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                    VALERO ENERGY CORPORATION

             NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

           Amended and Restated as of November 21, 1996

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             NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN


  1.     Purpose.  The Non-Employee Director Stock Option Plan (the "Plan") of
Valero Energy Corporation, a Delaware corporation (the "Company"), is for the
benefit of members of the board of directors of the Company who, at the time
of their service, are not employees of the Company or any of its subsidiaries
("Non-Employee Directors"), but are persons who have made or are expected to
make a significant contribution to the continued growth of the Company by
providing them with an additional incentive through an increase in their
proprietary interest in the success of the Company-thereby encouraging them to
continue in their present capacity.

  2.     Administration.  (a)  Except as otherwise set forth herein, the Plan
shall be administered by the Compensation Committee ( "Committee ") as
appointed and constituted from time to time by the Board.  If the Committee is
not composed solely of two or more  Non-Employee Directors " (as defined in
Rule 16b-3 under the Exchange Act) of the Company, then such additional or
different persons shall be appointed by the Board of Directors to act for
purposes of administering this Plan so that the committee administering this
Plan shall be composed solely of two or more  Non-Employee Directors. "

  (b)    In connection with its administration of this Plan, the Committee is
empowered to:

  (i)    Make rules and regulations for the administration of the Plan which
are not inconsistent with the terms and provisions of this Plan;

  (ii)   Construe all terms, provisions, conditions and limitations of the
Plan in good faith, and adopt amendments to the Plan;

  (iii)  Make equitable adjustments for any mistakes or errors in the
administration of this Plan or deemed to be necessary as the result of any
unusual situation or any ambiguity in the Plan;

  (iv)   Select, employ and compensate, from time to time, consultants,
accountants, attorneys and other agents and employees as the Committee may
deem necessary or advisable for the proper and efficient administration of the
Plan.

  (c)    The foregoing list of express powers granted to the Committee upon
the adoption of this Plan is not necessarily intended to be either complete or
exclusive, and the Committee shall, in addition to the specific powers granted
by this Plan, have such powers not inconsistent with the Plan or Rule 16b-3,
whether or not expressly authorized herein, which it may deem necessary,
desirable, advisable, proper, convenient or appropriate for the supervision
and administration of this Plan.  Except as otherwise specifically provided
herein , the decisions and judgment of the Committee on any question or claim
arising hereunder shall be final, binding and conclusive upon the Participants
and all persons claiming by, through or under a Participant.

  (d)    Notwithstanding the foregoing, the Committee shall have no authority
to exercise discretion with respect to the selection of any Non-Employee
Director as a Participant in the Plan, the determination of the number of
options ( "Options ") that are allocated to any such Non-Employee Director or
the terms or conditions of any such allocation, and shall have no authority to
amend any provision of the Plan relating to eligibility for participation in
the Plan, the amount or timing of grants under the Plan or the imposition or
removal of restrictions on the vesting of Options.

  3.     Option Shares.  The stock subject to the Options and other provisions
of the Plan shall be shares of the Company's Common Stock, $1.00 par value
(the "Common Stock").  The total amount of the Common Stock with respect to
which Options may be granted shall not exceed in the aggregate 100,000 shares. 
The class and aggregate number of shares which may be subject to the Options
granted under this Plan shall be subject to adjustment under Section 15.  The
shares issued upon the exercise of Options may be treasury shares or
authorized but unissued shares.  If an outstanding Option expires or is
terminated for any reason, the shares of Common Stock allocable to the
unexercised portion of that Option may again be subject to an Option under the
Plan.

  4.     Grant of Options.  

  (a)    Directors on the Effective Date of this Plan.

  (i)  Subject to the provisions of Section 19 hereof, there shall be granted
to each person who is a Non-Employee Director upon the effective date of this
Plan an Option to purchase 6,000 shares of Common Stock at a per share Option
Price equal to the fair market value (as defined in section 6 below) of a
share of Common Stock on such date.

  (ii)  For so long as this Plan is in effect and shares are available for the
grant of Options hereunder, on the date of the annual meeting of directors
each year beginning in 1996 (the "Annual Meeting"), there shall be granted to
each person who is a Non-Employee Director on the effective date of this Plan
and on the date of such Annual Meeting, an Option to purchase 1,000 shares of
Common Stock at a per share Option Price equal to the fair market value of a
share of the Company's Common Stock on such date (such number of shares being
subject to the adjustments provided in Section 15 of this Plan).

  (b)  Directors Elected after the Effective Date of this Plan.

