BLUE DOLPHIN ENERGY COMPANY
                             801 Travis, Suite 2100
                              Houston, Texas 77002


                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                             To Be Held May 21, 2003

To the Stockholders of
Blue Dolphin Energy Company:

         You are cordially  invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Blue Dolphin Energy Company (the "Company") to be held
in Houston,  Texas, on Wednesday,  May 21, 2003, at 10:00 a.m., Houston time, at
the Company's  principal  executive offices,  801 Travis,  Suite 2100,  Houston,
Texas, for the following purposes:

1.       To elect  four  directors  to serve  until the next  annual  meeting of
         stockholders or until their  successors are duly elected and qualified,
         or until their earlier resignation or removal;

2.       To amend the Company's 2000 Stock Incentive Plan to increase the number
         of shares of Common Stock that can be issued pursuant to the plan; and

3.       To transact such other  business as may properly come before the Annual
         Meeting, and any adjournment or postponement thereof.

Stockholders  of record at the close of business on April 21, 2003, are entitled
to  notice  of,  and to vote at,  the  Annual  Meeting  and any  adjournment  or
postponement thereof.

         Your vote is important.  Since many stockholders are not able to attend
the Annual Meeting,  we have enclosed a proxy card for your use. You may vote on
the matters to be acted upon at the Annual  Meeting by completing  and returning
the proxy card promptly in the enclosed stamped return envelope.

                                    For the Board of Directors


                                    /s/ Michael J. Jacobson
                                    -----------------------
                                    MICHAEL J. JACOBSON,
                                    President and Chief Executive Officer

Houston, Texas
April 16, 2003

WHETHER OR NOT YOU PLAN TO ATTEND  THE ANNUAL  MEETING,  YOU ARE  ENCOURAGED  TO
INDICATE YOUR VOTE AS TO THE MATTERS TO BE ACTED UPON ON THE ENCLOSED PROXY CARD
AND RETURN THE PROXY CARD PROMPTLY.  IF YOU ATTEND THE ANNUAL  MEETING,  YOU MAY
CHANGE YOUR VOTE AT THAT TIME.




                           BLUE DOLPHIN ENERGY COMPANY
                             801 Travis, Suite 2100
                              Houston, Texas 77002

                                 PROXY STATEMENT



                         ANNUAL MEETING OF STOCKHOLDERS
                                  May 21, 2003



         This  Proxy  Statement  is  being  furnished  to  the  stockholders  in
connection  with the  solicitation  of proxies by the Board of Directors of Blue
Dolphin Energy Company, a Delaware corporation (the "Company"),  from holders of
the Company's common stock, $.01 par value per share ("Common  Stock"),  for use
at the 2003 Annual Meeting of  Stockholders  and any adjournment or postponement
thereof (such meeting and any adjournment or postponement thereof is referred to
herein as the "Annual  Meeting").  The Annual Meeting is to be held on Wednesday
May 21, 2003, at 10:00 a.m., Houston time, at the Company's  principal executive
offices, 801 Travis, Suite 2100, Houston, Texas.

         This Proxy  Statement,  the  accompanying  notice and form of proxy are
first  being  mailed to  stockholders  on or about April 21, 2003 along with the
Annual Report to Stockholders for the year ended December 31, 2002.

         The Company will bear all costs of this  solicitation.  Proxies will be
solicited primarily by mail, but directors,  officers and other employees of the
Company  may also  solicit  proxies in person or by  telephone  in the  ordinary
course of  business  for which they will not be  compensated.  The  Company  has
requested that brokerage houses, nominees, fiduciaries and other custodians send
proxy  materials to the  beneficial  owners of the Common  Stock,  for which the
Company will reimburse them for their reasonable out-of-pocket expenses.

                                     VOTING

         At the Annual Meeting,  stockholders  will be asked (i) to consider and
vote upon the  election of four  nominees to serve on the Board of  Directors of
the Company (ii) to consider and vote upon an  amendment to the  Company's  2000
Stock Incentive Plan (the "Incentive  Plan")  increasing the number of shares of
Common  Stock that can be issued  pursuant  to the  Incentive  Plan and (iii) to
consider and take action upon such other matters as may properly come before the
Annual Meeting.

         All  shares  of Common  Stock  represented  at the  Annual  Meeting  by
properly  executed  proxies will be voted in  accordance  with the  instructions
indicated on the proxies.  If no instructions  are indicated with respect to any
shares for which properly executed proxies have been received, such proxies will
be voted "FOR"  election of all  nominees  to the Board of  Directors  and "FOR"
approval of the amendment to the Incentive Plan to increase the number of shares
of Common Stock that can be issued  pursuant to the Incentive Plan. The Board of
Directors of the Company does not know of any other matter to be brought  before
the Annual  Meeting.  If any other  matter is properly  presented  at the Annual
Meeting for action,  the persons named in the proxies and acting thereunder will
have discretion to vote on such matter.


                                       1


         Any proxy  given  pursuant to this  solicitation  may be revoked by the
person  giving it at any time before it is voted.  Proxies may be revoked by any
of the following actions:

         o        by providing written notice of revocation to the Company;

         o        delivering to the Company a signed proxy of a later date; or

         o        by voting in person at the Annual Meeting.

         Any written notice  revoking a proxy should be sent to the Secretary of
the Company at the Company's  principal  executive  offices,  801 Travis,  Suite
2100, Houston, Texas 77002.

         The Board of  Directors  has fixed the close of  business  on April 21,
2003,  as  the  record  date  (the  "Record  Date")  for  the  determination  of
stockholders  entitled  to notice  of, and to vote at,  the  Annual  Meeting.  A
complete  list of  stockholders  entitled to vote at the Annual  Meeting will be
open for  examination  by any  stockholder  during normal  business  hours for a
period  of ten days  prior to the  Annual  Meeting  at the  Company's  principal
executive  offices,  801 Travis,  Suite 2100,  Houston,  Texas.  At the close of
business on April 11, 2003,  there were  outstanding  6,635,157 shares of Common
Stock.  Stockholders will be entitled to one vote per share of Common Stock held
of record on the Record Date on each matter presented at the Annual Meeting. The
holders  of  a  majority  of  the  total  shares  of  Common  Stock  issued  and
outstanding,   whether  present  in  person  or  represented  by  proxies,  will
constitute  a quorum for the  transaction  of  business  at the Annual  Meeting.
Abstentions and broker non-votes (i.e. shares held by brokers and other nominees
as to which  they have not  received  voting  instructions  from the  beneficial
owners and lack the discretionary  authority to vote on a particular matter) are
counted as present for purposes of determining whether a quorum is present.

