PIPE GAS FRANCHISE AGREEMENT FOR PEI COUNTRY Construction Bureau of Pei Country Beijing Zhong Ran Wei Ye Gas Co., Ltd. July 22, 2005

PIPE GAS FRANCHISE AGREEMENT FOR PEI COUNTRY

Construction Bureau of Pei Country

Beijing Zhong Ran Wei Ye Gas Co., Ltd.

July 22, 2005

TABLE OF CONTENTS

Chapter 1		General
Chapter 2		Definitions
Chapter 3		Grant and Cancellation of Franchise
Chapter 4		Termination of Franchise Agreement
Chapter 5		Construction, Maintenance and Upgrade of Gas Facilities
Chapter 6		Security of Gas Supply
Chapter 7		Quality and Service Standards
Chapter 8		Fees
Chapter 9		Rights and Obligations
Chapter 10		Breach of Agreement
Chapter 11		Force Majeure
Chapter 12		Settlement of Disputes
Chapter 13		Miscellaneous Provisions
Chapter 14		Applicable Law
Chapter 15		Appendix

Chapter 1 General

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

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

Party A: Construction Bureau of Pei Country

Legal address: Xx. 0, Xxxxxxxxx Xxxxxx

Legal representative: Xxxx Xxxxxx (Director)

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

Legal address: Caizhiguoji Xxxxxxxx Xx. 00 Xxxxxxxxxxxxxxxx Xxxxxx, Xxxxxxx Xxxxxxxx

Registration No.: 019475

Legal representative: Xxx Xxxxxxx (Board Chairman)

1.3 The principles of franchising:

Both parties agree to comply with the following principles:

(1) openness, equality, justice and priority of public interests.

(2) compliance with Chinese laws.

(3) in accordance with urban planning and gas planning.

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

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

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

Chapter 2 Definitions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(2) epidemic disease and plague;

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

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

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

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

Chapter 3 Grant and Cancellation of Franchise

3.1 Grant of Franchise

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

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

3.2 Performance Guarantee

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

The amount of guarantee shall be RMB one million.

3.3 Franchise Term

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

3.4 Franchise Location

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

3.5 Scope of Franchise

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

3.6 Transfer and Pledge of Franchise

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

3.7 Cancellation of Franchise

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

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

(2) Pledging the Company assets without authorization;

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

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

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

Chapter 4 Termination of Franchise Agreement

4.1 Expiration of the Franchise Agreement

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

4.2 Termination of the Agreement

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

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

4.3 Termination Date of the Franchise Agreement

(1) the expiration date of the Franchise Agreement

(2) the effective date of the termination

(3) the cancellation date of Franchise

4.4 Termination Agreement

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

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

4.5 Guidelines on the ownership and disposition of assets

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

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

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

Chapter 5 Construction, Maintenance and Upgrade of Pipe Gas Facilities

5.1 Construction of Pipe Gas Facilities

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

5.2 Land Use

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

5.3 Operation, Maintenance and Upgrade of Pipe Gas Facilities

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

5.4 Expropriation and Compensation

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

Chapter 6 Security of Gas Supply

6.1 Security Requirements

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

6.2 Gas Security System

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

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

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

6.3 Security Prevention

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

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

6.4 Compulsory Insurance

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

6.5 Emergency Repair

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

6.6 Safe Use of Pipe Gas

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

6.7 Reports on User-Affected-Projects

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

6.8 Emergencies Notice

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

Chapter 7 Quality and Service Standards

7.1 Quality

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

7.2 Service Standards

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

Chapter 8 Fees

8.1 Approved Price

Both parties agree through consultation as follows:

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

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

8.2 Payment of Gas Price

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

8.3 Price Adjustment Procedure

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

8.4 Cost Regulation

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

Chapter 9 Rights and Obligations

9.1 Rights of Party A

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

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

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

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

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

9.2 Obligations of Party A

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

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

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

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

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

9.3 Rights of Party B

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

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

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

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

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

9.4 Obligations of Party B

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

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

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

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

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

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

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

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

9.5 Regular Reports

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

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

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

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

9.6 Current Reports

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

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

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

(3) changes in Party B’s shareholders or shareholding structure.

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

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

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

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

Chapter 10 Breach of Agreement

10.1 Compensation Liability

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

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

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

10.2 Advance Notice

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

10.3 Amendment

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

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

Chapter 11 Force Majeure

11.1 Exemption from liability

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

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

11.2 Limited exemption from liability

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

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

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

11.3 Obligations of the Party Claiming Force Majeure

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

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

Chapter 12 Settlement of Disputes

12.1 Consultation

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

12.2 Arbitration or Litigation

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

Chapter 13 Miscellaneous Provisions

13.1 Signing of the Agreement

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

13.2 Commencement of this Agreement

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

13.3 Amendment to the Agreement

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

13.4 Severability

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

13.5 Continuing Validity

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

Chapter 14 Applicable Law

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

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

Chapter 15 Appendix

Appendix 1		Authorization Letter signed by Party A
Appendix 2		Authorization Letter signed by Party B
Appendix 3		Map of Regional Scope of Franchise Rights
Appendix 4		Approval Documents of Project and Enterprise
		(the Planning Permit on Land for Construction Use, Land Use Certificate, Initial Design Approval, the Planning Permit on Construction Works, Foreign Designer Qualification Review and Design Contract, Approval of Design Contracting, Foreign Construction Contractor Qualification Approval and Qualification Certificate, Construction Contract Archive, the Working Permit on Construction Works, Acceptance of Environmental Protection Facilities, Acceptance of Construction Completion, Health license, Acceptance of Land Reclamation, Registration of Property Right for Pipe Gas Facilities and registration of other rights, Company Registration and Business License, Tax Registration, Financial Registration, Registration with Statistics Department, Customs Registration Archive, Labor Management Matters, Approval and Registration for Project Financing, etc.)
		(Note: adjusted to specific projects by the Parties)
Appendix 5		Technical Regulations and Requirements
Appendix 6		Facility Maintenance Plan
Appendix 7		Insurance
		(Note: include but not limited to proper insurance provided and maintained for gas facility safety, public responsibility safety and user safety.)
Appendix 8		Engineering Technology Plan
Appendix 9		Quality Standards of Pipe Gas and Service Standards of Gas Supply
Appendix 10		Safety Management Standards

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

Party A: Construction Bureau of Pei Country

Sealed

Representative:

Signed

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

Sealed

Representative:

Signed

PIPE GAS FRANCHISE AGREEMENT FOR PEI COUNTRY

SUPPLEMENTAL PROVISIONS

Party A: Construction Bureau of Pei County

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

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

The Supplemental Provisions are set forth as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sealed		Sealed
Representative:		Representative:
Signed		Signed
		Date: July 22, 2005