CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS

9 Months Ended

Sep. 30, 2011

CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS

NOTE 20 – CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS

The Company has leased a real property adjacent to Factory No. 1, with the related production facility, channels and ducts, other production equipment and the buildings located on the property, under capital lease. The future minimum lease payments required under capital lease, together with the present value of such payments, are included in the table show below.

The Company has leased five pieces of land under non-cancelable operating leases, which are fixed in rentals and expired through December 2030, December 2040, February 2059, August 2059 and June 2060, respectively. The Company accounts for the leases as operating leases.

The Company has committed (i) approximately $1,026,774 for the relocation and construction of new Factory No. 4 and (ii) approximately $1,409,946 for the drilling of exploratory wells and their associated facilities in Sichuan province as of September 30, 2011.

The following table sets forth the Company’s contractual obligations as of September 30, 2011:

	Capital Lease Obligations			Operating Lease Obligations		Purchase Obligations
Payable within:
the next 12 months	$	295,364		$	434,283	$	2,436,720
the next 13 to 24 months		295,365			633,612		-
the next 25 to 36 months		295,365			634,155		-
the next 37 to 48 months		295,365			637,892		-
the next 49 to 60 months		295,365			642,921		-
thereafter		4,135,106			17,637,271		-
Total	$	5,611,930		$	20,620,134	$	2,436,720
Less: Amount representing interest		(2,464,953	)
Present value of net minimum lease payments	$	3,146,977

Rental expenses related to operating leases of the Company amounted to $159,735 and $29,056 were charged to the income statements for the three-month ended September 30, 2011 and 2010, respectively. Rental expenses related to operating leases of the Company amounted to $421,223 and $75,436 were charged to the income statements for the nine-month ended September 30, 2011 and 2010, respectively.