Document:

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                                                                    EXHIBIT 10.3

                                PURCHASE CONTRACT

                                     BETWEEN

                             PENN OCTANE CORPORATION

                                    "SELLER"

                                       AND

                      RIO VISTA OPERATING PARTNERSHIP L.P.

                                     "BUYER"

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<TABLE>
<S>                                                                                                                  <C>
ARTICLE I.            QUANTITY OF LPG............................................................................    4

ARTICLE II.           TERM.......................................................................................    4

         Section 2.1       Term..................................................................................    4

         Section 2.2       Termination...........................................................................    4

ARTICLE III.          PRICE......................................................................................    5

ARTICLE IV.           TAXES......................................................................................    5

ARTICLE V.            POINT OF DELIVERY, FACILITIES AND OWNERSHIP AND CONTROL OF LPG.............................    5

         Section 5.1       Point of Delivery; Facilities.........................................................    5

         Section 5.2       Ownership and Control of LPG..........................................................    5

ARTICLE VI.           DELIVERY PRESSURE..........................................................................    5

ARTICLE VII.          NOTICES....................................................................................    5

         Section 7.1       Notices...............................................................................    5

         Section 7.2       Change of Address.....................................................................    6

ARTICLE VIII.         ASSIGNMENT.................................................................................    6

ARTICLE IX.           GENERAL TERMS AND CONDITIONS...............................................................    6
</TABLE>

                                    EXHIBITS

Exhibit A - General Terms and Conditions

<PAGE>

                                PURCHASE CONTRACT

         THIS PURCHASE CONTRACT (this "Contract") is made and entered into
effective as of the ___ day of ___________, 2003, by and between PENN OCTANE
CORPORATION, a Delaware corporation (hereinafter called "Seller"), and RIO VISTA
OPERATING PARTNERSHIP L.P., a Delaware limited partnership (hereinafter called
"Buyer"):

                              W I T N E S S E T H:

         WHEREAS, Seller desires to sell and deliver to Buyer and Buyer desires
to purchase and receive from Seller liquefied petroleum gas ("LPG"), in the
quantities and upon the terms and conditions hereinafter set forth;

         WHEREAS, the Conflicts Committee of Rio Vista GP LLC has approved of
the terms and conditions of this Contract;

         NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants and agreements contained herein, and the general terms and provisions
hereof, Buyer and Seller agree as follows:

                                   ARTICLE I.
                                 QUANTITY OF LPG

         Seller agrees to sell and deliver to Buyer and Buyer agrees to purchase
and receive from Seller a monthly volume of LPG equal to the total amount of LPG
per month that Buyer sells or otherwise distributes using, in whole or in part,
any of the Transferred Assets to the extent Seller is able to supply quantities
of LPG sufficient for Buyer's needs. Notwithstanding anything herein to the
contrary, Buyer shall have no obligation to purchase LPG from Seller in the
event the distribution of such LPG by Buyer to its customers would not require
the use, in whole or in part, of any of the Transferred Assets. In addition, to
the extent Seller does not or cannot supply quantities of LPG sufficient for
Buyer's needs, Buyer may purchase LPG from other suppliers during the period
that Seller does not or cannot supply quantities of LPG sufficient for Buyer's
needs without any obligation to Seller hereunder.

                                  ARTICLE II.
                                      TERM

         Section 2.1 Term. This Contract shall be effective as of the ___ day of
___________, 2003, and, subject to the provisions of this Contract, shall
continue and remain in full force and effect for so long as the earlier to occur
of (i) Seller ceases to have the right to access the Seadrift Pipeline and (ii)
Buyer ceases to use, in whole or in part, any of the Transferred Assets for the
sale of LPG.

         Section 2.2 Termination. In the event Buyer takes no LPG under this
Contract for thirty (30) consecutive Days for any reason whatsoever other than
force majeure, Seller shall have the right, at its option, exercisable at any
time within fifteen (15) Days following such thirty (30) consecutive Day period,
to terminate this Contract by delivering to Buyer written notice of termination.
In the event Seller so elects to terminate this Contract, such termination shall
be
<PAGE>
effective as of 7:00 o'clock a.m. Central Time on the first Day of the Month
next following the date of delivery of such notice to Buyer, whereupon the
parties hereto shall be relieved of all liabilities and obligations hereunder
except for liabilities and obligations of the parties that shall have accrued as
of such date of termination. In the event Seller does not or cannot supply
quantities of LPG sufficient for Buyer's needs for thirty (30) consecutive Days
for any reason whatsoever other than force majeure, Buyer shall have the right,
at its option, exercisable at any time within fifteen (15) Days following such
thirty (30) consecutive Day period, to terminate this Contract by delivering to
Seller written notice of termination. In the event Buyer so elects to terminate
this Contract, such termination shall be effective as of 7:00 o'clock a.m.
Central Time on the first Day of the Month next following the date of delivery
of such notice to Seller, whereupon the parties hereto shall be relieved of all
liabilities and obligations hereunder except for liabilities and obligations of
the parties that shall have accrued as of such date of termination.

