UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   Form 10-QSB



(Mark one)

[X]      Annual Report Under Section 13 or 15(d) of The Securities  Exchange Act
         of 1934

                 For the quarterly period ending March 31, 2004

[_]      Transition Report Under Section 13 or 15(d) of The Securities  Exchange
         Act of 1934

         For the transition period from ______________ to _____________



                         Commission File Number: 0-29613

                         TIDELANDS OIL & GAS CORPORATION
        (Exact name of small business issuer as specified in its charter)

         Nevada                                                 66-0549380
------------------------                                ------------------------
(State of incorporation)                                (IRS Employer ID Number)

                  1862 West Bitters Rd., San Antonio, TX 78410
                  --------------------------------------------
                    (Address of principal executive offices)

                                 (210) 764-8642
                          (Issuer's telephone number)



      Securities registered under Section 12 (b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:
                        Common Stock - $0.001 par value



Check  whether  the issuer  has (1) filed all  reports  required  to be files by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period the Company was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X  No
                                                             ---   ---

APPLICABLE  ONLY TO  ISSUERS  INVOLVED  IN  BANKRUPTCY  PROCEEDINGS  DURING  THE
PRECEDING FIVE YEARS
Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes    No
                                                 ---   ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

As of March 31, 2004,  there were  48,875,325  shares of Common Stock issued and
outstanding.

Transitional Small Business Disclosure Format : Yes    No X
                                                   ---   ---


<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                                   FORM 10-QSB


                                      INDEX

                                                                            Page
PART I - Financial Information

Item 1 - Financial Statements
         Condensed Consolidated Balance Sheets as of
         March 31, 2004 and December 31, 2003..............................  3-4

         Condensed Consolidated Statements of Operations
         For the Three Months Ended March 31, 2004 and 2003................    5

         Condensed Consolidated Statements of Cash Flows
         For the Three Months Ended March 31, 2004 and 2003................  6-7

         Notes to Condensed Consolidated Financial Statements.............. 8-12

Item 2 - Management's Discussion and Analysis or Plan of Operation.........   13

Item 3. - Controls and Procedures..........................................   16

PART II - Other Information

Item 1 - Legal Proceedings.................................................   17

Item 2 - Changes in Securities and Use of Proceeds.........................   17

Item 3 - Defaults Upon Senior Securities...................................   17

Item 4 - Submission of Matters to a Vote of Security Holdings..............   17

Item 5 - Other Information.................................................   17

Item 6 - Exhibits and Reports on Form 8K ..................................   17

Signature..................................................................   18

















                                      - 2 -



<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS
                                     ------



                                             March 31, 2004    December 31, 2003
                                           -----------------   -----------------
                                              (Unaudited)

Current Assets:
      Cash                                 $       3,548,489   $         894,457
      Accounts Receivable                                745                 228
      Prepaid Expenses                               580,708              22,209
                                           -----------------   -----------------
         Total Current Assets                      4,129,942             916,894
                                           -----------------   -----------------

Property Plant and Equipment, Net                    733,170             604,192
                                           -----------------   -----------------

Investment - Reef Ventures, L.P.                      98,629              98,629
                                           -----------------   -----------------

Other Assets:
      Deposits                                         3,800               3,800
                                           -----------------   -----------------

         Total Assets                      $       4,965,541   $       1,623,515
                                           =================   =================






















      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -3-


<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (CONTINUED)


                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------


                                                     March 31, 2004     December 31, 2003
                                                   -----------------    -----------------
                                                      (Unaudited)
<S>                                                <C>                  <C>
Current Liabilities:
      Accounts Payable and
         Accrued Expenses                          $         183,811    $         813,905
      Current Maturities of Long-Term Debt                   150,000              325,000
                                                   -----------------    -----------------
          Total Current Liabilities                          333,811            1,138,905

Long-Term Debt                                                     0                    0
                                                   -----------------    -----------------

         Total Liabilities                                   333,811            1,138,905
                                                   -----------------    -----------------

Commitments and Contingencies                                   --                   --

Stockholders' Equity:
      Common Stock, $.001 par value per share,
        100,000,000 shares authorized;
        48,875,325 shares issued and outstanding
        March 31, 2004, 44,825,302 shares issued
        and outstanding December 31, 2003                     48,876               44,826

Additional Paid-in Capital                                16,750,398           11,072,987

Subscriptions Receivable                                     (18,000)             (18,000)
Accumulated (Deficit)                                    (12,149,544)         (10,615,203)
                                                   -----------------    -----------------

         Total Stockholders' Equity                        4,631,730              484,610
                                                   -----------------    -----------------