                      Proposal No. 1 ELECTION OF DIRECTORS

         The members of the Board of Directors serve one-year terms. A plurality
of the votes cast by the stockholders present and entitled to vote at the Annual
Meeting,  in person or by proxy,  is necessary  for the  election of  directors.
Accordingly,  abstentions  and  broker  non-votes  will  have no  effect  on the
election of directors.

Nominees

         Messrs.  Michael S.  Chadwick,  Harris A. Kaffie,  James M. Trimble and
Ivar  Siem  (each a  "Nominee"  and  collectively,  the  "Nominees")  have  been
nominated by the Board of Directors to serve as directors  until the next annual
meeting of stockholders,  or in each case, until their successors have been duly
elected and  qualified,  or until their  earlier  resignation  or removal.  Each
Nominee is  currently a director of the  Company  and have all  previously  been
elected by the stockholders,  except for Mr. Trimble. Each Nominee has consented
to be nominated and has  expressed his intention to serve if elected.  The Board
of Directors has no reason to believe that any of the Nominees will be unable or
unwilling  to serve if elected.  However,  should any Nominee  become  unable or
unwilling to serve as a director at the time of the Annual  Meeting,  the person
or persons  exercising  the proxies  will vote for the  election of a substitute
nominee designated by the Board of Directors. Robert D. Wagner, Jr. notified the
Company that he will not seek reelection to the Board of Directors.


                                       2


         THE BOARD OF DIRECTORS  RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES.

                   Nominees, Directors and Executive Officers
                   ------------------------------------------

         The following table provides  certain  information  with respect to the
Nominees, directors and the executive officers of the Company.

                                                                       Position
         Name                      Age   Position                     Held Since
         ----                      ---   --------                     ----------
         Ivar Siem                 56    Chairman of the Board,          1989
                                         and Director
         Michael S. Chadwick       51    Director                        1992
         Harris A. Kaffie          53    Director                        1989
         James M. Trimble          54    Director                        2002
         Robert D. Wagner, Jr.     61    Director                        2001
         Michael J. Jacobson       56    President and Chief             1990
                                         Executive Officer
         John P. Atwood            51    Vice President                  1998
         G. Brian Lloyd            44    Vice President, Treasurer       1989
                                         and Secretary

         The following is a brief  description  of the  background and principal
occupation of each Nominee, director and executive officer:

         Ivar Siem - Chairman of the Board of Directors - Since  September 2000,
Mr.  Siem has  served  as  Chairman  and  President  of  Drillmar,  Inc.  a well
construction and intervention company. From 1995 to 2000, Mr. Siem served on the
Board of Directors of Grey Wolf,  Inc.,  during which time he served as Chairman
from 1995 to 1998 and interim President (1995) during its  restructuring.  Since
1985, he has been an international consultant in energy, technology and finance.
He has served as a Director  of Business  Development  for  Norwegian  Petroleum
Consultants and as an independent  consultant to the oil and gas exploration and
production  industry  based in London,  England.  Mr.  Siem holds a Bachelor  of
Science  Degree in Mechanical  Engineering  from the  University of  California,
Berkeley,  and has  completed  an  executive  MBA program at Amos Tuck School of
Business,  Dartmouth University.  Mr. Siem has served as Chairman of the Company
since December 1989.


                                       3


         Michael S.  Chadwick - Director - Mr.  Chadwick has been engaged in the
commercial and investment  banking businesses since 1975. From 1988 to 1994, Mr.
Chadwick  was  President  of Chadwick,  Chambers &  Associates,  Inc., a private
merchant  and  investment  banking firm in Houston,  Texas,  which he founded in
1988. In 1994, Mr. Chadwick joined Sanders Morris Harris, an investment  banking
and financial advisory firm, as Senior Vice President and a Managing Director in
the Corporate Finance Group, a position he continues to hold today. He currently
serves as a  Director  of  Landry's  Restaurants,  Inc.  and Home  Solutions  of
America,  as well as numerous  privately held  companies.  Mr.  Chadwick holds a
Bachelor of Arts Degree in Economics  from the University of Texas at Austin and
a Master of Business  Administration  Degree from Southern Methodist University.
Mr. Chadwick has served as a director of the Company since 1992.

         Harris  A.  Kaffie -  Director  - Mr.  Kaffie  is a  partner  in Kaffie
Brothers, a real estate,  farming and ranching partnership.  He currently serves
as a Director of KBK Capital  Corporation,  Drillmar,  Inc.,  and CCNG,  Inc., a
privately  held company with interests in natural gas related  assets,  oilfield
services,  and real  estate  development.  Mr.  Kaffie  received a  Bachelor  of
Business  Administration  Degree from Southern Methodist University in 1972. Mr.
Kaffie has served as a director of the Company since 1989.

         James M. Trimble - Director - Mr. Trimble has been President and CEO of
Tri-Union  Development  Corporation  since  July 2002.  Previously  he served as
President of Elysium Energy,  L.L.C.,  from July 2000 until the  contribution of
its  properties  to a public oil and gas  company  in  November  2001.  Prior to
Elysium,  Mr. Trimble served at Cabot Oil & Gas Corporation from May 1983 to May
2000 in several managerial and senior level executive positions.  Before joining
Cabot, Mr. Trimble served as President of Volvo Petroleum, Inc. a Houston based,
private  domestic and  international  exploration  and production  company.  Mr.
Trimble  graduated  from  Mississippi  State  University  where  he  majored  in
Petroleum  Engineering for undergraduate  and graduate studies.  Mr. Trimble has
served as a director of the Company since 2002. Robert D. Wagner, Jr. - Director
- Mr.  Wagner was the  Managing  Director  of Arthur  Andersen's  Global  Energy
Corporate  Finance Group from 1999 through  April 2001.  He  previously  was the
Managing  Director of Energy Corporate  Finance for Bankers Trust/BT Alex. Brown
and Bear Stearns and was an Executive Vice  President of First City Houston.  He
is a past President and Director of the Petroleum Club of Houston.  He is also a
Director of Comfort  Systems  USA and  Electric  City  Corporation.  Mr.  Wagner
received a Bachelor  of Arts degree in History  from Holy Cross  College in 1963
and a  Master  of  Business  Administration  degree  in  Finance  from  New York
University  in 1971.  Mr.  Wagner has served as a director of the Company  since
2001 and will not be seeking reelection at the Annual Meeting.

