Valero Energy Corporation
                  Executive Incentive Bonus Plan


        As Amended and Restated effective January 23, 1997

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                  EXECUTIVE INCENTIVE BONUS PLAN

                               Table of Contents

Section                                                                Page

I     Definitions........................................................1

II    Participation......................................................2

III   Bonus Determination................................................2

IV    Bonus Amounts......................................................2

V     Bonus Payouts......................................................3

VI    Administration.....................................................3

                           INTRODUCTION

     The Valero Energy Corporation Executive Incentive Bonus Plan (hereinafter
referred to as the "Plan") was established for the purpose of providing bonus
compensation to key employees of Valero Energy Corporation and its
subsidiaries (hereinafter collectively referred to as the "Company").  The
Company intends and desires to create individual performance incentive by
providing bonus compensation awards based upon individual contributions to
Company profitability by key employees.  Such bonus compensation is intended
to encourage levels of individual performance that will assure continued
Company profitability.  It is further intended that when added to other forms
of compensation the bonus compensation awards will result in total
compensation to key employees in amounts seen as competitive when Company
performance is compared to peer organizations.

                     SECTION I - Definitions

     The masculine gender, where appearing in the Plan will be deemed to
include the feminine gender and the singular may include the plural, unless
the context clearly indicates the contrary. 

     1.1  "Bonus Targets" shall mean the dollar value of an award established
to represent a normal or average bonus payment determined through survey
analysis.

     1.2  "Committee" shall mean the Compensation Committee who shall
administer the Plan.

     1.3  "Company" shall include Valero Energy Corporation and any Affiliated
Company.

     1.4  "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors of Valero Energy Corporation.

     1.5  "Fair Market Value" shall mean the average of the "high" and "low"
reported sales price per share of the Company's common stock as reported in
the New York Stock Exchange-Composite Transactions listing as of the relevant
measuring date, or if there are no sales on the New York Stock Exchange on
that measuring date, then as of the next following day on which there were
sales.

     1.6  "Key Employee(s)" shall mean any person employed by the Company
having responsibilities that impact Company operations and activities.

     1.7. "Participant" means an employee who is designated pursuant to
Section 2.1 as a participant in the Plan.

     1.8  "Peer Organizations" shall mean those entities, designated from time
to time, with which the Company competes for employee talent and/or business
markets.

     1.9  "Performance Measures" shall mean financial or operational
statistical indicators, designated from time to time, with which the level of
success of Company operations can be identified.

     1.10 "Salary Range Midpoints" shall mean the established dollar value,
adjusted from time to time, that represents the median of a range of dollar
values assigned to separately identifiable jobs within the Company through the
Company's adopted system of job evaluation and pricing.

                    SECTION II - Participation

     2.1  The Compensation Committee shall determine from recommendations
submitted by the Chief Executive Officer, from time to time, those key
employees of the company who are to be participants (Participants) in the
Plan.  Participants shall be restricted to key employees of the Company having
major responsibility for directing Company operations and activities.

     2.2  The Designation of employees of the Company as Participants under
the Plan shall be in the sole discretion of the Compensation Committee, and no
employee of the Company will have the right to require the Committee to make
him or her a Participant or to allow him or her to remain a Participant under
the Plan.

                SECTION III - Bonus Determination

     3.1  The Compensation Committee shall determine, based upon a review of
various Company financial, operational or other performance measures, the
suitability of the payment of bonuses.

          3.11 Company performance measures used by the Committee to determine
appropriateness of bonus payments will be selected by the Committee and may
vary from time to time.

          3.12 Selected Company performance measures may be compared to
similar measures of peer organizations or compared to past Company results.

          3.13 The Committee may approve the payment of bonuses when the
review of performance measures indicates Company operating results are at
levels that demonstrate improved or continued outstanding investment return to
stakeholders of the Company.

     3.2  Annual reviews of Company performance measures and a determination
of bonus payments shall be conducted by the Committee.

          3.21 The Committee may, from time to time, consider bonus payments
more frequently than annually in instances whereby outstanding individual
performance by key employee(s) warrant recognition.

     3.3  The Compensation Committee may declare and allocate, and the Company
may pay, bonuses prior to the end of the plan year based on the estimated or
expected financial performance of the Company for such plan year.