                                  ARTICLE III.
                                     PRICE

         Subject to the provisions of this Contract, the amount payable by Buyer
to Seller for each Gallon of LPG purchased hereunder each Month shall equal the
Purchase Price.

                                  ARTICLE IV.
                                     TAXES

         Seller shall pay or cause to be paid all taxes and assessments imposed
on Seller with respect to the LPG delivered hereunder prior to its delivery to
Buyer, and Buyer shall pay or cause to be paid all taxes and assessments imposed
upon Buyer with respect to LPG delivered hereunder after its receipt by Buyer.
Neither party shall be responsible or liable for any taxes or other statutory
charges levied or assessed against any of the facilities of the other party used
for the purpose of carrying out the provisions of this Contract.

<PAGE>

                                   ARTICLE V.
         POINT OF DELIVERY, FACILITIES AND OWNERSHIP AND CONTROL OF LPG

         Section 5.1 Point of Delivery; Facilities. Seller shall deliver the LPG
to Buyer hereunder at the point at which the LPG exits the Seadrift Pipeline and
is delivered into Buyer's facilities at its Brownsville, Texas terminal or any
other point which employs the use of the Transferred Assets. Buyer shall be
responsible for arranging for Buyer or its designee, to receive delivery of LPG
sold hereunder to Buyer at the Delivery Point into Buyer's or its designee's
gathering system.

         Section 5.2 Ownership and Control of LPG. Title to the LPG sold and
delivered hereunder shall pass to Buyer at the Delivery Point. As between the
parties hereto, Seller shall be in control and possession of the LPG and
responsible for any damage or injury caused thereby until same shall have been
delivered to Buyer, after which delivery Buyer shall be deemed to be in
exclusive control and possession thereof and responsible for any injury or
damage caused thereby.

                                  ARTICLE VI.
                               DELIVERY PRESSURE

         The LPG delivered or caused to be delivered hereunder by Seller to
Buyer or its designee(s) at the Delivery Point shall be delivered at a pressure
sufficient to enter the facilities at such point of Buyer or its designee(s).

                                  ARTICLE VII.
                                    NOTICES

         Section 7.1 Notices. Every notice, consent, approval, communication,
request or reply which is required or which may be given by either party to the
other under the terms of this Contract must be in writing, and may be effected
by actual delivery to the party to be notified, by depositing such notice in the
United States mail, postage prepaid, registered or certified mail, and addressed
to the party to be notified with return receipt requested, or by facsimile
transmission. Every notice deposited in the United States mail as hereinabove
authorized shall, in the absence of a strike, lock-out, boycott or other labor
dispute affecting the delivery of United States mail, be effective three (3)
days following the date on which it is so deposited. Notice given by facsimile
transmission shall be effective on completion and confirmation of the facsimile
transmission. Notice given in any other manner shall be effective only if and
when received by the party to be notified. For purposes of notice, the addresses
of the parties, until changed as hereinafter provided, shall be as follows:

         Seller:           Penn Octane Corporation
                           77-530 Enfield Lane, Building D
                           Palm Desert, CA 92211
                           Attn:  Jerome B. Richter, President
                           Facsimile: (760) 772-8588

         Buyer:            Rio Vista Operating Partnership L.P.

<PAGE>

                           820 Gessner Road, Suite 1285
                           Houston, Texas 77024
                           Attn: General Partner
                           Facsimile: (713)____________

         Section 7.2 Change of Address. Each of the parties shall have the
right, from time to time, to change its address, and each shall have the right
to specify as its address any other address within the United States of America
by delivering to the other party not less than ten (10) days' prior notice in
writing of such new address.

                                 ARTICLE VIII.
                                   ASSIGNMENT

         All the terms, conditions and provisions of this Contract shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, no assignment of this Contract by
either party shall be effective or binding until a copy of such assignment has
been furnished to the other party.

                                  ARTICLE IX.
                         GENERAL TERMS AND CONDITIONS.