         Michael  J.  Jacobson -  President  and Chief  Executive  Officer - Mr.
Jacobson has been  associated  with the energy  industry since 1968,  serving in
various  senior  management  capacities  since  1980.  He served as Senior  Vice
President   and  Chief   Financial   and   Administrative   Officer  for  Creole
International,   Inc.  and  it's   subsidiaries,   international   providers  of
engineering  and  technical  services  to the  energy  sector,  as  well as Vice
President of Operations for the parent holding company,  from 1985 until joining
the  Company in January  1990.  He has also served as Vice  President  and Chief
Financial Officer of Volvo Petroleum,  Inc., and for certain Fred. Olsen oil and
gas interests.  Mr.  Jacobson began his career with Shell Oil Company,  where he
served in various  analytical and management  capacities in the  exploration and
production  organization during the period 1968 through 1974. Mr. Jacobson holds
a Bachelor of Science  Degree in Finance from the  University  of Colorado.  Mr.
Jacobson  has served as  President  and Chief  Executive  Officer of the Company
since January 1990.

         John P. Atwood - Vice President,  Business Development - Mr. Atwood has
been  associated  with the  energy  industry  since  1974,  serving  in  various
management capacities since 1981. He served as Senior Vice President of Land and
Administration  for Glickenhaus  Energy from 1987 to 1991, Area Land Manager for
CSX Oil & Gas  Corporation  and Division Land Manager for Hamilton  Brothers Oil
Company/Volvo  Petroleum,  Inc. He served in various land capacities for Tenneco

                                       4


Oil Company from 1977 to 1981.  Mr. Atwood is a Certified  Professional  Landman
and holds a Bachelor of Arts Degree from Oklahoma City  University  and a Master
of Business  Administration  Degree from Houston Baptist University.  Mr. Atwood
served  as Vice  President  of Land of the  Company  from  1991 to 1998 and Vice
President of Finance and Corporate  Development  until his  appointment  as Vice
President of Business Development in 2001.

         G. Brian Lloyd - Vice President, Treasurer and Secretary - Mr. Lloyd is
a  Certified  Public  Accountant  and has been  employed  by the  Company  since
December 1985. Prior to joining the Company, he was an accountant for DeNovo Oil
and Gas Inc., an independent oil and gas company.  Mr. Lloyd received a Bachelor
of Science  Degree in Finance from Miami  University,  Oxford,  Ohio in 1982 and
attended  the  University  of Houston in 1983 and 1984.  Mr. Lloyd has served as
Secretary and Treasurer of the Company since 1989 and Vice President since March
1998.

         There are no family  relationships  between any Nominee,  director,  or
executive officer.

               COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

         During 2002, the Board of Directors of the Company held seven meetings.
Each director attended at least 75% of the total number of meetings of the Board
of Directors and committees on which he served.

         At the beginning of 2002, the Audit Committee consisted of Mr. Robert L
Barbanell and Messrs. Wagner and Chadwick.  After Mr. Barbanell's resignation in
February  2002, Mr. Wagner was elected as Chairman of the Audit  Committee.  The
Audit Committee's  duties include overseeing the Company's  financial  reporting
and internal  control  functions.  The Audit Committee met four times during the
last fiscal year.

         At the  beginning of 2002,  the  Compensation  Committee,  consisted of
Messrs.  Siem, Kaffie,  and Barbanell.  Mr. Barbanell resigned in February 2002.
The  Compensation  Committee's  duties  are to  oversee  and set  the  Company's
compensation  policy and to administer its stock option plans.  The Compensation
Committee met once during the last fiscal year.

         The Company does not have a nominating committee.  However, pursuant to
the Company's Certificate of Incorporation, stockholder nominations for election
to the Board of Directors  must be received by the Company  before  February 20,
2004 for the 2004 Annual Meeting. See "Nominations and Proposals by Stockholders
for the 2004 Annual Meeting."

                          REPORT OF THE AUDIT COMMITTEE

The  duties  and  responsibilities  of the  Audit  Committee  are set forth in a
written  charter  adopted by the Board of Directors.  The Audit Committee of the
Board of Directors  consists entirely of directors who meet the independence and
experience requirements of Nasdaq Stock Market, Inc., as determined by the Board
of Directors.  The Audit Committee  reviews and reassesses the charter  annually
and  recommends  any changes to the Board of Directors for  approval.  The Audit
Committee has reviewed the relevant  requirements of the  Sarbanes-Oxley  Act of
2002, the rules, proposed and adopted, of the Securities and Exchange Commission
and the proposed new listing  standards of the Nasdaq Small-cap Market regarding
audit committee procedures and responsibilities.  Although the Audit Committee's


                                       5


existing   procedures   and   responsibilities   generally   complied  with  the
requirements  of these rules and  standards,  the Board of Directors has adopted
amendments to the Audit Committee's charter to voluntarily  implement certain of
the rules and to make  explicit  its  adherence  to others.  A copy of the Audit
Committee's  amended and restated charter is attached to this Proxy Statement as
Appendix A.

         The Audit Committee's primary duties and responsibilities are to:

         o        assess the  integrity  of the  Company's  financial  reporting
                  process and systems of internal control regarding accounting;

         o        assess  the  independence  and  performance  of the  Company's
                  outside auditors; and

         o        provide an avenue of communication among the outside auditors,
                  management and the Board of Directors.

         Management is responsible for the Company's  internal  controls and the
financial reporting process. The outside auditors are responsible for performing
an  independent  audit of the  Company's  consolidated  financial  statements in
accordance with auditing  standards  generally  accepted in the United States of
America and to issue a report thereon.  The Audit Committee's  responsibility is
to monitor and oversee these processes.

         The Audit Committee held four meetings during fiscal 2002.

         The Audit Committee, comprised of Messers. Chadwick and Wagner reviewed
and  discussed  the audited  financial  statements of the Company for the fiscal
year ended  December  31,  2002 with the  Company's  management  and  management
represented to the Audit Committee that the Company's financial  statements were
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America.  The Audit Committee discussed with Mann Frankfort the
matters required to be discussed by Statement on Auditing  Standards No. 61, and
related amendments (Communication with Audit Committees).

         The Audit  Committee  received the written  disclosures  and the letter
from Mann  Frankfort  required by  Independence  Standards  Board Standard No. 1
(Independence  Discussion  with  Audit  Committees),  and  the  Audit  Committee
discussed with Mann Frankfort  their  independence  from the Company.  The Audit
Committee  considered  the  non-audit  services  provided by Mann  Frankfort and
determined  that the services  provided are  compatible  with  maintaining  Mann
Frankfort's independence.

