FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)

(X)     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934 For the fiscal year
                           ended December 31, 1998
                                       OR
(  )     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                           For the transition period from __________to _________

                        Commission File Number 001-12138
                                               ---------

                                PDV America, Inc.
             (Exact name of registrant as specified in its charter)

         Delaware                                                51-0297556
-------------------------------                             --------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                              750 Lexington Avenue
                            New York, New York 10022
               --------------------------------------------------
               (Address of principal executive offices, Zip Code)

        Registrant's telephone number, including area code (212) 753-5340
                                                           --------------

       Securities registered pursuant to Section 12(b) of the Securities
                             Exchange Act of 1934:


                                                       Name of Each Exchange
    Title of Each Class                                 on Which Registered
----------------------------------------   -------------------------------------
7-3/4% Senior Notes, Due 2000                      New York Stock Exchange, Inc.
7-7/8% Senior Notes, Due 2003                      New York Stock Exchange, Inc.

        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
                                      --
     Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K:
                                Not Applicable.

        Aggregate market value of the voting stock held by non-affiliates
                       of the registrant: Not Applicable.

     Number of shares of Common Stock outstanding as of March 1, 1999: 1,000

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


<PAGE>


                                Table of Contents

                                                                            Page
                                                                            ----

FACTORS AFFECTING FORWARD LOOKING STATEMENTS...................................1

                                     PART I
ITEMS 1. AND 2.  BUSINESS AND PROPERTIES.......................................1
ITEM 3.  LEGAL PROCEEDINGS....................................................17
ITEM 4.  SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS......................................................18

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
 ..............................................................................19
ITEM 6.  SELECTED FINANCIAL DATA..............................................19
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............................21
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........30
ITEM 8.  FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA............................................................33
ITEM 9.  CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................33

                                    PART III
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT.............................................................34
ITEM 11.  EXECUTIVE COMPENSATION..............................................34
ITEM 12.  SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................34
ITEM 13.  CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS..........................................................35

                                     PART IV
ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS AND
REPORTS ON FORM 8-K...........................................................38


                                        i

<PAGE>


                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

                  This Annual Report on Form 10-K contains certain "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Specifically, all statements under the captions "Items 1. and 2.
Business and Properties" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" relating to capital expenditures
and investments related to environmental compliance and strategic planning,
purchasing patterns of refined products and capital resources available to the
Companies (as defined herein) are forward looking statements. In addition, when
used in this document, the words "anticipate", "estimate", "prospect" and
similar expressions are used to identify forward looking statements. Such
statements are subject to certain risks and uncertainties, such as increased
inflation, continued access to capital markets and commercial bank financing on
favorable terms, increases in regulatory burdens, changes in prices or demand
for the Companies' products as a result of competitive actions or economic
factors and changes in the cost of crude oil, feedstocks, blending components or
refined products. Such statements are also subject to the risks of increased
costs in related technologies and such technologies producing anticipated
results. Should one or more of these risks or uncertainties, among others,
materialize, actual results may vary materially from those estimated,
anticipated or projected. Although PDV America, Inc. believes that the
expectations reflected by such forward looking statements are reasonable based
on information currently available to the Companies, no assurances can be given
that such expectations will prove to have been correct.

















<PAGE>


                                     PART I

                     ITEMS 1. AND 2. BUSINESS AND PROPERTIES

Overview

                  PDV America, Inc. ("PDV America" or the "Company" and,
together with its subsidiaries, the "Companies") was incorporated in 1986 in the
State of Delaware and is a wholly owned subsidiary, effective April 2, 1997, of
PDV Holding, Inc. ("PDV Holding"), a Delaware corporation. The Company's
ultimate parent is Petroleos de Venezuela, S.A. (together with one or more of
its subsidiaries, referred to herein as "PDVSA"), the national oil company of
the Republic of Venezuela. Through its wholly owned operating subsidiaries,
CITGO Petroleum Corporation ("CITGO") and PDV Midwest Refining L.L.C. ("PDVMR")
(see below), PDV America refines, markets and transports petroleum products,
including gasoline, diesel fuel, jet fuel, petrochemicals, lubricants, asphalt
and refined waxes, mainly within the continental United States east of the Rocky
Mountains.

                  Prior to May 1, 1997, the Company had a 50% interest in The
UNO-VEN Company ("UNO-VEN"), an Illinois general partnership. As of May 1, 1997,
pursuant to a Partnership Interest Retirement Agreement, certain UNO-VEN assets
were transferred to PDMVR. Accordingly, the Company's consolidated financial
statements reflect the equity in earnings of UNO-VEN through April 30, 1997
(Consolidated Financial Statements of PDV America - Note 8 of Item 14a), the
results of operations of PDVMR on a consolidated basis since May 1, 1997 and the
financial position of PDVMR at December 31, 1997 and 1998. See "--PDV Midwest
Refining, L.L.C."












<PAGE>


                  PDV America's aggregate net interest in rated crude oil
refining capacity is 858 thousand barrels per day ("MBPD"). The following table
shows the capacity of each U.S. refinery in which PDV America holds an interest
and PDV America's share of such capacity as of December 31, 1998.

                          PDV America Refining Capacity


<TABLE>
<CAPTION>
                                                                                                      Net PDV
                                                                                                      America
                                                                                       Total         Interest
                                                                                       Rated            in
                                                                                       Crude           Rated
                                                                    PDV America      Refining        Refining
                                                      Owner          Interest        Capacity        Capacity
                                                ----------------- ------------- --------------- -------------
                                                                       (%)            (MBPD)          (MBPD)
<S>                                             <C>                    <C>            <C>              <C>

Refinery Interests Held By PDV America
  as of December 31, 1998
  Lake Charles, LA                                    CITGO             100            320              320
  Corpus Christi, TX                                  CITGO             100            150              150
  Paulsboro, NJ                                       CITGO             100             84               84
  Savannah, GA                                        CITGO             100             28               28
  Houston, TX(1)                                 LYONDELL-CITGO          41            265              109
  Lemont, IL                                          PDVMR             100            167              167
                                                                                ----------       ----------
Total Rated Refining Capacity
    as of December 31, 1998                                                          1,014              858
                                                                                ==========       ==========


-------------------------
<FN>
(1)  The initial interest in LYONDELL-CITGO was acquired on July 1, 1993. CITGO's interest in LYONDELL-CITGO at
     December 31, 1998 approximates 41%. CITGO has a one-time option to increase, for an additional investment, its
     participation interest to 50%. This option may be exercised after January 1, 2000 but no later than September 30, 2000.
     See "--CITGO--Refining--LYONDELL-CITGO". See also "Factors Affecting Forward Looking Statements".
</FN>
</TABLE>










                                        2

<PAGE>


         The following table shows sales revenues and volumes of PDV America for
the three years in the period ended December 31, 1998.

                     PDV America Sales Revenues and Volumes


<TABLE>
<CAPTION>
                                           Year Ended December 31,                        Year Ended December 31,
                                 --------------------------------------------   --------------------------------------------
                                      1998           1997           1996             1998           1997           1996
                                 -------------- -------------- --------------   -------------- -------------- --------------
                                                ($ in millions)                                 (MM gallons)

<S>                                <C>            <C>            <C>                <C>            <C>            <C>
Gasoline                           $  6,252       $  7,754       $  7,451           13,241         11,953         11,308
Jet fuel                                828          1,183          1,489            1,919          2,000          2,346
Diesel/#2 fuel                        1,945          2,439          2,312            4,795          4,288          3,728
Asphalt                                 300            398            257              774            749            569
Petrochemicals and industrial
     products                           952          1,178            846            2,658          1,961          1,408
Lubricants and waxes                    441            467            426              230            239            220
                                   --------       --------       --------         --------       --------       --------
     Total refined product sales     10,718       $ 13,419       $ 12,781           23,617         21,190         19,579
Other sales                             242            203            171               --             --             --
                                   --------       --------       --------         --------       --------       --------
         Total sales               $ 10,960       $ 13,622       $ 12,952           23,617         21,190         19,579
                                   ========       ========       ========         ========       ========       ========
</TABLE>















                                        3

<PAGE>


                  The following table shows PDV America's aggregate interest in
refining capacity, refinery input and product yield for the three years in the
period ended December 31, 1998.


