Document:

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                                                                    EXHIBIT 10.2

                                                             P&H DRAFT
                                                    For Discussion Purposes Only
                                                         September 10, 2004

                            __________________, 2004

Blue Dolphin Energy Company
801 Travis, Suite 2100
Houston, Texas 77002

Blue Dolphin Pipeline Company
801 Travis, Suite 2100
Houston, Texas 77002

Western Gulf Pipeline Partners, LP
(as Collateral Agent for certain Investors)
c/o Peregrine Management, LLC,
14701 St. Mary's Lane, Suite 800
Houston, Texas 77079

      Re:   The Deeds of Trust Referenced on Attached EXHIBIT A (collectively,
            and in each case as amended, restated or otherwise modified from
            time to time, the "DOCUMENTS")/Consent to Certain Liens

Ladies and Gentlemen:

      Reference is hereby made to the Documents. Pursuant to your request and
pursuant to Section 2.14 of each of the Deeds of Trust listed on attached
EXHIBIT A, Tetra Applied Technologies, Inc. ("TETRA"), hereby (a) consents to
permit Blue Dolphin Pipe Line Company to enter into, and grant the liens and
security interests under, that certain Deed of Trust, Mortgage, Assignment of
Proceeds, Security Agreement and Financing Statement dated on or about the same
date as this letter to F. Gardner Parker, Trustee, for the benefit of Western
Gulf Pipeline Partners, LP, as Collateral Agent for certain Investors ("NEW
LENDER") covering the collateral described therein, and (b) agrees that the
execution and delivery of, and the granting of the liens and security interests
under, the foregoing Deeds of Trust shall not constitute a default under the
Documents.

      Nothing herein shall constitute an agreement, offer, or commitment by
Tetra to waive any other provision or covenant contained in the Documents.
Capitalized terms used herein without definition shall have the meanings given
to them in the Documents.

      Tetra does hereby certify, warrant and represent unto, and agrees with,
New Lender as follows:

      1.    Neither the Salvage Contract (as defined in the Documents) nor the
Documents have been modified or amended in any manner.

      2.    To the best knowledge and belief of Tetra, no uncured breaches or
defaults exist under the Salvage Contract or the Documents.

<PAGE>

      3.    The unpaid balance of the Salvage Contract on this date is $668,000.

      4.    The remaining payment schedule under the Salvage Contract is as set
forth in the letter from Blue Dolphin Exploration Company to Tetra dated August
18, 2004 attached hereto as Exhibit B.

      5.    To the best knowledge and belief of Tetra, no amount other than the
outstanding amount under the Salvage Contract is claimed to be owing or secured
by the Documents.

      THIS LETTER IS A DOCUMENT AND THIS LETTER AND THE OTHER DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

                                     TETRA:

                                     TETRA APPLIED TECHNOLOGIES, INC.

                                     By: ____________________________________
                                     Name:___________________________________
                                     Title:__________________________________

<PAGE>

                                    EXHIBIT A

                                   (DOCUMENTS)

1.    Deed of Trust, Mortgage, Assignment of Proceeds, Security Agreement and
      Financing Statement dated as of August 28, 2001, by Blue Dolphin Pipe Line
      Company to Geoffrey M. Hertel, Trustee, for the benefit of Lender, as
      recorded under Clerk's File Nos. 01-0329208 and 01-041607 in the Real
      Property Records of Brazoria County, Texas

2.    Deed of Trust, Mortgage, Assignment of Proceeds, Security Agreement and
      Financing Statement dated as of August 28, 2001, by Mission Energy, Inc.
      d/b/a MEI Mission Energy, Inc., to Geoffrey M. Hertel, Trustee, for the
      benefit of Lender as recorded under Clerk's File Nos. 01-0329207 and
      01-041606 in the Real Property Records of Brazoria County, Texas

3.    Deed of Trust, Mortgage, Assignment of Proceeds, Security Agreement and
      Financing Statement dated as of August 28, 2001, by Buccaneer Pipe Line
      Co., to Geoffrey M. Hertel, Trustee, for the benefit of Lender as recorded
      under Clerk's File Nos. 01-0329209 and 01-041608 in the Real Property
      Records of Brazoria County, Texas<PAGE>

                                  EXHIBIT 10.3

                              CONSULTING AGREEMENT

         This CONSULTING AGREEMENT (this "Agreement") is entered into effective
the 8th day of September, 2004 (the "Effective Date"), by and between BLUE
DOLPHIN SERVICES COMPANY, a Texas corporation (the "Company"), a wholly owned
subsidiary of Blue Dolphin Energy Company ("Blue Dolphin"), and F. GARDNER
PARKER, a resident of Harris County, Texas ("Consultant").

         WHEREAS, Consultant and Blue Dolphin are parties to that certain Note
and Warrant Purchase Agreement, dated as of September 8, 2004 (the "Purchase
Agreement"), which provides for the loan by Consultant and other investors of
certain amounts to Blue Dolphin and the acquisition by Consultant, and other
investors, of warrants of Blue Dolphin;

         WHEREAS, the Company desires Consultant to render to the Company
financial and other consulting services pending and following the execution of
the Purchase Agreement, and Consultant desires to provide such financial and
other consulting services to the Company, upon the terms and conditions hereof;

         NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

         1. Agreement to Retain. As of the Effective Date and upon the terms and
conditions hereinafter set forth, (a) the Company hereby retains Consultant as
an independent contractor to render services as a consultant as provided in this
Agreement and (b) Consultant hereby agrees to render such services to the
Company.

         2. Term. This Agreement shall terminate upon the earlier of (i)
eighteen (18) months from the Effective Date or (ii) the consummation of an
acquisition or merger. (hereinafter referred to as the "Services Period").