         Total Liabilities and
              Stockholders' Equity                 $       4,965,541    $       1,623,515
                                                   =================    =================
</TABLE>










      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -4-

<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                              Three Months Ended    Three Months Ended
                                                March 31, 2004        March 31, 2003
                                              ------------------    ------------------
<S>                                           <C>                   <C>

Revenues                                      $                0    $            5,265
                                              ------------------    ------------------

Operating Expenses:
      Operating Expenses                                       0                 5,425
      Depreciation                                        11,280                10,656
      Interest                                             4,719                25,675
      Officers & Directors Salaries & Fees               202,608                75,000
      General and Administrative                       1,319,601               195,792
                                              ------------------    ------------------
         Total Operating Expenses                      1,538,208               312,548
                                              ------------------    ------------------
(Loss) From Operations                                (1,538,208)             (307,283)
       Interest Income                                     3,867                     0
                                              ------------------    ------------------
Net (Loss)                                    $       (1,534,341)   $         (307,283)
                                              ==================    ==================

Net (Loss) Per Common Share
      Basic                                   $            (0.03)   $            (0.01)
                                              ==================    ==================

Weighted Average Number of Common
      Shares Outstanding, Basic                       46,850,314            34,415,079
                                              ==================    ==================

      Diluted                                 $            (0.03)   $            (0.01)
                                              ==================    ==================

Weighted Average Number of Common
   Shares Outstanding, Diluted                        58,733,717            35,415,079
                                              ==================    ==================
</TABLE>












      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -5-


<PAGE>
<TABLE>
<CAPTION>

                         TIDELANDS OIL & GAS CORPORATION
                 STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
                                   (UNAUDITED)


                                                     Three Months Ended    Three Months Ended
                                                       March 31, 2004        March 31, 2003
                                                     ------------------    ------------------
<S>                                                  <C>                   <C>
Cash Flows Provided (Required) By
  Operating Activities:
    Net (Loss)                                       $       (1,534,341)   $         (307,283)
    Adjustments to Reconcile Net (Loss)
          to Net Cash Provided (Required) By
          Operating Activities:

    Depreciation                                                 11,280                10,656
    Issuance of Common Stock
         for Services Provided                                1,226,816               109,297
     Officers' Salaries                                               0                60,000
       Changes in
       Accounts Receivable                                         (517)               15,419
       Prepaid Expenses                                        (300,499)                4,451
       Other Assets                                                   0                   812
       Accounts Payable and
         Accrued Expenses                                      (591,783)               68,870
                                                     ------------------    ------------------

Net Cash (Required)
   by Operating Activities                                   (1,189,044)              (37,778)
                                                     ------------------    ------------------

Cash Flows Provided (Required)
  By Investing Activities:
      Acquisitions of Property, Plant & Equipment              (140,258)              (92,789)
      Proceeds From Disposals of Property, Plant
        and Equipment                                                 0               102,327
                                                     ------------------    ------------------

         Net Cash Provided (Required)
            by Investing Activities                            (140,258)                9,538
                                                     ------------------    ------------------
</TABLE>










      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -6-
<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
                 STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
                                   (UNAUDITED)

                                   (CONTINUED)

                                                Three Months      Three Months
                                                   Ended             Ended
                                               March 31, 2004    March 31, 2003
                                               --------------    --------------

Cash Flows Provided (Required)
   by Financing Activities:
      Proceeds from Issuance of Common Stock        4,083,334            50,000
      Repayment of Short-Term Loans                  (100,000)                0
      Proceeds of Loans from Related Parties                0            53,654
      Repayment of Loans from Related Parties               0           (56,767)
                                               --------------    --------------

Net Cash Provided by Financing Activities           3,983,334            46,887
                                               --------------    --------------

Net Increase in Cash                                2,654,032            18,647
Cash at Beginning of Period                           894,457           193,669
                                               --------------    --------------
Cash at End of Period                          $    3,548,489    $      212,316
                                               ==============    ==============

Supplemental Disclosures of
   Cash Flow Information
      Cash Payments for Interest               $        4,719    $          659
                                               ==============    ==============

      Cash Payments for Income Taxes           $            0    $            0
                                               ==============    ==============
Non-Cash Financing Activities:
   Issuance of Common Stock:
      Operating Activities                     $    1,226,816    $      109,297
       Payment of Accounts Payable                     38,311            62,500
      Prepayment of Legal Fees                        258,000                 0
      Repayment of Short-Term Loan                     75,000                 0
                                               --------------    --------------

      Total Non-Cash Financing Activities      $    1,598,127    $      171,797
                                               ==============    ==============










      See Accompanying Notes to Condensed Consolidated Financial Statements

                                       -7-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004



NOTE 1 - BASIS OF PRESENTATION
------   ---------------------

         The accompanying  unaudited condensed consolidated financial statements
         for the three  month  periods  ended  March 31, 2004 and 2003 have been
         prepared in conformity with accounting principles generally accepted in
         the United States of America for interim financial information and with
         the  instructions  to Form 10-QSB and  Regulation  S-B.  The  financial
         information  as of December 31, 2003 is derived  from the  registrant's
         Form 10-KSB for the year ended December 31, 2003.  Certain  information
         or  footnote  disclosures  normally  included in  financial  statements
         prepared in accordance with accounting principles generally accepted in
         the United States of America have been condensed or omitted pursuant to
         the rules and regulations of the Securities and Exchange Commission.