                         PDV America Refinery Production

<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
                                                  -------------------------------------------------------------------------------
                                                            1998(6)                  1997(2)(3)                1996(1)(4)
                                                  ------------------------  ---------------------------  ------------------------
                                                                      (MBPD, except as otherwise indicated)

<S>                                                  <C>          <C>           <C>           <C>          <C>           <C>
Rated Refining Capacity(5)                           858                        853                        683

Refinery Input
  Crude oil                                          763           82.8%        675            80.9%       561            81.2%
  Other feedstocks                                   159           17.2         159            19.1        130            18.8
                                                     ---          -----         ---           -----        ---           -----
   Total                                             922          100.0%        834           100.0%       691           100.0%
                                                     ===          =====         ===           =====        ===           =====


Product Yield
  Light fuels
       Gasoline                                      413           44.3%        381            45.3%       313            44.9%
       Jet Fuel                                       69            7.4          68             8.1         70            10.0
       Diesel/#2 fuel                                175           18.8         144            17.1        122            17.5
  Asphalt                                             45            4.8          42             5.0         34             4.9
  Petrochemical and Industrial Products              231           24.7         206            24.5        158            22.7
                                                     ---          -----         ---           -----        ---           -----
       Total                                         933          100.0%        841           100.0%       697           100.0%
                                                     ===          =====         ===           =====        ===           =====


-------------------------
<FN>
(1)  For 1996, includes all of CITGO and 50% of UNO-VEN refinery production, except as otherwise noted.
(2)  For 1997, includes all of CITGO refinery production, 50% of UNO-VEN refinery production through April 30, 1997 and all of
     PDVMR refinery production beginning May 1, 1997 through December 31, 1997.
(3)  Includes a weighted average of 34.44% of the Houston refinery for 1997.
(4)  Includes a weighted average of 12.89% of the Houston refinery for 1996.
(5)  At year end.
(6)  Includes a weighted average of 41.25% of the Houston refinery for 1998.
</FN>
</TABLE>


Competitive Nature of the Petroleum Refining Business

                  The petroleum refining industry is cyclical and highly
volatile, reflecting capital intensity with high fixed and low variable costs.
Petroleum industry operations and profitability are influenced by a large number
of factors, over some of which individual petroleum refining and marketing
companies have little control. Governmental regulations and policies,
particularly in the areas of taxation, energy and the environment, have a
significant impact on petroleum industry activities, regulating how companies
conduct their operations and formulate their products. The U.S. petroleum
refining industry has entered a period of consolidation in which a number of
former competitors have combined their operations. Demand for crude oil and its
products is largely driven by the health of local and worldwide economies,
although weather patterns and taxation relative to other energy sources also
play significant parts. Generally, U.S. refiners compete for sales on the basis
of price and brand image and, in some areas, product quality.


                                        4

<PAGE>


CITGO

                  CITGO refines, markets and transports gasoline, diesel fuel,
jet fuel, petrochemicals, lubricants, refined waxes, asphalt and other refined
products throughout the United States, primarily east of the Rocky Mountains.
CITGO's transportation fuel customers include CITGO branded wholesale marketers,
convenience stores and airlines. Asphalt is generally marketed to independent
paving contractors on the East Coast of the United States. Lubricants are sold
to independent marketers, mass marketers and industrial customers, and
petrochemical feedstocks and industrial products are sold to various
manufacturers and industrial companies throughout the United States.
Petroleum coke is sold primarily in international markets.


Refining

                  CITGO's aggregate net interest in rated crude oil refining
capacity is 691 thousand barrels per day ("MBPD"). The following table shows the
capacity of each U.S. refinery in which CITGO holds an interest and CITGO's
share of such capacity as of December 31, 1998.


<TABLE>
<CAPTION>
                                                                                          Total               Net
                                                                                          Rated              CITGO
                                                                                          Crude            Ownership
                                                                          CITGO          Refining         In Refining
                                                   Owner                Interest         Capacity          Capacity
                                              --------------            --------         --------          --------
Location                                                                   (%)            (MBPD)            (MBPD)

<S>                                          <C>                           <C>             <C>               <C>
  Lake Charles, LA                                 CITGO                   100             320               320
  Corpus Christi, TX                               CITGO                   100             150               150
  Paulsboro, NJ                                    CITGO                   100              84                84
  Savannah, GA                                     CITGO                   100              28                28
  Houston, TX(1)                              LYONDELL-CITGO                41             265               109
                                                                                           ---               ---

     Total Rated Refining Capacity                                                         847               691
     as of December 31, 1998                                                               ===               ===

---------------
<FN>
(1)    Initial interest acquired on July 1, 1993. CITGO's interest in LYONDELL-CITGO at December 31, 1998 approximates
       41%. CITGO has a one-time option, exercisable after January 1, 2000 but not later than September 30, 2000, to increase
       for an additional investment, its participation interest up to a maximum of 50%. See "CITGO--Refining--LYONDELL-CITGO".
       See also "Factors Affecting Forward Looking Statements".
</FN>
</TABLE>










                                        5

<PAGE>


                  The following table shows CITGO's aggregate interest in
refining capacity, refinery input and product yield for the three years in the
period ended December 31, 1998.

                          CITGO Refinery Production (1)


<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                  -------------------------------------------------------------------------------
                                                            1998(2)                  1997(3)                   1996(4)
                                                  ------------------------  ---------------------------  ------------------------
                                                                      (MBPD, except as otherwise indicated)
<S>                                                  <C>          <C>           <C>          <C>             <C>           <C>
Rated Refining Capacity (5)                          691                        693                          606
Refinery Input
  Crude oil                                          615           81.0%        548           79.3%          488            80.3%
  Other Feedstocks                                   144           19.0%        143           20.7%          120            19.7%
                                                     ---           -----        ---           -----          ---            -----
     Total                                           759          100.0%        691          100.0%          608           100.0%
                                                     ===
Product Yield
  Light fuels
     Gasoline                                        334           43.3%        309           44.0%          269            44.0%
     Jet Fuel                                         66            8.5%         66            9.4%           65            10.6%
     Diesel/#2 fuel                                  134           17.4%        112           15.9%          103            16.8%
  Asphalt                                             45            5.8%         42            6.0%           34             5.6%
  Petrochemicals and industrial products             193           25.0%        174           24.7%          141            23.0%
                                                     ---          -----         ---          -----           ---            -----
     Total                                           772          100.0%        703          100.0%          612            100.0%
                                                     ===          =====         ===          =====           ===            =====

Utilization of Rated Refining Capacity                               89%                        79%                            81%

---------------
<FN>
(1)  Includes all of CITGO refinery production, except as otherwise noted.
(2)  Includes a weighted average of 41.25% of the Houston refinery for 1998.
(3)  Includes a weighted average of 34.44% of the Houston refinery for 1997.
(4)  Includes a weighted average of 12.89% of the Houston refinery for 1996.
(5)  At year end.
</FN>
</TABLE>

                  CITGO produces its light fuels and petrochemicals primarily
through its Lake Charles and Corpus Christi refineries. Asphalt refining
operations are carried out through CITGO's Paulsboro and Savannah refineries.
CITGO also owns an interest in and obtains refined products from a refinery in
Houston.

                  Lake Charles, Louisiana Refinery. This refinery was originally
built in 1944 and since then has been continuously upgraded. Today it is a
modern, complex, high conversion refinery, which is one of the largest in the
United States. It has a rated refining capacity of 320 MBPD and is capable of
processing large volumes of heavy crude oil into a flexible slate of refined
products, including significant quantities of high-octane unleaded gasoline and
reformulated gasoline. The Lake Charles refinery has a Solomon Process
Complexity Factor of 17.0 (as compared to an average of 13.8 for U.S. refineries
in the most recently available Solomon Associates, Inc. survey). The Solomon
Process Complexity Rating is an industry measure of a refinery's ability to
produce higher value-added products. A higher rating indicates a greater
capability to produce such products.





                                        6

<PAGE>


                  The following table shows the rated refining capacity,
refinery input and product yield at the Lake Charles refinery for the three
years in the period ended December 31, 1998.