                    SECTION IV - Bonus Amounts

     4.1  The Compensation Committee shall establish bonus targets for various
positions within the Company relative to position accountability, job
knowledge, problem solving requirements, and reporting relationship.

          4.11 Each bonus target shall be calculated using a percent of the
established salary range midpoints of the positions occupied by participants.

          4.12 Percents used in calculating bonus targets shall be determined
through comparative analyses of bonuses paid to employees of peer
organizations who utilize similar compensation methodologies and through
analysis of the position hierarchy of the Company, so as to establish bonus
targets competitive with industry practice by job size.

     4.2  Established bonus targets will be used as guidelines by the Chief
Executive Officer of the Company to recommend, from time to time, incentive
bonus awards for key employees to the Committee.

          4.21 The established bonus target shall act as the norm for a range
of possible bonus awards.

          4.22 Based upon an evaluation of Company financial performance and
individual contribution to Company performance, the Chief Executive Officer of
the Company will determine if recommended bonus awards shall be less than,
equal to or greater than the established bonus target.

     4.3  Based upon recommendations furnished the Committee by the Chief
Executive Officer of the Company and results of Company performance measure
comparisons the Committee shall approve, delete or adjust recommended bonus
awards.

                    SECTION V - Bonus Payouts

     5.1  Payment of bonuses shall occur as soon as practicable after
Committee approval or on a date as directed by the Committee.

     5.2  Bonuses payable under the Plan shall be in the form of cash to be
paid in a single lump-sum or in part or in whole in common stock of the
Company.  

     5.3  With respect to Plan bonuses payable in part or in whole in shares
of common stock of the Company ("Shares"), a Participant may pay all or part
of the amount of any taxes required to be collected or withheld by the Company
upon payment of the Participant's bonus (the "Tax Payment") by electing,
before the time of payment of the bonus, to have the Company withhold from the
number of Shares otherwise deliverable under the bonus a number of Shares
having a Fair Market Value on the date of the bonus not exceeding the amount
of the Tax Payment.

     5.4  The Committee may approve the payment of bonuses to be deferred and
paid in whole at a later date or in installments over a period of time.  The
length of time of deferral or installment period will be determined at the
discretion of the Committee.

                   SECTION VI - Administration

     6.1  This Plan shall be administered by the Compensation Committee, as
appointed and constituted from time to time, by the Board of Directors of
Valero Energy Corporation, its successors or assigns, so long as the
Compensation Committee is composed solely of two or more "Non-Employee
Directors" (as defined in Rule 16b-3 under the Exchange Act).  In the event
the Compensation Committee shall fail to meet the foregoing criteria, then
additional or different persons shall be appointed by the Board of Directors
for purposes of administering this Plan so that the committee administering
this Plan shall be composed solely of two or more Non-Employee Directors.

     6.2  The Compensation Committee is empowered to:

          6.21 Make all determinations and computations concerning the amounts
to which any Participant or his beneficiary is entitled under the Plan;

          6.22 Determine all questions relating to the eligibility of
Participants;

          6.23 Make rules and regulations for the administration of the Plan
which are not inconsistent with the terms and provisions hereof;

          6.24 Construe all terms, provisions, conditions and limitations of
the Plan in good faith.  All such determinations shall be final and conclusive
on all parties at interest;

          6.25 Make equitable adjustments for any mistakes or errors in the
administration of the Plan during the Plan Year or the preceding Plan Year,
and all such actions or determinations made by the Compensation Committee in
good faith shall not be subject to review;

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

     6.3  The foregoing list of express powers is not intended to be either
complete or exclusive, but the Compensation Committee shall, in addition, have
such powers, whether or not expressly authorized, which it may deem necessary,
desirable, advisable or proper for the supervision and administration of the
Plan.  Except as otherwise specifically provided herein, the decision or
judgment of the Compensation Committee on any question arising hereunder in
connection with the exercise of any of its powers shall be final, binding and
conclusive upon all parties concerned.

     6.4  The Compensation Committee shall have the responsibility of
authorizing payment to each eligible Participant and directing that such
payment be disbursed by the Company.

     6.5  The Board of Directors may, at any time, amend or terminate the
Plan.  Such amendments or terminations may be made without the consent of the
Participants.