Capital and Share Increase Agreement

Exhibit
      99.2

Capital
      and Share Increase Agreement

Party
      A:
      Jiaxing Li Ou Electromechanical Equipment Co. Ltd
Party
      B:
      Sinoenergy Holding Limited Co
Party
      C:
      Qingdao Sinogas General Machinery Co. Ltd.
 
With
      respect that:
 
(1)
      Party
      C is an “exclusively foreign-owned limited liability company” established in
      accordance with relevant laws of the People’s Republic of China with registered
      capital of USD Eleven Million and Eight Hundred Thousand
      ($11,800,000).
Party
      C
      is a professional company manufacturing and selling special equipments for
      compressed natural gas. In order to expand scale of manufacture and improve
      output and sales volume, Party A and Party B increase capital and adjust the
      structure of shares to expand the scale of manufacture and increase the market
      share basing on the principle of mutual benefits and using own
      advantages.
 
(2)
      Party
      B, which is a company registered in British Virgin Islands, holds 100% of shares
      of Party C before signing this agreement.
 
(3)
      Party
      A, which is a limited liability company established in accordance with relevant
      laws of the People’s Republic of China, plans to increase capital to Party
      C.

 
 

          
        
 
Therefore,
      the three parties come to the following agreement in Beijing on capital increase
      and collective management of Party C.
 
1.
      Party
      A shall increase capital to Party C in April 2008 with CNY 8 million
      (hereinafter referred to as “increased capital”), which shall be converted into
      USD according to the medium price of exchange between CNY and USD publicized
      by
      the People’s Bank of China. USD 621,800 shall be increased registered capital of
      Party C, and the remained amount shall be counted into the capital surplus
      of
      Party C. Then, the registered capital of Party C shall be increased to USD
      Twelve Million Four Hundred Twenty One Thousand and Eight Hundred
      ($12,421,800).
 
2.
      After
      increasing capital, Party A shall hold 5% of total shares of Party C, and Party
      B shall hold 95% of total shares of Party C. Party C shall become a joint
      venture enterprise.
 
3.
      Before
      increasing capital, Party B shall hold a meeting of directors of Party C to
      approve this agreement.
 
4.
      After
      increasing registered capital, alteration of registration documents and
      reorganization of board of directors of Party C shall be completed immediately
      in accordance with the Company Law. The new board of directors shall be composed
      of 5 members. Party A shall assign one director, and Party B shall assign 4
      directors and the president. The general manager and the CFO shall be
      recommended by Party B and appointed by the board of directors.
 
 
 

          
        
 
5.
      The
      increased capital shall be fully transferred to the account appointed by Party
      C
      within one month after this agreement comes into force.
 
6.
      Party
      A and Party B shall consign the person appointed by the board of directors
      of
      Party C within 15 days after this agreement comes into force to transact
      registration for alteration of registered capital and shareholders, which shall
      be completed within 30 days after this agreement comes into force.
 
7.
      After
      the alteration of shareholders is completed, Party A shall hold 5% of total
      shares of Party C and take corresponding rights and benefits, and Party B shall
      hold 95% of total shares of Party C and take corresponding rights and
      benefits.
 
8.
      Each
      party of this agreement shall insure necessary rights, powers and authorizations
      to sign this agreement and fulfill the following obligations. The
      representatives shall be legally authorized to sign this agreement and accept
      the obligations of this agreement.
 
9.
      Before
      the completion of increasing capital, Party A and Party B shall keep
      confidentiality of the capital increase and all related contents.

10.
      Force
      Majeure
 
10.1
      No
      party shall be deemed as breaching this agreement for failing to fulfill the
      obligations of this agreement in part or in all caused by force majeure, but
      necessary compensations shall be made to reduce the loss caused by force
      majeure.
 
 
 

          
        
 
10.2
      The
      party suffering force majeure shall give notice in writing to the other party
      within 3 workdays after force majeure happens, and provide details of force
      majeure and valid certificates for failing or delaying to fulfill the
      obligations within 15 workdays after force majeure happens. Parties of this
      agreement shall make consultation to decide cancelling this agreement, partly
      releasing the obligations or delaying to fulfill this agreement.
 
10.3
      The
      above mentioned force majeure refers to the unpredictable and unconquerable
      objective circumstances, including but not limited to war, blockage, embargo,
      turbulence, fire, flood, storm, earthquake, explosion, pestilence, epidemic
      and
      other matters caused by natural factors directly influencing fulfillment of
      this
      agreement.
 
11.
      Applicable Laws and Settlement of Disputes
Fulfillment
      of this agreement and settlement of disputes shall be in accordance with
      relevant laws of the People’s Republic of China. Any dispute arising from
      fulfillment of this agreement shall be settled through friendly consultation.
      If
      no settlement can be reached within 30 days, any party can apply litigation
      from
      the local court of Qingdao City.
 
12.
      Breaching Liabilities
After
      signing this agreement, failing to fulfill this agreement in part or in all
      shall be deemed as breaching this agreement. The party breaching this agreement
      shall be responsible for compensating all the direct economic loss of the other
      party, who shall have the right to require the party breaching this agreement
      to
      continue fulfilling this agreement.
 
 
 

          
        
 
13.
      Alteration and Cancellation of this Agreement
The
      alteration of this agreement shall be consulted by the parties of this
      agreement, and the alteration agreement in writing shall be made. If no
      unanimous consultation can be reached, this agreement shall be still valid.
      
 
14.
      This
      agreement shall come into force after being signed and sealed by the legal
      representative or authorized agent of each party and approved by the commercial
      administration authority. This agreement is in 6 original copies with the same
      force. Both Party A and Party B shall keep two copies, and the authority shall
      keep two copies.
 
 

          
        
 

(Signing
      Page)


Party
      A:
Legal
      Representative (Authorized Agent):


Party
      B:
Legal
      Representative (Authorized Agent):


Party
      C:
Legal
      Representative (Authorized Agent):
 
Date:
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Capital and Share Increase Agreement

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