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 EXCHANGE ACT OF 1934


                Date of report (Date of earliest event reported):
                                January 11, 2010

                           Blue Dolphin Energy Company

             (Exact name of registrant as specified in its charter)


          Delaware                     0-15905                  73-1268729
(State or Other Jurisdiction  (Commission File Number)         (IRS Employer
      of Incorporation)                                      Identification No.)

                          801 Travis Street, Suite 2100
                                Houston, TX 77002
              (Address of principal executive office and zip code)


                          (713) 568-4725
              (Registrant's telephone number, including area code)


                                (Not Applicable)
          (Former name or former address, if changed since last report)


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 (see General Instruction A.2 below):

[ ]  Written  communications  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 1.02         Termination of a Material Definitive Agreement.

         On July 31, 2009, Blue Dolphin Energy Company ("Blue Dolphin")  entered
into a Loan and Option Agreement (the "Agreement") with Lazarus Energy Holdings,
LLC, a Delaware limited  liability company ("LEH"),  Lazarus Louisiana  Refinery
II, LLC, a Delaware limited liability company ("LLRII"),  Lazarus Energy, LLC, a
Delaware limited liability company, and Lazarus  Environmental,  LLC, a Delaware
limited liability company (collectively referred to herein as "Lazarus").

         Under terms of the Agreement,  Blue Dolphin loaned  $2,000,000 to LLRII
and was granted an option (the  "Option")  to acquire  certain  assets  owned by
Lazarus in exchange for 47,141,196  shares of its common stock. Blue Dolphin and
Lazarus  have been unable to agree to terms of a  definitive  purchase  and sale
agreement  pursuant to which the Lazarus assets would have been acquired and the
Option has terminated.


































                                    SIGNATURE

         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.

Date:    January 11, 2010

                                                   Blue Dolphin Energy Company

                                                   /s/ THOMAS W. HEATH
                                                   -----------------------------
                                                   Thomas W. Heath
                                                   President