise expires, its assets must be transferred, and the
      compensation for the transferred assets must be provided based on the
      evaluation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Chapter
      5
      Construction, Maintenance and Upgrade of Pipe Gas Facilities

     

    5.1
      Construction of Pipe Gas Facilities

    


    In
      the
      region designated by this Agreement, Party B shall be responsible for the
      investment and construction of municipal pipe gas facilities, according to
      the
      requirements of urban planning. 

    


    5.2
      Land
      Use

    


    In
      the
      franchise term, the land on which Party B invests to build pipe gas facilities
      shall be regarded as land for public utilities use. Party B shall pay taxes
      and
      fees for urban infrastructure land use. Party B shall not change the purpose
      of
      land or transfer or pledge the land-use right without approval.

    


    5.3
      Operation, Maintenance and Upgrade of Pipe Gas Facilities

    


    In
      the
      franchise term, Party B shall be responsible for the operation, maintenance
      and
      upgrade of pipe gas facilities, based on national and regional standards as
      well
      as relevant regulations.

    


    5.4
      Expropriation and Compensation

    


    If
      Party
      A needs to expropriate legally the pipe gas facilities due to public interests,
      Party B shall cooperate with Party A, and Party A shall give Party B reasonable
      compensation. 

     

    Chapter
      6
Security
      of Gas
      Supply

     

    6.1
      Security
      Requirements

    


    Party
      A
      and Party B shall both strictly abide by national and regional safety laws,
      regulations, rules and policy documents. Party B promises to meet national,
      industrial and regional standards on gas supply, operation, quality, security
      and service. Party B shall be responsible for pipe gas supply security, public
      security and safe use publicity in the franchise region based on
      laws.

    


    6.2
      Gas
      Security System

    


    Party
      B
      shall build and improve the responsibility system as well as the security
      system, so as to ensure safe and stable gas supply, operation and service and
      to
      prevent accidents.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      When
        accidents happen and during accidents, Party B shall use all kinds of emergency
        measures to remedy, so as to minimize the impact of accidents on users and
        the
        public. Meanwhile, Party B must notify relevant departments according to
        national security administrative regulations.

       

    

    Party
      B
      shall strengthen inspection and eliminate potential hazards. Party B shall
      promptly stop all the possible threat to gas infrastructure, and inform relevant
      departments, persuade and inform in writing the organizations and individuals
      violating the security regulations to make correction. As for those who do
      not
      follow the instruction, Party B shall notify Party A or administrative and
      law
      enforcement agencies in writing. Party A, on receiving reports from Party B,
      shall promptly coordinate with law enforcement agencies to investigate and
      to
      punish.

    


    6.3
      Security Prevention

    


    Party
      B
      shall strictly follow the guidelines in pipe gas operation, maintenance and
      repair, and carry out regular inspections of the operation and performance
      of
      pipe gas facilities. In necessary cases, Party B shall carry out evaluation
      on
      the quality of underground pipeline network, and report to Party A regularly
      on
      the operation of the facilities if necessary ( in case of natural disasters
      and
      serious accidents). 

     

    The
      obligations of each party shall be clarified in Gas Supply Contracts signed
      between Party B and the users. 

    


    6.4
      Compulsory Insurance

    


    Party
      B
      shall implement the compulsory insurance for the security of pipe gas facility
      security, and user security.

    


    6.5
      Emergency Repair

    


    Party
      B
      shall make a plan for emergency repair, rescue and disaster relief, and build
      a
      guarantee system effective in organizing, directing, supplying equipment and
      materials, so that when gas emergencies happen, the guarantee system can be
      launched smoothly. Party B shall have a pipe gas facilities emergency repair
      team, providing around-the-clock emergency hotline. 

    


    6.6
      Safe
      Use of Pipe Gas


    


    Party
      B
      shall examine the pipes of customers and propagandize the knowledge of safe
      use,
      answer users’ inquiries, and raise people’s awareness in protecting pipe gas
      facilities.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    6.7
      Reports on User-Affected-Projects

    


    If
      Party
      B’s maintenance and transformation of pipe gas facilities may affect users,
      Party B shall inform users 24 hours before projects begin, and notify users
      and
      the public through media in advance the general information of projects, such
      as
      construction term, level of impact and affected region.