         Annexed hereto as a part hereof are General Terms and Conditions of
this Contract which General Terms and Conditions constitute a part of this
Contract and the terms and provisions hereof to the same extent as if written in
full in the body hereof.

                         (Signatures on following page)

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Contract in
multiple counterparts, each of which shall be deemed an original but all of
which constitute one and the same instrument as of the date first above
mentioned.

                                         "SELLER"

                                         PENN OCTANE CORPORATION

                                         By:____________________________________
                                            Jerome B. Richter, President

                                         "BUYER"

                                         RIO VISTA OPERATING PARTNERSHIP L.P.

                                             By:    RIO VISTA OPERATING GP LLC,
                                                    Its General Partner

                                                    By:_________________________
                                                    Name:_______________________
                                                    Title:______________________

<PAGE>

                                    EXHIBIT A

                          GENERAL TERMS AND CONDITIONS

                                   ARTICLE I.

                                   DEFINITIONS

         1.1      For the purpose of this Contract, the following terms shall
have the meanings ascribed thereto unless their use in context is specifically
to the contrary:

         (a)      Day - That period of time consisting of twenty-four (24)
consecutive hours beginning at 7:00 a.m. Central Time.

         (b)      COGS - is the average cost to Seller per Gallon of LPG on a
monthly basis of all LPG supplies obtained by Seller, including the base cost
per Gallon of LPG, costs to mix the product, premiums/discounts paid to
suppliers for LPGs, mercaptain, testing and inspection costs.

         (c)      Contributed Assets - shall have the meaning set forth in that
certain Contribution, Conveyance and Assumption Agreement dated ______________,
2003 between Seller and Buyer.

         (d)      ECCPL - the twelve inch pipeline to which the Seller has
access and which connects ExxonMobil Corporation's Viola valve station in Nueces
County, Texas to the inlet of the King Ranch Gas Plant.

         (e)      Gallon - 231 cubic inches or 0.133681 cubic feet of liquid at
sixty (60) degrees Fahrenheit and at the equilibrium vapor pressure of the
liquid.

         (f)      Margin Allocation Amount - is the product of (i) the quotient
of (a) the difference of Revenues minus COGS divided by (b) the Total LPG
Gallons, multiplied by (ii) the quotient of (c) Penn Costs divided by (d) Total
Costs.

         (g)      Month - A chart accounting month commencing at 7:00 a.m. on
the first day of the chart accounting month and ending at 7:00 a.m. on the first
day of the following chart accounting month.

         (h)      OPIS - the Oil Price Information Service.

         (i)      Penn Costs - All costs of Seller on a per Gallon of LPG basis
associated with the ownership or lease and operation of assets related to
bringing LPG from suppliers to the Delivery Point. These costs principally
relate to all variable charges for use of the ECCPL (including minimum thruput
charges), the Seadrift Pipeline (including minimum fixed rental charges),

                                       -8-

<PAGE>

minimum Markham storage reservation fees, utilities, trucking costs, insurance
costs and depreciation. Penn Costs shall also include all indirect selling,
general and administrative costs (excluding amounts paid by Buyer). In
determining Penn Costs, only cost items paid in cash or to be paid in cash plus
depreciation and amortization excluding interest and income taxes, gains/losses
on disposal of assets shall be included.

         (j)      Point of Delivery and Delivery Point - the point of delivery
as described in Section 5.1 of the Contract.

         (k)      Purchase Price - is the sum of the Margin Allocation Amount
and the Product Price Allocation.

         (l)      Product Price Allocation - the average monthly per Gallon
price of LPG in accordance with Buyer specifications (generally 90% propane and
10% butane) based on the price quoted for the month average of Mont Belvieu
non-tet propane per OPIS and the month average price for Mont Belvieu non-tet
normal butane per OPIS.

         (m)      Revenues - Total proceeds per Gallon of LPG to Buyer from the
sale of LPG supplied by Seller.

         (n)      Rio Vista Costs - All costs to Buyer on a per Gallon of LPG
basis associated with ownership or lease and operation of assets employed by
Buyer to bring LPG supplied by Seller from the Delivery Point to Buyer's
customers. These costs principally relate to the costs of operating the
Brownsville terminal facility, the US-Mexico pipelines and the Matamoros
terminal facility and any other asset brought on-line in the future which is put
into operation for the purpose of enhancing or providing sales of LPG to
customers from LPG supplies provided by Seller. Rio Vista Costs include payroll
costs, rent, insurance, utilities, repairs and maintenance and depreciation. Rio
Vista Costs shall also include all indirect selling, general and administrative
costs (including costs allocated from Seller, including costs incurred as a
result of the creation of Rio Vista Energy Partners L.P. as a publicly traded
limited partnership). In determining Rio Vista Costs, only costs items paid in
cash or to be paid in cash plus depreciation and amortization excluding interest
and income taxes, gains/losses on disposal of assets shall be included.

