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 13, 2004 (September 30, 2004)


                           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 8.01         OTHER EVENTS.

         As previously reported, the Company and its partner have been marketing
and  attempting  to sell their  interests  in New Avoca Gas  Storage,  LLC ("New
Avoca").  The Company has a 25% equity  interest  in, and is the manager of, New
Avoca. As of June 30, 2004, the Company's carrying value of its' interest in New
Avoca was approximately $.6 million. New Avoca was formed to complete the design
and to develop a natural gas storage facility.

         On  September  30,  2004,  the Company and its partner  entered  into a
non-binding  letter of intent to sell New Avoca.  The Company expects to receive
net proceeds from this transaction at closing of approximately $.9 million,  and
a possible future contingent  payment of approximately  $.4 million,  subject to
the occurrence of certain  future events.  The purchase price is also subject to
adjustment  based upon  changes in the working  capital,  inventories  and other
assets at the time of closing.  This transaction,  which is expected to close by
November 1, 2004, is subject to the buyer's completion of its due diligence, the
negotiation  and  execution  of  a  definitive  agreement  and  other  customary
conditions to closing.

ITEM 9.01         FINANCIAL STATEMENTS AND EXHIBITS

                  (c)      Exhibits - none.














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  13, 2004.

                                                     BLUE DOLPHIN ENERGY COMPANY


                                                      /s/ G. Brian Lloyd
                                                     ---------------------------
                                                     By:  G. Brian Lloyd
                                                     Vice President, Treasurer