     

    6.8
      Emergencies Notice

    


    If
      the
      gas emergencies being handled by Party B affect or may affect a large group
      of
      users, Party B shall simultaneously inform Party A of the emergencies, and
      notify users who are affected or may be affected through proper
      means.

     

    Chapter
      7
      Quality
      and Service Standards

     

    7.1
      Quality 

    


    Party
      B
      shall set up a quality guarantee system, to ensure pipe gas quality, pipeline
      transportation pressure, pipeline pressure to gas cookers, combustion heat
      value, Wobbe-index, gas odorization etc. can meet the quality requirements
      hereafter set forth in Appendix 4.

    


    7.2
      Service Standards

    


    Party
      B
      shall, according to users’ practical needs, provide users with such
      comprehensive services as business hotline, a chain of service stations,
      business reception, regular meter reading, facilities installation and
      inspection, which shall meet the standards hereafter set forth in Appendix
      5.

     

    Chapter
      8
      Fees

     

    8.1
      Approved Price

     

    Both
      parties agree through consultation as follows:

     

    The
      initial residential installation fee and the gas price charged by Party B shall
      be approved by the local department in charge of pricing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      charging standard of other paid services provided by Party B shall be approved
      by the local department in charge of pricing separately. 

    


    8.2
      Payment of Gas Price

     

    Gas
      Price
      shall be price per cubic meter times gas consumption, or shall be calculated
      by
      heat unit price. The payment of gas price shall be made in ways of regular
      meter
      reading or IC card deposit, based on applicable law. 

    


    8.3
      Price
      Adjustment Procedure

     

    In
      the
      cases of major changes in operational cost which can not be attributed to Party
      B, Party B can apply for adjustment of pipe price. Party A shall provide
      adjustment advice to upon verification.

    


    8.4
      Cost
      Regulation

     

    Party
      A
      has the rights to supervise the operational cost of pipe gas enterprises, and
      assess the operational performance of the enterprises.

     

    Chapter
      9
      Rights and Obligations

     

    9.1
      Rights of Party A

    


    (1)
      Party
      A supervises Party B’s franchise operations according to national laws,
      regulations and technological standards.

     

    (2)
      Party
      A supervises Party B’s implementation of the Franchise Agreement. Party A can
      hire intermediary agencies to evaluate Party B’s assets and operations, and make
      suggestions to Party B based on the evaluation results.

     

    (3)
      Party
      A has the right to review whether Party B’s Pipe Gas Five Year Plan and Annual
      Investment Plan is in accordance with the general urban planning.

     

    (4)
      Party
      A takes users’ complaints about Party B, investigates the situations and settles
      the problems according to law.

     

    (5)
      Other
      regulative rights granted by laws, rules and regulations.

     

    9.2
      Obligations of Party A

    


    (1)
      Party
      A shall ensure the integrity of the franchise. During the franchise term, Party
      A shall not grant the franchise to a third party in the franchise region which
      has been granted to Party B.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (2)
      Party
      A shall maintain the order of natural gas market in the franchise
      region.

     

    (3)
      Party
      shall provide necessary preferable policy and support to Party B’s franchise
      operation.

     

    (4)
      Party
      A shall have a plan to temporarily take over Party B’s pipe gas facilities, so
      as to ensure public interests.

     

    (5)
      Other
      obligations given by laws, regulations and this Agreement.

     

    9.3
      Rights of Party B

    


    (1)
      Party
      B has the exclusive rights to pipe gas business in the franchise
      region.

     

    (2)
      Party
      B has the rights to invest and develop pipe gas in the franchise
      region.

     

    (3)
      Party
      B has the rights to ensure the safe operation of gas pipeline network.


     

    (4)
      Party
      B has the rights to refuse supplying gas to users whose pipe gas facilities
      can
      not meet national safety technical standards and have potential safety hazards,
      or users who severely violate gas supply contracts or use gas illegally.


     

    (5)
      Other
      rights given by laws, regulations and this Agreement.

    


    9.4
      Obligations of Party B

    


    (1)
      Party
      B shall make both long term and short term investment plans for pipe gas
      development, and make investment pursuant to general urban planning and gas
      planning.

     

    (2)
      Party
      B shall provide gas and relevant services according to national, industrial,
      regional and corporate standards.

