<PAGE> 1
             SECURITIES AND EXCHANGE COMMISSION
                   Washington, D.C. 20549
                              
                          FORM 10-Q
                              
                              
/X/Quarterly  Report Pursuant to Section 13 or  15(d)of  the
Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 1998


                             or

/  /Transition Report Pursuant to Section 13 or 15(d)of  the
Securities Exchange Act of 1934

For the Transition Period Ended ______________________

                    Commission File Number 0-10501

               STERLING GAS DRILLING FUND 1981
     (Exact name of registrant as specified in charter)

                          New York
      (State or other jurisdiction of incorporation or
                        organization)
                              
                         13-3098770
            (IRS employer identification number)

      One Landmark Square, Stamford, Connecticut  06901
    (Address and Zip Code of principal executive offices)

                       (203) 358-5700

    (Registrant's telephone number, including area code)

                       Not Applicable
   (Former name, former address and former fiscal year, if
                 changed since last report)

Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes  /X/  No   / /





<PAGE> 2
                                PART I
Item 1.       Financial Statements
The following Financial Statements are filed herewith:

Balance Sheets - March 31, 1998 and December 31, 1997.

Statements of Operations for the Three Months Ended March 31, 1998 and
1997.

Statements of Changes in Partners' Equity for the year ended December 31,
1997 and for the Three Months Ended March 31, 1998.

Statements of Cash Flows for the Three Months Ended March 31, 1998 and
1997.

Note to Financial Statements

Item 2.   Management's Discussion and Analysis of Financial Condition
and Results of Operations

1.   Liquidity -

The oil and gas industry is intensely competitive in all its phases.
There is also competition among this industry and other industries in
supplying energy and fuel requirements of industrial and residential
consumers.  It is not possible for the Registrant to calculate its
position in the industry as the Registrant competes with many other
companies having substantially greater financial and other resources.
In accordance with the terms of the Prospectus, the General Partners
of the Registrant will make cash distributions of as much of the
Partnership cash credited to the capital accounts of the Partners as
the General Partners have determined is not necessary or desirable for
the payment of any contingent debts, liabilities or expenses or for
the conduct of the Partnership's business. As of March 31, 1998, the
General partners have distributed to the Limited partners $3,955,500.
Such cash distributions are equivalent to 45% of original total
Limited Partner capital contributions.
     
     All aspects of the Partnership's operations and administration is
handled through the use of  the operating and managing general
partner's computer systems.  Both , the operations company and the
managing general partner are taking steps to minimize any potential
computer issues with regard to any necessary changes for the year
2000.  A complete system upgrade, which includes but is not limited
to, the year 2000 issue will be implemented with in the next nine
months by both the operating company and the managing general partner.
Both companies  upgrades and year 2000 changes are part of their
normal course of business and no material costs should be allocated to
the partnership for the implementation necessary by either company.
<PAGE> 3
     The net proved oil and gas reserves of the Partnership are
considered to be a  indicator of financial strength and future
liquidity.  The present value of unescalated future net revenue
(S.E.C. case) associated with such reserves, discounted at 10% as of
December 31, 1997 was approximately $687,900 as compared to  the value
as of December 31, 1996 which  was approximately $817,000. Overall
reservoir engineering is a subjective process of estimating
underground accumulations of gas and oil that can not be measured in
an exact manner.  The accuracy of any reserve estimate is a function
of the quality of available data and of the engineering and geological
interpretation and judgment.  Accordingly, reserve estimates are
generally different from the quantities of gas and oil that are
ultimately recovered and such differences may have a material impact
on the partnership's financial results and future liquidity.

2.  Capital Resources -

The Registrant was formed for the sole purpose of drilling oil and gas
wells. The Registrant entered into a drilling contract with an
independent contractor in December 1981 for $6,900,000.  Pursuant to
the terms of this contract, wells have been drilled resulting in
thirty-seven producing wells, three non commercial wells and one
plugged well.   The Registrant has had a reserve report prepared which
details reserve value information, and such information is available
to the Limited Partners pursuant to the buy-out provisions of the
Prospectus as previously filed.

3.   Results of Operations -

 The Partnership's operating revenues increased from $69,873 in 1997
to $80,990 in 1998 .This increase can be directly attributed to the an
increase in gas production from 23,280 MCF's in 1997 to 27,719 MCF's
in 1998.  The Partnership did benefit from a stable average price per
mcf of $2.90 in 1997 and $2.86 in 1998. A large amount of the gas
produced by the Partnership is sold under  a twelve month fixed price
contract that commenced  in December 1997. The price received
currently is still more favorable and less changeable then the current
market spot price.  Production expenses increased slightly from
$25,359 in 1997  to $27,471  in 1998. Most expenditures for repairs,
locations and labor in 1997  and 1998  were used to maintain the
general upkeep of the wells and well sites.  Also, variable costs
associated with production data increased, for example the related
well taxes which are based upon production.