                        Lake Charles Refinery Production


<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                  -------------------------------------------------------------------------------
                                                      1998                        1997                       1996
                                                  ------------------------  ---------------------------  ------------------------
                                                                      (MBPD, except as otherwise indicated)
<S>                                                  <C>          <C>           <C>          <C>             <C>          <C>
Rated Refining Capacity(1)                           320                        320                          320

Refinery Input
  Crude oil                                          288           84.2%        291           87.9%          274           85.1%
  Other feedstocks                                    54           15.8          40           12.1            48           14.9
                                                    ----         ------        ----         ------          ----         ------
      Total                                          342          100.0%        331          100.0%          322          100.0%
                                                    ====         ======        ====         ======          ====         ======


Product Yield
  Light fuels
       Gasoline                                      187           53.7%        177           52.4%          164           50.3%
       Jet Fuel                                       59           17.0          60           17.7            62           19.0
       Diesel/#2 fuel                                 47           13.5          45           13.3            38           11.7
Petrochemicals and Industrial Products                55           15.8          56           16.6            62           19.0
                                                     ---          -----         ---          -----           ---          -----
       Total                                         348          100.0%        338          100.0%          326          100.0%
                                                     ===          =====         ===          =====           ===          =====

Utilization of Rated Refining Capacity                               90%                        91%                          86%

-------------------------
<FN>
(1)  At year end.
</FN>
</TABLE>


                  Approximately 66%, 63% and 67% of the total crude runs at the
Lake Charles refinery, in the years 1998, 1997 and 1996, respectively, consisted
of crude oil with an average API gravity of 24 degrees or less. Due to the 
complex processing required to refine such crude oil, the Lake Charles 
refinery's economic crude oil throughput capacity is approximately 290 MBPD, 
which is approximately 90% of its rated capacity of 320 MBPD.

                  The Lake Charles refinery's Gulf Coast location provides it
with access to crude oil deliveries from multiple sources. Imported crude oil
and feedstocks supplies are delivered by ship directly to the Lake Charles
refinery, and domestic crude oil supplies are delivered by pipeline and barge.
In addition, the refinery is connected by pipelines to the Louisiana Offshore
Oil Port and to terminal facilities in the Houston area through which it can
receive crude oil deliveries if the Lake Charles docks are temporarily
inaccessible. For delivery of refined products, the refinery is connected
through the Lake Charles Pipeline directly to the Colonial and Explorer
Pipelines, which are the major refined product pipelines supplying the northeast
and midwest regions of the United States, respectively. The refinery also uses
adjacent terminals and docks, which provide access for ocean tankers and barges.

                  The Lake Charles refinery's main petrochemical products are
propylene and benzene. Industrial products include sulphur, residual fuels and
petroleum coke.

                  Located adjacent to the Lake Charles refinery is a lubricants
refinery operated by CITGO and owned by Cit-Con Oil Corporation ("Cit-Con"),
which is owned 65% by CITGO and 35% by Conoco, Inc. ("Conoco"). Primarily
because of its specific design, the Cit-Con refinery produces extremely high
quality oils and waxes and is one of the few in the industry designed as a
stand-alone lubricants refinery. 

                                        7

<PAGE>


Feedstocks are supplied 65% from CITGO's Lake Charles refinery and 35% from
Conoco's nearby refinery. Finished refined products are shared on the same pro
rata basis by CITGO and Conoco.

                  Corpus Christi, Texas Refinery. This refinery complex consists
of the East and West Plants, located within five miles of each other.
Construction began on the East Plant in 1937, and it was extensively
reconstructed and modernized during the 1970s and 1980s. The West Plant was
completed in 1983. The Corpus Christi refinery is an efficient and highly
complex facility, capable of processing high volumes of heavy crude oil into a
flexible slate of refined products, with a Solomon Process Complexity Factor of
20.5 (as compared to an average of 13.8 for U.S. refineries in the most recently
available Solomon Associates, Inc. survey).

                  The following table shows rated refining capacity, refinery
input and product yield at the Corpus Christi refinery for the three years in
the period ended December 31, 1998.

                       Corpus Christi Refinery Production


<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                  -------------------------------------------------------------------------------
                                                           1998                        1997                       1996
                                                  ------------------------  ---------------------------  ------------------------
                                                                      (MBPD, except as otherwise indicated)
<S>                                                  <C>          <C>           <C>          <C>             <C>          <C>
Rated Refining Capacity(1)                           150                        150                          140

Refinery Input
  Crude oil                                          152           71.4%        115           59.3%          133           66.8%
  Other feedstocks                                    61           28.6          79           40.7            66           33.2
                                                     ---          -----         ---          -----           ---          -----
      Total                                          213          100.0%        194          100.0%          199          100.0%
                                                     ===          =====         ===          =====           ===          =====

Product Yield
  Light fuels
      Gasoline                                        97           45.7%         93           47.9%           93           47.0%
      Diesel/#2 fuel                                  58           27.4          45           23.2            59           29.8
 Petrochemicals and Industrial Products               57           26.9          56           28.9            46           23.2
                                                     ---          -----         ---          -----           ---          -----
       Total                                         212          100.0%        194          100.0%          198          100.0%
                                                     ===          =====         ===          =====           ===          =====

Utilization of Rated Refining Capacity                              101%                        77%                          95%

-------------------------
<FN>
(1)  At year end.
</FN>
</TABLE>

                  Corpus Christi crude runs during 1998 consisted of 100% heavy
sour Venezuelan crude. The average API gravity of the composite crude slate run
at the Corpus Christi refinery is approximately 24 degrees. Crude oil supplies
are delivered directly to the Corpus Christi refinery through the Port of Corpus
Christi.

                  CITGO operates the West Plant under a sublease agreement (the
"Sublease") from Union Pacific Corporation ("Union Pacific"). The basic term of
the Sublease ends on January 1, 2004, but CITGO may renew the Sublease for
successive renewal terms through January 31, 2011. CITGO has the right to
purchase the West Plant from Union Pacific at the end of the basic term, the end
of any renewal term, or on January 31, 2011, at a nominal price.

                  During the last several years, CITGO has increased the
capacity of the Corpus Christi refinery to produce petrochemical products. The
Corpus Christi refinery's main petrochemical products include cumene,
cyclohexane, methyl tertiary butyl ether ("MTBE") and aromatics (including
benzene,

                                        8

<PAGE>


toluene and xylene). The Company produces a significant quantity of cumene, an
important petrochemical product used in the engineered plastics market. The
production of xylene, a basic building block used in the manufacture of consumer
plastics, allows the refinery to take advantage of its reforming capacity while
staying within the gasoline specifications of the Clean Air Act Amendments of
1990.

                  Paulsboro, New Jersey Refinery. This is an asphalt refinery
which consists of Unit I, with a rated capacity of 44 MBPD, and Unit II, with a
rated capacity of 40 MBPD. Unit I was constructed in 1979 primarily to process
low sulphur, light crude oil but has been modified to run heavier crudes. Unit
II, originally constructed in 1980 to produce asphalt from high sulphur, heavy
crude oil high in naphthenic acid, is a combination atmospheric and vacuum
distillation facility.

                  Savannah, Georgia Refinery. This is an asphalt refinery, which
includes two crude distillation units, with a combined rated capacity of 28
MBPD.

                  LYONDELL-CITGO REFINING L.P. On July 1, 1993, subsidiaries of
CITGO and Lyondell Chemical Company ("Lyondell") formed LYONDELL-CITGO REFINING
LP ("LYONDELL-CITGO"), which owns and operates a sophisticated 265 MBPD refinery
previously owned by Lyondell and located on the ship channel in Houston, Texas.
At December 31, 1998, CITGO's investment in LYONDELL-CITGO was $597 million. In
addition, at December 31, 1998, CITGO held notes receivable from LYONDELL-CITGO
of $36 million. (See Consolidated Financial Statements of PDV America - Note 2
in Item 14a.) The crude oil processed by this refinery is supplied by PDVSA
under a long-term crude oil supply agreement through the year 2017. CITGO
purchases substantially all of the refined products produced at this refinery
under a long-term contract. (See Consolidated Financial Statements of PDV
America - Note 2 in Item 14a.)

                  CITGO's participation interest in LYONDELL-CITGO was
approximately 41% at December 31, 1998. CITGO has a one-time option, exercisable
after January 1, 2000 but not later than September 30, 2000, to increase, for an
additional investment, its participation interest to 50%.

Crude Oil and Refined Product Purchases

                  CITGO owns no crude oil reserves or production facilities, and
must therefore rely on purchases of crude oil and feedstocks for its refinery
operations. In addition, because CITGO's refinery operations do not produce
sufficient refined products to meet the demands of its branded marketers, CITGO
purchases refined products, primarily gasoline, from other refiners, including
LYONDELL-CITGO, PDV Midwest Refining, L.L.C. ("PDVMR"), Chalmette Refining,
L.L.C. ("Chalmette") and a joint venture that owns and operates a refinery in
St. Croix, U.S. Virgin Islands ("HOVENSA"). See "Item 13. Certain Relationships
and Related Transactions".










