8-K

                                  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.

EX-99.1

                                  EXHIBIT 99.1

                                  NEWS RELEASE
                                  ------------


FOR IMMEDIATE RELEASE                                           October 31, 2005


Houston, Texas - Blue Dolphin Energy Company (NASDAQ Symbol: BDCO)

BLUE DOLPHIN ENERGY ANNOUNCES RESTATEMENT OF FIRST AND SECOND QUARTER FINANCIALS
AND OTHER SIGNIFICANT EVENTS

Blue Dolphin Energy Company,  Inc., a Delaware  corporation (the "Company") will
be filing  amendments  to its Forms 10-QSB for the first and second  quarters of
2005 to recognize non-cash compensation expense pursuant to Financial Accounting
Standards  Board  Interpretation  No. 44  "Accounting  for Certain  Transactions
involving  Stock  Compensation - An  Interpretation  of APB Opinion No. 25." The
Company's previously issued financial statements for the quarterly periods ended
March 31, 2005 and June 30,  2005 should no longer be relied on because  they do
not reflect such non-cash compensation expense.

The Company expects to recognize  additional non-cash  compensation  expense for
the six months ended June 30, 2005 of $686,000, or $0.09 per share.  Recognition
of this  expense  will  increase  Additional  Paid in Capital  by an  equivalent
amount. There will be no liability to the Company recognized as a result of this
additional  expense.  The Company expects the additional  non-cash  compensation
expense to increase the net loss for the first quarter of 2005 by  approximately
$533,000,   or  $0.07  per  share.   Additional  non-cash  compensation  expense
recognized  in the  second  quarter  of 2005  is  expected  to be  approximately
$153,000, or $0.02 per share.

The  Company  also  announces  that  it  has  received  cash  payments  totaling
$1,383,247  for  production  from  July 1,  2004  through  June  2005  from  its
after-payout  working  interest  in High  Island  Block 37.  There are two wells
currently producing in the 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. These wells are currently shut-in awaiting the
resumption of 3rd party transportation services.




Blue Dolphin  Energy Company is engaged in the gathering and  transportation  of
natural gas and condensate.  Questions  should be directed to Gregory W. Starks,
at  the  Company's  offices  in  Houston,  Texas,   713-227-7660.   For  further
information see our Home Page at http://www.blue-dolphin.com.

Certain of the  statements  included  in this  press  release,  which  express a
belief, expectation or intention, are "forward-looking"  statements as that term
is  defined  in the  Securities  Act of 1933,  as  amended,  and the  Securities
Exchange  Act of 1934,  as  amended.  The  words  "expect,"  "plan,"  "believe,"
"anticipate,"  "project,"  "estimate,"  and similar  expressions are intended to
identify forward-looking  statements.  These forward-looking  statements are not
guarantees of future  performance or events and such statements involve a number
of risks, uncertainties and assumptions,  general economic conditions,  interest
rates,  and other  factors.  Should one or more of these risks or  uncertainties
materialize or should the underlying assumptions prove incorrect, actual results
and outcomes may differ  materially from those indicated in the  forward-looking
statements.  Readers  are  cautioned  not  to  place  undue  reliance  on  these
forward-looking statements,  which speak only as of the date hereof. The Company
undertakes  no  obligation to republish  revised  forward-looking  statements to
reflect  events  or  circumstances  after  the date  hereof  or to  reflect  the
occurrence of unanticipated events.