  (i)  Subject to the provisions of Section 19, for so long as this Plan is in
effect and shares are available for the grant of Options hereunder, each
person who shall first become a Non-Employee Director after the effective date
of this Plan shall be granted, on the date of his or her election, an Option
to purchase 5,000 shares of Common Stock at a per share Option Price equal to
the fair market value of a share of Common Stock on such date (such number of
shares being subject to the adjustments provided in Section 15 of this Plan).

  (ii)  For so long as this Plan is in effect and shares are available for the
grant of Options hereunder, at the Annual Meeting each year beginning in the
year after the year of his or her first election as a Non-Employee Director,
there shall be granted to each person who shall become a Non-Employee Director
after the effective date of this Plan, and is a Non-Employee Director on the
date of such Annual Meeting, an Option to purchase 1,000 shares of Common
Stock at a per share Option Price equal to the fair market value of a share of
Common Stock on such date (such number of shares being subject to the
adjustments provided in Section 15 of this Plan).

  5.     Eligibility.  The individuals who shall be eligible to participate in
the Plan shall be those individuals who are members of the Board of Directors
of the Company who, at the time of a grant hereunder, are not employees of the
Company or an Affiliate (as defined in Section 11 below).  An
employee-director who retires from employment with the Company or an Affiliate
shall be (without further action by the Committee) eligible to participate in
the Plan and shall be entitled to receive the Option grants described in
Section 4(b) immediately upon commencement of his or her service as a
Non-Employee Director.

  6.     Option Price.  The price at which a share subject to an Option may be
purchased pursuant to an Option granted under this Plan (the "Option Price")
shall be its Fair Market Value on the date the Option is granted.  The Fair
Market Value of a share of Common Stock shall be the average of the  "high "
and  "low " sales prices of a share of Common Stock on that date as reported
by the principal national securities exchange on which the Common Stock is
listed if the Common Stock is listed on a national securities exchange, or the
average of the bid and asked price of a share of Common Stock on that date as
reported in the NASDAQ listing if the Common Stock is not listed on a national
securities exchange.  If no closing price or quotes are reported on that date
or if, in the discretion of the Committee, another means of determining the
Fair Market Value of a share of stock on that date is necessary or advisable,
the Committee may provide for another means for determining the Fair Market
Value.

  7.     Duration of Options.  No Option shall be exercisable after the
expiration of 10 years from the date the Option is granted.

  8.     Amount Exercisable.  

  8A.   All initial Options granted pursuant to Sections 4(a)(i) and 4(b)(i)
shall vest and become exercisable as follows:

  (a)    On the first anniversary of the date the Option was granted (the
"Date of Grant"), the Option may be exercised with respect to up to one-third
of the shares subject to the Option; 

  (b)    After each succeeding anniversary of the Date of Grant, the Option
may be exercised with respect to up to an additional one-third of the shares
subject to the Option, so that after the expiration of the third anniversary
of the Date of Grant the Option shall be exercisable in full; and

  (c)    The provisions of clauses (a) and (b) notwithstanding, no Options
shall be exercisable prior to six months following the date on which this Plan
is approved by the stockholders of the Company.

  8B.   Each subsequent Option granted pursuant to Sections 4(a)(ii) and
4(b)(ii) may be exercised, so long as it is valid and outstanding, from time
to time in part or as a whole, after the expiration of six months following
the date of grant. 

  8C.   Notwithstanding the preceding provisions of this Section 8, if a
Non-Employee Director shall be retired in good standing from the Board of
Directors for reason of age or disability under the then established rules of
the Company, all Options not already vested shall become fully vested and
immediately exercisable by the retiring Non-Employee Director.

  8D.   (a)   In the event of any Change of Control, the Chief Executive
Officer of the Company may on or before the date of the event constituting a
Change of Control, file with the Corporate Secretary of the Company a written
notice (the  "Nonacceleration Notice ") signed by the officer stating that the
Change of Control shall not result in the acceleration of Options granted
under the Plan to the Participants identified in the notice (or held by
persons claiming by, through or under such Participants).  The Nonacceleration
Notice may be filed with respect to all Options granted under the Plan or with
respect to Options granted to Participants specified in the notice (each
Participant referred to by name or generically in a Nonacceleration Notice,
together with each person claiming by, through or under such Participant, is
hereinafter referred to as a  "Nonaccelerated Person ").  Notwithstanding any
other provision of this Plan, each Option granted under this Plan, not
theretofore forfeited or terminated and held as of the date of a Change of
Control by a Director who as of such date is not a Nonaccelerated Person shall
upon occurrence of the Change of Control immediately become vested or
exercisable with respect to all of the shares granted thereunder and will
remain exercisable for the remainder of the original term of the Option.