The fees paid to Mann Frankfort in calendar year 2002 are as follows:

Audit Fees ......................................................       $105,699
Financial Information System Design and Implementation Fees                 --
All other Fees ..................................................         38,500
                                                                        --------

Total ...........................................................       $144,199
                                                                        ========

The estimated  audit fees to be paid to Mann Frankfort in calendar year 2003 are
$70,000.


                                       6


         Based on the Audit  Committee's  discussions  with  management and Mann
Frankfort,  and the Audit Committee's review of the representation of management
and the report of Mann  Frankfort to the Audit  Committee,  the Audit  Committee
recommended  to the Board of  Directors  that the  Company's  audited  financial
statements  be included in the  Company's  Annual  Report on Form 10-KSB for the
fiscal year ended  December 31, 2002 for filing with the Securities and Exchange
Commission.
The Audit Committee
Robert D. Wagner, Jr., Chairman
Michael S. Chadwick

                            COMPENSATION OF DIRECTORS

         In fiscal 2002, the Company paid to  non-employee  members of the Board
of  Directors  an annual  retainer  of  $12,000,  payable 50% in cash and 50% in
Common Stock. The Audit Committee chairman receives an annual retainer of $3,000
and other Audit  Committee  members  receive an annual  retainer  of $1,500.  In
addition,  each director  received stock options to acquire an aggregate  market
value of $20,000 of the underlying shares. No additional remuneration is paid to
directors for committee meetings attended, except that directors are entitled to
be reimbursed for expenses related to attendance of board or committee meetings.

                             EXECUTIVE COMPENSATION

         The  following  table  sets  forth the  compensation  paid to the Chief
Executive Officer and each of the executive officers of the Company whose annual
salary  exceeded  $100,000 in fiscal 2002  (collectively,  the "Named  Executive
Officers") for services rendered to the Company.






























                                       7


                           SUMMARY COMPENSATION TABLE*


                                                            Long-Term
                                                          Compensation
                                                              Awards
                                                         ---------------
          Name and                 Annual Compensation     Securities
                                   -------------------     Underlying
   Principal Position       Year   Salary (1)    Bonus   Options (#) (2)
-------------------------   ----   ----------    -----   ---------------

Ivar Siem                   2002   $ 80,000       --         10,000
    Chairman of the Board   2001   $150,000       --           --
                            2000   $150,000       --          8,000

Michael J. Jacobson         2002   $125,000       --         10,000
    President and Chief     2001   $200,000       --           --
    Executive Officer       2000   $200,000       --          6,000
John P. Atwood
    Vice President -        2002   $ 90,000       --         10,000
    Business                2001   $137,500       --           --
    Development             2000   $124,167       --          4,000

G. Brian Lloyd              2002   $105,000       --         10,000
    Vice President -        2001   $103,083       --           --
    Treasurer               2000   $ 99,422      --          3,000





* Excludes certain personal benefits, the aggregate value of which do not exceed
10% of the Annual Compensation shown for each person.

(1) Effective January 1, 2002, as part of the Company's cost reduction  program,
    the annual  salaries of Messers  Siem,  Jacobson  and Atwood were reduced to
    $80,000, $125,000 and $80,000, respectively.  Effective October 1, 2002, Mr.
    Atwood's annual salary was increased to $120,000.

(2) In fiscal year 2001 no options were granted to the named Executive Officers.








                                       8


                        OPTION GRANTS IN LAST FISCAL YEAR

                                      Percent of
                                         Total
                       Number of        Options
                       Securities     Granted to
                       Underlying      Employees       Exercise of
                        Options        In Fiscal       Base Price*    Expiration
Name                    Granted           Year            ($/Sh)         Date
----                  ------------  ----------------  -------------  -----------

Ivar Siem               10,000               14%          $1.55       3/25/2012

Michael J. Jacobson     10,000               14%          $1.55       3/25/2012

John P. Atwood          10,000               14%          $1.55       3/25/2012

G. Brian Lloyd          10,000               14%          $1.55       3/25/2012

(*) The per share market  price,  as reported by the Nasdaq  Smallcap  Market on
March 26, 2002, the date of grant, was $1.55.


    AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES



                                                                                                  Value of Unexercised
                                                                 Number of Unexercised            In-the-Money Options
                                                                  Options at Year End                at Year End (*)
                        Shares Acquired        Value       --------------------------------   ------------------------------
Name                    on Exercise (#)      Relalized      Exercisable      Unexercisable     Exercisable    Unexercisable
----                  --------------------  -------------  -------------    ---------------   -------------  ---------------
                                                                                           
Ivar Siem                      --              $   --          22,000            4,000           $   --         $    --


Michael J. Jacobson            --              $   --          20,000            4,000           $   --         $    --


John P. Atwood                 --              $   --          16,666            2,667           $   --         $    --


G. Brian Lloyd                 --              $   --          14,666            1,667           $   --         $    --




(*) Based on the  difference  between  the  average of the  closing  bid and ask
    prices on December 31, 2002 (the last trading day of 2002),  which  exceeded
    the exercise price.





                                       9


         The Company's  stock option plans provide that upon a change of control
the Compensation Committee may accelerate the vesting of options, cancel options
and make payments in respect thereof in cash in accordance with the terms of the
stock option plans,  adjust the  outstanding  options as  appropriate to reflect
such  change of  control,  or  provide  that each  option  shall  thereafter  be
exercisable for the number and class of securities or property that the optionee
would have been  entitled to receive had the option  been  exercised.  The stock
option plans  provide that a change of control  occurs if any person,  entity or
group acquires or gains ownership or control of more than 50% of the outstanding
Common Stock or, if after certain enumerated transactions,  the persons who were
directors before such  transactions  cease to constitute a majority of the Board
of Directors.

Security Ownership of Certain Beneficial Owners and Management

         The  following  table  sets  forth,  as  of  April  11,  2003,  certain
information  with respect to the beneficial  ownership of shares of Common Stock
(the Company's only class of voting security  issued and  outstanding) as to (i)
all persons  known by the Company to be  beneficial  owners of 5% or more of the
outstanding  shares of Common Stock, (ii) each director and Nominee,  (iii) each
Named  Executive  Officer and (iv) all executive  officers and  directors,  as a
group. Unless otherwise indicated, each of the following persons has sole voting
and dispositive power with respect to such shares.

