UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 8-K


                                 CURRENT REPORT


                       PURSUANT TO SECTION 13 OR 15(D) OF
                     THE SECURITIES AND EXCHANGE ACT OF 1934

               Date of Report: (Date of earliest event reported):
                       October 31, 2005 (October 27, 2005)


                           Blue Dolphin Energy Company
             (Exact name of registrant as specified in its charter)



        Delaware                       0-15905                   73-1268729
(State of Incorporation)        (Commission file Number)       (IRS Employer 
                                                             Identification No.)

                             801 Travis, Suite 2100
                              Houston, Texas 77002
              (Address of Registrant's principal executive offices)

                                 (713) 227-7660
              (Registrant's telephone number, including area code)



Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions:

|_|  Written communication pursuant to Rule 425 under the Securities Act (17 CFR
     230.425)

|_|  Soliciting  material pursuant to rule 14a-12 under the Exchange Act (17 CFR
     240.14a-12)

|_|  Pre-commencement   communications  pursuant  to  Rule  14d-2(b)  under  the
     Exchange Act (17 CFR 240.14d-2(b))

|_|  Pre-commencement   communications  pursuant  to  Rule  13e-4(c)  under  the
     Exchange Act (17 CFR 240.13e-4(c))





ITEM 4.02  NON-RELIANCE ON PREVIOUSLY  ISSUED FINANCIAL  STATEMENTS OR A RELATED
           AUDIT REPORT OR COMPLETED INTERIM REVIEW.

On October 31, 2005,  Blue Dolphin Energy Company,  Inc. a Delaware  corporation
(the "Company") issued a press release  announcing that on October 27, 2005, the
management of the Company,  in consultation  with members of its Audit Committee
and UHY Mann Frankfort Stein & Lipp CPAs, LLP ("UHY"), the Company's independent
registered  public  accounting  firm,  concluded  that the Company's  previously
issued financial  statements for the quarterly  periods ended March 31, 2005 and
June 30,  2005  should  no  longer  be  relied  upon  because  of errors in such
financial statements. The underlying errors relate to the Company's treatment of
the "cashless"  exercise of compensatory  stock options by certain directors and
employees of the Company. The Company expects to file an amended Form 10-QSB for
each of the first and second quarters of 2005 by November 15, 2005.

During  the first and  second  quarters  of 2005,  pursuant  to the terms of the
Company's 2000 Stock  Incentive  Plan,  certain option holders were permitted to
make  "cashless"  exercises of stock options.  Upon a "cashless"  exercise of an
option,  shares of  common  stock  having a fair  market  value,  at the time of
exercise,  equal to the exercise price are withheld to pay the exercise price of
the options exercised.

The Company  accounts  for  stock-based  compensation  as fixed awards under the
Intrinsic Value Method as prescribed by Accounting  Principles Board Opinion No.
25  "Accounting  for Stock Issued to Employees"  ("APB No. 25"). The Company has
concluded,  after consultation with UHY, that options exercised in the first and
second quarters of 2005 using the "cashless"  exercise  method require  variable
accounting  treatment under Financial  Accounting Standards Board Interpretation
No. 44 "Accounting for Certain  Transactions  involving Stock  Compensation - An
Interpretation  of APB  Opinion  No.  25"  ("FIN  44").  Under  APB  No.  25 the
compensation expense associated with option grants that receive fixed accounting
treatment is measured at the grant date. When variable  accounting  treatment is
applied,  compensation expense is measured again and recognized at periods after
the initial measurement date.

Accordingly,  the Company  will be amending  its Forms  10-QSB for the first and
second quarters of 2005 to recognize  non-cash  compensation  expense related to
the exercise of stock options using the  "cashless"  method.  For the six months
ended June 30, 2005, the Company will recognize additional  compensation expense
of approximately $686,000, or $0.09 per share.  Recognition of this expense will
increase Additional Paid in Capital by an equivalent amount. The Company expects
the  additional  compensation  expense  to  increase  the net loss for the first
quarter by approximately  $533,000, or $0.07 per share.  Additional compensation
expense recognized in the second quarter of 2005 will be approximately $153,000,
or $0.02 per share.  There will be no liability to the Company  recognized  as a
result of this additional  expense.  The Company  believes it has identified all
the  adjustments  necessary,   however,  the  accounting  analysis  is  ongoing.
Therefore,  the final financial  results may be different from that indicated in
this report.

The full text of the press  release is  attached  hereto as Exhibit  99.1 and is
incorporated herein by reference.




ITEM 8.01         OTHER EVENTS.

In the October 31, 2005 press  release,  the Company also  announced that it had
received cash payments  totaling  $1,383,247  for  production  from July 1, 2004
through June 2005 for its after-payout working interest in High Island Block 37.
There are two wells  that are  currently  producing  in this block at a combined
rate of  approximately  25 MMcf per day.  The Company has a working  interest of
approximately 2.7% in the wells.

Additionally,  production  from the  Company's  working  interest in High Island
Block A-7 has increased significantly following the successful  re-completion of
two wells in  August  2005.  However,  the  wells in High  Island  Block A-7 are
currently shut-in awaiting the resumption of 3rd party  transportation  services
following Hurricane Rita.

A copy of the press release is filed as Exhibit 99.1 hereto and is  incorporated
herein by reference.


ITEM 9.01         FINANCIAL STATEMENTS AND EXHIBITS.

(c)      Exhibits

         99.1     Press Release issued October 31, 2005.


SIGNATURE



         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

Date:   October 31, 2005.

                                                     BLUE DOLPHIN ENERGY COMPANY


                                                      /s/ Gregory W. Starks     
                                                     ---------------------------
                                                     By: Gregory W. Starks
                                                         Treasurer









                                INDEX TO EXHIBITS


Exhibit           Description of Exhibit

99.1              Press Release issued October 31, 2005.