  (b)    A "Change of Control" shall be deemed to occur when:

    (i)  the shareholders of the Company approve any agreement or transaction
pursuant to which:  (A) the Company will merge or consolidate with any other
Person (other than a wholly owned subsidiary of the Company) and will not be
the surviving entity (or survives only as the subsidiary of another entity);
(B) the Company will sell all or substantially all of its assets to any other
person (other than a wholly owned subsidiary of the Company); (C) the Company
will be liquidated or dissolved; 

    (ii) any  "person " or  "group " (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act) other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or its subsidiaries, or any
entity holding shares for or pursuant to the terms of those employee benefits
plans, is or becomes an  "Acquiring Person " as defined in that certain Rights
Agreement, dated October 26, 1995 ( "Rights Agreement "), between the Company
and Harris Trust and Savings Bank (or any successor Rights Agreement).

    (iii)     any  "person " or  "group " (as such terms are used above) shall
commence a tender offer or exchange offer for 30% or more of the shares then
outstanding, or for any number or amount of shares which, if the tender or
exchange offer were to be fully subscribed and all shares for which the tender
or exchange offer is made were to be purchased or exchanged pursuant to the
offer, would result in the acquiring person or group directly or indirectly
beneficially owning 50% or more of the Shares then outstanding; or

    (iv) as a result of or in connection with a contested election of
directors, a number of directors equal to a majority of the Board before the
election cease to be members of the Board.

  9.     Exercise of Options.

  (a)    Unless otherwise prescribed by the Committee, Options may be
exercised only by written notice of exercise (the  "Exercise Notice "), in the
form prescribed by the Committee, delivered to the Company to the Stock Option
Plan administrator, and signed by the Participant or other person acting on
behalf of the Participant.  The date on which the Exercise Notice is delivered
to the Company shall be the  "Notice Date. "  The Exercise Notice shall
specify a date (the  "Settlement Date "), not less than five business days nor
more than ten business days following the Notice Date, upon which the shares
or other rights shall be issued or transferred to the Participant (or other
person entitled to exercise the Option) and the Option 's exercise price shall
be paid to the Company.

  (b)    Unless otherwise prescribed by the Committee, on the Settlement Date,
the person exercising an Option shall tender to the Company full payment for
the shares or other rights with respect to which the Award is exercised,
together with an additional amount, in cash, certified check, cashier 's check
or bank draft approved by the Company, equal to the amount of any taxes
required to be collected or withheld by the Company in connection with the
exercise of the Option (the  "Tax Payment ").

  (c)    Subject to any rules and limitations as the Committee may adopt, a
person exercising an Option may make the Tax Payment in whole or in part by
electing, at or before this time of exercise of the Option, either (i) to have
the Company withhold from the number of shares otherwise deliverable a number
of shares whose Fair Market Value equals the Tax Payment, or (ii) to deliver
certificates for other shares owned by the person exercising the Option,
endorsed in blank with appropriate signature guarantee, having a Fair Market
Value equal to the amount otherwise to be collected or withheld.  If the
Committee shall fail to disapprove the election prior to the Settlement Date,
the election will be deemed approved.

  (d)    Subject to any rules and limitations as the Committee may adopt, a
person exercising an Option for the receipt of shares may pay for the shares
by tendering to the Company other shares of Company Common Stock legally and
beneficially owned by that person at the time of the exercise of the Options. 
This method of exercise may include use of a procedure whereby a person
exercising an Option may request that shares received upon exercise of a
portion of an Option be automatically applied to satisfy the exercise price
for additional and increasingly larger portions of the Option.  The
certificate(s) representing any shares tendered in payment of an Option 's
exercise price must be accompanied by a stock power duly executed with
appropriate signature guarantees.  The Committee may, in its sole discretion,
refuse any tender of shares in which case the Company shall promptly redeliver
the shares to the person exercising the Option and notify the person of the
refusal as soon as practicable.  In this event, the person may either (i)
tender to the Company on the Settlement Date the cash amount required to pay
for the Option shares, or (ii) rescind the Exercise Notice.  If the person
elects to rescind his or her Exercise Notice, the person may again (subject to
the other terms of this Plan) deliver an Exercise Notice with respect to the
Option at any time prior to its expiration date.

