Pacific Asia Petroleum signed the Letter of Intent to acquire 49% of ownership interest in the Handan Changyuan Gas Co., Ltd. (HCG) from the Beijing Tai He Sheng Ye Investment Company Limited.

Located 250 miles south of Beijing, in Hebei Province, Handan City has a population of 1.4 million. HCG is currently the primary gas distributor in Handan city, supplying gas from Sinopec and PetroChina to over 300,000 customers. It owns 35 miles of a main gas pipeline, more than 450 miles of delivery gas pipelines, and an 80,000 sq. ft. field distribution facility.

Revenues for HCG have been increasing at an average rate of over 40% per year over the last 4 years.

This venture helps to deliver on Pacific Asia's strategy to invest in high-quality, early cash flow investments in the Chinese energy sector and to become a significant asset owner across China's energy value chain.

Pacific Asia Petroleum will continue its final legal and financial due diligence with an objective of entering into a mutually agreed final sale and purchase agreement.

Handan City Gas Distribution Facilities Visit by President & CEO, Frank Ingriselli.  January 2009