                                        9

<PAGE>


                  Crude Oil Purchases. The following chart shows CITGO's
purchases of crude oil for the three years in the period ended December 31,
1998:

                            CITGO Crude Oil Purchases


<TABLE>
<CAPTION>
                       Lake Charles, LA              Corpus Christi, TX              Paulsboro, NJ                Savannah, GA
                 ----------------------------    --------------------------   --------------------------   ------------------------
                   1998      1997     1996        1998     1997     1996       1998     1997     1996       1998     1997     1996
                   ----      ----     ----        ----     ----     ----       ----     ----     ----       ----     ----     ----
Suppliers                   (MBPD)                        (MBPD)                       (MBPD)                       (MBPD)
<S>                 <C>       <C>      <C>         <C>      <C>      <C>         <C>      <C>      <C>        <C>      <C>      <C>
PDVSA               134       130      142         153      117      130         52       49       39         17       14       17
PEMEX                51        61       44           0        0        0          0        0        0          0        0        0
Occidental           20        40       43           0        0        0          0        0        0          0        0        0
Other Sources        88        57       45           0        0        3          0        0        0          0        0        0
                    ---       ---      ---         ---      ---      ---        ---      ---      ---        ---      ---      ---
     Total          293       288      274         153      117      133         52       49       39         17       14       17
                    ===       ===      ===         ===      ===      ===         ==       ==       ==         ==       ==       ==
</TABLE>


                  CITGO's largest supplier of crude oil is PDVSA, and CITGO has
entered into long-term crude oil supply agreements with PDVSA with respect to
the crude oil requirements for each of CITGO's refineries. See "Item 13. Certain
Relationships and Related Transactions". The following table shows the base and
incremental volumes of crude oil contracted for delivery and the volumes of
crude oil actually delivered under these contracts in the three years ended
December 31, 1998.

                  The crude supply contracts include force majeure clauses that
have been exercised on certain occasions. Exercise of these clauses requires
that the Company locate alternative sources of supply for its crude oil
requirements, and such action may result in lower operating margins.

                                    CITGO Crude Oil Supply Contracts with PDVSA


<TABLE>
<CAPTION>
                                                                          Volumes of Crude
                                                                            Oil Purchased 
                                 Contract Crude                          for the Year Ended             Contract
                                   Oil Volume                               December 31,               Expiration
                          -----------------------------       ---------------------------------------
                             Base      Incremental(1)             1998         1997           1996        Date
                          ---------- ------------------       ------------ -------------  ------------ ----------
                                     (MBPD)                                   (MBPD)                     (year)

Location
<S>                          <C>           <C>                    <C>          <C>           <C>          <C> 
Lake Charles, LA             120           50                     121(2)       115(2)        121(2)       2006
Corpus Christi, TX           130           --                     128(2)       125(2)        130          2012
Paulsboro, NJ                 30           --                      35(2)        35(2)         34(2)       2010
Savannah, GA                  12           --                      12(2)        12(2)         11(2)       2013
Houston, TX(3)               200           --                     223          216           134          2017


--------------------
<FN>
(1)      The supply agreement for the Lake Charles refinery gives PDVSA the right to sell to CITGO incremental volumes
         up to the maximum amount specified in the table, subject to certain restrictions relating to the type of crude
         oil to be supplied, refining capacity and other operational considerations at the refinery.
(2)      Volumes purchased under the supply agreements do not equal purchases from PDVSA shown in the previous table as a result
         of spot purchases or transfers between refineries.
(3)      CITGO acquired a participation interest in LYONDELL-CITGO, the owner of the Houston refinery, on July 1, 1993. In
         connection with such transaction, LYONDELL-CITGO entered into a long-term crude oil supply agreement with PDVSA that
         provided for delivery volumes of 135 MBPD until the completion of a refinery enhancement project at which time the
         delivery volumes increased to a range that extends from 200 MBPD to 230 MBPD.
</FN>
</TABLE>

                  Most of the crude oil and feedstocks purchased by CITGO from
PDVSA are delivered on tankers owned by PDV Marina, S.A. ("PDV Marina"), a
wholly owned subsidiary of PDVSA, or by other

                                       10

<PAGE>


PDVSA subsidiaries. In 1998, 82% of the PDVSA contract crude oil delivered to
the Lake Charles and Corpus Christi refineries was delivered on tankers operated
by PDVSA subsidiaries.

                  CITGO purchases additional crude oil under a 90-day evergreen
agreement with an affiliate of Petroleos Mexicanos ("PEMEX"). CITGO's refineries
are particularly well suited to refine PEMEX's Maya heavy, sour crude oil, which
is similar in many respects to several types of Venezuelan crude oil.

                  CITGO was a party to a contract with an affiliate of
Occidental Petroleum Corporation ("Occidental") for the purchase of light, sweet
crude oil to produce lubricants. This contract expired on August 31, 1998. CITGO
also purchases sweet crude oil under long-standing relationships with numerous
other producers.

                  Refined Product Purchases. CITGO is required to purchase
refined products to supplement the production of the Lake Charles and Corpus
Christi refineries in order to meet the demand of CITGO's marketing network.
During 1998, CITGO's shortage in gasoline production approximated 329 MBPD.
However, due to logistical needs, timing differences and product grade
imbalances, CITGO purchased approximately 581 MBPD of gasoline and sold into the
spot market or to refined product traders or other refiners, approximately 254
MBPD of gasoline. The following table shows CITGO's purchases of refined
products for the three years in the period ended December 31, 1998.

                         CITGO Refined Product Purchases


                                             Year Ended December 31,
                               ------------------------------------------------
                                     1998             1997             1996
                               ---------------- ---------------- --------------
                                                     (MBPD)

Light Fuels
    Gasoline                          581              518              484
    Jet Fuel                           69               74               92
    Diesel/#2 fuel                    208              190              153
                                      ---              ---              ---
          Total                       858              782              729
                                      ===              ===              ===


                  As of December 31, 1998, CITGO purchased substantially all of
the refined products, excluding petrochemicals, produced at the LYONDELL-CITGO
refinery under a long-term contract through the year 2017. LYONDELL-CITGO was a
major supplier in 1998 providing CITGO with 120 MBPD of gasoline, 79 MBPD of
diesel/#2 fuel and 17 MBPD of jet fuel.
See "--Refining--LYONDELL-CITGO".

                  As of May 1, 1997, CITGO began purchasing, under a contract
with a sixty-month term, substantially all of the refined products produced at
the PDVMR refinery. During the period ended December 31, 1998, the PDVMR
refinery provided CITGO with 78 MBPD of gasoline, 42 MBPD of diesel/#2 fuel and
5 MBPD of jet fuel.

                  An affiliate of PDVSA acquired a 50% equity interest in a
refinery in Chalmette, Louisiana ("Chalmette") in October 1997 and has assigned
to CITGO its option to purchase up to 50 percent of the refined products
produced at the refinery through December 31, 1999. CITGO exercised this option
on November 1, 1997, and acquired approximately 65 MBPD of refined products from
the refinery during 1998, approximately one-half of which was gasoline.

                  In October 1998 an affiliate of PDVSA acquired a 50% equity
interest in HOVENSA and has the right under a product sales agreement to assign
periodically to CITGO, or other related parties, its

                                       11

<PAGE>


option to purchase 50% of the refined products produced by HOVENSA (less a
certain portion of such products that HOVENSA will market directly in the local
and Caribbean markets). In addition, under the product sales agreement, the
PDVSA affiliate has appointed CITGO as its agent in designating which of its
affiliates shall from time to time take deliveries of the refined products
available to it. The product sales agreement will be in effect for the life of
the joint venture, subject to termination events based on default or mutual
agreement. Pursuant to the above arrangement, CITGO began acquiring
approximately 120 MBPD of refined products from HOVENSA on November 1, 1998,
approximately one-half of which was gasoline.

Marketing

                  CITGO's major products are light fuels (including gasoline,
jet fuel and diesel fuel), industrial products, petrochemicals, asphalt, and
lubricants and waxes. The following table shows revenue and volumes of each of
these product categories for the three years in the period ended December 31,
1998.