  (e)    Any calculation with respect to a participant 's income, required tax
withholding or other matters required to be made by the Company upon the
exercise of an Option shall be made using the Fair Market Value of the shares
on the Notice Date, whether or not the Exercise Notice is delivered to the
Company before or after the close of trading on that date, unless otherwise
specified by the Committee.

  10.    Transferability of Options.  Without prior written approval from the
Committee, Options shall not be transferable by the optionee except by will or
under the laws of descent and distribution, and shall be exercisable, during
the optionee's lifetime, only by the optionee.

  11.    Forfeitures.  Notwithstanding any other provision of this Plan, if
the Committee finds by a majority vote, that the optionee, before or after
termination of his capacity as a Non-Employee Director of the Company or any
subsidiary corporation, limited partnership or other entity controlling, or
controlled by, or under common control with the Company (an "Affiliate "),
committed fraud, embezzlement, theft, commission of felony, or proven
dishonesty in the course of his relationship to the Company and/or its
Affiliates which conduct damaged the Company or its Affiliates, or disclosed
trade secrets of the Company or its Affiliates, then any outstanding Options
which have not been exercised by optionee shall be forfeited.  The decision of
the Committee will be final.

  12.    Requirements of Law.  The Company shall not be required to sell or
issue any shares under any Option if issuing the shares shall constitute a
violation by the optionee or the Company of any provisions of any law or
regulation of any governmental authority.  Each Option granted under this Plan
shall be subject to the requirements that, if at any time the Company or the
Committee shall determine that the listing, registration or qualification of
the shares upon any securities exchange or under any state or federal law of
the United states or of any other country or governmental subdivision, or the
consent or approval of any governmental regulatory body, or investment or
other representations, are necessary or desirable in connection with the issue
or purchase of shares subject to an Option, that Option shall not be exercised
in whole or in part unless the listing, registration, qualification, consent,
approval or representations shall have been effected or obtained free of any
conditions not acceptable to the Company.  Any determination in this
connection by the Committee shall be final.  If the shares issuable on
exercise of an Option are not registered under the Securities Act of 1933, the
Company may imprint on the certificate for those shares the following legend
or any other legend which counsel for the Company considers necessary or
advisable to comply with the Securities Act of 1933 or other applicable state
or federal securities laws or regulations:

  "The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of
any state and may not be sold or transferred except upon registration or upon
receipt by the Company of an opinion of counsel satisfactory to the Company,
in form and substance satisfactory to the Company, that registration is not
required for a sale or transfer."

The Company shall endeavor to register any securities covered by this Plan
under the Securities Act of 1933 (as now in effect or as later amended) and,
if any shares are registered, the Company may remove any legend on
certificates representing those shares.  The Company shall not be obligated to
take any other affirmative action in order to cause the exercise of an Option
or the issuance of shares under the Option to comply with any law or
regulation or any governmental authority.

  13.    No Rights as Stockholder.  No optionee shall have rights as a
stockholder with respect to shares covered by his Option until the date a
stock certificate is issued for the shares.  Except as provided in Section 15,
no adjustment for dividends, or other matters shall be made if the record date
is prior to the date the certificate is issued.

  14.    No Obligation to Retain Optionee.  The granting of any Option shall
not impose upon the Company or any of its subsidiaries any obligation to
retain or continue to retain any optionee in his capacity as a Non-Employee
Director.  The right of the Company, the directors or the stockholders of the
Company or of any subsidiary of the Company to terminate any optionee shall
not be diminished or affected by reason of the fact that one or more Options
have been or will be granted to him.

  15.    Changes in the Company's Capital Structure.  The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalization, reorganization or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of
or affecting the Common Stock or the rights of the Common Stock, or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

