Document:

PIPE
      GAS FRANCHISE AGREEMENT 

     

    FOR
      

     

    XIAHUAYUAN
      DISTRICT

    

    Construction
      Bureau of Xiahuayuan District

     

    Zhangjiakou
      City Xiahuayuan District Jin Li Gas Co., Ltd.

     

    December
      27, 2006 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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 

              	 	
                Settlement
                  of Disputes

              
	 	 	 
	
                Chapter
                  12 

              	 	
                Miscellaneous
                  Provisions

              
	 	 	 
	
                Chapter
                  13

              	 	
                Applicable
                  Law

              

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Chapter 1
      General

     

    
      	
              1.1

            	
              In
                order to regulate pipe gas franchise operation in Xihuayuan
                District, to strengthen market supervision, to safeguard public interests
                and public security, both parties agree to enter into this Agreement
                in
                Xihuayuan District, Zhangjiakou Ciry, Hebei Province on this day
                of
                December
                27, 2006  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 Hebei Province.

            

    

    

    
      	
              1.2

            	
              This
                Agreement is signed by and between the Construction Bureau of Xiahuayuan
                District (hereinafter referred to as Party A), entrusted by Xiahuayuan
                District Municipal Government and Zhangjiakou City Xiahuayuan Jin
                Li Gas
                Co., Ltd. (hereinafter referred to as Party
                B)

            

    

    

    Party
      A:
Construction
      Bureau of Xiahuayuan District

    Legal
      address: Xinchen Road, Xiahuayuan District

    Legal
      representative: Xi Chunlei (Director)

    

    Party
      B:
      Zhangjiakou City Xiahuayuan Jin Li Gas Co., Ltd.

    Legal
      address: 

    Legal
      representative: Ma Jiali (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 1000 households, lasting more than 24 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;

    

    3.2
      Franchise Term

    

    The
      franchise granted under this Agreement shall be for a term of 25 years, starting
      on November 25, 2005 and ending on November 24, 2030.

    

    3.3
      Franchise Location

    

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

    

    3.4
      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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    3.5
      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.

    

    3.6
      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.

    

    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 72 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 be responsible for the coordination with the local government and
      relevant departments of the government and shall provide the following
      warranties to Party B in the form of official government documents:

    

    ·
      to grant
      Party B the exclusive right to construct and operate natural gas project within
      the urban planned area of Xiahuayuan District for 25 years and ensure the
      legality thereof; not to approve any new pipe gas project during such
      time;

    

    ·
      to
      ensure that Party B shall enjoy the relevant government preferential policies
      relating to business investment and raising of capital, urban infrastructure
      construction and land grant in Yu County. Considering that the Pipeline Project
      is an urban infrastructure project, the destruction of municipal roads for
      the
      construction of the condensed gas station and pipeline network shall be restored
      by Party B.

    

    ·
      to
      require the inclusion of construction of pipeline gas project as part of any
      new
      real estate development project and any renovation or expansion projects related
      thereto in order to obtain the required government approval; The government
      departments that are in charge of urban construction, planning, public
      utilities, real estate must supervise closely to ensure that pipeline gas
      projects are designed, constructed and inspected simultaneously and together
      with the principal projects, and can only be constructed by Party B; otherwise,
      such projects shall not be approved for construction, inspection and no sales
      permit shall be issued therefor.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (3)
      Party
      A shall be responsible for assisting Party B in the following
      matters:

    
       

      ·
        the
        application and registration procedures to establish the gas project
        company;

      

      ·
        the
        procedures for land use, planning, fire protection and commencement of project
        construction;

      

      ·
        timely
        provision of the municipal planning and relevant materials to Party B upon
        its
        request;

       

      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)
      uniform planning, implementation and management of pipeline gas project in
      accordance with the urban planning of Xiahuayuan District; complete and improve
      the pipe gas network in stages in accordance with users’ requests.

     

    (2)
      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.

     

    (3)
      Party
      B shall provide gas and relevant services according to national, industrial,
      regional and corporate standards.

     

    (4)
      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.

     

    (5)
      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.

     

    (6)
      Party
      B shall accept daily supervision, regulation and temporary takeover by Party
      A,
      allow other regulative measures and supervision by the public.

     

    (7)
      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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (8)
      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.
      

     

    (9)
      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.

     

    (10)
      Party B shall not charge the initial residential installation fee from old
      pipe
      gas users who need to connect natural gas in the Franchise region.

     

    (11)
      Party B must be qualified for the Franchise bidding in accordance with the
      rules
      on municipal public utilities management.

     

    (12)
      Party B shall obtain the approved documents granted by Party A before the
      construction of developing new pipe natural gas users.

     

    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
      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 30 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. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Chapter
      11
      Settlement of Disputes

     

    11.1
      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.

    

    11.2
      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
      12
      Miscellaneous Provisions

     

    12.1
      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.

    

    12.2
      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.

    

    12.3
      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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    12.4
      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.

    

    12.5
      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
      13
      Applicable Law 

     

    13.1
      This
      Agreement and its Appendix are executed in the Chinese language in 4 originals.
      Each Party holds 2 originals. All Appendix shall have the same force and effect
      as this Agreement.