                CITGO Refined Product Sales Revenues and Volumes

<TABLE>
<CAPTION>
                                          Year Ended December 31,                         Year Ended December 31,
                             ------------------------------------------------ ---------------------------------------------
                                  1998             1997            1996            1998            1997            1996
                             ---------------  --------------  --------------- --------------- --------------- -------------
                                              ($ in millions)                                  (MM gallons)
<S>                              <C>             <C>              <C>             <C>             <C>             <C>   
Light Fuels
   Gasoline                      $6,252          $7,754           $7,451          13,241          11,953          11,308
   Jet Fuel                         828           1,183            1,489           1,919           2,000           2,346
   Diesel/#2 fuel                 1,945           2,439            2,312           4,795           4,288           3,728
Asphalt                             300             398              257             774             749             569
Petrochemicals and
   Industrial Products              937           1,172              846           2,440           1,940           1,408
Lubricants and Waxes                441             467              426             230             239             220
                                -------         -------          -------          ------          ------          ------
         Total                  $10,703         $13,413          $12,781          23,399          21,169          19,579
                                =======         =======          =======          ======          ======          ======
</TABLE>


                  Light Fuels. Gasoline sales accounted for 58% of CITGO's
refined product sales in the years 1998, 1997 and 1996. CITGO markets CITGO
branded gasoline through over 15,000 independently owned and operated CITGO
branded retail outlets (including 13,165 branded retail outlets owned and
operated by approximately 824 independent marketers and 1,888 7-Eleven(TM)
convenience stores) located throughout the United States, primarily east of the
Rocky Mountains. CITGO purchases gasoline to supply its marketing network, as
the gasoline production from the Lake Charles and Corpus Christi refineries was
only equivalent to approximately 48%, 47% and 49% of the volume of CITGO branded
gasoline sold in 1998, 1997 and 1996, respectively. See "--Crude Oil and Refined
Product Purchases--Refined Product Purchases".

                  CITGO's strategy is to enhance the value of the CITGO brand in
order to obtain premium pricing for its products by appealing to consumer
preference for quality petroleum products and services. This is accomplished
through a commitment to quality, dependability and customer service to its
independent marketers, which constitute CITGO's primary distribution channel.

                  Sales to independent branded marketers typically are made
under contracts that range from three to seven years. Sales to 7-Eleven(TM)
convenience stores are made under a contract that extends through the year 2006.
Under this contract, CITGO arranges all transportation and delivery of motor
fuels and handles all product ordering. CITGO also acts as processing agent for
the purpose of facilitating and implementing orders and purchases from
third-party suppliers. CITGO receives a processing fee for such services.


                                       12

<PAGE>


                  CITGO markets jet fuel directly to airline customers at 26
airports, including such major hub cities as Atlanta, Chicago, Dallas/Fort
Worth, New York and Miami.

                  Growth in wholesale rack sales to marketers has been the
primary focus of diesel/#2 marketing efforts. Such marketing efforts have
resulted in increases in wholesale rack sales volume from approximately 1,561
million gallons in 1996 to approximately 1,928 million gallons in 1998. The
remaining diesel/#2 fuel production is sold either in bulk through contract
sales (primarily as heating oil in the Northeast) or on a spot basis.

                  CITGO's delivery of light fuels to its customers is
accomplished in part through 49 refined product terminals located throughout
CITGO's primary market territory. Of these terminals, 34 are wholly owned by
CITGO and 15 are jointly owned. Fifteen of CITGO's product terminals have
waterborne docking facilities, which greatly enhance the flexibility of CITGO's
logistical system. In addition, CITGO operates eight terminals owned by PDVMR in
the Midwest. Refined product terminals owned or operated by CITGO provide a
total storage capacity of approximately 23 million barrels. Also, CITGO has
active exchange relationships with over 270 other refined product terminals,
providing flexibility and timely response to distribution needs.

                  Petrochemicals and Industrial Products. CITGO sells
petrochemicals in bulk to a variety of U.S. manufacturers as raw materials for
finished goods. The majority of CITGO's cumene production is sold to Mount
Vernon Phenol Plant Partnership ("MVPPP")(see "Item 13. Certain Relationships
and Related Transactions"), a joint venture phenol production plant in which
CITGO is a limited partner. The phenol plant produces phenol and acetone for
sale primarily to the principal partner in the phenol plant for the production
of plastics. Sulphur is sold to the U.S. and international fertilizer industry;
cycle oils are sold for feedstock processing and blending; natural gas liquids
are sold to the U.S. fuel and petrochemical industry; petroleum coke is sold
primarily in international markets, through a joint venture, for use as kiln and
boiler fuel; and residual fuel blendstocks are sold to a variety of fuel oil
blenders and customers.

                  Asphalt. CITGO markets asphalt through 15 terminals located
along the East Coast, from Savannah, Georgia to Albany, New York. Asphalt is
sold primarily to independent contractors for use in the construction and
resurfacing of roadways. Demand for asphalt in the Northeastern United States
peaks in the summer months.

                  Lubricants and Waxes. CITGO markets many different types,
grades and container sizes of lubricants and wax products, with the bulk of
sales consisting of automotive oil and lubricants and industrial lubricants.
Other major lubricant products include 2-cycle engine oil and automatic
transmission fluid.

Pipeline Operations

                  CITGO owns and operates 339 miles of crude oil pipeline
systems and approximately 1,080 miles of products pipeline systems. CITGO also
has equity interests in three crude oil pipeline companies with a total of
nearly 5,400 miles of pipeline plus equity interest in six refined product
pipeline companies with a total of approximately 8,000 miles of pipeline.
CITGO's pipeline interests provide it with access to substantial refinery
feedstocks and reliable transportation to refined product markets, as well as
cash flows from dividends. One of the refined product pipelines in which CITGO
has an interest, Colonial Pipeline, is the largest refined product pipeline in
the United States transporting gasoline, jet fuel and diesel/#2 fuel oil from
the Gulf Coast to the mid-Atlantic and eastern seaboard states.


                                       13

<PAGE>


Employees

                  CITGO and its subsidiaries have a total of approximately 4,500
employees, approximately 1,900 of whom are covered by 15 union contracts.
Approximately 1,600 of the union employees are employed in refining operations.
The remaining union employees are located primarily at a lubricant blending and
packaging plant and at various refined product terminals.

                  Effective February 28, 1998, the stock of Petro-Chemical
Transport, Inc. ("PCT"), a wholly owned subsidiary of CITGO, was sold. As a
result of this sale, approximately 420 employees were terminated. The operations
of PCT were not material to CITGO.


PDV Midwest Refining, L.L.C.

Refining

                  PDVMR produces light fuels, petrochemicals and industrial
products at its refinery in Lemont, Illinois. The refinery has a crude
distillation capacity of 167 MBPD and has a Solomon Process Complexity Factor of
11.3 (as compared to an average of 13.8 for U.S. refineries in the most recently
available Solomon Associates, Inc. survey).

                  The following table shows refining capacity, refinery input
and product yield at the Lemont refinery for the three years in the period ended
December 31, 1998.

                           Lemont Refinery Production


<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                         -------------------------------------------------------------------------------
                                                  1998                        1997                       1996
                                         ------------------------  ---------------------------  ------------------------
                                                             (MBPD, except as otherwise indicated)
<S>                                         <C>          <C>          <C>          <C>             <C>          <C>
Rated Refining Capacity (1)                 167                       160                          153

Refinery Input
       Crude oil                            148           90.8%       151           89.1%          146           88.4%
       Other feedstocks                      15            9.2%        17           10.9            19           11.6
                                            ---          -----        ---          -----           ---          -----
            Total                           163          100.0%       168          100.0%          165          100.0%
                                            ===          =====        ===          =====           ===          =====

Product Yield
       Light fuels
       Gasoline                              79           49.1%        87           52.4%           87           53.0%
       Jet Fuel                               3            1.8%         3            1.8%            7            4.3
       Diesel/#2 Fuel                        41           25.5%        39           23.5%           37           22.6
       Industrial Products &
          Petrochemicals                     38           23.6%        37           22.3%           33           20.1
                                            ---          -----        ---          -----           ---          -----
            Total                           161          100.0%       166          100.0%          164          100.0%
                                            ===          =====        ===          =====           ===          =====
Utilization of Rated                                      89%                       94%                          95%
       Refining Capacity

-----------------------

<FN>
(1)  At year end.
</FN>
</TABLE>



                                       14

<PAGE>


                  The average API gravity of the composite crude slate run at
the Lemont refinery is approximately 27.2 degrees. Crude oil is supplied to the
refinery by pipeline.

                  Petrochemical products at the Lemont refinery include benzene,
toluene and xylene, plus a range of ten different aliphatic solvents.

                  PDVMR owns a 25% interest in a partnership which operates a
needle coke production facility adjacent to the Lemont refinery (the "Needle
Coker"). The remaining 75% interest is held by various subsidiaries of UNOCAL.

Crude Oil Purchases

                  PDVMR owns no crude oil reserves or production facilities and,
therefore, relies on purchases of crude oil for its refining operations. A
portion of the crude oil refined at the Lemont refinery is supplied by PDVSA
under a crude oil supply agreement, effective as of April 23, 1997, that expires
in the year 2002 and thereafter is renewable annually. The contract calls for
delivery of a guaranteed volume of up to 100 MBPD; however, PDVMR is not
required to purchase a set minimum. In 1998, the crude oil processed at the
Lemont refinery was 23 percent Venezuelan, 67 percent Canadian and 10 percent
from other sources.