                                               Shares Owned Beneficially
            Name of                      ---------------------------------------
        Beneficial Owner                       Number           Percent (1)
----------------------------------       ---------------------------------------

Colombus Petroleum
   Limited, Inc. (2)                           911,712             13.0
Ivar Siem (3)                                  935,207             13.3
Harris A. Kaffie (3)                           801,737             11.4
Michael S. Chadwick (3)                        107,365              1.5
Robert D. Wagner, Jr. (3)                       96,185              1.4
James M. Trimble (3)                            64,785              1.0
Michael J. Jacobson (3)                        174,060              2.5
John P. Atwood (3)                              55,346                *
G. Brian Lloyd (3)                              49,921                *
Executive Officers and
   Directors, as a Group
(8 persons) (3)                              2,284,606             32.6

----------------------------------
*        Less than 1%

(1) Based upon 6,635,157 shares of Common Stock outstanding on April 11, 2003.

(2) Based on a Schedule 13D filed with the Securities and Exchange Commission on
    February 1, 1999.  The  address of  Colombus  Petroleum  Limited,  Inc.,  is
    Aeulestrasse 74, FL-9490, Vaduz, Liechtenstein.



                                       10


(3) Includes  shares of Common Stock  issuable upon exercise of options that may
    be  exercised  within 60 days of February  18,  2003 as follows:  Mr. Siem -
    22,000; Mr. Kaffie - 85,238; Mr. Chadwick - 84,071; Mr. Wagner - 80,571; Mr.
    Trimble - 57,142;  Mr. Jacobson - 20,000;  Mr. Atwood - 16,666;  Mr. Lloyd -
    14,666 and all directors and executive officers as a group - 380,354.

         Equity  Compensation  Plans.  The  following  table sets forth  certain
information  as of December 31, 2002 with respect to shares of Common Stock that
may be issued under the Incentive Plan and other equity compensation plans.



                      Equity Compensation Plan Information

                                                                                       Number of securities
                                            Number of           Weighted-average       remaining available
                                        securities to be       exercise price of       for future issuance
                                           issued upon       outstanding options,         under equity
                                           exercise of        warrants and rights      compensation plans
                                           outstanding                                     (excluding
                                        options, warrants                             securities reflected
                                           and rights                                 in the first column)
                                        -----------------    --------------------     ---------------------
                                                                             
Plan Category
-------------
Equity compensation plan approved
   by security holders (*)                   385,655                $1.23                      61,644

Equity compensation plan not approved
   by security holders                        30,666                 3.13                     366,157
                                        -----------------    --------------------     ---------------------
Total                                        416,321                $1.37                     397,801
                                        =================    ====================     =====================


(*)  Represents  shares of Common Stock  issuable upon  exercise of  outstanding
options granted under the Incentive Plan.


         Proposal No. 2 To Approve Amendment to 2000 Stock Incentive Plan

         As of March 19, 2003, 114,395 shares of Common Stock were available for
grant  pursuant to the Incentive  Plan.  The Board of Directors does not believe
that  such  remaining  amount  under  this plan is  sufficient  to carry out its
compensation  policy.  Accordingly,  as part of the Company's  overall effort to
increase   shareholder  value,  on  March  19,  2003,  the  Board  of  Directors
unanimously  adopted an amendment to the Incentive Plan,  subject to shareholder
approval,  increasing the aggregate number of shares reserved for grant pursuant
to the  Incentive  Plan from 500,000 to 650,000.  The amendment to the Incentive
Plan is intended to (i) further the Company's  efforts in attracting,  retaining
and  motivating  officers,  key employees and  non-employee  consultants  of the
Company and (ii) continue to closely align the interest of  participants  in the
Incentive Plan with those of stockholders by encouraging  stock ownership and by
tying compensation to the performance of the Company and the Company Stock.


                                       11


         If  approved,  264,345  shares of Common  Stock will be  available  for
future grants pursuant to the Incentive  Plan. If approved,  this amendment will
not change any other material term of the Incentive Plan.

         The amendment appears as Appendix B to this proxy statement.

Participation in the Incentive Plan

The grant of incentive and  non-qualified  stock  options,  shares of restricted
stock and stock bonuses under the Incentive Plan to key employees,  consultants,
and non-employee directors, including our Chairman, Chief Executive Officer, and
each of the other Named Executive Officers,  is subject to the discretion of the
Compensation  Committee.  As of April 11,  2003,  the fair  market  value of the
Common Stock was $.42 per share,  which was the closing  sale price  reported by
The Nasdaq Small Cap Stock Market.  The following  table sets forth  information
with respect to grants of options to the Named Executive  Officers and the other
individuals  and  groups   indicated  that  were  previously   approved  by  the
Compensation  Committee and are subject to the approval of the  stockholders  of
the amendment to the Incentive Plan. The exercise price per share of all options
granted  on  January  6, 2003 is $.43 per  share.  No  associate  of any of such
individuals has been granted options under the Incentive Plan.




     STOCK OPTIONS GRANTED BY COMPENSATION COMMITTEE SUBJECT TO STOCKHOLDER
                APPROVAL OF THE AMENDMENT TO THE INCENTIVE PLAN



                                                                         SHARES OF COMMON STOCK UNDERLYING
                        NAME AND POSITION                                          OPTION GRANTS
------------------------------------------------------------------     ---------------------------------------
                                                                                    
Ivar Siem - Chairman of the Board                                                      30,000

Michael J. Jacobson - President and Chief Executive Officer                            30,000

John P. Atwood - Vice President - Business Development                                 30,000

G. Brian Lloyd - Vice President - Treasurer                                            30,000

All executive officers as a group (4 persons)                                         120,000

All current directors who are not executive officers as a group                          -
     (4 persons)

All employees, including all current officers who are not                              36,000
     executive officers, as a group



Vote Required for Approval

    The affirmative vote of a majority of the Common Stock represented in person
or by proxy and  entitled  to vote at the Annual  Meeting is required to approve


                                       12


the amendment to the Incentive Plan.  Abstentions will have the same effect as a
vote  "Against"  this  proposal.  Broker  non-votes  will  have no effect on the
approval of this proposal.

         THE BOARD OF  DIRECTORS  RECOMMENDS  A VOTE "FOR" THE PROPOSAL TO AMEND
THE INCENTIVE PLAN.

Compliance With Section 16(A) Of The Securities Exchange Act Of 1934, as amended

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires the Company's directors,  executive officers,  and stockholders who own
more than 10% of the  Common  Stock,  to file  reports  of stock  ownership  and
changes in ownership with the Securities and Exchange  Commission and to furnish
the Company with copies of all such reports they file.  Based solely on a review
of the copies of the Section 16(a) reports furnished to the Company, the Company
believes  that during fiscal year 2002,  all Section  16(a) filing  requirements
applicable  to  its   directors,   executive   officers  and  greater  than  10%
shareholders were complied with.