     

    (3)
      Party
      B shall maintain the normal operation of gas pipe facilities and pipeline
      network, and ensure the continuity of gas supply. In the cases of failure or
      accidents, Party B shall immediately carry out emergency repair and
      rescue.

     

    (4)
      Party
      B has the obligation to offer universal service and continuous operation. Party
      B shall not suspend gas supply, dismiss or close without permission from Party
      A.

     

    (5)
      Party
      B shall accept daily supervision, regulation and temporary takeover by Party
      A,
      allow other regulative measures and supervision by the public.

     

    (6)
      Party
      B has the obligation and must compensate Party A for the environmental pollution
      and any damage, fees, loss caused by the construction, operation and maintenance
      of municipal pipe gas facilities, excluding the damage, fees, loss due to Party
      A’s breach of the agreement or the environmental pollution which Party B is not
      responsible for as stated in this Agreement.

     

    (7)
      Party
      B must submit to Party A upon completion all the technical data in the design,
      construction and operation of the municipal pipe gas facilities, including
      design report, calculation and design documents, operational data, so that
      Party
      A can supervise the design, construction process and operation of facilities.
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (8)
      Party
      B shall ensure normal supply and continuous service during the period designated
      by the grantor after the cancellation and termination of franchise. Party B
      shall be fully responsible for the safety, service and personnel resettlement
      during the transitional period before transferring the necessary assets to
      maintain franchise operations and all the documents to the enterprise designated
      by the grantor.

    


    9.5
      Regular Reports

    


    During
      the franchise term, Party B shall make regular reports to Party A on the
      following matters:

     

    
      	
              (1)

            	
              Party
                B shall submit to Party A a frachise report for the previous year
                (contents include: report on the franchise assets, development, management
                and service quality; implementation of operation plan; and basic
                situation
                about the enterprise) as well as a franchise financial report before
                February, 1 of
                each year.

            


    

     

    
      	
              (2)

            	
              Party
                B shall submit to Party A a pipe gas quality test report for the
                previous
                year before February each year.

            


    

     

    
      	
              (3)

            	
              Party
                B shall submit to Party A reports on pipe gas development, gas
                consumption, investment project plan and an annual operation plan for the
                present year before February each
                year.

            


    

    


    9.6
      Current Reports

    


    Party
      B
      shall submit written reports to Party A for reference ten days within the
      following occurrences:

     

    
      	
              (1)

            	
              making
                long term operation plan(such as five-year or ten-year operation
                plan)

            


    

     

    
      	
              (2)

            	
              appointment
                or replacement of Party B’s Board Chairman, supervisors, general manager,
                vice general manager, Chief Financial Officer, general engineer and
                other
                members of the senior management
                team.

            


    

     

    
      	
              (3)

            	
              changes
                in Party B’s shareholders or shareholding
                structure.

            


    

     

    
      	
              (4)

            	
              decisions
                made by Party B’s Board of Directors and Board of Supervisors relating to
                franchise operations.

            


    

     

    
      	
              (5)

            	
              Contract,
                Agreement and Letter of Intent signed by Party B that may have a
                major
                impact on franchise operations.

            


    

     

    
      	
              (6)

            	
              major
                occurrences that affect gas price, safety, technology, quality and
                service.

            


    

     

    
      	
              (7)

            	
              other
                occurrences that have a major impact on the enterprise’s franchise
                operations.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Chapter
      10
      Breach of Agreement

     

    10.1
      Compensation Liability

    


    Conduct
      of any Party that violates any term under this Agreement shall be deemed as
      breach of agreement. The Breaching Party bears compensation liability, including
      the damages caused by the Non-Breaching Party to a third party, due to the
      breaching party’s violation.

     

    The
      Non-Breaching Party shall minimize the loss due to the violation of the
      Breaching Party.

     

    Should
      part of the loss occur due to the action or inaction of the Non-Breaching Party,
      equivalent amount shall be deducted from indemnity paid by the Breaching
      Party.

    


    10.2
      Advance Notice

    


    When
      Party B knows or should know that it is no longer capable to honor this
      Agreement, it shall inform Party A in written forms in advance, and help Party
      A
      carry out temporary takeover plan. If Party B fails to inform Party A promptly,
      which leads to loss or major social impact, Party B and its responsible person
      shall bear relevant legal responsibilities.