         The  preparation  of condensed  consolidated  financial  statements  in
         conformity with accounting  principles generally accepted in the United
         States of America requires management to make estimates and assumptions
         that affect the reported  amounts of assets and liabilities at the date
         of the financial  statements  and the reported  amounts of revenues and
         expenses during the reporting period.  Actual results could differ from
         those  estimates.  In  the  opinion  of  management,  the  accompanying
         financial statements include all adjustments  necessary (which are of a
         normal and recurring  nature) for the fair  presentation of the results
         of the interim periods  presented.  While the registrant  believes that
         the  disclosures  presented are adequate to keep the  information  from
         being  misleading,  it is suggested that these  accompanying  financial
         statements  be  read  in  conjunction  with  the  registrant's  audited
         consolidated financial statements and notes for the year ended December
         31, 2003,  included in the registrant's  Form 10-KSB for the year ended
         December 31, 2003.

         Operating  results for the three-month  period ended March 31, 2004 are
         not necessarily  indicative of the results that may be expected for the
         remainder of the fiscal year ending December 31, 2004. The accompanying
         unaudited  condensed  consolidated  financial  statements  include  the
         accounts  of the  registrant  and its  wholly-owned  subsidiaries.  All
         significant   inter-company   accounts  and   transactions   have  been
         eliminated in consolidation.










                                       -8-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004


NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
------   -----------------------------

         A summary of  property,  plant and  equipment  at March 31,  2004 is as
         follows:

                                                                     Estimated
                                                                   Economic Life
                                                                   -------------
             Pre-Construction Costs-
               International Crossing to Mexico    $      265,021
             Equipment and
               Leasehold Improvements                      27,929    3-10 Years
             Pipelines                                    431,560      15 Years
             Processing Plant                             166,410      15 Years
                                                   --------------
                  Total                                   890,920
             Less Accumulated Depreciation                157,750
                                                   --------------
                  Total                            $      733,170
                                                   ==============

NOTE 3 - LITIGATION
------   ----------

         On January 6, 2003,  the Company was served as a third party  defendant
         in a lawsuit titled Northern  Natural Gas Company vs. Betty Lou Sheerin
         vs. Tidelands Oil & Gas Corporation, ZG Gathering, Ltd. and Ken Lay, in
         the 150th Judicial District Court,  Bexar County,  Texas,  Cause Number
         2002-C1-16421.  The lawsuit was initiated by Northern  Natural Gas when
         it sued Betty Lou Sheerin  for her  failure to make  payments on a note
         she executed  payable to Northern in the original  principal  amount of
         $1,950,000.  Northern's  suit was filed on November 13,  2002.  Sheerin
         answered  Northern's  lawsuit  on January  6,  2003.  Sheerin's  answer
         generally denied Northern's claims and raised the affirmative  defenses
         of fraudulent inducement by Northern,  estoppel, waiver and the further
         claim that the note does not comport with the legal  requirements  of a
         negotiable instrument. Sheerin seeks a judicial ruling that Northern be
         denied  any  recovery  on  the  note.   Sheerin's   answer  included  a
         counterclaim  against  Northern,  ZG  Gathering,  and Ken Lay generally
         alleging, among other things, that Northern, ZG Gathering, Ltd. and Ken
         Lay, fraudulently induced her execution of the note. Northern has filed
         a general denial of Sheerin's counterclaims.  Sheerin's answer included
         a third party cross claim against Tidelands. She alleges that Tidelands
         entered into an agreement to purchase the Zavala  Gathering System from
         ZG Gathering , Ltd.  and that,  as a part of the  agreement,  Tidelands
         agreed to satisfy  all of the  obligations  due and owing to  Northern,
         thereby relieving Sheerin of all obligations she had to Northern on the
         promissory  note in question.  She alleges that  Tidelands is liable to
         her for all of her  actual  damages,  costs of the  lawsuit  and  other
         unstated  relief.  Tidelands  participated  in a mediation on March 11,
         2003 and the case settled at that time.  Tidelands answered the Sheerin
         suit on March 26,  2003 and denied  all of  Sheerin's  allegations.  No
         discovery   has  been   completed  at  this  time.   Based  on  initial
         investigations,   however,  Tidelands  appears  to  have  a  number  of
         potential  defenses to  Sheerin's  claims and  intends to  aggressively
         defend the lawsuit.

