Installment Purchase Agreement

REFERENCE: AMENDMENT NO. 1 TO THE LEASE/INSTALLMENT PURCHASE AGREEMENT DATED




                                 January 7, 1999

Mr.  Jerome  B.  Richter
Chairman  of  the  Board
Penn  Octane  Corp.
900  Veterans  Blvd.,  Suite  240
Redwood  City,  CA  94063


REFERENCE:  AMENDMENT  NO.  1  TO THE LEASE/INSTALLMENT PURCHASE AGREEMENT DATED
NOV.  24,  1998  BY  AND BETWEEN PENN OCTANE CORPORATION AND CPSC INTERNATIONAL.



Dear  Mr.  Richter:

     In  reference  to  said Lease/Installment Purchase Agreement dated November
24, 1998, this letter agreement shall serve as Amendment No. 1 and the agreement
shall  be  amended  effective  January  1,  1999  as  follows:

1.     The  language  in  SECTION  1.1.1  (Definitions)  shall be deleted in its
entirety  and  replaced  with  the  following:

1.1.1.     "PIPELINES"  MEANS  THOSE  TWO  (2) PIPELINES, APPROXIMATELY EIGHTEEN
(18)  MILES  IN  LENGTH  AND  WITH A NOMINAL 8.625 INCH OUTSIDE DIAMETER (8.625"
O.D.)  AND  A NOMINAL 625 INCH OUTSIDE DIAMETER (6.625" O.D.) TO BE CONSTRUCTED
IN CAMERON COUNTY, TEXAS, AS MORE PARTICULARLY DESCRIBED IN EXHIBIT "A" ATTACHED
HERETO  AND  MADE  A  PART  HEREOF.

2.     The language in SECTION 3.2 (Rental) shall be deleted in its entirety and
replaced  with  the  following:

3.2.     RENTAL.  FOR  THE  DURATION  OF THE LEASE TERM (AS HEREIN DEFINED), POC
         -------
SHALL  PAY  TO  CPSC AS RENTAL THE SUM OF ONE MILLION SEVENTY-TWO THOUSAND EIGHT
HUNDRED  DOLLARS  ($1,072,800.00)  PER  LEASE  YEAR  (THE  "RENTAL"), SUBJECT TO
FOLLOWING  PROVISIONS  OF  THIS  SECTION 3.2.  THE RENTAL FOR EACH LEASE YEAR IS
PAYABLE  IN  TWELVE (12) EQUAL MONTHLY INSTALLMENTS OF EIGHTY NINE THOUSAND FOUR
HUNDRED  DOLLARS ($89,400.00) EACH, DUE AND PAYABLE ON OR BEFORE THE LAST DAY OF
EACH  MONTH PROVIDED, HOWEVER, IF THE SUBSTANTIAL COMPLETION DATE DOES NOT OCCUR
ON  THE  FIRST  DAY OF THE MONTH, THEN SOLELY WITH RESPECT TO THE INSTALLMENT OF
RENTAL  PAYABLE  OF THE INITIAL MONTH OF THE INITIAL LEASE YEAR.  POC SHALL MAKE
AN  ENTIRE  MONTHLY  INSTALLMENT.  SUCH PAYMENT SHALL BE CONSIDERED A PREPAYMENT
FOR  THE PARTIAL MONTH'S RENTAL AT THE END OF THE LEASE TERM.  POC SHALL REQUIRE
ITS  CUSTOMER TO MAKE ALL PAYMENTS TO AN ESCROW ACCOUNT IN THE NAME OF CPSC.  AN
ESCROW  AGENT  (RZB)  WILL DEDUCT THE LEASE PAYMENT AND ANY OTHER FUNDS DUE CPSC
FROM  THE  ESCROW  ACCOUNT  AND  REMIT  THE  REMAINDER  TO POC.  A SAMPLE ESCROW
AGREEMENT  IS  ATTACHED  AS  EXHIBIT  "F".

3.     The  language  in SECTION 3.3 (Letter of Credit)  shall be deleted in its
entirety  and  replaced  with  the  following:


January  7,  1999
Mr.  Richter
Page  2  of  2

3.3     LETTER  OF  CREDIT.  POC  SHALL  PROVIDE,  AT  CLOSING  OF  THE
        -------------------
LEASE/INSTALLMENT  AGREEMENT,  AN  IRREVOCABLE  STANDBY  LETTER  OF  CREDIT  TO
GUARANTEE  PAYMENTS  TO  CPSC IN THE AMOUNT OF FIVE HUNDRED THIRTY-FOUR THOUSAND
DOLLARS  ($534,000.00).  IF  THERE IS A DEFAULT IN PAYMENT, CPSC CAN CALL ON THE
LETTER OF CREDIT FOR PAYMENT.  THE IRREVOCABLE LETTER OF CREDIT WILL BE OBTAINED
FROM  A  FIRST  RATED  BANK  ACCEPTABLE  TO  CPSC.

     Except  as set forth above, all other terms and conditions of the Agreement
shall  remain  unchanged  and  in  full  force  and effect.  If the foregoing is
acceptable  to  you,  please  indicate your acceptance thereof by signing in the
space provided below and returning both original copies to us.  A fully executed
copy  will  be  returned  to  you  for  your  files.


Submitted  by:

     CPSC  INTERNATIONAL



     Accepted  by:                              Accepted  by:

     CPSC  INTERNATIONAL                    PENN  OCTANE  CORPORATION


By:  ______________________________         By:  _______________________________


Title:  ___________________________         Title:  ____________________________


Date:  ____________________________         Date:  _____________________________



Acd/presentaion