    


    10.3
      Amendment

    


    If
      Party
      A believes Party B’s conduct can lead to the cancellation of the Franchise,
      Party A shall inform Party B in written forms, and shall offer Party B a Cure
      Period of 60 days since the day of the written notice. 

     

    Party
      B
      shall correct mistakes or eliminate obstacles within the Cure Period, or raise
      an objection to Party A’s inform. Party A shall investigate the situation within
      60 days after it receives the objection, and decide whether to cancel the
      Franchise.

     

    Chapter
      11 Force
      Majeure

     

    11.1 Exemption
      from liability

    


    Should
      any Party be prevented from performing its complete or partial obligations
      under
      this agreement due to the occurrence of any event of Force Majeure, such party
      can suspend its obligations under this Agreement (excluding obligations occurred
      before the Force Majure events that should be but has not yet been
      met.)

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    If
      Party
      A or Party B suspends its obligations based on the previous term, it must resume
      its obligations as soon as possible once the event of Force Majeure
      ends.

    


    11.2
      Limited
      exemption from liability

    


    The
      following occurrences shall not be regarded as Force Majeure
      events:

     

    
      	
              (1)

            	
              equipment
                failure or damage due to normal attrition, inappropriate maintenance
                or
                insufficient inventory of component parts.


            


    

     

    
      	
              (2)

            	
              any
                conduct, event or situation that only leads to non-economy when
                implementing this Agreement.

            


    

    


    11.3
      Obligations of the Party Claiming Force Majeure

    


    The
      Party
      claiming Force Majeure shall promptly inform the other party in writing once
      it
      knows about the Force Majeure event, stating details of such event, the possible
      impact on the Party’s implementation of its contractual obligations and its
      predicted period, as well as any other information the other party may
      reasonably request for. In the event of Force Majeure, each Party shall bear
      its
      own expenses and costs incurred by Force Majeure.

     

    The
      Party
      claiming Force Majeure shall, in all times, use all reasonable endeavours to
      avoid or minimize the consequences of such Force Majeure.

     

    Chapter
      12 Settlement of Disputes

     

    12.1
      Consultation

    


    In
      the
      event of any dispute, controversy or claim arising out of or under or relating
      to this Agreement, or about the interpretation of the terms in this
      Agreement(including the existence, validity or termination hereof) or arising
      from the implementation of this Agreement, the Parties shall attempt in the
      first instance to resolve such dispute through friendly consultations.


    


    12.2
      Arbitration or Litigation

    


    In
      the
      event such dispute is not resolved through consultations according to 12.1,
      the
      dispute can be submit for arbitration before the China International Economic
      and Trade Arbitration Commission ("CIETAC").

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Chapter
      13 Miscellaneous Provisions

     

    13.1
      Signing of the Agreement

    


    This
      Agreement shall be signed when representatives of both Party A and Party B
      have
      been duly authorized to sign it, and the internal approval procedure of this
      Agreement has been completed both at Party A and Party B.

    


    13.2
      Commencement of this Agreement

    


    This
      Agreement commences on the date when it is signed and sealed by representatives
      of both Parties. Supplemental agreements and Appendix are part of this
      Agreement. Such supplemental agreements and Appendix shall have the same force
      and effect as this Agreement.

    


    13.3
      Amendment to the Agreement

    


    During
      the effective period of this Agreement, if this Agreement or part of this
      Agreement can not be performed due to changes in applicable laws and regulations
      or relevant policies, amendment or supplemental agreements can be made to this
      Agreement through consultation between the two Parties.

    


    13.4
      Severability

    


    If
      any of
      the provisions of this Agreement is, or is determined to be illegal, invalid
      or
      unenforceable by any arbitration tribunal or court with jurisdiction, the
      validity and enforceability of other provisions shall not be
      affected.

    


    13.5
      Continuing Validity 

    


    Provisions
      of dispute settlement and provisions agreed to remain valid under this Agreement
      after it terminates, shall survive the termination of this
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Chapter
      14 Applicable Law 

     

    14.1
      This
      Agreement and its Appendix are executed in the Chinese language in 2 originals
      and 2 copies. Each Party holds 1 original and 1 copy. All Appendix shall have
      the same force and effect as this Agreement.

