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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECURITIES
      AND EXCHANGE COMMISSION </strong></font></div>
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      D.C. 20549 </strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FORM
      8-K </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
      REPORT </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pursuant
      to Section 13 or 15(d) of the </strong></font></div>
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      Exchange Act of 1934 </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Date
      of report (Date of earliest event reported): January 6,
      2006</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FORTUNE
      OIL &amp; GAS, INC.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>(Exact
      name of registrant as specified in Charter)</strong></font></div>
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            </td>
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            </td>
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            </td>
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          <tr>
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                or other jurisdiction <br>of </strong></font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>incorporation
                or organization)</strong></font></div>
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                File No.)</strong></font></div>
            </td>
            <td valign="top" width="33%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>(IRS
                Employee Identification
                No.)</strong></font></div>
            </td>
          </tr>

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      Martin Drive</font></div>
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      Rock, British Columbia</font></div>
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      V4A 6E7</font></div>
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      of Principal Executive Offices) </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">604-531-0385</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman, serif"><strong>(Issuer
      Telephone number) </strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
      <hr style="COLOR: black" align="center" noshade size="1" width="10%">
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Form
      8-K and other reports filed by Fortune Oil &amp; Gas, Inc. (the "Registrant" or
      the &#8220;Company&#8221;) from time to time with the Securities and Exchange Commission
      (collectively the "Filings") contain forward looking statements and information
      that are based upon beliefs of, and information currently available to, the
      Registrant's management as well as estimates and assumptions made by the
      Registrant's management. When used in the Filings the words "anticipate",
      "believe", "estimate", "expect", "future", "intend", "plan" or the negative
      if
      these terms and similar expressions as they relate to the Registrant or the
      Registrant's management identify forward looking statements. Such statements
      reflect the current view of the Registrant with respect to future events and
      are
      subject to risks, uncertainties, assumptions and other factors relating to
      the
      Registrant's industry, operations and results of operations and any businesses
      that may be acquired by the Registrant. Should one or more of these risks or
      uncertainties materialize, or should the underlying assumptions prove incorrect,
      actual results may differ significantly from those anticipated, believed,
      estimated, expected, intended or planned.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      </strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>8.01</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Other
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company and its subsidiaries Fortune Ship Management Ltd. and Indo-Pacific
      Resources (JAVA) Ltd. were named as defendants and counterclaimants in an action
      brought before the United States District Court for the Southern District of
      New
      York captioned </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>National
      Oil Well Maintenance Co. and Enterprise Trading Limited v. Fortune Oil and
      Gas,
      Inc., Fortune Ship Management Ltd. and Indo-Pacific Resources (JAVA)
      Ltd.</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      Case No
      02 CV. 7666 (LBS).&#160; The case was filed September 20, 2002. In this action,
      Plaintiffs </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">National
      Oil Well Maintenance (&#8220;NOWMCO&#8221;) and Enterprise Trading Limited (&#8220;Enterprise&#8221;)
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">sought
      to
      enforce promissory notes given by the Company in the approximate amount of
      $4,200,000 plus attorneys&#8217; fees and interest.&#160; Plaintiffs also sought to
      retain possession of a storage tanker that had been repossessed by Plaintiffs
      from the Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      December 2, 2002 the Company counterclaimed against NOWMCO and Enterprise
      alleging breach of contract for remediation work on the Camar Field oil wells
      and fraudulent and negligent misrepresentation as to the qualifications and
      skills of NOWMCO and Enterprise. The counterclaim asked for damages plus
      attorneys&#8217; fees and interest. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      January 6, 2006, the parties to the litigation reached a settlement agreement
      (the &#8220;Settlement Agreement&#8221;) which provides, among other things, that (i) the
      Company shall issue to Enterprise a promissory note in the principal amount
      of
      $2,860,000 (the &#8220;Note&#8221;) and (ii) NOWMCO shall be obligated to offer and perform
      certain remediation services valued at $7,000,000, where such services when
      performed shall be charged at a 20% discount to NOWMCO&#8217;s then retail price list
      for such services (the &#8220;Services&#8221;). </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      payment terms of the Note include payment of interest beginning one year after
      the issuance of the Note, and payment of principal in two equal installments
      on
      the second and third anniversaries of the issuance of the Note. The Company
      may
      prepay the Note. The Company&#8217;s shares of its subsidiary, Indo-Pacific Resources
      (JAVA) Ltd. and the proceeds due to the Company under the Company&#8217;s interest in
      the Bawean Production Sharing Contract, shall be held in trust as security
      for
      payments under the Note. Upon payment defaults, Enterprise shall have certain
      rights with respect to the shares and the proceeds as set forth in the
      Settlement Agreement. The foregoing summary of the Settlement Agreement is
      qualified in its entirety by reference to the attached Exhibit
      99.1.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Due
      to
      the Settlement Agreement, the case has been dismissed with prejudice and without
      costs to any party under the Order of Discontinuance dated January 6, 2006.