         (o)      Seadrift Pipeline - an approximately 132 mile pipeline which
is leased by Seller from the Seadrift Corporation and connects ExxonMobil
Corporation's King Ranch Gas Plant in Kleberg County, Texas and Duke Energy's La
Gloria Gas Plant in Jim Wells County, Texas to Buyer's Brownsville, Texas
terminal facility.

         (p)      Total Costs - The sum of the Penn Costs and the Rio Vista
Costs calculated on a monthly basis.

         (q)      Total LPG Gallons - is the total number of Gallons of LPG sold
by Buyer from supplies of LPG provided by Seller in any one month calculation
period.

                                       -9-
<PAGE>

                                   ARTICLE II.

                                     QUALITY

         Seller agrees that the LPG delivered hereunder shall be of merchantable
quality meeting the pressure and quality specifications of customers of Buyer.
Buyer shall not be obligated to purchase any LPG which fails to meet the
foregoing contract quality specifications. If LPG does not meet such
specifications and Buyer desires not to purchase LPG, Seller will be given a 15
day written notice of such intent. Except as hereinafter expressly provided,
Buyer shall be obligated to purchase all LPG tendered by Seller hereunder,
whether or not such LPG meets the quality specifications of any particular third
party purchaser or transporter, so long as such LPG meets the foregoing contract
quality specifications. Notwithstanding the foregoing, in the event (a) LPG
delivered by Seller to Buyer hereunder is unmarketable and, such LPG, when
blended together with LPG from any other sources available to Buyer that exceeds
the quality of Seller's LPG, for purposes of improving the overall quality of
Seller's LPG, is still unmarketable, and (b) Buyer reasonably demonstrates to
Seller's satisfaction that Buyer has made reasonable efforts to market the LPG
but has been unable to market the LPG due specifically to the quality of
Seller's LPG, then Buyer shall be relieved from its obligation to purchase and
take the portion of Seller's LPG which is unmarketable but only for the period
of time such LPG remains unmarketable. In the event that such LPG remains
unmarketable for a period of ninety (90) days, Seller's obligation to sell and
deliver to Buyer and Buyer's obligation to purchase and receive hereunder the
portion of Seller's LPG that is unmarketable shall cease and Seller shall be
entitled to dispose of such LPG to any third party or parties free and clear of
any claim by Buyer hereunder.

                                  ARTICLE III.

                                   MEASUREMENT

         3.1      The unit of volume for purposes of measurement of LPG
delivered hereunder shall be one (1) Gallon. All fundamental constants,
observations, records and procedures involved in the determining and/or
verifying of the quality and other characteristics of LPG delivered hereunder
shall, unless otherwise specified herein, be in accordance with the standards
and methods prescribed in Gas Measurement Committee Report No. 3, dated April,
1955, of the American Gas Association as now and from time to time amended.

         3.2      The temperature of the LPG flowing through the meter or meters
shall be assumed to be sixty (60) degrees Fahrenheit, but may be determined by
continuous use of a recording thermometer installed by Seller (if deemed
necessary by Buyer and at Buyer's expense) so that it will properly record the
temperature of the LPG flowing through the meter or meters. The arithmetical
average of the temperatures recorded while LPG is passing through the meter or
meters in each chart period shall be used in computing measurements for that
chart period.

                                      -10-
<PAGE>

         3.3      The specific gravity of the LPG flowing through the meter or
meters shall be assumed to be .600; however, at Buyer's option and expense, the
specific gravity may be determined by use of a sampling device, connected so as
to collect a representative sample of the LPG delivered hereunder. The specific
gravity of the LPG sample will be determined by calculation from a fractional
analysis obtained with a chromatograph. The specific gravity will be calculated
from the fractional analysis using data in the most up-to-date table, "Physical
Constants of Paraffin Hydrocarbons," published by the Natural LPG Processors
Association. The specific gravity so determined will be used in calculating LPG
deliveries for the Month during which the sample is collected.