Certain Relationships and Related Transactions

         In March 2003, the Company entered into a sublease  agreement  expiring
December  31, 2006 for certain of its office  space with  Tri-Union  Development
Corporation ("Tri-Union"). The Company's annual receipts from this sublease will
be $81,630.  Mr. James M. Trimble, a director of the Company is the Chairman and
Chief Executive Officer of Tri-Union.

         In September 2001, Drillmar, Inc. an affiliate of the Company,  entered
into a merger  agreement and merged with Zephyr Drilling Ltd.  ("Zephyr").  Ivar
Siem, Chairman of the Company,  and Harris A. Kaffie, a director of the Company,
are both directors, and Mr. Siem is Chairman and President of Drillmar. Prior to
the merger,  Zephyr was a limited  partnership in which Drillmar was the general
partner  and Messrs.  Siem and Kaffie  were  limited  partners.  Zephyr  owned a
semi-submersible  drilling  rig that was  prepared  for  reconfiguration  into a
semi-tender.  Prior  to the  merger,  the  Company  owned  approximately  64% of
Drillmar's  outstanding common stock. As a result of the merger between Drillmar
and Zephyr,  the Company's  interest in Drillmar  decreased to 12.8% and Messrs.
Siem and Kaffie  became owners of 30.3% and 30.6%,  respectively,  of Drillmar's
common stock.

         Messrs.  Siem  and  Kaffie  provided  funding  to  Drillmar  in 2002 of
$116,000  and  $100,000,  respectively,  and in 2001 of $300,000  and  $425,000,
respectively,  and were issued  unsecured  promissory  notes from Drillmar.  The
promissory notes were due June 30, 2002 and bore interest at the rate of 10% per
annum. Along with the promissory notes,  Drillmar issued detachable  warrants to
Messrs.  Siem and  Kaffie of  41,500  and  42,500,  respectively.  Each  warrant
provides for the purchase of one share of Drillmar  common stock at $5 per share
and are  exercisable  through June 2005.  At December 31, 2002,  the  promissory
notes and accrued  interest had not been paid.  The  promissory  notes issued by
Drillmar are nonrecourse to the Company.

         In January 2003,  Drillmar  stockholders  approved a restructuring plan
whereby  Drillmar will issue up to $3.0 million of  convertible  notes that will
convert  into  common  stock  representing  over 99% of  Drillmar's  outstanding
shares. As a result, the Company's ownership in Drillmar will be reduced to less
than 1%. Messrs. Siem and Kaffie are expected to exchange their promissory notes
and accrued interest into Drillmar new convertible notes.


                                       13


         Effective March 31, 2002, the Company recorded a full impairment of its
investment  in Drillmar of  approximately  $340,000  and a full  reserve for the
accounts receivable amount owed from Drillmar of approximately  $200,000, due to
Drillmar's working capital deficiency and delays in securing capital funding.

         In May 2002,  the Company and  Drillmar  entered  into a new  agreement
effective as of May 1, 2002,  whereby the Company will provide  office space and
minimal accounting and administrative services to Drillmar for $2,000 per month.
If Drillmar is able to secure  financing to implement its business plan, the fee
will increase to $20,000 per month retroactive to May 1, 2002. The agreement can
be terminated upon 30 days notice or by the mutual agreement of the parties.

         In January 2003, the Company and Drillmar  entered into a new agreement
effective as of February 1, 2003,  whereby the Company will provide office space
to Drillmar for $1,500 per month.  The Company  will also provide  professional,
accounting and  administrative  services to Drillmar based on hourly rates based
on the Company's cost. The agreement can be terminated upon 30 days notice or by
the mutual agreement of the parties.

                    NOMINATIONS AND PROPOSALS BY STOCKHOLDERS
                           FOR THE 2004 ANNUAL MEETING

         The Company has  tentatively  set its year 2004 annual  meeting for May
19, 2004.  Accordingly,  stockholders should submit nominations and proposals in
accordance with the guidance set forth below.

         Nominations for the year 2004 Annual Meeting. The Company's Certificate
of  Incorporation  provides that no person shall be eligible for  nomination and
election as a director unless written notice of such nomination is received from
a  stockholder  of record by the  Secretary  of the  Company 90 days  before the
anniversary  date of the previous year's annual meeting.  Further,  such written
notice is to be accompanied by the written consent of the nominee to serve,  the
name, age,  business and residence  addresses,  and principal  occupation of the
nominee,  the number of shares beneficially owned by the nominee,  and any other
information  which would be required to be  furnished by law with respect to any
nominee  for  election  to the Board of  Directors.  Stockholders  who desire to
nominate,  at the year 2004 annual meeting of stockholders,  persons to serve on
the Board of Directors, must submit nominations to the Company, at its principal
executive  office,  so that such notice is received by the Company no later than
February 20,  2004.  In order to avoid  controversy  as to the date on which any
such  nomination is received by the Company,  it is suggested that  stockholders
submit their nominations, if any, by certified mail, return receipt requested.

         Proposals for the year 2004 Annual Meeting.  Stockholders who desire to
present  proposals,  other  than  notices  of  nomination  for the  election  of
directors,  to  stockholders  of the Company at the year 2004 annual  meeting of
stockholders,  and to  have  such  proposals  included  in the  Company's  proxy
materials,  must  submit  their  proposals  to the  Company,  at  its  principal
executive  office, by December 22, 2003. In order to avoid controversy as to the
date on which any such proposal is received by the Company, it is suggested that
stockholders  submit their proposals,  if any, by certified mail, return receipt
requested.


                                       14


         Moreover,  any  stockholder  who  intends  to  submit  a  proposal  for
consideration at the Company's 2004 annual meeting, but not for inclusion in the
Company's proxy materials, must notify the Company. Pursuant to the rules of the
U.S. Securities and Exchange Commission, such notice must (1) be received at the
Company's  executive offices no later than February 20, 2004 and (2) satisfy the
rules of the U.S. Securities and Exchange Commission.

                                RELATIONSHIP WITH
                         INDEPENDENT PUBLIC ACCOUNTANTS

         In February 2002, the Company elected not to continue the engagement of
KPMG  LLP  ("KPMG")  as the  Company's  independent  accountants  and the  Audit
Committee  recommended,  and the Board approved, the selection of Mann Frankfort
Stein & Lipp CPAs, LLP ("Mann Frankfort") as its new independent accountants.