                                       -9-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004



NOTE 3 - LITIGATION (CONTINUED)
------   ----------------------

         In September  2002, as a pre-closing  deposit to the purchase of the ZG
         pipelines,  the Company executed a $300,000 promissory note to Betty L.
         Sheerin,  a partner of ZG  Gathering,  Ltd.  In  addition,  the Company
         issued  1,000,000  shares of its  restricted  common  stock to  various
         partners  of  ZG  Gathering,   Ltd.  The  company   believes  that  the
         aforementioned  promissory  note and shares of restricted  common stock
         will be cancelled  based upon the outcome of the  litigation  described
         above.  Accordingly,  the Company's  financial  statements reflect that
         position.

NOTE 4 - OTHER
------   -----

         During January and February 2004, the Company issued  2,722,223  shares
         of its restricted common stock for $4,083,335.

         On January 8, 2004,  the  Company  authorized  the  issuance of 200,000
         shares of its common stock for 2004 legal fees valued at $344,000 under
         the Stock Grant and Option Plan.

         On January 8, 2004, the Company issued 300,000 shares of its restricted
         common  stock for  services  valued at $450,000  regarding  the private
         placement of the Company's common stock.

         On January 8, 2004,  the Company  authorized the issuance of 700,000 of
         its  restricted   common  stock  for  consulting   services  valued  at
         $1,050,000. These shares were issued during January and February 2004.

         On January 8, 2004,  the  Company  issued  52,800  shares of its common
         stock valued at $90,816 to a Company  officer under the Stock Grant and
         Option Plan.

         On January 8, 2004, the Company  approved the issuance of 75,000 shares
         of its restricted common stock in payment of a $75,000  promissory note
         and $38,311 of accrued  interest.  These shares were issued February 3,
         2004.











                                      -10-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004


NOTE 5 - SUBSEQUENT EVENTS
------   -----------------

         On April 7, 2004,  the  Company  entered  into a Letter of Intent  with
         Impact  International,  LLC  regarding  (1) the  exercise of the Impact
         Stock Purchase  Warrant issued on April 16, 2003, and (2) the Company's
         purchase and the sale of Impact's  interest in Reef  Ventures,  L.P., a
         Texas limited  partnership for $6,580,222.02,  adjusted for revenue and
         interest expense calculated from the construction project funding dates
         through date of closing.  The warrant  exercise and Reef sale terms are
         subject to the execution of definitive  agreements which may include an
         amendment  to  the  Stock  Purchase  Warrant  and  Registration  Rights
         Agreements and the preparation of appropriate Reef sale agreements.  In
         connection with the execution of the Letter of Intent, Impact exercised
         Five Hundred Thousand  (500,000) common shares on a cashless basis. The
         Company issued the shares to Impact on April 12, 2004.

         Stock Purchase Warrant

         Impact International, LLC had given the Company notice of its intent to
         exercise  all of the common  stock  purchase  warrants  under the Stock
         Purchase Warrant and Registration  Rights Agreement between the Company
         and Impact  International,  LLC dated April 16, 2003 and  reported on a
         Form 8-K Current Report filed May 8, 2003.

         The Stock  Purchase  Warrant  provides  for the  exercise of  6,830,000
         common  shares,   or  a  19%  interest  in  the  Company's  issued  and
         outstanding  common  stock  at the time of  exercise.  The  Warrant  is
         subject to anti-dilution  provisions and a pricing formula. The Warrant
         provides for both cash and cashless exercise  methods.  Since executing
         the Stock Purchase  Warrant,  the Company has issued  additional common
         stock, entitling Impact to an increased number of warrants.

         Pursuant  to the terms of the  Letter of  Intent,  and  subject  to the
         definitive terms and conditions of amended and future  agreements,  the
         Company would agree:  (1) that the Impact Stock  Purchase  Warrant,  as
         adjusted,  covers Ten Million (10,000,000)  Tidelands' common shares at
         an  exercise  price of $0.335 per  share;  (2) that the  Company  would
         register  the  Impact  common  shares  on  the   appropriate   form  of
         registration statement with the Securities and Exchange Commission, and
         (3)  that if the  registration  statement  were not  filed or  declared
         effective within 90 days of April 7, 2004, that the Company would issue
         500,000  common  shares under the cashless  exercise  provisions of the
         amended  Stock  Purchase  Warrant.  For  each 90 day  period  that  the
         registration  statement  were not  filed  or  declared  effective,  the
         Company  would  continue to issue 500,000 share blocks of common stock,
         until declared effective.