Overall general and administrative expenses, both related and third
party costs, changed very little between 1997 and 1998. The amounts
charged reflect management's efforts to limit costs, both incurred and
allocated to the Registrant. Management continues  to use in-house



<PAGE> 4

resources to provide efficient and timely services to the Partnership.
The  related party expenses attributable to the affairs and operations
of the Partnership, reimbursed to PEMC, are limited to an annual
amount not to exceed 5% of the Limited Partners capital contributions.
Amounts related to both years are substantially less than the amounts
allocable to the Registrant under the Partnership Agreement.

The Partnership records additional depreciation, depletion and
amortization to the extent that net capitalized costs exceed the
undiscounted future net cash flows attributable to the partnership
properties.  The partnership was not required to revise downward the
properties basis in either 1997 or first quarter 1998.  The
partnership did expend $3,045 in 1998 for capitalized costs. An
example of these types of costs are lift equipment , replacement of
tubing or piping. The operator will expend funds on capital
improvements if to do so would increase and stabilize production or
minimize declines.  Overall depletion expense is consistent for each
year based upon the property basis and the rates used.

PART II

Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.Item 6  Exhibits and Reports on
Form 8-K
The Partnership was not required to file any reports on Form 8-K and
no such form was filed during the period covered by this report.

Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report.


<PAGE> 5

                          S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


                                   STERLING GAS DRILLING FUND 1981

May 12, 1998                       BY: /S/Charles E.Drimal Jr.
    (DATE)                             -----------------------
                                       Charles E. Drimal, Jr.
                                       General Partner




<PAGE> 6

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                              (unaudited)
                                          March 31,      December 31,
                                            1998             1997
Assets                                                                
Current Assets:                                                       
  Cash and cash equivalents            $           5  $             16
                                          ----------       -----------
      Total current assets                         5                16
                                                                      
Oil and Gas properties -                                              
successful efforts method:                                            
  Leasehold costs                            236,502           236,502
  Well and related facilities              6,951,108         6,948,063
   less accumulated depreciation,                                      
    depletion and amortization            (6,042,233)       (6,023,905)
                                          ----------        ----------
                                           1,145,377         1,160,660
                                          ----------        ----------
       Total assets                    $   1,145,382  $      1,160,686
                                          ==========        ==========
Liabilities and Partners' Equity                               
  Current liabilities:                                         
   Due to affiliates                   $     102,623  $        124,096
                                          ----------        ----------
        Total current liabilities            102,623           124,096
                                          ----------        ----------
                                                                      
  Partners' Equity                                                    
   Limited partners                        1,145,309         1,142,831
   General partners                         (102,550)         (106,251)
                                          ----------        ----------
         Total partners' equity            1,042,759         1,036,580
                                          ----------        ----------
                                                                      
         Total liabilities and                                        
          partners' equity             $   1,145,382  $      1,160,676
                                          ==========        ==========
                                   
                                   
                                   
See accompanying note to the financial statements.



<PAGE> 7
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                     March 31, 1998

                               Limited     General      
                               Partners    Partners     Total
Revenue:                                                
Operating revenue           $     68,153 $    12,837 $     80,990
                                --------    --------      -------
  Total Revenue                   68,153      12,837       80,990
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                23,117       4,354       27,471
General and administrative                                       
 to a related party               21,043       3,964       25,007
General and administrative         3,370         635        4,005
Depreciation, depletion                                          
 and amortization                 18,145         183       18,328
                                --------    --------      -------
  Total Costs and Expenses        65,675       9,136       74,811
                                --------    --------      -------
  Net Income                $      2,478 $     3,701 $      6,179
                                ========    ========      =======
Net Income per equity unit  $       0.28                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial  statements.




<PAGE> 8
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                     March 31, 1997

                               Limited     General      
                               Partners    Partners     Total
Revenue:                                                
Operating revenue           $     58,798 $    11,075 $     69,873
                                --------    --------      -------
  Total Revenue                   58,798      11,075       69,873
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                21,340       4,019       25,359
General and administrative                                       
 to a related party               21,037       3,962       24,999
General and administrative         3,045         573        3,618
Depreciation, depletion                                          
 and amortization                 17,842         180       18,022
                                --------    --------      -------
  Total Costs and Expenses        63,264       8,734       71,998
                                --------    --------      -------
  Net Income(loss)          $     (4,466) $    2,341 $     (2,125)
                                ========    ========      =======
Net Income(loss)                                                 
    per equity unit         $      (0.51)                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial  statements.
                                   


