SECOND AMENDED AND RESTATED NONQUALIFIED STOCK OPTION AGREEMENT

THIS SECOND AMENDED AND RESTATED NONQUALIFIED STOCK OPTION AGREEMENT (this " Agreement ") is made and entered into as of this 14 ^th day of January, 2009, by and between Far East Energy Corporation, a Nevada corporation (the " Corporation "), and Michael R. McElwrath (" Participant ").

WHEREAS , the Corporation and the Participant previously entered into a Stock Option Agreement (the " Original Option Agreement ") dated as of January 29, 2002 (the " Award Date ") setting forth the grant of options to purchase 100,000 shares of common stock, par value $0.001 per share, of the Corporation (the " Common Stock ") at an exercise price per share of $0.65;

WHEREAS , the Corporation and the Participant subsequently entered into an Amended and Restated Nonqualified Stock Option Agreement (the " 2004 Option Agreement ") dated December 23, 2004, which amended, restated and superseded the Original Option Agreement;

WHEREAS , the Participant has entered into an Amended and Restated Employment Agreement (as amended, restated and modified from time to time, the " Employment Agreement ") dated December 23, 2004 with the Corporation;

WHEREAS , the Corporation and the Participant acknowledge that of the 100,000 options granted under the Original Option Agreement, 60,000 options vested on or before December 31, 2004 (the " Options "), and that 40,000 options vested on or after January 1, 2005;

WHEREAS, the Options remain subject to the 2004 Option Agreement and the remaining 40,000 options, which vested on or after January 1, 2005, are subject to that certain Second Amended and Restated Nonqualified Stock Option Agreement dated December 27, 2007 between the Corporation and the Participant;

WHEREAS, the Corporation and Participant desire to extend expiration of the Exercise Period for the Options subject to the 2004 Option Agreement from January 29, 2009 to January 29, 2012; and

WHEREAS , by executing this Agreement, the Corporation and Participant desire to amend, replace and supersede the 2004 Option Agreement with respect to the Options.

NOW, THEREFORE , in consideration of the foregoing, of the mutual promises hereinafter set forth and of such other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

1.             Defined Terms .   Capitalized terms used herein without definition shall have the meaning ascribed to such terms in the Employment Agreement.

3.             Termination of Option .   The Option and all rights hereunder with respect thereto, to the extent such rights shall not have been exercised, shall terminate and become null and void after January 29, 2012 (the " Option Termination Date ").

A.             Participant may exercise the Options with respect to all or any part of the number of Shares then exercisable hereunder by giving the Secretary of the Corporation written notice of intent to exercise.  The notice of exercise shall specify the number of Shares as to which Participant is exercising and the date of exercise thereof, which date shall be not less than five (5) days after the giving of such notice (unless an earlier time shall have been mutually agreed upon in writing).  All or any portion of the vested portion of the Option may be exercised by Participant during the Exercise Period.

B.             Notwithstanding anything contained in this Article 4 to the contrary, each Option may be exercised only in compliance with all applicable securities laws and only by (i) Participant’s completion, execution and delivery to the Corporation of a notice of exercise and, if required by the Corporation, an "investment letter" as supplied by the Corporation and (ii) the payment to the Corporation, as provided in Article 4D hereof, of an amount equal to the amount obtained by multiplying the Exercise Price of such Option by the number of Shares being purchased pursuant to such exercise as shall be specified by Participant in such notice of exercise.

C.             In the event of the death or Disability of Participant at such time that Participant shall possess an Option pursuant to the terms of this Agreement, within three years following Participant’s termination of employment, Participant or Participant’s estate, executors or administrators, or personal or legal representatives, as the case may be, shall be entitled to exercise any Options  that are or become exercisable within three years following Participant's termination of employment (but not beyond the Option Termination Date) and all such Options not exercised within such period shall be forfeited.  Any person, other than Participant, so desiring to exercise Participant's Options shall be required, as a condition to the exercise of the Options, to furnish to the Corporation such documentation as the Corporation shall deem satisfactory to evidence the authority of such person to exercise the Options on

behalf of Participant.  In the event of the exercise of such Options by Participant's estate, executors or administrators, or personal or legal representatives, all references herein to Participant shall, to the extent applicable, be deemed to refer to and include such estate, executors or administrators, or personal or legal representatives, as the case may be.

D.             The Exercise Price shall be paid in full by Participant for the Shares purchased on or before the exercise date specified in the notice of exercise, at Participant's option, in one or a combination of the following methods:  (i) in cash or by electronic funds transfer; (ii) by check payable to the order of the Corporation; (iii) if authorized by the Board of Directors of the Corporation (the " Board "), or the Compensation Committee of the Board (the " Committee "), by a promissory note of the Participant; (iv) by notice and third party payment in such manner as may be authorized by the Board or the Committee; (v) by the delivery of shares of Common Stock of the Corporation already owned by the Participant; or (vi) pursuant to a "cashless exercise" procedure (the " Cashless Exercise Right ") pursuant to which the Participant shall surrender to the Corporation such Option and a notice of exercise, duly completed and executed by the Participant to evidence the exercise of the Cashless Exercise Right by authorizing the Corporation to withhold from issuance a number of Shares issuable upon such exercise of such Option which, when multiplied by the Fair Market Value (as defined below) of such Shares, is equal to the aggregate Exercise Price of such Option (and such withheld Shares shall no longer be issuable under such Option).  Shares of Common Stock used to satisfy the Exercise Price of an Option shall be valued at their Fair Market Value on the date of exercise.

(a)  if the security at issue is listed on a national securities exchange or admitted to unlisted trading privileges on such an exchange or quoted on either the National Market System or the Small Cap Market of the automated quotation service operated by The Nasdaq Stock Market, Inc., the Fair Market Value shall be the last reported sale price of that security on such exchange or system on the day for which the Fair Market Value is to be determined or, if no such sale is made on such day, the average of the highest closing bid and lowest asked price for such day on such exchange or system; or

(b)  if the security at issue is not so listed or quoted or admitted to unlisted trading privileges, the Fair Market Value shall be the average of the last reported highest bid and lowest asked prices quoted on the Electronic Bulletin Board operated by