                                      -11-

<PAGE>

                         TIDELANDS OIL & GAS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004


NOTE 5 - SUBSEQUENT EVENTS (CONTINUED)
------   -----------------------------

         Stock Purchase Warrant (Continued)

         If the registration of the shares was accomplished by certain deadlines
         stated in the Letter of Intent,  Impact  would be obligated to exercise
         the  balance of the  Warrant  for cash  payable by Impact  through  the
         execution  of a  promissory  note  payable to  Tidelands  (the  "Impact
         Note").  If the registration  was not completed by the deadline,  which
         would be either 12 or 15 months from April 7, 2004. Impact would not be
         obligated  to exercise  the  balance of the  Warrant  for cash,  rather
         Tidelands  would  be  obligated  to issue  the  remaining  shares  on a
         cashless  basis.  In either  case,  the  Company  would be  required to
         continue to register the shares.

         Purchase and Sale of Reef Ventures, LLC Interests

         Impact  would sell its 72% limited  partnership  interest  and Coahuila
         Pipeline, LLC would sell its 1% general partnership interest in Reef to
         the Company for $6,580,222.02,  less revenue received from Reef through
         March 9, 2004.  An amount equal to interest  would be added at closing,
         calculated  from the date of net  funding by Impact at a per annum rate
         of 12%.  The  purchase  price  would be further  adjusted  to take into
         account project expenses and revenues  incurred or received after March
         10, 2004.

         Impact would finance the Tidelands'  purchase price. The purchase price
         would be payable  through a promissory  note  delivered by Tidelands at
         closing (the  Tidelands  Note")  bearing  interest at the prime rate of
         interest  plus two (2%)  percent.  The note  would  call for  quarterly
         interest payments during the first fifteen (15) months, and thereafter,
         principal  and interest  would be due quarterly  amortized  over twenty
         (20) years,  but not to exceed an amount  equal to One  Hundred  (100%)
         percent of Reef's net cash flow.  The unpaid  balance of the note would
         be due at the end of the  fourth  year.  The note would be secured by a
         deed of trust  covering  the Gas Project and a guarantee  of payment of
         the Tidelands note by Reef.

         The Reef Deed of Trust  would  include a present  assignment  of Reef's
         rights  to  receive  cash  flow  from the Gas  Project  which  would be
         exercisable by Impact only upon default under the Tidelands  Note, Reef
         guarantee, or Reef Deed of Trust.

         At such time,  if ever, as Impact has executed and delivered the Impact
         Note, Tidelands would exchange a cancellation of the Impact Note for an
         amended  Tidelands  Note,  reducing  the  Principal  sun owed under the
         Tidelands Note by the dollar amount evidenced by the Impact Note.





                                      -12-

<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operation

Business Overview

         Tidelands Oil & Gas Corporation (the  "Company"),  formerly known as C2
Technologies,  Inc., was  incorporated  under the laws of the State of Nevada on
February 25, 1997. C2 Technologies, Inc. changed its name to Tidelands Oil & Gas
Corporation on November 19, 1998. The Company has two wholly owned  subsidiaries
named Rio Bravo Energy,  LLC, and Sonora Pipeline,  LLC. The Company also owns a
25% limited partnership interest in Reef Ventures, L.P. as described below.

         Rio Bravo  Energy,  LLC was  formed on August 10,  1998 to operate  the
Chittim Gas  Processing  Plant which was  purchased  in 1999 and was  processing
natural gas primarily from Conoco Oil's Sacatosa  Field.  The Sacatosa Field was
primarily  an  oilfield  which  produced  high BTU  casinghead  gas  from  which
processing would yield valuable hydrocarbon  components such as propane,  butane
and natural  gasolines.  As the field  depleted  lower volumes of casinghead gas
were being  delivered by Conoco and other gas producers  could not be contracted
with for  processing of additional  replacement  volumes of gas.  Therefore,  in
October 2002, the plant was temporarily shut down due to the declining economics
associated with low volume  operation of the plant.  Management  plans to reopen
the plant when adequate  volumes of gas from third party  producers  makes plant
operations  economically  attractive.  The  market  for the  products  of  plant
operation could include our future propane/butane terminal and pipeline crossing
into Mexico.