         3. Duties. Consultant shall, as an independent contractor, perform
financial consulting and other services as may be specifically requested by the
Company in writing from time to time, and which Consultant agrees to perform.
Consultant shall have control of the methods and manner in which Consultant
performs such services for the Company.

         4. Non-Exclusive Services. To the extent Consultant's activities are
not restricted by the performance of the duties required hereunder, Consultant
may during the Services Period take other employment and participate in other
business endeavors with any business not competing with the business of the
Company.

         5. Services Fee. In consideration for the performance of Consultant's
obligations hereunder, Consultant shall be entitled to receive a fee (the
"Services Fee") of $2,000.00 per month on the last day of the month, in arrears.
If Blue Dolphin completes an acquisition or merger of a sufficient magnitude to
have a material effect on the financial condition of Blue

<PAGE>

Dolphin, in the sole determination of the Audit Committee of Blue Dolphin,
during the Services Period (the "Acquisition"), Consultant shall be entitled to
an additional fee (the "Bonus Fee") of $3,000.00 per month which shall accrue
from the Effective Date and be payable when the Acquisition is completed by Blue
Dolphin.

         6. Taxes. Consultant shall pay all Taxes (as that term is hereinafter
defined) and agrees to indemnify the Company and hold the Company safe and
harmless from any and all Taxes. As used herein, the term "Taxes" shall mean all
taxes, assessments, charges or fees assessed or levied by any country,
government, or political subdivision of either (i) against Consultant
(including, without limitation, all income and self-employment taxes), (ii) on
account of the services provided or work produced hereunder, whether assessed or
levied against Consultant or the Company, (iii) on account of Consultant's
property or equipment, whether assessed or levied against Consultant or the
Company, and (iv) on account of any compensation paid or earned, or benefits
earned (if so provided for herein) hereunder. Consultant further agrees to
indemnify the Company and hold the Company safe and harmless from any and all
taxes, assessments, charges and fees assessed or levied against on or account of
wages, salaries, payments or benefits paid or earned by any assistants,
employees or agents of Consultant.

         7. Independent Contractor Status. It is understood and agreed that the
detailed manner and method of performing the duties of Consultant described
herein shall at all times be under the Consultant's control and direction. It is
understood and agreed that for purposes of this Agreement, Consultant is an
independent contractor. Consultant shall not be considered an employee or agent
of the Company. Consultant shall not be entitled to the benefits of an employee
of the Company, such as, but not limited to, workmen's compensation, group
insurance, vacation, pension and unemployment insurance. As an independent
contractor, Consultant assumes all legal contractual obligations arising out of
the performance of Consultant's duties, including without limitation, the
payment of all employment, compensation, insurance, old age benefits, social
security or other Taxes. The Company and Consultant do not intend for this
Agreement to establish any relationship between them as partners, joint
venturers, joint employers, or employees of each other.

         8. Notice. Any notice provided for or permitted to be given under this
Agreement by any party to the other party must be in writing, and may be served
by depositing same in the United States mail, addressed as provided below,
postage prepaid, by delivering the same in person to such party, or by
facsimile. Notice deposited in the mail in the manner described above shall be
deemed to have been given and received three business days after deposit in the
United States mail; notice given in any other manner shall be effective upon the
receipt thereof. For purposes of notice, the address of each of the parties
shall be as set forth opposite their respective names below, or such other
address as such party shall fix by notice in writing, given as provided herein,
the other party to this Agreement.

                                                                               2
<PAGE>

         If to the Company:

                           Blue Dolphin Services Company
                           801 Travis, Suite 2100
                           Houston, Texas  77002
                           Fax No. (713) 227-7626
                           Attention: Michael Jacobson, President

         If to Consultant:

                           F. Gardner Parker
                           3601 Piping Rock
                           Houston, Texas 77027
                           Fax No. (713) 963-0421

         9. Assignment. This Agreement is personal to Consultant, and Consultant
shall not have the right to assign any of Consultant's rights or delegate any of
Consultant's duties hereunder without the prior written consent of the Company.

         10. Survival. Sections 6 and 7 of this Agreement shall survive the
termination of the Services Period hereunder.

         11. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas, excluding any
conflicts of law rule or principle that might otherwise refer to the substantive
law of another jurisdiction. The Company and Consultant agree that the state and
federal courts in Harris County, Texas, shall have exclusive personal
jurisdiction and venue over the Company and Consultant to hear all disputes
arising under this Agreement. This Agreement is to be at least partially
performed in Harris County, Texas.

         12. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and Consultant with respect to the Consultant's provision of
services to the Company and supersedes all prior agreements and understandings,
whether written or oral, between them concerning the provisions of such
services.

         13. Waiver and Amendments; Cumulative Rights and Remedies. This
Agreement may be amended, modified or supplemented, and any obligation hereunder
may be waived, only by a written instrument executed by the parties hereto. The
waiver by either party of a breach of any provision of this Agreement shall not
operate as a waiver of any subsequent breach. No failure on the part of any
party to exercise, and no delay in exercising, any right or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right or remedy. All rights and remedies
hereunder are cumulative and are in addition to all other rights and remedies
provided by law, agreement or otherwise.

         14. Severability. In the event that any provision or provisions of this
Agreement are held to be invalid or unenforceable by any court of law or
otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid and enforceable as though the invalid or unenforceable
parts had not been included therein.

                                                                               3

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                          BLUE DOLPHIN SERVICES COMPANY

                                          By: /s/ Michael J. Jacobson
                                             -----------------------------------
                                             Michael Jacobson, President

                                                                       "COMPANY"

                                          /s/ F. Gardner Parker
                                          --------------------------------------
                                          F. Gardner Parker

                                                                    "CONSULTANT"

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