RELEASE OFLIEN

That the undersigned, IMPACT INTERNATIONAL, L.L.C., an Oklahoma limited liability company (“Lender”), and RAMIIILAJ, a Limited Partnership, a Texas limited partnership, the legal and equitable owners and holders of the following described promissory note, guaranty, and lien:

(i)           that certain Promissory Note, and any renewals, extensions, and modifications thereof, in the original principal amount of Six Million Five Hundred Twenty-Three Thousand Seven Hundred Seventy-Three and 30/100 Dollars ($6,523,773.30), dated May 25, 2004, executed by Tidelands Oil & Gas Corporation, a Nevada corporation (“Tidelands”), payable to the order of Lender (the “Note”),

(ii)           that certain Guaranty of Reef Ventures, L.P., a Texas limited partnership (“Reef”), in favor of Lender, dated May 25, 2004 (the “Guaranty”); and

(iii)          that certain Deed of Trust, Mortgage, Security Agreement, Financing Statement and Assignment between Reef and Lender,, dated effective May 25, 2004, recorded in Volume 809, Pages 195-219 of the Official Public Records of Maverick County, Texas (the “Deed of Trust”);

said Note and Guaranty being secured by the above-described Deed of Trust lien against the property more particularly described therein (collectively, the “Property”).

For full and valuable consideration to the undersigned, the receipt of which is hereby acknowledged, the undersigned have released and discharged, and by these presents hereby release and discharge, the Property from all liens held by the undersigned securing the Note and Guaranty.

The undersigned expressly release any and all rights that the undersigned may now or hereafter have to establish or enforce said lien or liens as security for the payment of the Note, the Guaranty, and any other or future indebtedness.