STAR GAS PARTNERS, L.P.

Exhibit 10.40

STAR GAS PARTNERS, L.P.

CLEARWATER HOUSE

2187 ATLANTIC STREET

STAMFORD, CONNECTICUT 06902

October 17, 2003

Mr. David Anthony Shinnebarger

Dear David:

As you are aware, we are all very excited about your joining Star Gas Partners, L.P. as its Chief Marketing Officer. We believe your broad strategic perspective combined with strong execution approach to marketing will be of great assistance in Star’s realizing it’s full growth potential. With that in mind, I have set forth below the terms of your employment.

You will be hired by Star Gas Partners, L.P. as its Chief Marketing Officer reporting directly to me as Star’s Chief Executive Officer. In that role you will be responsible for all sales and marketing activities at Star’s two operating subsidiaries, Star Gas Propane and Petroleum Heat and Power Co., Inc. While your primary focus will initially be to improve customer retention and attraction at Petro, it is expected you will also oversee Star Propane’s marketing and sales activities as well as assist both subsidiaries in selling additional rationally related products.

Your annual compensation will consist of a $325,000 annual base salary, plus an annual end-of-year bonus potential equivalent to 100% of base salary for the first year of employment, 150% of base salary in the second year of employment and 200% of base salary in the third year of employment, as described in greater detail below. The annual base salary will be increased in years two and three in accordance with normal salary adjustments made to the Company’s other senior executives. In addition, you will be granted, upon commencement of employment, 4,500 Common Unit Appreciation Rights with a strike price of $22 per unit to vest 25% upon grant and 25% per year on each of the three anniversary dates, thereafter.

David Anthony Shinnebarger

October 17, 2003

Page Two

In regard to employee benefits, you will be entitled to participate in the same programs provided generally to Star’s other senior executives.

Calculation

As referred to in the “Compensation” section of this letter, you will be entitled to an annual bonus to be calculated as follows:

Your first year bonus will be based on the increase from November 1, 2003 – September 30, 2004 in customers purchasing home heating oil from Star’s Petroleum Heat and Power subsidiary, excluding the effect of accounts obtained through Petro’s acquisition program for two years following the purchase of such accounts. To the extent the customer count remains the same at the end of the period as in the beginning, a bonus of 30% of your salary will be earned (“Base Bonus”). You will be entitled to a bonus over and above this 30%, up to 100% of your annual base salary to the extent there is a 3% net increase in customer count (“Supplemental Bonus”). The actual bonus earned of this additional 70% potential will be 23.3% of your salary for each 1% net increase in customer count up to a maximum of 3%. Any portion of this 70% potential can only be earned if gross customer losses are less than 12.5% (i.e., 2% below the 14.5% annual customer churn rate budgeted for Petro’s 2003 Fiscal Year). See Exhibit I for an example of this calculation.

Your second year bonus will be based on the increase in customers purchasing home heating oil from Petro from October 1, 2004 – September 30, 2005, excluding the effect of accounts obtained through the Petro’s acquisition program. To the extent the net customer count increases 2% from the beginning to the end of the period, a bonus of 30% of salary will be earned. You will earn a bonus over and above this 30% up to 150% of your annual base salary, to the extent there is an 8% increase in customer count. The actual bonus earned of this additional 120% potential will be 20% of salary for each 1% net increase in customer count from 3% to 8%. Any portion of this 120% can only be earned if gross customer losses are less than 10.5% of the company’s beginning of Fiscal Year 2005 customer base.

David Anthony Shinnebarger

October 17, 2003

Page Three

Your third year bonus will be based on the increase in customers purchasing home heating oil from Petro from October 1, 2005 – September 30, 2006, excluding the effect of accounts obtained through the Petro’s acquisition program. To the extent the customer count increases 2%, from the beginning to the end of this period, a bonus of 30% of your salary will be earned. You will earn a bonus over and above this 30% up to 200% of your annual base salary, to the extent there is an 8% increase in customer count. The actual bonus earned of this additional 170% potential will be 28.3% of salary for each 1% increase in customer count from 3% to 8%. Any portion of this 170% can only be earned if gross customer losses are less than 8.5% of the company’s beginning of Fiscal Year 2006 customer base.

Please note, that while this is the expected formula to be used in calculating your 2006 Fiscal Year bonus, that is three years away, and should circumstances change, the two of us will discuss at the beginning of that year, whether this formula remains the appropriate basis for bonus calculation.

It is assumed that all marketing programs used to achieve the customer count performance upon which your bonus is based, will involve profitable customers that provide the company with a 17.5% Internal Rate of Return over the expected life of the account.

Payment

Your annual bonus will be paid at the same time as bonuses are remitted to the Company’s other senior executives.

Payment of your earned bonus will be as follows:

Notwithstanding the foregoing, any portion of your bonus that would have been due in units will be paid in cash if Star Gas Partners has not received all required regulatory approvals to issue the units to you.

David Anthony Shinnebarger

October 17, 2003

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Regarding terms of the severance outlined above, should Star Gas Partners fail to perform in accordance with these terms and/or compensate you for earned bonus due under “Section 3. Annual Bonus”, subsections “Calculation” and “Payment”, you will be entitled to reasonable costs of collection, including attorneys’ fees. Further, Star Gas Partners agrees to pay all costs associated with arbitration of any disputes as to pay and/or bonus compensation as a first step towards avoiding litigation.

David Anthony Shinnebarger

October 17, 2003

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Again, we think Star has some very exciting opportunities and we look forward to working together with you, towards realizing its potential.

Exhibit I

Bonus Calculation

Example