         3.4      The reading, calibrating and adjustment of such equipment and
instruments on which quantities of LPG delivered hereunder are determined and
the changing of charts shall be done by employees, agents or representatives of
Buyer. Upon request of Seller, Buyer shall submit to Seller records and charts
from such equipment, subject to return by Seller within twenty (20) days after
receipt thereof. The charts and records shall be kept on file for a period of
three (3) years for the mutual use of the parties hereto.

         3.5      At least once each year Buyer, or its affiliates, shall test
and calibrate the meter and instruments or cause the same to be tested and
calibrated consistent with prior practices. Buyer shall give Seller notice of
the time of all tests sufficiently in advance of holding same so that Seller may
conveniently have Seller's representative present; however, if Seller's
representative is not present, Buyer or a third party acting for Buyer may
proceed with the test.

         3.6      If the metering equipment in the aggregate is found to be
inaccurate by two percent (2%) or more, registrations thereof and any payments
based upon such registrations shall be corrected at the rate of such inaccuracy
for any period which is definitely known or agreed upon, then for a period
extending back one-half (1/2) of the time elapsed since the last test not
exceeding, however, fifteen (15) days. Following any test, any metering
equipment found to be inaccurate to any degree shall be adjusted immediately to
record accurately.

         3.7      If for any reason any meter, scale or other system of
measurement is out of service or out of repair so that the quantity of LPG
received and/or sold by Buyer cannot be ascertained or computed from the reading
thereof, the quantity of LPG so received and/or sold during the period the
system of measurement is out of repair shall be estimated and agreed upon by the
parties hereto upon the basis of the best available data, using the first of the
following methods which is feasible:

                  (a)      by using the registration of any check measuring
equipment of Buyer if installed and accurately registering;

                  (b)      by correcting the error if the percentage or amount
of error is ascertainable by calibration, test or mathematical calculation;

                  (c)      by estimating the quantity of purchases during
preceding periods under similar conditions when the meter was registering
accurately.

                                      -11-
<PAGE>

         3.8      For the purpose of measurement and meter calibration, the
atmospheric pressure shall be assumed to be constant at fourteen and
seven-tenths (14.7) psia.

         3.9      The measurement hereunder shall be corrected for deviation
from Boyle's law at the pressure and temperature under which LPG is delivered
hereunder.

         3.10     It is agreed that the value of the EXPANSION FACTOR, REYNOLDS
NUMBER FACTOR, SUPERCOMPRESSABILITY FACTOR and MANOMETER FACTOR (where Mercury
type orifice meters are used) shall be actual values.

                                   ARTICLE IV.

                               BILLING AND PAYMENT

                  Buyer shall render to Seller on or before the tenth day of
each month a statement of the quantity of LPG (in terms of Gallons) purchased by
Buyer from Seller during the preceding Month or for which payment is due, and
the amount payable. Buyer shall make payment to Seller for LPG received and/or
sold during the preceding Month upon Seller's receipt of the proceeds from the
sales of such LPG. Such payments shall be made by wire transfer of immediately
available funds to the bank account of Seller specified by Seller to Buyer from
time to time pursuant to Article VII of the Contract. Accounting shall be by
Buyer, and billings for payment shall be accompanied by a statement showing such
calculations and adjustments, if any, as were used to arrive at the amount set
out.

                                   ARTICLE V.

                                WARRANTY OF TITLE

                  Seller warrants title to all LPG delivered hereunder by
Seller, that Seller has the right to sell the same and that such LPG is free
from liens and adverse claims of every kind. Seller will pay all royalties,
taxes and other sums due on production of the LPG delivered hereunder. Seller
further warrants that the LPG delivered hereunder is free and clear of any prior
contract or dedication to any third party that limits or restricts the right of
Seller to sell LPG to Buyer hereunder, or that gives such third party a claim to
either the proceeds paid or a claim that a like quantity of LPG be tendered to
such third party at a later date. Seller will indemnify and save Buyer harmless
against all loss, damage and expense of every character on account of adverse
claims to the LPG delivered by Seller or of royalties, taxes, payments or other
charges thereon applicable before or upon delivery to Buyer. If Seller's title
is questioned or involved in any legal action, Buyer may withhold payment of
sums due hereunder up to the amount of the claim until title is freed from such
question or such action is finally determined, or until Seller furnishes either
bond with surety or an escrow arrangement satisfactory to Buyer and conditioned
to save Buyer harmless.

                                      -12-
<PAGE>

                                   ARTICLE VI.