      Accordingly, the case will be closed. A copy of the Order of Discontinuance
      is
      attached as Exhibit 99.2 hereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>9.01
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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            <td width="3%">&#160;</td>
            <td width="3%"><font size="2">(a) </font></td>
            <td width="1%">&#160;</td>
            <td colspan="2" width="93%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Financial
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            </td>
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          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%">&#160;</td>
            <td width="73%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%"><font size="2">Not applicable</font>&#160;</td>
            <td width="73%">&#160;</td>
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          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%">&#160;</td>
            <td width="73%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%"><font size="2">(b)&#160;</font>&#160;</td>
            <td width="1%">&#160;</td>
            <td colspan="2" width="93%"><font size="2">Pro Forma Financial
              Information</font>&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%">&#160;</td>
            <td width="73%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%"><font size="2">Not applicable.</font>&#160;</td>
            <td width="73%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%">&#160;</td>
            <td width="73%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%"><font size="2">(c)</font>&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%"><font size="2">Exhibits.</font>&#160;</td>
            <td width="73%">&#160;</td>
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          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%">&#160;</td>
            <td width="73%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%"><u><font size="2">Number</font></u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </td>
            <td width="73%"><u><font size="2">Item</font></u>&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
            <td width="20%"><font size="2">99.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font>&#160;</td>
            <td width="73%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Settlement
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          </tr>
          <tr bgcolor="white">
            <td width="3%">&#160;</td>
            <td width="3%">&#160;</td>
            <td width="1%">&#160;</td>
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            <td width="73%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Order
              of Discontinuance dated January 6,
              2006.&#160;</font></td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SIGNATURES
      </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned hereunto
      duly authorized. </font></div>
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            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
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                Oil &amp; Gas, Inc.</font></div>
            </td>
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            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
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          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">Dated:
              January 12, 2006</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">By:&#160;&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: "><u>/s/
              James B.
              Wensveen&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
              </u></font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Chief
                Executive Officer</strong></font></div>
            </td>
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            <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
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{"company-data": {"conformed-name": "FORTUNE OIL & GAS INC", "cik": "0001119949", "assigned-sic": "1311", "irs-number": "000000000"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-51484", "film-number": "06525956"}, "business-address": {"street1": "305-1656 MARTIN DRIVE", "city": "WHITE ROCK", "state": "A1", "zip": "V4A-6E7", "phone": "(604) 531-0385"}, "mail-address": {"street1": "305-1656 MARTIN DRIVE", "city": "WHITE ROCK", "state": "A1", "zip": "V4A-6E7"}}
SECURITIES
      AND EXCHANGE COMMISSION
WASHINGTON,
      D.C. 20549
FORM
      8-K
CURRENT
      REPORT
Pursuant
      to Section 13 or 15(d) of the
Securities
      Exchange Act of 1934
Date
      of report (Date of earliest event reported): January 6,
      2006
FORTUNE
      OIL & GAS, INC.
(Exact
      name of registrant as specified in Charter)
Nevada
000-51484
88-0393369
(State
                or other jurisdiction
of
incorporation
                or organization)
(Commission
                File No.)
(IRS
                Employee Identification
                No.)