    

    13.2
      This
      Agreement shall be governed and interpreted by the laws of the People's Republic
      of China. 

     

    Party
      A:
      Construction Bureau of Xiahuayuan District
      

     

    Sealed

    Representative:

     

    Party
      B:
      Zhangjikou City Xiahuayuan District Jin Li Gas Co., Ltd.

     

    Sealed

    Representative:PIPE
      GAS FRANCHISE AGREEMENT FOR YU
      COUNTRY

    

    Yu
      Country Public Utilities Management Division

    Yu
      Country Jin Li Gas Co., Ltd.

    December
      26,
      2006 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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 1
      General

     

    
      	
              1.1

            	
              In
                order to regulate pipe gas franchise operation in Yu
                Country, to strengthen market supervision, to safeguard public interests
                and public security, both parties agree to enter into this Agreement
                in Yu
                Country, Zhangjiakou Ciry, Hebei Province on this day of December
                26, 2006  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 Hebei Province.

            

    

    

    
      	
              1.2

            	
              This
                Agreement is signed by and between the Yu
                Country Public Utilities Management Division
                (hereinafter referred to as Party A), entrusted by Yu Country Municipal
                Government and Yu Country Jin Li Gas Co., Ltd. (hereinafter referred
                to as
                Party B)

            

    

    

    Party
      A:
Yu
      Country Public Utilities Management Division

     

    Legal
      address: 

     

    Legal
      representative: Xu Jinfeng (Director)

    

    Party
      B:
      Yu Country Jin Li Gas Co., Ltd.

     

    Legal
      address: 

     

    Registration
      No.: 1307262000143

     

    Legal
      representative: Ma Jiali (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 1000 households, lasting more than 24 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;

    

    3.2
      Franchise Term

    

    The
      franchise granted under this Agreement shall be for a term of 25 years, starting
      on November 8, 2005 and ending on November 7, 2030.

    

    3.3
      Franchise Location

    

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

    

    3.4
      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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    3.5
      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.

    

    3.6
      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
      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. 

    

    6.5
      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.

    

    6.6
      Reports on User-Affected-Projects

    

    If
      Party
      B’s maintenance and transformation of pipe gas facilities may affect users,
      Party B shall inform users 72 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.

     

    6.7
      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:

     

    
      	
              (1)

            	
              initial
                residential installation fee: RMB 2600/unit for a household
                

            

      	 	 

    

    
      	
              (2)

            	
              gas
                price: RMB 2.5 per cubic meter

            

    

     

    The
      payment charged by Party B from users in its service region shall be in
      accordance with pricing standard document published by Party A together with
      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 be responsible for the coordination with the local government and
      relevant departments of the government and shall provide the following
      warranties to Party B in the form of official government documents:

    

      ·
        to
        grant
        Party B the exclusive right to construct and operate natural gas project
        within
        the urban planned area of Yu County for 25 years and ensure the legality
        thereof; not to approve any new pipe gas project during such time;

       

      ·
        to
        ensure
        that Party B shall enjoy the relevant government preferential policies relating
        to business investment and raising of capital, urban infrastructure construction
        and land grant in Yu County. Considering that the Pipeline Project is an
        urban
        infrastructure project, any government fees to be incurred by Party B for
        the
        destruction of municipal roads for the construction of the condensed gas
        station
        and pipeline network shall be deducted and exempted.

       

      ·
        to
        require the inclusion of construction of pipeline gas project as part of
        any new
        real estate development project and any renovation or expansion projects
        related
        thereto in order to obtain the required government approval; The government
        departments that are in charge of urban construction, planning, public
        utilities, real estate must supervise closely to ensure that pipeline gas
        projects are designed, constructed and inspected simultaneously and together
        with the principal projects, and can only be constructed by Party B; otherwise,
        such projects shall not be approved for construction, inspection and no sales
        permit shall be issued therefor.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      (3)
        Party
        A shall be responsible for assisting Party B in the following
        matters:

       

      ·
        the
        application and registration procedures to establish the gas project
        company;

       

      ·
        the
        procedures for land use, planning, fire protection and commencement of project
        construction;

       

      ·
        making
        available water, electricity and transportation and handle other infrastructure
        related matters and assisting Party B to organize the design and construction
        of
        the project;

       

      ·
        application
        of all potentially available tax and administrative fee waivers and
        deductions

       

      ·
        timely
        provision of the municipal planning and relevant materials to Party B upon
        its
        request;

       

      ·
        uniform
        planning, implementation and management of pipeline gas project in accordance
        with the urban planning of Yu Country; complete and improve the pipe gas
        network
        in stages in accordance with users’ requests.

    

    

    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.

     

    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 30 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. 

     

    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 4
      originals. Each Party holds 2 originals. 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. 

    

    Party
      A:
Yu
      Country Public Utilities Management Division 

     

    Sealed         

     

    Party
      B:
      Yu Country Jin Li Gas Co., Ltd.

     

    Sealed

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