Marketing

                  Subsequent to the transfer of assets on May 1, 1997,
substantially all of PDVMR's products are sold to and marketed by CITGO. (See
"Item 13. Certain Relationships and Related Transactions".)

Employees

                  PDVMR has no employees. CITGO operates the Lemont refinery and
provides all administrative functions to the Company pursuant to a Refinery
Operating Agreement (as defined below).

Refinery Operating Agreement with CITGO

                  CITGO operates the Lemont refinery in accordance with a
Refinery Operating Agreement (the "Refinery Operating Agreement") between CITGO
and PDVMR. The Refinery Operating Agreement sets out the duties, obligations and
responsibilities of the operator and the Company with respect to the operation
of the refinery. CITGO provides all administrative functions to the Company,
including cash management, legal and accounting services. The term of the
agreement is 60 months, commencing May 1, 1997, and shall be automatically
renewed for periods of 12 months (subject to early termination as provided in
the Refinery Operating Agreement). (See "Item 13. Certain Relationships and
Related Transactions".)

Environment and Safety

Environment--General

                  Beginning in 1994, the U.S. refining industry was required to
comply with stringent product specifications under the 1990 Clean Air Act
("CAA") Amendments for reformulated gasoline and low sulphur diesel fuel, which
necessitated additional capital and operating expenditures, and altered
significantly the U.S. refining industry and the return realized on refinery
investments. In addition, numerous other factors affect the Company's plans with
respect to environmental compliance and related expenditures. See "Factors
Affecting Forward Looking Statements".



                                       15

<PAGE>


                  In addition, the Companies are subject to various federal,
state and local environmental laws and regulations which may require the
Companies to take action to correct or improve the effects on the environment of
prior disposal or release of petroleum substances by the Companies or other
parties. Management believes the Companies are in compliance with these laws and
regulations in all material aspects. Maintaining compliance with environmental
laws and regulations in the future could require significant capital
expenditures and additional operating costs.

                  The Company's accounting policy establishes environmental
reserves as probable site restoration and remediation obligations become
reasonably capable of estimation. Based on currently available information,
including the continuing participation of former owners in remediation actions
and indemnification agreements with third parties, the Company's management
believes that its accruals are sufficient to address the Companies'
environmental clean-up obligations.

                  Conditions which require additional expenditures may exist for
various of the Companies' sites including, but not limited to, the Companies'
operating refinery complexes, closed refineries, service stations and crude oil
and petroleum product storage terminals. The amount of such future expenditures,
if any, is indeterminable.

Environment--CITGO

                  Under a 1992 agreement with CITGO, a former owner of certain
of CITGO's operations and assets, including the Lake Charles refinery,
indemnifies CITGO for certain environmental remediation costs, "Superfund"
liabilities and tort liabilities related to those operations and assets
according to relative ownership periods and the terms of the agreement.

                  A February 1999 order of a Louisiana agency specifies
requirements to complete closure of certain surface impoundments at the Lake
Charles refinery. CITGO and the former owner are participating in this closure
and sharing the related costs based on estimated contributions of waste and
ownership periods. Final closure is expected to begin in 2000.

                  Based on publicly available information, CITGO believes that
the former owner has the financial capability to fulfill all of its
responsibilities under the 1992 agreement. Accordingly, CITGO believes that its
liability exposure under the Federal Superfund and similar state laws with
respect to those sites for which the former owner provides indemnity is not
material.

                  In July 1997, the Texas Natural Resources Conservation
Commission ("TNRCC") issued a Preliminary Report and Petition alleging that
CITGO Refining and Chemicals Company LP ("CITGO Refining") violated TNRCC rules
relating to operation of a hazardous waste management unit without a permit and
recommended a penalty of $699,200. CITGO Refining disagrees with those
allegations and the proposed penalties. As part of the continuing negotiations,
TNRCC has proposed to settle the alleged violation of hazardous waste management
rules and regulations in addition to alleged unauthorized emissions to the
atmosphere and alleged unauthorized discharge to the waters of the state in
return for payment of a penalty of $786,300.

                  Increasingly stringent regulatory provisions periodically
require additional capital expenditures. During 1998, CITGO expended
approximately $65 million for environmental and regulatory capital improvements
in its operations. Management currently estimates that CITGO will spend
approximately $303 million for environmental and regulatory capital projects
over the five-year period 1999-2003. These estimates may vary due to a variety
of factors. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources". See also
"Factors Affecting Forward Looking Statements".



                                       16

<PAGE>


Environment--PDVMR

                  In accordance with the Partnership Interest Retirement
Agreement, the Company, VPHI Midwest, Inc., a subsidiary of the Company, and
PDVMR assumed joint and several liability for all environmental matters relating
to past operations of UNO-VEN.

                  During 1998, PDVMR expended approximately $4 million for
environmental and regulatory capital improvements in its operations and
currently anticipates spending approximately $29 million for environmental and
regulatory capital projects over the five-year period 1999-2003. These estimates
may vary due to a variety of factors. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources".

Safety

                  Due to the nature of petroleum refining and distribution, both
CITGO and PDVMR are subject to stringent occupational health and safety laws and
regulations. CITGO and PDVMR maintain comprehensive safety, training and
maintenance programs, and PDV America believes that both companies are in
substantial compliance with occupational health and safety laws.


                            ITEM 3. LEGAL PROCEEDINGS

                  Various lawsuits and claims arising in the ordinary course of
business are pending against the Companies. The Companies record accruals for
potential losses when, in management's opinion, such losses are probable and
reasonably estimable. If known lawsuits and claims were to be determined in a
manner adverse to the Companies, and in amounts greater than the Companies'
accruals, then such determinations could have a material adverse effect on the
Companies' results of operations in a given reporting period. However, in
management's opinion the ultimate resolution of these lawsuits and claims will
not exceed, by a material amount, the amount of the accruals and the insurance
coverage available to the Companies. This opinion is based upon management's and
counsel's current assessment of these lawsuits and claims. The most significant
lawsuits and claims are discussed below.

                  In a pending case in federal court, Oil Chemical and Atomic
Workers, Local 7-517 (the "Union") has asserted claims against CITGO, PDVSA, PDV
America, PDVMR, UNO-VEN and Unocal pursuant to the Labor Management Relations
Act. The Union alleges that CITGO and the other defendants are bound by the
terms of a collective bargaining agreement between UNO-VEN and the Union
covering certain employees at a refinery in Lemont, Illinois. This refinery was
acquired by PDVMR on May 1, 1997 in a transaction involving the former partners
of UNO-VEN. Pursuant to an operating agreement with PDVMR, CITGO became the
operator of this refinery and employed the substantial majority of the employees
previously employed by UNO-VEN pursuant to its initial terms and conditions of
employment, but CITGO did not assume the existing labor agreement. The Union
seeks monetary compensation for certain differences in employee benefits and
reinstatement of all of the UNO-VEN benefit plans. The Union also seeks to
require CITGO to abide by the terms of the collective bargaining agreement
between the Union and UNO-VEN. As an alternative claim against all defendants
but CITGO, the Union alleges that if the labor agreement is not binding on
CITGO, there was a violation of the Federal Workers Adjustment Retraining and
Notification Act by failure to give 60 days' written notice of termination to
approximately 400 UNO-VEN employees; this would allegedly entitle such workers
to 60 days' pay and benefits, which is estimated to be approximately $6 million.
In March 1999, the federal appeals court affirmed the trial court's grant of the
motions for summary judgment filed by CITGO and the other defendants.

                  PDVMR and PDV America, jointly and severally, have agreed to
indemnify UNO-VEN and certain other related entities against certain liabilities
and claims, including the preceding matter.


                                       17

<PAGE>


                  In May 1997, an explosion and fire occurred at CITGO's Corpus
Christi refinery. No serious personal injuries were reported. CITGO received
approximately 7,500 individual claims for personal injury and property damage
related to the above noted incident. Approximately 1,300 of these claims have
been resolved for amounts which individually and collectively are not material.
There are presently six lawsuits pending against CITGO in federal and state
courts alleging property damages, personal injury and punitive damages. A trial
in one of the federal court lawsuits in October 1998 involving ten bellwether
plaintiffs, out of approximately 400 plaintiffs, resulted in a verdict for
CITGO. The remaining cases are not currently scheduled for trial. CITGO
anticipates that the claims of the remaining plaintiffs in this lawsuit will be
resolved for an immaterial amount.

