FAR EAST ENERGY CORPORATION FORM OF INCENTIVE STOCK OPTION AGREEMENT

Exhibit 10.2

FAR EAST ENERGY CORPORATION

FORM OF INCENTIVE STOCK OPTION AGREEMENT

FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Far East Energy Corporation (the “ Company ”), a Nevada corporation, hereby grants to                              (the “ Option Holder ”), the option to purchase shares of the common stock, $0.001 par value per share, of the Company (“ Shares ”), upon the terms set forth in this incentive stock option agreement (this “ Agreement ”):

WHEREAS, the Option Holder has been granted the following award in connection with his or her retention as an employee and as compensation for services to be rendered, and the following terms reflect the Company’s 2005 Incentive Stock Plan (the “ Plan ”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows.

1. Defined Terms; Plan . Terms used but not defined herein shall have the same meaning ascribed to such terms in the Plan. This Agreement and the grant herein is subject to the terms and conditions herein and the terms and conditions of the applicable provisions of the Plan, the terms of which are incorporated herein by reference.

2. Grant . The Option Holder is hereby granted an option (the “ Option ”) to purchase                      Shares (the “ Option Shares ”) pursuant to the Plan. The Option is granted as of                      (the “ Date of Grant ”). This Option is intended to qualify as an “incentive stock option” as defined in Section 422(b) of the Code to the extent that the aggregate Fair Market Value (determined as of the Date of Grant) of Option Shares that are exercisable for the first time by the Option Holder during any calendar year does not exceed $100,000. The remaining Option Shares covered by this Option, if any, shall be deemed to be non-qualified options.

3. Status of Option Shares . The Option Shares shall upon issue rank equally in all respects with the other Shares.

4. Option Price . The purchase price for the Option Shares shall be, except as herein provided, $                      per Option Share, hereinafter sometimes referred to as the “ Option Price ,” payable immediately in full upon the exercise of the Option. In no event shall the Option Price be less than 100% of the Fair Market Value of the Option Shares subject to this Option on the Date of Grant (or 110% where the Option Holder owns more than 10% of the combined voting power of all classes of stock of the Company on the Date of Grant).

5. Term of Option . The Option may be exercised only during the period (the “ Option Period ”) set forth in Section 7 below and shall remain exercisable until the tenth anniversary of the Date of Grant (or in the case that the Option Holder owns more than 10% of the combined voting power of the Company on the Date of Grant, then the Option shall remain exercisable until the day preceding the fifth anniversary of Date of Grant). Thereafter, the Option Holder shall cease to have any rights in respect thereof.

6. Exercisability . Subject to the Option Holder’s continued service with the Company and the terms and conditions of this Agreement and the Plan, the Option will vest and become exercisable with respect to              % of the Option Shares on each of the                      ,                      ,                      ,                      and

                     anniversaries of the Date of Grant, so that the Option will be 100% vested and exercisable after the                      anniversary of the Date of Grant, as set forth in the following schedule:

7. Exercise of Option . The Option may be exercised for all, or from time to time any part, of the Option Shares for which it is then exercisable. The exercise date shall be the date the Company receives a written notice of exercise signed by the Option Holder, specifying the whole number of Option Shares in respect of which the Option is being exercised, accompanied by (a) full payment for the Option Shares with respect to which the Option is exercised, in a manner acceptable to the Company (which, at the discretion of the Company, shall include a broker assisted exercise arrangement), of the Option Price for the Option Shares for which the Option is being exercised and (b) payment by the Option Holder of all payroll, withholding or income taxes incurred in connection with the Option exercise (or arrangements for the collection or payment of such tax satisfactory to the Committee are made). The purchase price for the Shares as to which the Option is exercised shall be paid to the Company in full at the time of exercise at the election of the Option Holder (i) in cash, (ii) in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee; provided , that , such Shares have been held by the Option Holder for no less than six months, (iii) partly in cash and partly in such Shares, or (iv) through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the aggregate Option Price for the Shares being purchased. Anything to the contrary herein notwithstanding, the Company shall not be obligated to issue any Option Shares hereunder if the issuance of the Option Shares would violate the provision of any applicable law, in which event the Company shall, as soon as practicable, take whatever action it reasonably can so that the Option Shares may be issued without resulting in such violations of law.

8. Exercisability Upon Termination of Service by Death or Disability . Upon a Termination of Service by reason of death or Disability, the Option may be exercised within 180 days following the date of death or Termination of Service due to Disability (subject to any earlier termination of the Option as provided herein), by the Option Holder in the case of Disability, or in the case of death, by the Option Holder’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but in any case only to the extent the Option Holder was entitled to exercise the Option on the date of his or her Termination of Service by death or Disability. To the extent that the Option Holder was not entitled to exercise the Option at the date of his or her Termination of Service by death or Disability, or if he or she does not exercise the Option (which he or she was entitled to exercise) within the time specified herein, the Option shall terminate. Notwithstanding anything to the contrary herein, the Committee may at any time and from time to time prior to the termination of the Option, with the consent of the Option Holder, extend the period of time during which the Option Holder may exercise his or her Option following the date of Termination of Service due to death or Disability; provided , however , that the maximum period of time during which the Option shall be exercisable following the date of Termination of Service due to death or Disability shall not exceed the original term of the Option and that notwithstanding any extension of time during which the Option may be exercised, the Option, unless

otherwise amended by the Committee, shall only be exercisable to the extent the Option Holder was entitled to exercise the Option on the date of Termination of Service due to death or Disability. Any such extension shall be designed to conform to the requirements of Section 409A of the Code so as to avoid the imposition of t