<PAGE> 9

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   
                                Limited        General       
                                Partners       Partners      Total
                                                             
Balance at December 31, 1996  $  1,183,494  $    (112,355) $   1,071,139
  Net Income(Loss)                 (40,663)         6,104        (34,559)
                                 ---------      ---------      ---------
Balance at December 31, 1997     1,142,831       (106,251)     1,036,580
  Net Income                         2,478          3,701          6,179
                                 ---------      ---------      ---------
Balance at March 31, 1998     $  1,145,309  $    (102,550) $   1,042,759
                                 =========      =========      =========
                                   
See accompanying note to the financial  statements.
                                   


<PAGE> 10
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                       Three months     Three months
                                        ended March     ended March
                                          31,1998         31,1997
                                                                    
Net cash provided by operating                                      
activities                           $         3,034 $            47
                                          ----------      ----------
Cash provided by/(used in)                                          
investment activities:
  Investment in wells and related                                   
  facilities                                  (3,045)              0
                                          ----------      ----------
Net  cash provided by/(used in)                                     
investment activities                         (3,045)              0
                                          ----------      ----------
                                                                    
Net increase(decrease) in cash and                                  
  cash equivalents                               (11)             47
Cash and cash equivalents at                                        
beginning of period                               16              26
                                          ----------      ----------
Cash and cash equivalents at end of                                 
period                               $             5 $            73
                                          ==========      ==========

See accompanying note to the financial  statements.




<PAGE> 11
                       STERLING GAS DRILLING FUND 1981
                       (a New York limited partnership)
                        Note to Financial Statements
                             March 31, 1998

1.   The accompanying statements for the period ending March 31, 1998
are unaudited but reflect all the adjustments necessary to present
fairly the results of operations
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1
             SECURITIES AND EXCHANGE COMMISSION
                   Washington, D.C. 20549
                              
                          FORM 10-Q
                              
                              
/X/Quarterly  Report Pursuant to Section 13 or  15(d)of  the
Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 1998

                             or

/  /Transition Report Pursuant to Section 13 or 15(d)of  the
Securities Exchange Act of 1934

For the Transition Period Ended ______________________

                    Commission File Number 0-10501

               STERLING GAS DRILLING FUND 1981
     (Exact name of registrant as specified in charter)

                          New York
      (State or other jurisdiction of incorporation or
                        organization)
                              
                         13-3098770
            (IRS employer identification number)

      One Landmark Square, Stamford, Connecticut  06901
    (Address and Zip Code of principal executive offices)

                       (203) 358-5700

    (Registrant's telephone number, including area code)

                       Not Applicable
   (Former name, former address and former fiscal year, if
                 changed since last report)

Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes  /X/  No   / /
2
                                PART I
Item 1.       Financial Statements
The following Financial Statements are filed herewith:

Balance Sheets - March 31, 1998 and December 31, 1997.

Statements of Operations for the Three Months Ended March 31, 1998 and
1997.

Statements of Changes in Partners' Equity for the year ended December 31,
1997 and for the Three Months Ended March 31, 1998.

Statements of Cash Flows for the Three Months Ended March 31, 1998 and
1997.

Note to Financial Statements

Item 2.   Management's Discussion and Analysis of Financial Condition
and Results of Operations

1.   Liquidity -

The oil and gas industry is intensely competitive in all its phases.
There is also competition among this industry and other industries in
supplying energy and fuel requirements of industrial and residential
consumers.  It is not possible for the Registrant to calculate its
position in the industry as the Registrant competes with many other
companies having substantially greater financial and other resources.
In accordance with the terms of the Prospectus, the General Partners
of the Registrant will make cash distributions of as much of the
Partnership cash credited to the capital accounts of the Partners as
the General Partners have determined is not necessary or desirable for
the payment of any contingent debts, liabilities or expenses or for
the conduct of the Partnership's business. As of March 31, 1998, the
General partners have distributed to the Limited partners $3,955,500.
Such cash distributions are equivalent to 45% of original total
Limited Partner capital contributions.
     
