Construction Begins for Penn Octane's Cross-border Pipeline; Ground Broken in U.S. and Mexico Alike.

REDWOOD CITY, CA--(BUSINESS WIRE)--Sept. 16, 1999--

LPG Volume Increases 32% to 117 Million Gallons; Revenues

Increase to $35.3 Million for Fiscal Year Ended July 31, 1999

Jerry Richter, Chairman of Penn Octane Corporation (NASDAQ Small Cap: POCC) announced that today ground was broken in the United States for the construction of two pipelines that will transport liquid petroleum gas (LPG) and carry diesel fuel and motor gasoline from Brownsville, Texas, US to Matamoras, Mexico. Construction preparations for the pipeline began approximately two weeks ago on the Mexican side of the boarder. The Company estimates that the pipeline will be completed in November 1999. Simultaneously, Penn Octane is ramping up construction of a third terminal facility in Saltillo, Mexico, 350 miles south of the border, which will serve as an unloading facility for railroad tank-cars. Recently, Penn Octane was issued a U.S. State Department presidential permit for the $14 million project, which will significantly increase the transportation efficiency and volume of LPG and other refined products into Mexico by eliminating the cross-border trucking obstacles now encountered.

Mr. Richter commented on this and other developments within the company, "Breaking ground for this historic pipeline is a tremendous, long-awaited milestone for Penn Octane. The project is unique in that it is the only inter-country LPG pipeline between the US and Mexican borders owned by a US company on both sides--significantly increasing transportation efficiencies while allowing for greater LPG distribution to the market. Penn Octane's position as a low cost import supplier to Northeast Mexico is now literally `in' solid ground." Mr. Richter continued, "As we are now better positioned to serve the growing demand for LPG in a potentially broadened market area, we expect that our long -term revenues and profitability will follow accordingly."

The pipelines are poised to become operational at a time when many factors combine to make this a very favorable environment for LPG. LPG, which is used in Mexico as a cooking and heating fuel in the same way the U.S. consumers use natural gas, is a market that is rapidly expanding among consumers. In addition, January, 2000 will mark the deregulation of LPG by the Mexican government thus permitting Penn Octane to sell directly to independent distributors in addition to Petroleos Mexicanos. PEMEX, the state-owned Mexican oil company, is currently the exclusive importer and wholesaler of LPG to Mexican distributors. .

The volume of LPG gallons sold during the fiscal year 1999 expanded to 117.0 million (an average of 9.75 million gallons per month) as compared to 88.4 million for 1998 (an average of 7.37 million gallons per month). This resulted in an increase of 32%. During the same period, revenues increased to $35.3 million for 1999 from $30.5 million for 1998, a 16% advance. The new pipelines, which when completed could carry up to 50 million gallons of LPG and an equal amount of refined products per month, will originate at the Port of Brownsville, Texas and run 21 miles across the Rio Grande River to Saltillo, Mexico. They will connect an existing pipeline in Brownsville with a new storage and distribution terminal in Matamoros.

Penn Octane is a leading supplier of Liquefied Petroleum Gas to Mexico. Penn Octane leases a 132-mile, six-inch pipeline from a pipeline in Kleberg County, Texas to its terminal in Brownsville, Texas, which acts as a trans-shipment point for delivery to Mexico. The company's network is further enhanced due to the 160 miles of pipe it has rights to use to transport LPG to and from its storage facility in Markham, TX.

For more information on Penn Octane Corporation, visit the Company's website at www.pennoctane.com.

Certain of these statements in this news release are forward-looking statements. While these statements reflect the Company's beliefs, they are subject to uncertainties and risks that could cause actual results to differ materially.