                                REGULATORY BODIES

                  This Contract shall be subject to all valid and applicable
laws, rules and regulations of any duly constituted governmental body having
jurisdiction herein. Buyer does not require any governmental authority or
approval to enter into this Contract or to accept the delivery of LPG from
Seller hereunder. If at any time there is a new law, rule or regulation, or
changed interpretation of any existing law, rule or regulation that requires
Buyer to obtain any governmental approval or authorization, Buyer will notify
Seller of the requirement and will furnish Seller with any application filed,
the evidence to support the application and of the order or authorization
entered.

                                  ARTICLE VII.

                                  FORCE MAJEURE

                  In the event either party hereto is rendered unable, wholly or
in part, by force majeure, to carry out its obligations under this Contract,
other than to make payments due hereunder, then on such party's giving notice
and reasonable full particulars of such force majeure in writing or by telecopy
to the other party as soon as possible after the occurrence of the cause relied
upon, the obligations of the party giving notice, so far as they are affected by
such force majeure, shall be suspended during, but only during, the continuance
of any inability so caused. The term "force majeure," as used herein, shall mean
acts of God, strikes, lockouts, acts of the public enemy, wars, blockades,
insurrections, riots, epidemics, landslides, lightning, earthquakes, hurricanes
or the threat thereof, fires, storms, floods, washouts, arrest and restraints of
rulers of people, civil disturbances, the freezing of wells or lines of pipe,
requisitions, directives, diversions, embargoes, priorities, expropriations of
government or governmental authorities, legal or de facto, whether purporting to
act under some constitution, decree, law or otherwise, failure of pipelines,
facilities or lines of pipe provided such failure of pipelines, facilities or
lines of pipe is not reasonably within the control of the party claiming
suspension, the partial or entire failure of LPG wells, and the inability to
acquire, or the delays in acquiring at reasonable cost and after the exercise of
reasonable diligence, such servitudes, right of way grants, permits, licenses,
approvals and authorizations by regulatory bodies, and/or such supplies and
materials (or permission from regulatory bodies to use supplies and materials on
hand), as may be necessary in order that obligations assumed hereunder may be
lawfully performed in the manner herein contemplated. Upon the occurrence of an
event constituting force majeure, the same shall, so far as possible, be
remedied with all reasonable dispatch. The settlement of strikes or other labor
difficulties shall be entirely within the discretion of the party having the
difficulty, and the above requirement that any force majeure shall be remedied
with all reasonable dispatch shall not require the settlement of strikes or
other labor difficulties by acceding to the demands of any opposing party
therein when such course is inadvisable in the discretion of the party having
the difficulty.

                                      -13-
<PAGE>

                                  ARTICLE VIII.

                                    INDEMNITY

                  Buyer shall indemnify, defend and hold Seller harmless from
and against all loss, cost and expense, including court costs and attorney's
fees, for any claims, suits, judgments, demands, actions or liability growing
out of the operations conducted hereunder by Buyer or arising while the LPG is
in Buyer's exclusive control and possession. Likewise, Seller shall indemnify,
defend and hold Buyer harmless from and against any loss, cost and expense,
including court costs and attorney's fees, for any claims, suits, judgments,
demands, actions or liability growing out of Seller's operations of its wells,
leases, equipment, pipelines and other facilities and appurtenances thereto or
arising while the LPG is in Seller's exclusive control and possession.

                                   ARTICLE IX.

                                  MISCELLANEOUS

         9.1      Entirety - This Contract contains the entire agreement between
the parties and there are no oral promises, agreements or warranties affecting
it.

         9.2      Titles - The numbering and titling of particular provisions of
this Contract are for the purpose of facilitating administration and shall not
be construed as having any substantive effect on the terms of this Contract.

         9.3      Waiver - Waiver of any breach or failure to enforce any of the
terms and conditions of this Contract at any time shall not in any way affect,
limit or waive either party's right thereafter to enforce and compel compliance
with every term and condition hereof.

         9.4      Time of Essence - Time is of the essence in this Contract in
all respects.

         9.5      Preparer - This Contract was prepared jointly by the parties
hereto and not by either party to the exclusion of the other.

         9.6      Severability - In the event that any clause or provision in
this Contract shall, for any reason, be deemed illegal, invalid or
unenforceable, the remaining provisions and clauses shall not be affected,
impaired or invalidated and shall remain in full force and effect. In lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as a part of this Contract a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.

         9.7      Governing Law - As to all matters of construction and
interpretation, this Contract shall be interpreted, construed and governed by
the laws of the State of Texas, excluding conflicts of law principles that might
require the application of the laws of another jurisdiction.