         Sonora  Pipeline,  LLC was formed in January 1998 to operate the Sonora
pipeline  network which has the  capability of  delivering  adequate  volumes of
natural gas for economic  operation  of the Chittim Gas  Processing  Plant.  The
pipeline network consists of approximately 80 miles of gas pipeline.  The assets
of this company were  acquired in  conjunction  with the Chittim Gas  Processing
Plant   acquisition   and,  when   operational,   would  generate  revenue  from
transportation  fees to be charged to third party gas producers shipping natural
gas to the gas plant owned by Rio Bravo Energy LLC.

         On April 16, 2003,  the Company sold a  Seventy-five  (75%) interest in
our wholly owned subsidiaries,  Reef  International,  L.L.C. and Reef Marketing,
L.L.C.   for   $1,960,867.   The  L.L.C.   interests  were  acquired  by  Impact
International,  L.L.C. (99% of the 75%) and Coahuila Pipeline, L.L.C. (1% of the
75%).  Immediately after the transactions,  Tidelands,  Impact International and
Coahuila  transferred  their respective  interests in both Reef L.L.C.'s to Reef
Ventures,  L.P., a Texas limited partnership.  Tidelands retained a 25% interest
in Reef  Ventures,  L.P.  Reef  International,  L.L.C.  is the  holder of United
States, Texas permits for the construction, ownership, operation and maintenance
of a twelve (12")  pipeline and a six (6") liquids line  (together  with loading
and unloading facilities) from Eagle Pass, Texas to Piedras Negras, Mexico. Reef
Marketing, L.L.C. was organized for the marketing,  gathering and transportation
of natural gas and natural gas liquids from Eagle Pass, Texas to Piedras Negras,
Mexico.



                                      -13-
<PAGE>

         Impact  International  LLC and  Coahuila  Pipeline LLC fully funded the
capital  required  for  construction  of the Reef  Ventures,  L.P.  natural  gas
pipeline and related metering facilities.  Full operation of these assets by the
partnership  began on  November  1,  2003.  Under the  terms of the  partnership
agreement,  no income or loss is allocable to Tidelands Oil & Gas  Corporation's
25% limited  partnership  interest  until such time as Impact and Coahuila  have
recovered 150% of their capital contributions.  Additionally,  Impact has agreed
to  finance  the  construction  of the 6 inch  propane/butane  liquids  pipeline
subject to the negotiation and execution of definitive  agreements.  The liquids
pipeline financial commitment is $2,723,226. Impact's total financial commitment
to Tidelands regarding the sale of the Reef interests and pipeline  construction
is not to exceed $8,000,000.

         As  disclosed  above in Note 5 -  Subsequent  Events  of the  Condensed
Consolidated Financial Statements for the three months ended March 31, 2004, the
Company has entered into a Letter of Intent to purchase  all of the  partnership
interests held by Impact International LLC and Coahuila Pipeline LLC in the Reef
Ventures,  L.P.  partnership.  The  Company  would  also  restructure  the Stock
Purchase  Warrant  agreement  as  described  above.   Management  expects  these
transactions  to be  completed on or before May 28, 2004.  When  completed,  the
transactions  would result in the Company owning 98% of the Reef Ventures,  L.P.
business  activities  which include the currently  operating 12 inch natural gas
pipeline  crossing and the future 6 inch LPG  pipeline  crossing  between  Eagle
Pass, TX and Piedras Negras,  Coahuila.  Management believes this acquisition to
be of strategic  importance to the Company due to the  potential for  meaningful
increases in volumes  transported through the natural gas pipeline to additional
markets in Coahuila  and the cost and  efficiency  of  substitution  of pipeline
transport  for truck  transport  with  respect to the existing LPG demand in the
Coahuila market area. This acquisition  will allow these business  opportunities
to be more fully realized by the Company as they occur.

         The Company  continues with feasibility  studies for the development of
an underground natural gas storage facility near Reynosa, Tamaulipas pursuant to
the existing  Memorandum of Understanging  with PEMEX.  Chronic  underfunding of
investment in midstream  energy  projects and increasing  demand for natural gas
have  created a need for a  storage  facility  which can cover  receipt/delivery
balancing  needs and efficient  interconnection  with major gas  pipelines.  The
Company's   planned  project  includes  an  underground   storage  facility  and
interconnections  between the  existing  and planned  natural gas  pipeline  and
processing infrastructure.  Management believes the project has the potential to
evolve into a market center (hub) for natural gas in Northern Mexico.

RESULTS OF OPERATIONS

REVENUES:

         The Company  reported  revenues of $0 for the three  months ended March
31, 2004 as compared  with  revenues of $5,265 for the three  months ended March
31,  2003.  The revenue  reductions  were due to the  elimination  of  providing
administrative services related to processing of proceeds from natural gas sales
for a third party.

TOTAL COSTS AND EXPENSES:

         Total costs and expenses  increased  from $312,548 for the three months
ended March 31, 2003 to $1,538,208 for the three months ended March 31, 2004.