     All aspects of the Partnership's operations and administration is
handled through the use of  the operating and managing general
partner's computer systems.  Both , the operations company and the
managing general partner are taking steps to minimize any potential
computer issues with regard to any necessary changes for the year
2000.  A complete system upgrade, which includes but is not limited
to, the year 2000 issue will be implemented with in the next nine
months by both the operating company and the managing general partner.
Both companies  upgrades and year 2000 changes are part of their
normal course of business and no material costs should be allocated to
the partnership for the implementation necessary by either company.
3
     The net proved oil and gas reserves of the Partnership are
considered to be a  indicator of financial strength and future
liquidity.  The present value of unescalated future net revenue
(S.E.C. case) associated with such reserves, discounted at 10% as of
December 31, 1997 was approximately $687,900 as compared to  the value
as of December 31, 1996 which  was approximately $817,000. Overall
reservoir engineering is a subjective process of estimating
underground accumulations of gas and oil that can not be measured in
an exact manner.  The accuracy of any reserve estimate is a function
of the quality of available data and of the engineering and geological
interpretation and judgment.  Accordingly, reserve estimates are
generally different from the quantities of gas and oil that are
ultimately recovered and such differences may have a material impact
on the partnership's financial results and future liquidity.

2.  Capital Resources -

The Registrant was formed for the sole purpose of drilling oil and gas
wells. The Registrant entered into a drilling contract with an
independent contractor in December 1981 for $6,900,000.  Pursuant to
the terms of this contract, wells have been drilled resulting in
thirty-seven producing wells, three non commercial wells and one
plugged well.   The Registrant has had a reserve report prepared which
details reserve value information, and such information is available
to the Limited Partners pursuant to the buy-out provisions of the
Prospectus as previously filed.

3.   Results of Operations -

 The Partnership's operating revenues increased from $69,873 in 1997
to $80,990 in 1998 .This increase can be directly attributed to the an
increase in gas production from 23,280 MCF's in 1997 to 27,719 MCF's
in 1998.  The Partnership did benefit from a stable average price per
mcf of $2.90 in 1997 and $2.86 in 1998. A large amount of the gas
produced by the Partnership is sold under  a twelve month fixed price
contract that commenced  in December 1997. The price received
currently is still more favorable and less changeable then the current
market spot price.  Production expenses increased slightly from
$25,359 in 1997  to $27,471  in 1998. Most expenditures for repairs,
locations and labor in 1997  and 1998  were used to maintain the
general upkeep of the wells and well sites.  Also, variable costs
associated with production data increased, for example the related
well taxes which are based upon production.

Overall general and administrative expenses, both related and third
party costs, changed very little between 1997 and 1998. The amounts
charged reflect management's efforts to limit costs, both incurred and
allocated to the Registrant. Management continues  to use in-house
4

resources to provide efficient and timely services to the Partnership.
The  related party expenses attributable to the affairs and operations
of the Partnership, reimbursed to PEMC, are limited to an annual
amount not to exceed 5% of the Limited Partners capital contributions.
Amounts related to both years are substantially less than the amounts
allocable to the Registrant under the Partnership Agreement.

The Partnership records additional depreciation, depletion and
amortization to the extent that net capitalized costs exceed the
undiscounted future net cash flows attributable to the partnership
properties.  The partnership was not required to revise downward the
properties basis in either 1997 or first quarter 1998.  The
partnership did expend $3,045 in 1998 for capitalized costs. An
example of these types of costs are lift equipment , replacement of
tubing or piping. The operator will expend funds on capital
improvements if to do so would increase and stabilize production or
minimize declines.  Overall depletion expense is consistent for each
year based upon the property basis and the rates used.

PART II

Items 1 through 5 have been omitted in that each item is either
inapplicable or the answer is negative.Item 6  Exhibits and Reports on
Form 8-K
The Partnership was not required to file any reports on Form 8-K and
no such form was filed during the period covered by this report.

Exhibit 27 - Financial Data Schedule is attached to the electronic
filing of this report.
5

                          S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                   STERLING GAS DRILLING FUND 1981

May 12, 1998                       BY: /S/Charles E.Drimal Jr.
    (DATE)                             -----------------------
                                       Charles E. Drimal, Jr.
                                       General Partner
6

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                            Balance Sheets
                              (unaudited)
                                          March 31,      December 31,
                                            1998             1997
Assets                                                                
Current Assets:                                                       
  Cash and cash equivalents            $           5  $             16
                                          ----------       -----------
      Total current assets                         5                16
                                                                      