    


    14.2
      This
      Agreement shall be governed and interpreted by the laws of the People's Republic
      of China. 

     

    Chapter
      15 Appendix

    

      
        	
                Appendix
                  1

              	 	
                Authorization
                  Letter signed by Party A

              
	 	 	 
	
                Appendix
                  2

              	 	
                Authorization
                  Letter signed by Party B

              
	 	 	 
	
                Appendix
                  3

              	 	
                Map
                  of Regional Scope of Franchise Rights

              
	 	 	 
	
                Appendix
                  4

              	 	
                Approval
                  Documents of Project and Enterprise

              
	 	 	 
	 	 	
                (the
                  Planning Permit on Land for Construction Use, Land Use Certificate,
                  Initial Design Approval, the Planning Permit on Construction Works,
                  Foreign Designer Qualification Review and Design Contract, Approval
                  of
                  Design Contracting, Foreign Construction Contractor Qualification
                  Approval
                  and Qualification Certificate, Construction Contract Archive, the
                  Working
                  Permit on Construction Works, Acceptance of Environmental Protection
                  Facilities, Acceptance of Construction Completion, Health license,
                  Acceptance of Land Reclamation, Registration of Property Right
                  for Pipe
                  Gas Facilities and registration of other rights, Company Registration
                  and
                  Business License, Tax Registration, Financial Registration, Registration
                  with Statistics Department, Customs Registration Archive, Labor
                  Management
                  Matters, Approval and Registration for Project Financing,
                  etc.)

              
	 	 	 
	 	 	
                (Note:
                  adjusted to specific projects by the Parties)

              
	 	 	 
	
                Appendix
                  5

              	 	
                Technical
                  Regulations and Requirements

              
	 	 	 
	
                Appendix
                  6

              	 	
                Facility
                  Maintenance Plan

              
	 	 	 
	
                Appendix
                  7

              	 	
                Insurance

              
	 	 	 
	 	 	
                (Note:
                  include but not limited to proper insurance provided and maintained
                  for
                  gas facility safety, public responsibility safety and user
                  safety.)

              
	 	 	 
	
                Appendix
                  8

              	 	
                Engineering
                  Technology Plan

              
	 	 	 
	
                Appendix
                  9

              	 	
                Quality
                  Standards of Pipe Gas and Service Standards of Gas
                  Supply

              
	 	 	 
	
                Appendix
                  10

              	 	
                Safety
                  Management Standards

              


      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, this
      Agreement is signed by duly authorized representatives of both Party A and
      Party
      B on this day of July 22, 2005. 

     

    Party
      A:
      Construction Bureau of Pei Country 

    Sealed
          

              

    Representative:
             

    Signed
                   

     

    Party
      B:
      Beijing Zhong Ran Wei Ye Gas Co., Ltd.

    Sealed 

     

    Representative:

    Signed
       

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    PIPE
      GAS FRANCHISE AGREEMENT FOR PEI COUNTRY

    


    SUPPLEMENTAL
      PROVISIONS

     

    Party
      A: Construction
      Bureau of Pei County

     

    Party
      B: Beijing
      Zhong Ran Wei Ye Gas Co., Ltd.


    


    To
      improve the urban pipe gas project in Pei County and provide the pipe gas for
      the people of Pei County, the Construction Bureau of Pei County (“Party
      A”)
      and
      Beijing Zhong Ran Wei Ye Gas Co., Ltd. (“Party
      B”)
      hereby
      execute the Supplementary Provisions to the Pipe
      Gas Project Franchise Agreement for Pei Town Pei County (together
      with the Supplemental Provisions set forth herein, collectively, the
“Agreement”).
      

    


    The
      Supplemental Provisions are set forth as follows:

    


    1. Party
      A
      shall be responsible for canceling the agreement(s) between Party A and [Tianjin
      Donghai Gas Company].

    


    2. Party
      B
      shall purchase all the remaining gas projects and assets related thereto of
      Tianjin Donghai Gas Company in Pei Town by entering into an asset purchase
      agreement with Tianjin Donghai Gas Company.

    


    3. Party
      B
      shall purchase the Han Street’s Gas Cylinder & Pipe Station from Tianjin
      Donghai Gas Company. Party B shall (i) continue to employ the five employees
      of
      such gas station, (i) promise to pay for the past-due pension insurance premium
      for such employees in the amount of RMB 100,000 yuan, (iii) enter into
      employment contracts with them, and (iv) ensure the payment of their salaries
      and pension insurance [premium].