305-1676
      Martin Drive
White
      Rock, British Columbia
Canada,
      V4A 6E7
(Address
      of Principal Executive Offices)
604-531-0385
(Issuer
      Telephone number)
This
      Form
      8-K and other reports filed by Fortune Oil & Gas, Inc. (the "Registrant" or
      the "Company") from time to time with the Securities and Exchange Commission
      (collectively the "Filings") contain forward looking statements and information
      that are based upon beliefs of, and information currently available to, the
      Registrant's management as well as estimates and assumptions made by the
      Registrant's management. When used in the Filings the words "anticipate",
      "believe", "estimate", "expect", "future", "intend", "plan" or the negative
      if
      these terms and similar expressions as they relate to the Registrant or the
      Registrant's management identify forward looking statements. Such statements
      reflect the current view of the Registrant with respect to future events and
      are
      subject to risks, uncertainties, assumptions and other factors relating to
      the
      Registrant's industry, operations and results of operations and any businesses
      that may be acquired by the Registrant. Should one or more of these risks or
      uncertainties materialize, or should the underlying assumptions prove incorrect,
      actual results may differ significantly from those anticipated, believed,
      estimated, expected, intended or planned.
Item
8.01
Other
      Events
The
      Company and its subsidiaries Fortune Ship Management Ltd. and Indo-Pacific
      Resources (JAVA) Ltd. were named as defendants and counterclaimants in an action
      brought before the United States District Court for the Southern District of
      New
      York captioned
National
      Oil Well Maintenance Co. and Enterprise Trading Limited v. Fortune Oil and
      Gas,
      Inc., Fortune Ship Management Ltd. and Indo-Pacific Resources (JAVA)
      Ltd.
,
      Case No
      02 CV. 7666 (LBS).  The case was filed September 20, 2002. In this action,
      Plaintiffs
National
      Oil Well Maintenance ("NOWMCO") and Enterprise Trading Limited ("Enterprise")
sought
      to
      enforce promissory notes given by the Company in the approximate amount of
      $4,200,000 plus attorneys' fees and interest.  Plaintiffs also sought to
      retain possession of a storage tanker that had been repossessed by Plaintiffs
      from the Company.
On
      December 2, 2002 the Company counterclaimed against NOWMCO and Enterprise
      alleging breach of contract for remediation work on the Camar Field oil wells
      and fraudulent and negligent misrepresentation as to the qualifications and
      skills of NOWMCO and Enterprise. The counterclaim asked for damages plus
      attorneys' fees and interest.
On
      January 6, 2006, the parties to the litigation reached a settlement agreement
      (the "Settlement Agreement") which provides, among other things, that (i) the
      Company shall issue to Enterprise a promissory note in the principal amount
      of
      $2,860,000 (the "Note") and (ii) NOWMCO shall be obligated to offer and perform
      certain remediation services valued at $7,000,000, where such services when
      performed shall be charged at a 20% discount to NOWMCO's then retail price list
      for such services (the "Services").
The
      payment terms of the Note include payment of interest beginning one year after
      the issuance of the Note, and payment of principal in two equal installments
      on
      the second and third anniversaries of the issuance of the Note. The Company
      may
      prepay the Note. The Company's shares of its subsidiary, Indo-Pacific Resources
      (JAVA) Ltd. and the proceeds due to the Company under the Company's interest in
      the Bawean Production Sharing Contract, shall be held in trust as security
      for
      payments under the Note. Upon payment defaults, Enterprise shall have certain
      rights with respect to the shares and the proceeds as set forth in the
      Settlement Agreement. The foregoing summary of the Settlement Agreement is
      qualified in its entirety by reference to the attached Exhibit
      99.1.
Due
      to
      the Settlement Agreement, the case has been dismissed with prejudice and without
      costs to any party under the Order of Discontinuance dated January 6, 2006.
      Accordingly, the case will be closed. A copy of the Order of Discontinuance
      is
      attached as Exhibit 99.2 hereto.
Item
9.01
Financial
      Statements and Exhibits
(a)
Financial
                Statements of Businesses Acquired.
Not applicable
(b)
Pro Forma Financial
              Information
Not applicable.
(c)
Exhibits.
Number
Item
99.1
Settlement
              Agreement dated January 6, 2006.
99.2
Order
              of Discontinuance dated January 6,
              2006.
SIGNATURES
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned hereunto
      duly authorized.
Fortune
                Oil & Gas, Inc.
Dated:
              January 12, 2006
By:
/s/
              James B.
              Wensveen
Chief
                Executive Officer