LETTER OF INTENT

    CNPC United Lube Oil Corporation (Side A) and XCL, Ltd. 
(Side B), according to the Law of Joint Ventures of the
People's Republic of China, on the principles of equality and
mutual benefit, and on the foundation of an established Joint
Venture for the manufacturing and selling of high quality
lubricating oil and related products and in research and
development of new products which is located in LangFang City,
Hebei Province, China, based on additional friendly
discussions, agree as follows:

     1.     The existing Joint Venture shall serve as the guide
for futher discussions of the additional projects.

     2.     Once the the Joint Venture is established, the
parties agree to immediately explore the following matters:

     A.  Mianying Plant.  The Mianying Plant has initial
production capacity of 20,000 metric tons per year.  The
parties are conducting valuation and feasibility studies on
the Mianying Plant to increase the quality of the products
that can be produced from the plant.  The parties agree that
expansion of their cooperation to include the Mianying Plant 
is of the hightest priority.

     B.   Southern Production Base.  The parties will explore the
feasibility of an additional production base for the Joint
Venture to be located in a port area on the Southeastern coast
of China.

     C.   Storage and terminal facilities.  The Joint Venture
will explore the feasibility of storage and terminal 
facilities on the Northeast and Southeast coasts of China.

     D.   Cooperative Ventures with Refineries.  To assure the
availability of high quality lubricating oil base stocks
necessary to meet the domestic demand for high quality
lubricating oil and to meet the requirements of the 
international export market, the Joint Venture with the
approval and assistance from CNPC will enter into cooperative
ventures with oil field refineries to assure quality and
quantity of base oil and products for the purposes of the
Joint Venture.  The parties agree promptly to establish the 
feasibility of such cooperation.

     3.     After this letter of intent has been approved by the
board of directors and higher authorities of Side A and the 
Board of Directors of Side B, the parties shall establish an
implementation committee to negotiate and finalize the terms 
of this further cooperations, discuss the joint venture
agreement, contract and charter, and to complete all the 
related issues for approval of those joint venture projects.

     4.     The parties will share the profit, loss, and risk of 
theses projects based on their investment percentage in the
registered capital of the joint venture after additional
capital required has been calculated and agreed to.  The
amount of the invetsment, and the amount of additional
registered capital from each side shll be determined based on
feasibility studies to be conducted jointly by the parties.

     5.     The Joint Venture will be a legal entity organized 
under the laws of China.  All joint venture documents will be 
negotiated and drafted in both Chinese and English, and both
versions shall govern.

     6.     Once the projects in this Letter of Intent begin to 
be implemented, the cost incurred in the implementation of 
this letter of inten with the consent of both parties may be
treated as part of the contribution to the registered capital
of the Joint Venture by the party who paid those costs.

     This letter of intent is signed by the representatives of
both sides in Beijing, China.

CNPC United Lube Oil Corporation           XCL China Ltd.

  /s/ Ge Tinggen                            /s/ David A. Melman
By:________________________              By:______________________

Date:  95.7.17                           Date:  July 17, 1995