  If all or any portion of an Option is exercised subsequent to any stock
dividend, rights distribution, split-up, recapitalization, exchange of shares,
merger, spin-off, reorganization or liquidation ("Reorganization Event"), as a
result of which securities of any class or rights shall be issued in respect
of outstanding shares of Common Stock or shares of Common Stock shall be
changed into the same or a different number of shares of the same or another
class of other securities, the person so exercising such Option shall receive,
for the aggregate price payable upon the exercise of such Option, (i) the
aggregate number and class of shares, rights or other securities for which a
recognized market exists, and (ii) a cash amount equal to the fair market
value on such date, as reasonably determined by the Committee, of any other
property (other than regular cash dividend payments) and of any shares, rights
or other securities for which no recognized market exists, which, if shares of
Common Stock (as authorized at the date of the granting of such Option) had
been purchased at the date of granting of the Option for the same aggregate
price (on the basis of the price per share provided in the Option) and had not
been disposed of, such person or persons would be holding at the time of such
exercise as a result of such purchase and any such Reorganization Event;
provided, however, that no fractional share of Common Stock, fractional right
or other fractional security shall be issued upon any such exercise, and the
aggregate price paid shall be appropriately reduced to reflect any fractional
share of Common Stock, fractional right or other fractional security not
issued; and provided further, however, that if the exercise of any Option
subsequent to any Reorganization Event would, pursuant to this Section 15,
require the delivery of shares, rights or other securities which the Company
is not then authorized to issue or which in the sole judgment of the Committee
cannot be issued without undue effort or expense, the person exercising such
Option shall receive, in lieu of such shares, rights or other securities, a
cash payment equal to the fair market value on the Exercise Date, as
reasonably determined by the Committee, of such shares, rights or other
securities.   For purposes of applying the provisions of this Plan, the
Preference Share Purchase Rights distributed to stockholders of record of the
Company on November 25, 1995, or any successor rights, shall be deemed not to
have been distributed until the Distribution Date (as defined in the Rights
Agreement or any successor agreement).

  In the event of any change in the number of shares of Common Stock
outstanding resulting from a Reorganization Event, the aggregate number and
class of shares of Common Stock remaining available to be optioned under this
Plan shall be that number and class which a person, to whom an Option had been
granted for all of the available shares of Common Stock under this Plan on the
date preceding such change as provided in Section 3 would be entitled to
receive upon exercise of such Option following such change.  Upon the
occurrence of any Reorganization Event, the Committee shall be entitled (but
shall not be required) to determine that new Option Agreements (or amendments
to the existing Option Agreements) shall be entered into with Participants
reflecting such stock dividend or other event.

  Except as expressly provided before in this Plan, the issue by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, for cash or property, or for labor or services either upon
direct sale or upon the exercise of rights or warrants to subscribe for
shares, or upon conversion of shares or obligations of the Company convertible
into shares or other securities, shall not affect, and no adjustment by reason
of it shall be made with respect to, the number or price of shares of Common
Stock then subject to outstanding Options.

  16.    Amendment or Termination of Plan.  The Board of Directors may modify,
revise or terminate this Plan at any time.  However, without the further
approval of the holders of at least a majority of the outstanding shares of
voting stock, or if the provisions of the corporate charter, by-laws or
applicable state law prescribe a greater degree of stockholder approval for
this action, without the degree of stockholder approval thus required, the
Board of Directors may not (a) change the aggregate number of shares which may
be issued under Options pursuant to the provisions of this Plan; (b) reduce
the Option Price permitted for options; (c) change the class of persons
eligible to receive options; (d) extend the term during which an Option may be
exercised or the termination date of the Plan; or (e) materially increase any
other benefits accruing to the Non-Employee Directors under the Plan or
materially modify the requirements as to eligibility for participation in the
Plan unless the Board of Directors shall have obtained an opinion of legal
counsel to the effect that stockholder approval of the amendment is not
required by law or the applicable rules and regulations of, or any agreement
with, any national security exchange on which the Common Stock is listed or if
the Common Stock is not listed, the rules and regulations of, or any agreement
with, the National Association of Securities Dealers, Inc., or in order to
make available to the optionee with respect to any Option granted under the
Plan, the benefits of Rule 16b-3 of the Rules and Regulations under the
Securities Exchange Act of 1934 or any similar or successor rule.  In
addition, the terms of the Plan relating to the number of shares that may be
subject to an Option, the times at which Options are to be granted, and the
means by which the Option Price for the Options granted is to be determined
shall not be amended more than once every six months, other than to comport
with the changes in the Internal Revenue Code of 1986, the Employee Retirement
Security Act or the rules under either of those laws.  All Options granted
under this Plan shall be subject to the terms and provisions of this Plan and
any amendment, modification or revision of this Plan shall be deemed to amend,
modify or revise all Options outstanding under this Plan at the time of the
amendment, modification or revision.

  17.    Written Agreement.  Each Option granted under this Plan shall be
embodied in a written option agreement, which shall be subject to the terms
and conditions prescribed above, and shall be signed by the optionee and by
the appropriate officer of the Company for and in the name and on behalf of
the Company.  Each option agreement shall contain any other provisions that
the Committee in its discretion shall deem advisable if they do not conflict
with the terms of this Plan.

  18.    Effective Date of Plan.  The Plan shall become effective and shall be
deemed to have been adopted on July 25, 1995.  No Options shall be granted
pursuant to the Plan after July 25, 2005.