    


    4. After
      acquiring the Han Street’s Gas Cylinder & Pipe Station, Party B shall ensure
      the safe and normal gas supply to the residents of 300 units of Han Street
      district and Fu Tai Long District. Party B shall not unilaterally terminate
      gas
      supply except for termination due to routine safety inspections. For any
      termination of gas supply due to repair or technological upgrade, Party B shall
      compensate the affected users in accordance with the relevant regulations
      provisions. If the termination of supply is due to any operational or other
      problems, Party A shall have the right to deduct from the project construction
      deposit made by Party B to ensure temporary operation of the gas stations,
      and
      Party B shall be deemed to have breached this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    5. Upon
      the
      signing of this Agreement, Party B shall make detailed construction plan as
      soon
      as possible and ensure gas supply to certain downtown districts by the end
      of
      September [of 2005]. If the delay of construction is due to Force Majeure,
      Party
      B shall ensure the commencement of operation by the end of October [of 2005];
      otherwise, Party B shall be deemed to have breached this Agreement.

    


    6. Dependent
      upon the development of the gas market in Pei County, Party B [may be required
      to] construct a principal pipeline to connect Pei County and Xu Zhou after
      the
      West-To-East Gas Pipeline has reached Xu Zhou. 

    


    7. Because
      Tianjin Donghai Gas Company has owed excessive amount of debts to the
      construction companies, Party B shall promptly make plans to for the transfer
      of
      property rights from Tianjing Donghai Gas Company to Party B. After the transfer
      of the property rights, Party B, Tianjing Donghai Gas Company and the relevant
      construction companies shall enter into debt assignment agreement(s) to ensure
      the smooth execution of the project.

    


    8. Party
      B
      shall provide a construction deposit in the aggregate amount of RMB 1 million
      (including the premium for employee pension insurance in the amount of RMB
      100,
      000) to an bank account designated by Party A, which shall be administered
      by
      both Parties with seal. RMB 400,000 of such construction deposit shall be made
      within10 days following the execution of this Agreement. The remaining RMB
      600,000 shall be deposited by Party B on or before September 30, 2005. If any
      amount of the deposit is not made when due in accordance with the foregoing,
      Party B shall be deemed to have breached this Agreement and Party A shall be
      entitled to cancel this Agreement. Party B agrees to pay the employee pension
      insurance premium in the amount of RMB 100,000 in advance; and the remaining
      amount shall be refunded to Party B after the commencement of gas supply to
      Jiangnan Luzhou First Stage, Jiangnan Shanshui, Zijin Huayuan First Stage,
      Fengguang Didai First Stage, Chengshi Huayuan, Jiuzhou Yijing and etc, after
      deducting from such refund fees and expenses as provided under Article 9 of
      the
Pipe
      Gas Project Franchise Agreement for Pei Town Pei County.

    


    9. Party
      B
      shall not commence the construction of the main gas station and pipeline network
      until it has completed the relevant [government] procedures. Party B shall
      permit Party A to use the construction deposit to restore roads and vegetation
      if Party B shall failed to do so in accordance with the applicable
      standards.

    


    10. Party
      A
      promises Party B to reduce part of its administrative fees and help coordinate
      relevant matters to ensure the execution of the project.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    11. In
      case
      of any breach of this Supplemental Provisions by a Party, the breaching Party
      shall be liable in accordance with Article X of the Pipe
      Gas Project Franchise Agreement for Pei Town Pei County
      and the
      Agreement shall be terminated. 

    


    The
      Parties executed the Pipe
      Gas Project Franchise Agreement for Pei Town Pei County.
      The
      above provisions, as the Supplemental Provisions to the agreement, and the
      Pipe
      Gas Project Franchise Agreement for Pei Town Pei County
      shall
      have the same force and effect of Pipe
      Gas Project Franchise Agreement for Pei Town Pei County.


     

    There
      are
      four originals of this Supplemental Provisions. Each party holds two
      originals.


    


    Party
      A:Construction Bureau of Pei County: Party B:Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.

    

      
        	
                Sealed
                  

              	 	
                Sealed
                  

              
	
                Representative:
                  

              	 	
                Representative:

              
	
                Signed
                  

              	 	
                Signed
                  

              
	 	 	 
	 	 	 
	 	 	 
	
              	 	
                
                  Date:
                    July 22, 2005