                                      -14-
<PAGE>

         9.8      Damages - Neither party shall be liable to the other for any
indirect, incidental, consequential or punitive damages which may occur, in
whole or in part, as a result of a party's performance or non-performance of any
of the terms and conditions of this Contract.

                       End of General Terms and Conditions

                                      -15-<PAGE>
                                                                    Exhibit 10.4

THIS OPTION AND THE LIMITED LIABILITY COMPANY INTERESTS PURCHASABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

                              UNIT PURCHASE OPTION

                            Void after July 10, 2006

Option No. 1                                                       July 10, 2003

         FOR VALUE RECEIVED and pursuant to the terms of that certain letter
agreement dated November 29, 2002, between Penn Octane Corporation, a Delaware
corporation ("Penn Octane"), and Shore Capital LLC, the undersigned, Penn
Octane, hereby certifies that Shore Capital LLC (the "Holder"), or assigns, is
entitled, subject to the terms set forth below, to purchase from Penn Octane
after the date (the "Distribution Date") Penn Octane completes the distribution
to its stockholders of all of the outstanding common units of Rio Vista Energy
Partners L.P., a Delaware limited partnership, and before 5:00 P.M. New York
time, on July 10, 2006 (the "Expiration Date") 25,000 Units (as defined below)
of Rio Vista GP LLC, a Delaware limited liability company (the "Company"),
representing 25% of the outstanding Units of the Company. The purchase price per
Unit shall be $__ (the "Exercise Price").

         As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

         (a) The term "Company" includes any corporation that shall succeed to
or assume the obligations of the Company.

         (b) The term "Exercise Price" shall have the meaning ascribed to such
term in the first paragraph hereof.

         (c) The term "Limited Liability Company Agreement" shall mean the
Amended and Restated Limited Liability Company Agreement of the Company dated
__________, 2003.

         (c) The term "Purchase Price" shall mean the amount equal to the
product of the Exercise Price and the number of Units to be purchased upon the
full exercise of this Option.

         (d) The term "Units" shall have the meaning ascribed to such term in
the Limited Liability Company Agreement.

         1. Exercise of Option. This Option may be exercised in full by the
Holder hereof at any time after the Distribution Date and before the Expiration
Date by surrender of this Option, with the form of subscription, addendum
agreement to the limited liability company agreement of the Company and the
Voting Agreement attached hereto duly executed by such Holder, to the Company
and Penn Octane at their respective principal offices, accompanied by payment of
the

<PAGE>

Purchase Price. The Purchase Price shall be paid by cash or check payable to the
order of Penn Octane Corporation.

         2. When Exercise Effective. The exercise of this Option shall be deemed
to have been effected immediately prior to the close of business on the business
day on which this Option is surrendered as provided in Section 1 and the
documents referenced in Section 1 are duly executed and delivered as provided in
Section 1, and at such time the Holder shall be deemed to be the record holder
of such Units for all purposes.

         3. Delivery on Exercise. As soon as practicable after the exercise of
this Option in full, and in any event within ten (10) business days thereafter,
Penn Octane at its expense (including the payment by it of any applicable issue
taxes) will cause to be delivered to the holder hereof a certificate or
certificates for the number of Units to which such holder shall be entitled on
such exercise.

         4. Investment Intent. Unless a current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), shall be in effect
with respect to the securities to be purchased upon exercise of this Option, the
Holder hereof, by accepting this Option, covenants and agrees that, at the time
of exercise hereof, and at the time of any proposed transfer of securities
acquired upon exercise hereof, such Holder will deliver to the Company and Penn
Octane a written statement that the securities acquired by the Holder are for
such Holder's own account, and are not acquired with a view to, or for sale in
connection with, any distribution thereof (or any portion thereof) except
pursuant to current registration statement under the Securities Act or an
available exemption from registration.

         5. Transfer. This Option is not transferable without the prior written
consent of Penn Octane.

         6. No Rights or Liability as a Member. This Option does not entitle the
Holder hereof to any voting rights or other rights as a Member (as defined in
Limited Liability Company Agreement). No provisions hereof and no enumeration
herein of the rights or privileges of the Holder hereof shall give rise to any
liability of such holder as a Member of the Company. The Units to be purchased
pursuant to this Option are subject to the terms of the Limited Liability
Company Agreement. The Holder shall not be deemed to be a Member and shall not
have any rights of a Member or rights of an assignee from a Member with respect
to, any Units subject to this Option unless and until the Holder has satisfied
all requirements for exercise of this Option pursuant to its terms. Before
receiving the Units subject to this Option, the Holder shall take such action
and execute such documents as the Company and Penn Octane may require to become
a Member of the Company.

