Like all E38 7-series, the fuel filter is located on the passenger-side (right side) UNDER the car, approximately in line with the front passenger seat. There should be a plastic protective cover that is held with several hex screws. This cover starts from the rear of the front wheel well to about where the B-pillar is.
Once the cover is removed, there is a silver cylinder. On the 1998, there should be a fuel hose connected to each end of the cylinder.
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