         In connection with the audits of the Company's  consolidated  financial
statements  for each of the two fiscal  years ended  December 31, 1999 and 2000,
and the  subsequent  interim  period  through  February 15, 2002,  there were no
disagreements  with KPMG on any matter of  accounting  principles  or practices,
financial  disclosure,  or auditing scope or procedures,  which disagreements if
not resolved to their satisfaction,  would have caused them to make reference in
connection  with their opinion to the subject  matter of the  disagreement.  The
audit reports of KPMG on the  consolidated  financial  statements of the Company
and  subsidiaries  as of and for the years ended  December 31, 1999 and 2000 did
not  contain  any  adverse  opinion  or  disclaimer  of  opinion,  nor were they
qualified or modified as to uncertainty,  audit scope, or accounting principles,
except that KPMG's report on the Company's consolidated financial statements for
the years ended December 31, 1999 and 2000 contain a separate  paragraph stating
that "As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1999,  the  Company  changed  its method of  accounting  for costs of
start-up activities."

         During the two fiscal years ended  December 31, 2001 and the subsequent
interim period prior to engaging Mann Frankfort,  neither the Company nor anyone
on its  behalf  consulted  with Mann  Frankfort  regarding  the  application  of
accounting principles to a specified transaction,  either completed or proposed,
or the type of audit opinion that might be rendered on the  Company's  financial
statements,  and neither a written report nor advice was provided to the Company
by Mann  Frankfort  that was an important  factor  considered  by the Company in
reaching a decision as to any accounting, auditing or financial reporting issue.

         Mann  Frankfort  Stein  & Lipp  CPAs,  LLP,  has  been  engaged  by the
Company's Board of Directors as the independent accountants for the Company. The
Company   expects   that  they  will   continue  as   independent   accountants.
Representatives  of Mann  Frankfort  are  expected  to be  present at the Annual
Meeting,  with the  opportunity to make a statement if they desire to do so, and
to respond to questions.

                                 OTHER BUSINESS

         At the date of this Proxy  Statement,  the Board of Directors  does not
know of any  matter to be acted  upon at the  Annual  Meeting  other  than those
matters  described  above and set forth in the Notice.  If other  business comes
before the Annual Meeting, the persons named on the proxy will vote the proxy in
accordance with their best judgment.




By Order of the Board of Directors

 /s/ G. Brian Lloyd
---------------------------------------
G. Brian Lloyd
Vice President, Treasurer and Secretary
Houston, Texas
April 16, 2003


                                       15


                                   Appendix A


                           BLUE DOLPHIN ENERGY COMPANY
                              AMENDED AND RESTATED
                             AUDIT COMMITTEE CHARTER
                            Effective April 15, 2003


The Audit  Committee  is appointed by the Board of Directors to assist the Board
in monitoring (1) the integrity of the financial  statements of the Company, (2)
the  compliance by the Company with legal and regulatory  requirements,  and (3)
the independence and performance of the Company's independent auditors.

The Audit  Committee  shall  have the  authority  to  retain,  at the  Company's
expense, special legal, accounting or other consultants or experts to advise the
Audit Committee.  The Audit Committee may request any officer or employee of the
Company or the  Company's  outside  counsel or  independent  auditor to attend a
meeting of the Audit Committee or to meet with any member of, or consultants to,
the Audit Committee.

The Audit Committee shall make regular reports to the Board. The Audit Committee
shall meet at least four times each year and hold such other  meetings from time
to  time as may be  called  by its  Chairman  or any two  members  of the  Audit
Committee.  At least  quarterly,  the Audit Committee will meet separately in an
executive session with the independent auditors.

Composition

The Audit  Committee shall be comprised of at least three directors who shall be
appointed by the Board.  The Audit  Committee  shall only include  directors who
satisfy the independence  requirements of the Securities and Exchange Commission
(the "SEC") and the NASDAQ Stock Market,  Inc. (the "NASDAQ")  applicable to the
Company  and are free of any  relationship  that,  in the  opinion of the Board,
would  interfere  with  their  exercise  of  independent  judgment  as an  Audit
Committee  member. No member of the Audit Committee may receive any payment from
the  Company  other than  payment  for  services  as a  director  or member of a
committee  of the Board of Directors or be an affiliate of the Company or any of
its subsidiaries.

Audit  Committee  members  must  be  able to  read  and  understand  fundamental
financial  statements,  including the Company's balance sheet,  income statement
and cash  flow  statement.  As  required  by  NASDAQ,  one  member  of the Audit


                                       16


Committee shall have accounting or related  financial  management  expertise and
qualify as a "financial  expert" in accordance with the  requirements of the SEC
and the NASDAQ (as may be modified or  supplemented).  The role of the financial
expert will be that of assisting  the Audit  Committee in  overseeing  the audit
process, not auditing the Company.

Responsibilities and Duties.

The Audit Committee shall:

         1.       Review and reassess the adequacy of this Charter  annually and
                  recommend any proposed changes to the Board for approval.

         2.       Review   the  annual   audited   financial   statements   with
                  management,  including major issues  regarding  accounting and
                  auditing  principles  and practices as well as the adequacy of
                  internal   controls  that  could   significantly   affect  the
                  Company's financial statements.

         3.       Review  with  management  and  the  independent   auditor  (a)
                  significant financial reporting issues, accounting principles,
                  practices   and  judgments   made  in   connection   with  the
                  preparation of the Company's financial  statements,  including
                  an analysis of the effect of  alternative  GAAP methods on the
                  Company's  financial  statements  and  a  description  of  any
                  transactions  as to which  management  obtained  Statement  on
                  Auditing Standards No. 50 letters and (b) any material reports
                  or  estimates   prepared  by  outside   consultants,   reserve
                  engineers, or other experts or specialists.

         4.       Review with management and the independent  auditor the effect
                  of  regulatory   and   accounting   initiatives   as  well  as
                  off-balance  sheet  structures  on  the  Company's   financial
                  statements.

         5.       Review  with  management  and  the  independent   auditor  the
                  Company's quarterly  financial  statements prior to the filing
                  of its Form 10-Q,  including  the  results of the  independent
                  auditors' reviews of the quarterly financial  statements.  The
                  Chair of the  Committee  may perform this task and convene the
                  Committee when appropriate.

         6.       Meet  periodically  with  management  to review the  Company's
                  major  financial risk  exposures and the steps  management has
                  taken to monitor and control such exposures.

         7.       Review major changes to the Company's  auditing and accounting
                  principles  and  practices  as  suggested  by the  independent
                  auditor or management.