Oil and Gas properties -                                              
successful efforts method:                                            
  Leasehold costs                            236,502           236,502
  Well and related facilities              6,951,108         6,948,063
   less accumulated depreciation,                                      
    depletion and amortization            (6,042,233)       (6,023,905)
                                          ----------        ----------
                                           1,145,377         1,160,660
                                          ----------        ----------
       Total assets                    $   1,145,382  $      1,160,686
                                          ==========        ==========
Liabilities and Partners' Equity                               
  Current liabilities:                                         
   Due to affiliates                   $     102,623  $        124,096
                                          ----------        ----------
        Total current liabilities            102,623           124,096
                                          ----------        ----------
                                                                      
  Partners' Equity                                                    
   Limited partners                        1,145,309         1,142,831
   General partners                         (102,550)         (106,251)
                                          ----------        ----------
         Total partners' equity            1,042,759         1,036,580
                                          ----------        ----------
                                                                      
         Total liabilities and                                        
          partners' equity             $   1,145,382  $      1,160,676
                                          ==========        ==========
                                   
                                   
                                   
See accompanying note to the financial statements.
7
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                     March 31, 1998

                               Limited     General      
                               Partners    Partners     Total
Revenue:                                                
Operating revenue           $     68,153 $    12,837 $     80,990
                                --------    --------      -------
  Total Revenue                   68,153      12,837       80,990
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                23,117       4,354       27,471
General and administrative                                       
 to a related party               21,043       3,964       25,007
General and administrative         3,370         635        4,005
Depreciation, depletion                                          
 and amortization                 18,145         183       18,328
                                --------    --------      -------
  Total Costs and Expenses        65,675       9,136       74,811
                                --------    --------      -------
  Net Income                $      2,478 $     3,701 $      6,179
                                ========    ========      =======
Net Income per equity unit  $       0.28                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial  statements.
8
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Operations
                              (unaudited)
                                   
                                   Three Months Ended
                                     March 31, 1997

                               Limited     General      
                               Partners    Partners     Total
Revenue:                                                
Operating revenue           $     58,798 $    11,075 $     69,873
                                --------    --------      -------
  Total Revenue                   58,798      11,075       69,873
                                --------    --------      -------
                                                        
Costs and Expenses:                                     
Production expense                21,340       4,019       25,359
General and administrative                                       
 to a related party               21,037       3,962       24,999
General and administrative         3,045         573        3,618
Depreciation, depletion                                          
 and amortization                 17,842         180       18,022
                                --------    --------      -------
  Total Costs and Expenses        63,264       8,734       71,998
                                --------    --------      -------
  Net Income(loss)          $     (4,466) $    2,341 $     (2,125)
                                ========    ========      =======
Net Income(loss)                                                 
    per equity unit         $      (0.51)                         
                                  ======                         
                                                                 
                                                                 
                                   
                                   
See accompanying note to the financial  statements.
9

                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
               Statement of Changes in Partners' Equity
                              (unaudited)
                                   
                                   
                                Limited        General       
                                Partners       Partners      Total
                                                             
Balance at December 31, 1996  $  1,183,494  $    (112,355) $   1,071,139
  Net Income(Loss)                 (40,663)         6,104        (34,559)
                                 ---------      ---------      ---------
Balance at December 31, 1997     1,142,831       (106,251)     1,036,580
  Net Income                         2,478          3,701          6,179
                                 ---------      ---------      ---------
Balance at March 31, 1998     $  1,145,309  $    (102,550) $   1,042,759
                                 =========      =========      =========
                                   
See accompanying note to the financial  statements.
10
                      STERLING DRILLING FUND 1981
                   (a New York Limited Partnership)
                        Statement of Cash Flows
                              (unaudited)
                                   
                                       Three months     Three months
                                        ended March     ended March
                                          31,1998         31,1997
                                                                    
Net cash provided by operating                                      
activities                           $         3,034 $            47
                                          ----------      ----------
Cash provided by/(used in)                                          
investment activities:
  Investment in wells and related                                   
  facilities                                  (3,045)              0
                                          ----------      ----------
Net  cash provided by/(used in)                                     
investment activities                         (3,045)              0
                                          ----------      ----------
                                                                    
Net increase(decrease) in cash and                                  
  cash equivalents                               (11)             47
Cash and cash equivalents at                                        
beginning of period                               16              26
                                          ----------      ----------
Cash and cash equivalents at end of                                 
period                               $             5 $            73
                                          ==========      ==========

See accompanying note to the financial  statements.
11
                       STERLING GAS DRILLING FUND 1981
                       (a New York limited partnership)
                        Note to Financial Statements
                             March 31, 1998

1.   The accompanying statements for the period ending March 31, 1998
are unaudited but reflect all the adjustments necessary to present
fairly the results of operations