EXHIBIT 99.2

                          DIRECTOR SEPARATION AGREEMENT


November 7, 2006



F. Gardner Parker
3601 Piping Rock
Houston, Texas 77027

Re:  Director Separation Agreement

Dear Mr. Parker:

In connection with your  resignation from the Board of Directors of Blue Dolphin
Energy Company (the "Company"),  the Board has agreed to your request to be paid
director  compensation  as if you had  continued  to be a  member  of the  Board
through  May  15,  2007,  the  estimated  date  of  the  Company's  next  Annual
Stockholders'  Meeting.  Based on such an  arrangement,  you would have received
three payments of $3,000 each in connection  with meetings on November 15, 2006,
February 15, 2007 and May 15, 2007.

In order to reduce the future  administrative  burden of these payments, a check
in the amount of $9,000, which represents the total of the future payments, will
be mailed to you within 10 days of the effective date of your resignation.

With kind regards,


/s/ IVAR SIEM
- ----------------------------------
Ivar Siem
Chairman and CEO

IS/jmh

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                            ACKNOWLEDGMENT OF RECEIPT

I hereby  acknowledge  receipt of the  Company's  letter dated  November 7, 2006
regarding the Director Separation Agreement.

/s/ F GARDNER PARKER                         11/14/06
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Signature                                    Date