                                      -14-
<PAGE>

OPERATING  EXPENSES:

         (Gas Processing Plant) Operating expenses decreased from $5,425 for the
three  months  ended March 31, 2003 to $0 for the three  months  ended March 31,
2004 due to the temporary closing of our Gas Processing Plant.

SELLING, GENERAL AND ADMINSTRATIVE EXPENSES:

         Selling, general and administrative expense increased from $195,792 for
the three months ended March 31, 2003 to  $1,319,601  for the three months ended
March 31,  2004.  The  increase of  $1,123,809  was  primarily  due to increased
consulting fees.

INCOME TAX:

         The pretax loss  increased  from  ($307,283) for the three months ended
March 31, 2003 to  ($1,534,341)  for the three months  ended March 31, 2004,  an
increased loss of $1,227,058.

LIQUIDITY AND CAPITAL RESOURCES:

         Capital  expenditures  during the three  months  ended  March 31,  2004
totaled  $140,258 as compared  with $92,789 for the three months ended March 31,
2003. The increase of $47,469 consists of 2004 pre-construction costs related to
our  proposed  underground  storage  facility  to be built for  PEMEX,  Mexico's
state-owned  petroleum  company,  as  compared  to 2003  pre-construction  costs
incurred for our international pipeline crossings to Mexico.

         Total debt decreased  from  $1,138,905 at December 31, 2003 to $333,811
at March  31,  2004.  Total  debt as of March 31,  2004 and  December  31,  2003
expressed as a percentage of the sum of total debt and shareholders'  equity was
6.72% and 70.2% respectively.

         Net loss for the three months ended March 31, 2004 was  ($1,534,341) an
increase of 499.33% from the net loss of  ($307,283)  for the three months ended
March 31, 2003. Diluted net loss per common share increased 300% to ($0.03). The
net loss per  share  calculation  for the three  months  ended  March  31,  2004
included an increase in actual and equivalent shares outstanding.

         As  detailed   above,   the  Company  has   experienced  a  significant
improvement  with respect to its  financial  condition in the past three months.
Improvement  in the ability to fund ongoing  operations  has also  occurred as a
result of actions  taken in the three months  ended March 31, 2004.  At December
31, 2003, the Company had received  $1,000,000 of the  $5,000,000  total funding
commitment with respect to the private placement of 3,303,618  restricted common
shares with Margaux Investment  Management Group, S.A. On February 11, 2004, the
Company  received  the final  disbursement  of funds  which  fulfilled  the full
$5,000,000   commitment  plus  an   oversubscription   of  $83,335.   Management
anticipates that sufficient  liquidity and capital resources  currently exist to
fund our  operations  with respect to recurring  operating  expenses and project
pre-construction  expenditures for planned projects in the upcoming fiscal year,
however, additional borrowing and, or sale of additional shares of stock will be
necessary to fund actual  construction  of newly  planned  projects  such as the
Burgos Gas Storage facility which is currently in the pre-construction  phase of
development.  Management  expects that financing for the  construction  costs of
this project will be available  in the form of a  conventional  project  finance
structure,  - i.e.- a construction  loan followed with term debt. Other projects
currently in the feasibility  study phase would likely utilize similar financing
structures.  Until the various  projects  are  constructed  and  operating,  the
Company  does not  expect  to  receive  significant  revenues  and must  rely on
existing cash resources and future borrowings and/or equity issuance. Management
believes that market forces continue to emerge and justify the Company's efforts
to provide midstream energy projects for the cross-border and Mexico natural gas
marketplace   and  the   Company's   efforts  will  continue  to  address  these
opportunities in the future.



                                      -15-
<PAGE>

         Management  believes that the financial  effect of the proposed buy-out
of the Impact  International  LLC and Coahuila  Pipeline  LLC  interests in Reef
Ventures,  L.P.  will be  affordable  due to a cap  limitation  of required cash
payments  from the Company to the Sellers in the amount of existing  project net
cash flow during the term of the purchase money note. Similarly, the opportunity
to offset the Stock Warrant  Purchase note owed the Company against the purchase
money note for the acquisition of the Impact/Coahuila partnership interests will
limit the effective  total purchase price for the natural gas pipeline  crossing
to an acceptable level.