                  A class action lawsuit is pending in Corpus Christi, Texas
state court against CITGO and other operators and owners of nearby industrial
facilities which claims damages for reduced value of residential properties
located in the vicinity of the industrial facilities as a result of air, soil
and groundwater contamination. In 1997, CITGO offered to purchase about 275
properties in a neighborhood adjacent to CITGO's Corpus Christi refinery, which
were included in the lawsuit. Related to this offer, $15.7 million was expensed
in 1997. To date, CITGO has reached agreements to buy all but 18 of such
properties, which include settlements of property damage claims, and has offers
open to purchase the remaining properties. Two related personal injury and
wrongful death lawsuits were filed against the same defendants in 1996 and are
scheduled for trial in 1999.

                  Litigation is pending in federal court in Lake Charles,
Louisiana, against CITGO by a number of current and former Lake Charles refinery
employees and applicants asserting claims of racial discrimination in connection
with CITGO's employment practices. Trials in this case are set to begin in the
fall of 1999.

                  CITGO is among defendants to lawsuits in California and North
Carolina alleging contamination of water supplies by methyl tertiary butyl ether
("MTBE"), a component of gasoline. The action in California was filed in
November 1998 by the South Tahoe Public Utility District and CITGO was added as
a defendant in February 1999. The North Carolina case, filed in January 1999, is
a putative class action on behalf of owners of water wells and other drinking
water supplies in the state. Both actions allege that MTBE poses public health
risks. Both actions seek damages as well as remediation of the alleged
contamination. These matters are in early states and there has been no discovery
conducted against CITGO. CITGO intends to deny all of the allegations and is
pursuing its defenses.


                       ITEM 4. SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS

                  Not Applicable.





                                       18

<PAGE>


                                     PART II

                  ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS

                  The Company's common stock is not publicly traded. All of the
Company's common stock is held by PDV Holding, Inc. ("PDV Holding"), a Delaware
corporation, whose ultimate parent is PDVSA. In 1998 PDV America declared and
paid a dividend of $268.5 million to PDV Holding. PDV America did not declare or
pay any dividends in 1997.


                         ITEM 6. SELECTED FINANCIAL DATA

                  The following table sets forth certain selected historical
consolidated financial and operating data of PDV America as of the end of and
for each of the five years in the period ended December 31, 1998. The following
table should be read in conjunction with the consolidated financial statements
of PDV America as of December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998, included in Item 8. The audited
consolidated financial statements of PDV America for each of the five years in
the period ended December 31, 1998 have been prepared on the basis of United
States generally accepted accounting principles.















                                       19

<PAGE>




<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                  -----------------------------------------------------------------------
                                                      1998           1997(8)       1996           1995(7)        1994
                                                  ------------- -------------- -------------- -------------- ------------
                                                                              ($ in millions)
Income Statement Data
<S>                                                 <C>            <C>           <C>            <C>             <C>
Sales                                               $10,960        $13,622       $12,952        $10,522         $9,247
Equity in earnings (losses) of affiliates(1)             82             69            45             48             55
Net revenues                                         11,107         13,754        13,071         10,647          9,374
Income before extraordinary items
     and cumulative effect of accounting
     changes                                            231            228           138            143            205
Extraordinary gain (charges)(2)                          --             --            --              3             (2)
Cumulative effect of accounting
     changes(3)                                          --             --            --             --             (4)
Net income                                              231            228           138            146            199

Ratio of Earnings to Fixed Charges(4)                 3.06x          2.58x         1.91x          2.02x          2.65x

Balance Sheet Data
Total assets                                         $7,075         $7,244        $6,938         $6,220         $5,770
Long-term debt (excluding current
     portion)(5)                                      2,174          2,164         2,595          2,297          2,155
Total debt(6)                                         2,273          2,526         2,755          2,428          2,279
Shareholder's equity                                  2,601          2,589         2,111          1,973          1,812

-------------------------
<FN>
(1)  Includes the equity in the earnings of UNO-VEN of $0.4 million, $23 million, $15 million and $27 million for the four months
     ended April 30, 1997 and the years ended December 31, 1996, 1995 and 1994, respectively.
(2)  Represents extraordinary gain or (charges) for the early extinguishment of debt (net of related income tax provision of
     $2 million and income tax benefits of $1 million in 1995 and 1994, respectively).
(3)  Represents the cumulative effect of the accounting change to Statement of Financial Accounting Standards ("SFAS") No. 112,
     "Employers' Accounting for Postemployment Benefits" in 1994 (net of related income tax benefits of $3 million).
(4)  For the purpose of calculating the ratio of earnings to fixed charges, "earnings" consist of income before income taxes
     and cumulative effect of accounting changes plus fixed charges (excluding capitalized interest), amortization of previously
     capitalized interest and certain adjustments to equity in income of affiliates. "Fixed charges" include interest expense,
     capitalized interest, amortization of debt issuance costs and a portion of operating lease rent expense deemed to be
     representative of interest.
(5)  Includes long-term debt to third parties, note payable to affiliate and capital lease obligations.
(6)  Includes short-term bank loans, current portion of capital lease obligations and long-term debt, long-term debt, capital
     lease obligations and note payable to affiliate.
(7)  Includes operations of Cato Oil and Grease Company since May 1, 1995.
(8)  Includes operations of PDVMR since May 1, 1997.
</FN>
</TABLE>










                                       20

<PAGE>


                  ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

                  The following discussion of the financial condition and
results of operations of PDV America should be read in conjunction with the
consolidated financial statements of PDV America included elsewhere herein.

                  Petroleum industry operations and profitability are influenced
by a large number of factors, some of which individual petroleum refining and
marketing companies cannot entirely control. Governmental regulations and
policies, particularly in the areas of taxation, energy and the environment,
have a significant impact on petroleum activities, regulating how companies
conduct their operations and formulate their products, and, in some cases
limiting their profits directly. Demand for crude oil and refined products is
largely driven by the condition of local and worldwide economies, although
weather patterns and taxation relative to other energy sources also play a
significant part. PDV America's consolidated operating results are affected by
these industry-specific factors and by company-specific factors, such as the
success of marketing programs and refinery operations.

                  The earnings and cash flows of companies engaged in the
refining and marketing business in the United States are primarily dependent
upon producing and selling quantities of refined products at margins sufficient
to cover fixed and variable costs. The refining and marketing business is
characterized by high fixed costs resulting from the significant capital outlays
associated with refineries, terminals and related facilities. This business is
also characterized by substantial fluctuations in variable costs, particularly
costs of crude oil, feedstocks and blending components, and in the prices
realized for refined products. Crude oil and refined products are commodities
whose price levels are determined by market forces beyond the control of the
Companies.

                  In general, prices for refined products are significantly
influenced by the price of crude oil, feedstocks and blending components.
Although an increase or decrease in the price for crude oil, feedstocks and
blending components generally results in a corresponding change in prices for
refined products, there is usually a lag in the realization of the corresponding
increase or decrease in prices for refined products. The effect of changes in
crude oil prices on PDV America's consolidated operating results therefore
depends in part on how quickly refined product prices adjust to reflect these
changes. A substantial or prolonged increase in crude oil prices without a
corresponding increase in refined product prices, a substantial or prolonged
decrease in refined product prices without a corresponding decrease in crude oil
prices, or a substantial or prolonged decrease in demand for refined products
could have a significant negative effect on the Company's earnings and cash
flows. CITGO purchases a significant amount of its crude oil requirements from
PDVSA under long-term crude oil supply agreements (expiring in the years 2006
through 2013). CITGO's supply agreements were designed to reduce the volatility
of earnings and cash flows from CITGO's refining operations by providing a
relatively stable level of gross margin on crude oil supplied by PDVSA. This
supply represented approximately 58% of the crude oil processed in refineries
owned by CITGO in the year ended December 31, 1998. The crude supply contracts
include force majeure clauses that have been exercised on certain occasions.
Exercise of these clauses requires that CITGO locate alternative sources of
supply for its crude oil requirements, and such action may result in lower
operating margins. CITGO also purchases significant volumes of refined products
to supplement the production from its refineries to meet marketing demands and
to resolve logistical issues. PDV America's earnings and cash flows are also
affected by the cyclical nature of petrochemical prices. As a result of these
factors, the earnings and cash flows of PDV America may experience substantial
fluctuations. Inflation was not a significant factor in the operations of PDV
America for the three years ended 1998.