         8.       Review the experience and qualifications of the senior members
                  of the  independent  auditor  team  and  the  quality  control
                  procedures of the independent auditor.

         9.       Retain  and,  where  warranted  in the  Committee's  judgment,
                  terminate independent auditors selected to audit the financial
                  statements of the Company.

         10.      Approve all permissible  non-audit services to be performed by
                  the independent auditors.



                                       17


         11.      Approve the fees to be paid to the independent auditor.

         12.      Receive   periodic   reports  from  the  independent   auditor
                  regarding   the   auditor's   independence   consistent   with
                  Independence  Standards Board Standard 1, discuss such reports
                  with the auditor, and if so determined by the Audit Committee,
                  take or recommend that the full Board take appropriate  action
                  to oversee the independence of the auditor.

         13.      Establish procedures for the receipt, retention, and treatment
                  of complaints  received by the Company  regarding  accounting,
                  internal accounting controls, or auditing matters.

         14.      Approve all related-party transactions.

         15.      Meet with the independent auditor prior to the audit to review
                  the planning and staffing of the audit.

         16.      Obtain from the independent auditor assurance that Section 10A
                  of the  Securities  Exchange Act of 1934 (added by the Private
                  Securities  Litigation  Reform  Act  of  1995)  has  not  been
                  implicated.

         17.      Review  with  management  and  the  independent   auditor  any
                  correspondence  with regulators or  governmental  agencies and
                  any  employee  complaints  or  published  reports  which raise
                  material issues regarding the Company's  financial  statements
                  or accounting policies.

         18.      Obtain  reports from  management and the  independent  auditor
                  that the acts and conduct of the Company's  executives  are in
                  conformity with applicable legal requirements.

         19.      Discuss with the independent  auditor the matters  required to
                  be discussed by  Statement on Auditing  Standards  No. 61, and
                  related amendments, relating to the conduct of the audit.

         20.      Review  with  the   independent   auditor   any   problems  or
                  difficulties   the  auditor  may  have   encountered  and  any
                  management  letter  provided by the auditor and the  Company's
                  response to that letter. Such review should include:

                  a.       Any  difficulties  encountered  in the  course of the
                           audit work,  including any  restrictions on the scope
                           of activities or access to required information.
                  b.       Any  changes  required  in the  planned  scope of the
                           audit.

         21.      Prepare the Audit  Committee  report  required by the rules of
                  the Securities  and Exchange  Commission to be included in the
                  Company's annual proxy statement.

         22.      Advise the Board with  respect to the  Company's  policies and
                  procedures  regarding  compliance  with  applicable  laws  and
                  regulations.



                                       18


         23.      Review with the outside legal counsel  matters that may have a
                  material  impact on the  financial  statements,  the Company's
                  compliance  policies  and any  material  reports or  inquiries
                  received from regulators or governmental agencies.

While the Audit Committee has the  responsibilities and powers set forth in this
Charter,  it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's  financial  statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent  auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations.




Approved by the Board of Directors



-----------------------------------
G. Brian Lloyd
Secretary





























                                       19


                                   Appendix B




                             FIRST AMENDMENT TO THE
                            2000 STOCK INCENTIVE PLAN

         Blue Dolphin  Energy  Company (the  "Company")  hereby  amends the Blue
Dolphin Energy  Company 2000 Stock  Incentive Plan (the "2000 Plan") as follows,
effective March 19, 2003.

         1.       The first  paragraph  of  Section  1.4 is  amended  to read as
                  follows in its entirety:

                  Subject  to  adjustment  under  Section  6.5,  there  shall be
         available for Incentive  Awards under the Plan that are granted  wholly
         or partly in Common Stock  (including  rights or Stock Options that may
         be exercised for or settled in Common Stock) Six Hundred Fifty Thousand
         (650,000) Shares of Common Stock. Six Hundred Fifty Thousand  (650,000)
         of the Shares  reserved under the Plan shall be available for grants of
         Incentive Stock Options.  The number of Shares of Common Stock that are
         the subject of Incentive  Awards under this Plan, that are forfeited or
         terminated,  expire unexercised,  are settled in cash in lieu of Common
         Stock or in a manner such that all or some of the Shares  covered by an
         Incentive  Award  are not  issued  to a Grantee  or are  exchanged  for
         Incentive  Awards  that  do  not  involve  Common  Stock,  shall  again
         immediately  become  available  for  Incentive  Awards  hereunder.  The
         Committee  may from time to time  adopt  and  observe  such  procedures
         concerning  the  counting of Shares  against the Plan maximum as it may
         deem appropriate.

                  During  such  period  that  the  Company  is a  Publicly  Held
         Corporation,  then  unless and until the  Committee  determines  that a
         particular  Incentive  Award  granted  to a  Covered  Employee  is  not
         intended to comply with the Performance-Based  Exception, the following
         rules shall apply to grants of Incentive Awards to Covered Employees:

                           (a) Subject to adjustment as provided in Section 6.5,
                  the  maximum  aggregate  number  of  Shares  of  Common  Stock
                  (including   Stock  Options,   Restricted   Stock,   or  Other
                  Stock-Based  Awards paid out in Shares) that may be granted or
                  that may vest, as applicable, in any calendar year pursuant to
                  any Incentive  Award held by any individual  Covered  Employee
                  shall be Five Hundred Thousand (500,000) Shares.

                           (b) The  maximum  aggregate  cash  payout  (including
                  Other  Stock-Based  Awards  paid out in cash) with  respect to
                  Incentive  Awards  granted in any  calendar  year which may be
                  made to any Covered  Employee  shall be Five Hundred  Thousand
                  dollars ($500,000).



                                       20


                           (c) With  respect  to any Stock  Option  granted to a
                  Covered  Employee that is canceled or repriced,  the number of
                  Shares  subject to such Stock Option  shall  continue to count
                  against the  maximum  number of Shares that may be the subject
                  of Stock Options  granted to such Covered  Employee  hereunder
                  and, in this regard,  such maximum  number shall be determined
                  in accordance with Section 162(m) of the Code.

                           (d) The  limitations of subsections  (a), (b) and (c)
                  above shall be construed and administered so as to comply with
                  the Performance-Based Exception.

         The  following  officer of the Company has caused this  amendment to be
executed effective as of March 19, 2003, subject to shareholder approval.


                           BLUE DOLPHIN ENERGY COMPANY


                           By:
                              --------------------------------------------------

                           Name:
                                ------------------------------------------------

                           Title:
                                 -----------------------------------------------





















                                       21