FORWARD-LOOKING STATEMENTS:

         We have included  forward-looking  statements in this report.  For this
purpose,  any  statements  contained in this report that are not  statements  of
historical fact may be deemed to be forward looking statements. Without limiting
the foregoing, words such as "may", "will", "expect",  "believe",  "anticipate",
"estimate",  "plan" or "continue" or the negative or other variations thereof or
comparable  terminology  are  intended to identify  forward-looking  statements.
These statements by their nature involve  substantial  risks and  uncertainties,
and actual  results  may differ  materially  depending  on a variety of factors.
Factors that might cause  forward-looking  statements to differ  materially from
actual  results  include,  among other  things,  overall  economic  and business
conditions,  demand  for the  Company's  products,  competitive  factors  in the
industries  in which we compete or intend to compete,  natural gas  availability
and cost and timing,  impact and other  uncertainties of our future  acquisition
plans.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

         The Company does not issue or invest in financial  instruments or their
derivatives for trading or speculative  purposes.  The operations of the Company
are conducted  primarily in the United States,  and, are not subject to material
foreign  currency  exchange risk.  Although the Company has outstanding debt and
related  interest  expense,  market risk of interest rate exposure in the United
States is currently not material.

Item 3.     Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

         Within the 90 days prior to the date of this  Quarterly  Report for the
period ended March 31, 2004, we carried out an evaluation, under the supervision
and with the participation of our management,  including the Company's  Chairman
and  Chief  Executive   Officer  and  the  Chief  Financial   Officer,   of  the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  pursuant to Rule 13a-14 of the Securities  Exchange Act of 1934 (the
"Exchange Act"), which disclosure controls and procedures are designed to insure
that  information  required to be  disclosed by a company in the reports that it
files under the  Exchange Act is recorded,  processed,  summarized  and reported
within required time periods specified by the SEC's rules and forms.  Based upon
that evaluation, the Chairman and the Chief Financial Officer concluded that our
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating  to the  Company  required to be included in the
Company's period SEC filings.

(b) Changes in Internal Control.

         Subsequent to the date of such  evaluation as described in subparagraph
(a)above,  there were no significant  changes in our internal  controls or other
factors that could significantly affect these controls, including any corrective
action with regard to significant deficiencies and material weaknesses.


                                      -16-
<PAGE>

                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

         No material changes in previously reported legal proceedings.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

         During the first  quarter of 2004 the Company  authorized,  offered and
sold the  following  securities  pursuant to  exemptions  from the  registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").

         During  January  and  February  2004,  we  authorized  the  issuance of
2,722,223 common shares two foreign investors for $4,083,335.

         On January 8, 2004, we authorized the issuance of 300,000 common shares
to Carl Hessel for services valued at $450,000.

         On January 8, 2004, we authorized the issuance of 300,000 common shares
to Stanley Merdinger for services valued at $450,000.

         On January 8, 2004, we authorized the issuance of 400,000 common shares
to Milo Resources for consulting services valued at $600,000.

         On January 8, 2004, we authorized  the issuance of 75,000 common shares
to Jerome Tannenbaum and Elizabeth Tannenbaum in payment of a $75,000 promissory
note, including $38,311 of accrued interest.

         We believe the shares issued above were issued in private  transactions
pursuant  to  Section  4(2) of the  Securities  Act of 1933,  as  amended,  (the
"Securities Act"). These shares are considered restricted securities and may not
be publicly resold unless  registered for resale with  appropriate  governmental
agencies or unless exempt from any applicable registration requirements.

Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         No matter was submitted to a vote of the security holders,  through the
solicitation  of proxies or  otherwise,  during the first  quarter of the fiscal
year covered by this report.

Item 5.  Other Information

         On January  28,  2004,  Carl M.  Hessel was  appointed  to our Board of
Directors to fill the vacancy created when Royis Ward resigned.

Item 6.  Exhibits and Reports on Form 8-K

a)       Exhibits

      Exhibit No.                       Exhibit Name

         31.1              Chief  Executive  Officer-Section  302  Certification
                           pursuant to Sarbane-Oxley Act.
         31.2              Chief Financial  Officer-  Section 302  Certification
                           pursuant to Sarbane-Oxley Act.
         32.1              Chief  Executive  Officer-Section  906  Certification
                           pursuant to Sarbane-Oxley Act.
         32.2              Chief Financial  Officer-  Section 906  Certification
                           pursuant to Sarbane-Oxley Act.

(b)      Reports  on Form 8-K.  During  the first  quarter  of 2004 we filed one
Current  Report on Form 8-K on February 11, 2004  reporting  under Item 5, Other
Events.



                                      -17-

<PAGE>

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                                       TIDELANDS OIL & GAS CORP.

                                                        /s/ Michael Ward
Dated: May 14, 2004                                    -------------------------
                                                       By: Michael Ward
                                                       Title: President, CEO


                                                        /s/ James Smith
Dated: May 14, 2004                                    -------------------------
                                                       By: James Smith
                                                       Title: CFO
































                                      -18-