         7. Damages. Penn Octane recognizes and agrees that the Holder hereof
will not have an adequate remedy if Penn Octane fails to comply with the terms
of this Option and that damages will not be readily ascertainable, and Penn
Octane expressly agrees that, in the event of such failure, it shall not oppose
an application by the Holder of this Option or any other person entitled to the
benefits of this Option requiring specific performance of any and all provisions
hereof or enjoining the Penn Octane from continuing to commit any such breach of
the terms hereof.

                                       2

<PAGE>

         8. Notices. All notices and other communications required or permitted
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by first class mail, or (c) by a recognized
overnight delivery service (with charges prepaid), addressed (1) if to the
Holder of this Option, at such Holder's address as it appears in the records of
Penn Octane (unless otherwise indicated by such Holder), (2) if to Penn Octane,
at its office at 77-530 Enfield Lane, Building D, Palm Desert, CA 92211,
Attention: Chief Executive Officer, or at such other address as Penn Octane
shall have furnished to the Holder of the Option in writing or (3) if to the
Company, at its office at 820 Gessner Road, Suite 1285, Houston, Texas 77024 or
at such other address as the Company or Penn Octane shall have furnished to the
Holder of the Option in writing

         9. Payment of Taxes. Penn Octane shall pay all taxes and other
governmental charges that may be imposed in respect to the issue or delivery of
the Units purchased upon the exercise of this Option.

         10. Governing Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Option and the
attachments hereto shall be governed by, and construed in accordance with, the
laws of the State of Texas without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas. In furtherance of the foregoing, the internal law
of the State of Texas shall control the interpretation and construction of this
Option (and all attachments hereto), even though under that jurisdiction's
choice of law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.

         11. Consent to Jurisdiction.

                  (a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Texas state court or federal court o the United States of
America sitting in Houston, Texas, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby or for recognition or enforcement of any
judgment relating thereto, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such Texas state court or, to the
extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.

                  (b) Each of the parties hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Option or the
transactions contemplated hereby in any Texas state or federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

                                       3
<PAGE>

                  (c) Each party to this Option irrevocably consents to service
of process in the manner provided for notices in Section 8. Nothing in this
Option will affect the right of any party to this Option to serve process in any
other manner permitted by law.

         12. Waiver of Jury Trial.

                  (a) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS OPTION IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS OPTION OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

                  (b) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH WAIVER VOLUNTARILY, AND (iv) IT
HAS BEEN INDUCED TO ENTER INTO THIS OPTION BY, AMONG OTHER THINGS, THE MUTUAL
WAIVER AND CERTIFICATIONS IN THIS SECTION 12.

         13. Miscellaneous. This Option and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Option are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.

                                     PENN OCTANE CORPORATION

                                     By:  __________________________________
                                     Name: _________________________________
                                     Title: ________________________________

                                     ACKNOWLEDGED AND AGREED TO WITH RESPECT
                                     TO ITS RIGHTS AND OBLIGATIONS HEREUNDER:

                                     SHORE CAPITAL LLC

                                     By:  __________________________________
                                     Name: _________________________________
                                     Title: ________________________________

                                       4
<PAGE>

                             ATTACHMENT A TO OPTION

                              FORM OF SUBSCRIPTION

                    (TO BE SIGNED ONLY ON EXERCISE OF OPTION)

         To:      PENN OCTANE CORPORATION

         The undersigned, the holder of the within Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder, 25,000 Units of RIO VISTA GP LLC and herewith makes payment
of $___________ therefor,

         and requests that the certificates for such units be issued in the name
of, and delivered to the undersigned, whose address is
___________________________________.

                                        ---------------------------------------
                                        (Signature must conform in all respects
                                        to name of holder as specified on the
                                        face of the Option)

                                        ---------------------------------------

                                        ---------------------------------------
                                        Address

         Dated:  ________________________

                                       5

<PAGE>

                             ATTACHMENT B TO OPTION

               ADDENDUM AGREEMENT TO THE LIMITED LIABILITY COMPANY
                         AGREEMENT OF RIO VISTA GP LLC

                                      -6-
<PAGE>

                             ATTACHMENT C TO OPTION

                                VOTING AGREEMENT

                                      -7-

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