CHINA NATURAL GAS, INC. 2009 EMPLOYEE STOCK OPTION AND STOCK AWARD PLAN

The purpose of the China Natural Gas, Inc. 2009 Employee Stock Option and Stock Award Plan (the “ Plan ”) is to enhance the long-term stockholder value of China Natural Gas, Inc., a Delaware corporation (the “ Company ”), by offering opportunities to employees,  directors, officers, consultants, agents, advisors and independent contractors of the Company and its Subsidiaries (as defined in Section  2) to participate in the Company’s growth and success, and to encourage them to remain in the service of the Company and its Subsidiaries and to acquire and maintain stock ownership in the Company.

For purposes of the Plan, the following terms shall be defined as set forth below:

2.1           “ Award ” means an award or grant made pursuant to the Plan, including, awards or grants of Options or Incentive Stock Awards.

2.2           “ Board ” means the Board of Directors of the Company.

2.3           “ Cause ” means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conviction or confession of a crime punishable by law (except minor violations), as provided under applicable law, in each case as determined by the Plan Administrator, and its determination shall be conclusive and binding.

2.4           “ Code ” means the United States Internal Revenue Code of 1986, as amended from time to time.

2.5           “ Common Stock ” means the common stock, par value $.0001 per share, of the Company.

2.6            “ Disability ” means “permanent and total disability” as that term is defined for purposes of Section 22(e)(3) of the Code.

2.7            “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended.

2.8           “ Fair Market Value ” shall be established in good faith by the Plan Administrator or if the Common Stock is listed on the Nasdaq Global Market or the Nasdaq Capital Market, the average of the high and low per share sales prices for the Common Stock as reported by the Nasdaq Global Market or the Nasdaq Capital Market (as the case may be) for a single trading.  If there is no such reported price for the Common Stock for the date in question, then such price on the last preceding date for which such price exists shall be determinative of the Fair Market Value.  Notwithstanding anything in this Plan to the contrary, to the extent applicable, the determination of the Fair Market Value of a share of Common Stock shall be determined in a manner which complies with Section 409A of the Code and the applicable Treasury Regulations promulgated thereunder.

2.9           “ Grant Date ” means the date the Plan Administrator adopted the granting resolution and all conditions precedent to the grant have been satisfied; provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date. If, however, the Plan Administrator designates in a resolution a later date as the date an Award is to be granted, then such later date shall be the “ Grant Date .”

2.10          “Incentive Stock Award” means an Option to purchase Common Stock granted under Section 7 and as designated under Section 7.9.

2.11          “ Nonqualified Stock Option ” means an Option to purchase Common Stock granted under Section 7.

2.12          “ Option ” means the right to purchase Common Stock granted under Section 7.

2.13          “ Participant ” means (a) the person to whom an Award is granted; (b) for a Participant who has died, the personal representative of the Participant’s estate, the person(s) to whom the Participant’s rights under the Award have passed by will or by the applicable laws of descent and distribution, or the beneficiary designated in accordance with Section 8; or (c) person(s) to whom an Award has been transferred in accordance with Section 8.

2.14          “ Plan Administrator ” means the Compensation Committee of the Board or any successor committee of the Board designated to administer the Plan under Section 3.1.

2.15          “ PRC ” means the People’s Republic of China.

2.16          “ Retirement ” means retirement on or after the individual’s normal retirement date under PRC law or the law of such individual’s other jurisdiction of employment unless otherwise defined by the Plan Administrator from time to time for purposes of the Plan.

2.17          “ Securities Act ” means the United States Securities Act of 1933, as amended.

2.18          “ Subsidiary ” means any entity that is directly or indirectly controlled by the Company or in which the Company has a significant ownership interest, as determined by the Plan Administrator, and any entity that may become a direct or indirect subsidiary of the Company.

3.1            Plan Administrator.   The Plan shall be administered by the Compensation Committee of the Board or a successor committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of, the Board. If and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in selecting the Plan Administrator and the membership of any committee acting as Plan Administrator, with respect to any persons subject or likely to become subject to Section 16 of the Exchange Act, the provisions regarding “non employee directors” as contemplated by Rule 16b-3 under the Exchange Act. The Plan Administrator may delegate the responsibility for administering the Plan with respect to designated classes of eligible persons to different committees consisting of one or more members of the Board, subject to such limitations as the Board deems appropriate. Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time. To the extent consistent with applicable law, the Plan Administrator may authorize one or more officers of the Company to grant Awards to designated classes of eligible persons, within the limits specifically prescribed by the Plan Administrator.

3.2            Administration and Interpretation by the Plan Administrator.   Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to Awards under the Plan, including the selection of individuals to be granted Awards, the type of Awards, the number of shares of Common Stock subject to an Award, all terms, conditions, restrictions and limitations, if any, of an Award and the terms of any instrument that evidences the Award. The Plan Administrator shall also have exclusive authority to interpret the Plan and may from time to time adopt, and change, rules and regulations of general application for the Plan’s administration. The Plan Administrator’s interpretation of the Plan and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected. The Plan Administrator may delegate administrative duties to such of the Company’s officers as it so determines.

4.1            Authorized Number of Shares.   Subject to adjustment from time to time as provided in Section 9.1, the number of shares of Common Stock that shall be available for issuance under the Plan shall be 2,920,000 shares.  The maximum aggregate number of shares of  Common Stock that may be issued under the Plan pursuant to the exercise or vesting of Awards shall be the number determined pursuant to the preceding sentence, as adjusted from time to time pursuant to Section 9.1.  Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.

4.2            Reuse of Shares.   Any shares of Common Stock that have been made subject to an Award that cease to be subject to the Award (other than by reason of exercise or payment of the Award to the extent it is exercised for or settled in shares), and/or shares of Common Stock subject to repurchase or forfeiture which are subsequently reacquired by the Company, shall again be available for issuance in connection with future grants of Awards under the Plan.

Awards may be granted under the Plan to those officers, directors and employees of the Company and its Subsidiaries as the Plan Administrator from time to time selects. Awards may also be granted to consultants, agents, advisors and independent contractors who provide services to the Company and its Subsidiaries.

6.1            Form and Grant of Awards.   The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be made under the Plan. Such Awards may include Nonqualified Stock Options or Incentive Stock Awards. Awards may be granted singly or in combination.

6.2            Settlement of Awards.   The Company may settle Awards through the delivery of shares of Common Stock, cash payments, the granting of replacement Awards or any combination thereof as the Plan Administrator shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Plan Administrator shall determine. The Plan Administrator may permit or require the deferral of any Award payment