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

China Natural Gas, Inc., a Delaware corporation (the “Company”), has granted to the Participant named on the Notice of Grant of Options (the “Notice of Grant”), which is attached hereto, an option (the “Option”) to purchase that number of Shares set forth on the Notice of Grant at the exercise price per Share set forth on the Notice of Grant (the “Exercise Price”), subject to all of the terms, definitions and provisions in this Agreement and the Company’s 2009 Employee Stock Option and Stock Award Plan (as applicable, the “Plan”), which is incorporated herein by reference.  In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail.  The terms defined in the Plan shall have the same defined meanings in this Agreement.

1.            Nature of Option .  This Option is not intended to qualify as an Incentive Stock Option under Section 422 of the Code. This Option is intended to be a Nonstatutory Stock Option.

2.            Vesting Schedule .  Subject to the Performance Conditions provided in Section 3, the Option awarded by this Agreement shall vest in accordance with the vesting provisions set forth in the Notice of Grant.  Shares scheduled to vest on a certain date or upon the occurrence of a certain condition shall not vest in Participant in accordance with any of the provisions of this Agreement, unless Participant shall have been continuously an Employee from the Grant Date until the date such vesting occurs.

4.            Administrator Discretion .  The Plan Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Option at any time, subject to the terms of the Plan.  If so accelerated, such Option shall be considered as having vested as of the date specified by the Plan Administrator.

5.            Exercise of Option .  This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Agreement.

6.            Method of Payment .  The exercise price for Shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of Shares purchased. Such consideration must be paid in cash.

7.            Termination Period .   Subject to applicable laws, if the Participant ceases to be an Employee, he or she may, but only within three (3) months after the date Participant ceases to be an Employee, exercise this Option to the extent that he or she was entitled to exercise it as of the date of such cessation.  To the extent he or she was not entitled to exercise this Option as of the date of such cessation, or if he or she does not exercise the Option within the time specified herein, the Option shall terminate.

Notwithstanding the provisions above, if Participant ceases to be an employee as a result of his or her Disability, he or she may, but only within twelve (12) months from the date of such cessation, exercise his or her Option to the extent he or she was entitled to exercise it at the date of cessation.  To the extent that he or she was not entitled to exercise this Option at the date of such cessation, or if he or she does not exercise such Option within the time specified herein, the Option shall terminate.

In the event of the death of the Participant during the term of this Option and while an employee, the Option shall become fully exercisable, including as to Shares for which it would not otherwise be exercisable, and may be exercised, at any time within twelve (12) months following the date of death, by Participant’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance.

Notwithstanding the foregoing, in no event may this Option be exercised after the expiration date as provided above.

8.            Tax Obligations .   The Company and its Subsidiaries shall assess tax and social insurance contribution liability and requirements in connection with the Participant’s participation in the Plan, including, without limitation, tax liability and social insurance contribution liability associated with the grant or exercise of the Option or sale of the underlying Shares (the “Tax Liability”).  These requirements may change from time to time as laws or interpretations change.  Regardless of the Company’s or any Subsidiary’s  actions in this regard, the Participant hereby acknowledges and agrees that the Tax Liability shall be the Participant’s ultimate responsibility and liability.  The Participant agrees as a condition of his or her participation in the Plan to make arrangements satisfactory to the Company and its Subsidiaries to enable it to satisfy all withholding, payment and/or collection requirements associated with the satisfaction of the Tax Liability, including authorizing the Company or the Subsidiary to: (i) withhold all applicable amounts from the Participant’s wages or other cash compensation due to the Participant, in accordance with any requirements under the laws, rules, and regulations of the country of which the Participant is a resident, and/or (ii) act as the Participant’s agent to sell sufficient Shares for the proceeds to settle such requirements.  Furthermore, the Participant agrees to pay the Company or the Subsidiary any amount the Company or any Subsidiary may be required to withhold, collect or pay as a result of the Participant’s participation in the Plan or that cannot be satisfied by deduction from the Participant’s wages or other cash compensation paid to the Participant by the Company or the Subsidiary or sale of the Shares acquired under the Plan. The Participant acknowledges that he or she may not participate in the Plan and the Company and the Subsidiary  shall have no obligation to deliver Shares until the Tax Liability has been satisfied by the Participant.

9.            Rights as Stockholder .  Neither Participant nor any person claiming under or through Participant shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant.  After such issuance, recordation and delivery, Participant shall have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

10.            Acknowledgments .   In accepting the Option, the Participant acknowledges that:

(a)           Any notice period mandated under applicable laws shall not be treated as continuous service for the purpose of determining the vesting of the Option; and the Participant’s right to receive Shares in settlement of the Option after termination of service, if any, will be measured by the date of termination of the Participant’s service and will not be extended by any notice period mandated under applicable laws.  Subject to the foregoing and the provisions of the Plan, the Company, in its sole discretion, shall determine whether the Participant’s service has terminated and the effective date of such termination.

(b)           The Plan is established voluntarily by the Company.  It is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement.

(c)           All decisions with respect to future Option grants, if any, will be at the sole discretion of the Company.

(d)           The Participant’s participation in the Plan shall not create a right to continued service with the Company (or any Subsidiary).

(e)           The Participant is voluntarily participating in the Plan.

(f)           The Option is an extraordinary item that does not constitute compensation of any kind for service of any kind rendered to the Company (or any Subsidiary), and which is outside the scope of the Participant’s employment contract, if any.

(g)