                                       21

<PAGE>


                  CITGO's revenues accounted for approximately 99% of PDV
America's consolidated revenues in 1998, 1997 and 1996. PDVMR's sales of $1,034
million for the period ended December 31, 1998 were primarily to CITGO and,
accordingly, these were eliminated in consolidation. However, the operations of
PDVMR contributed approximately $77 million to the Companies' consolidated gross
margin.

                  In July 1997 the Company's senior management implemented a
Transformation Program designed to ensure that numerous expense controls,
business information systems and business efficiency initiatives underway were
effectively coordinated to achieve desired results. Included in this program
were reviews of CITGO's business units, assets, strategies, and business
processes. These combined actions include personnel reductions (the "Separation
Programs"). The cost of the Separation Programs was approximately $8 million and
$22 million for the years ended December 31, 1998 and 1997, respectively. In
addition, as part of the Transformation Program, the first phase of Systems,
Applications and Products in Data Processing ("SAP") implementation, which
included the financial reporting and materials management systems, was brought
into production on January 1, 1998. Additional SAP modules, including plant
maintenance work order and cost tracking, were implemented throughout 1998. The
implementation will continue in 1999.

         The following table summarizes the sources of PDV America's sales
revenues and volumes.

                     PDV America Sales Revenues and Volumes


<TABLE>
<CAPTION>
                                           Year Ended December 31,                      Year Ended December 31,
                                 -------------------------------------------   ---------------------------------------
                                      1998          1997           1996            1998          1997         1996
                                 -------------- ------------- --------------   ------------- ------------ ------------
                                               ($ in millions)                               (MM gallons)

<S>                               <C>           <C>            <C>                <C>           <C>          <C>   
Gasoline                          $   6,252     $   7,754      $   7,451          13,241        11,953       11,308
Jet fuel                                828         1,183          1,489           1,919         2,000        2,346
Diesel/#2 fuel                        1,945         2,439          2,312           4,795         4,288        3,728
Asphalt                                 300           398            257             774           749          569
Petrochemicals and industrial
     products                           952         1,178            846           2,658         1,961        1,408
Lubricants and waxes                    441           467            426             230           239          220
                                  ---------     ---------      ---------         -------       -------      -------
      Total refined product sales    10,718     $  13,419      $  12,781          23,617        21,190       19,579
Other sales                             242           203            171              --            --           --
                                  ---------     ---------      ---------         -------       -------      -------
          Total sales             $  10,960     $  13,622      $  12,952          23,617        21,190       19,579
                                  =========     =========      =========         =======       =======      =======
</TABLE>


          The following table summarizes PDV America's cost of sales and
operating expenses.

                 PDV America Cost of Sales and Operating Expense


<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                             ------------------------------------------------
                                                                   1998            1997             1996
                                                             --------------- ---------------- ---------------
                                                                             ($ in millions)
<S>                                                            <C>             <C>              <C>      
Crude oil                                                      $   2,571       $   3,552        $   3,053
Refined products                                                   5,102           6,739            7,139
Intermediate feedstocks                                              900           1,240            1,000
Refining and manufacturing costs                                     949             940              801
Other operating costs and expenses and inventory changes             784             527              498
                                                               ---------       ---------        ---------
Total cost of sales and operating expenses                     $  10,306       $  12,998        $  12,491
                                                               =========       =========        =========
</TABLE>




                                       22

<PAGE>


Results of Operations--1998 Compared to 1997

                  Sales revenues and volumes. Sales decreased by $2,662 million,
representing a 20% decrease from 1997 to 1998. This was due to a decrease in
average sales price of 28% partially offset by an increase in sales volumes of
12%. (See PDV America Sales Revenues and Volumes table above.)

                  Equity in earnings (losses) of affiliates. Equity in earnings
of affiliates increased by approximately $13 million, or 18.8% from $69 million
in 1997 to $82 million in 1998. This increase was due primarily to a $14 million
increase in CITGO's equity in earnings of LYONDELL-CITGO as a result of the
change in CITGO's interest in LYONDELL-CITGO which increased from approximately
13% at December 31, 1996 to approximately 42% on April 1, 1997 and the
improvement in LYONDELL-CITGO's operations since completion of its refinery
enhancement project during the first quarter of 1997 (See Consolidated Financial
Statements of PDV America - Note 2 in Item 14a.)

                  Cost of sales and operating expenses. Cost of sales and
operating expenses decreased by $2,692 million, or 21% from 1997 to 1998. (See
PDV America Cost of Sales and Operating Expense table above.)

                  The Companies purchase refined products to supplement the
production from their refineries to meet marketing demands and resolve
logistical issues. The refined product purchases represented 50% and 52% of cost
of sales for the years 1998 and 1997, respectively. These refined product
purchases included purchases from LYONDELL-CITGO, Chalmette and HOVENSA. The
Companies estimate that margins on purchased products, on average, are lower
than margins on produced products due to the fact that the Companies can only
receive the marketing portion of the total margin received on the produced
refined products. However, purchased products are not segregated from the
Companies produced products and margins may vary due to market conditions and
other factors beyond the Companies' control. As such, it is difficult to measure
the effects on profitability of changes in volumes of purchased products. The
Companies anticipate their purchased product requirements will increase, in
volume and as a percentage of refined products sold, in order to meet marketing
demands, although in the near term, other than normal refinery turnaround
maintenance, the Companies do not anticipate operational actions or market
conditions which might cause a material change in anticipated purchased product
requirements; however, there could be events beyond the control of the Companies
which impact the volume of refined products purchased. See also "Factors
Affecting Forward Looking Statements".

                  Gross margin. The gross margin for 1998 was $655 million
compared to $625 million for 1997. Gross margins in 1998 were positively
affected by a 12% increase in sales volume partially offset by an erosion of
gross margin on a per gallon basis which includes a lower of cost or market
adjustment of $172 million.

                  Selling, general and administrative expenses. Selling, general
and administrative expenses increased $47 million, or 22% in 1998. The increase
is due primarily to salary and related burden allocations as well as increases
in advertising expense and depreciation.

                  Interest expense. Interest expense decreased $29 million from
1997 to 1998. The decrease was primarily due to the decrease in average debt
outstanding related to a decrease in working capital requirements and the
deferral of a significant 1998 excise tax payment, as well as the repayment of
$250

                                       23

<PAGE>


million of the Company's Senior Notes on August 1, 1998. Also the average
interest rate decreased due to a decrease in key rates and replacement of higher
rate debt with lower rate debt.

                  Income taxes. PDV America's provision for income taxes in 1998
was $131 million, representing an effective tax rate of 36%. In 1997, PDV
America's provision for income taxes was $106 million, representing an effective
tax rate of 32%. The relatively low rate in 1997 was due primarily to the
favorable resolution of a significant tax issue with the Internal Revenue
Service in the second quarter of 1997. The resolution resulted in the reduction
of a contingency reserve previously established related to this matter. The
decrease was partially offset by the recording of a valuation allowance related
to a capital loss carryforward. In 1998 the effective tax rate decreased
slightly compared to the 1996 rate due to a decrease in state taxes.

Results of Operations--1997 Compared to 1996

                  Sales revenues and volumes. Sales increased by $670 million,
representing a 5% increase from 1996 to 1997. The increase was due to an
increase in sales volumes of 8% partially offset by a decrease in average sales
prices of 3%. (See PDV America Sales Revenue and Volumes table above.)

                  Equity in earnings (losses) of affiliates. Equity in earnings
of affiliates increased by approximately $24 million, or 53% from $45 million in
1996 to $69 million in 1997. This increase was due primarily to a $43 million
increase in CITGO's equity earnings of LYONDELL-CITGO, which was due primarily
to the change in CITGO's interest in LYONDELL-CITGO, which increased from
approximately 13% at December 31, 1996 to approximately 42% on April 1,
1997, and the improvement in LYONDELL-CITGO's operations since completion of its
refinery enhancement project during the first quarter of 1997. Also, subsequent
to the transfer of UNO-VEN assets, the Companies have recorded $4 million of
equity in the earnings of Needle-Coker from the period from May 1, 1997 to
December 31, 1997. These were offset by a $23 million decrease in the equity in
earnings of UNO-VEN from $23 million in 1996 to $.5 million for the first four
months of 1997. See "--PDV Midwest Refining, LLC" under "Business and
Properties" and Consolidated Financial Statements of PDV America - Note 8 in
Item 14a).

                  Other income (expense). Other income (expense) was $(14.5)
million for the year ended December 31, 1997 as compared to $(3.4) million for
the same period in 1996. The 1997 amount includes $8.7 million in loss reserves
on a lubricants plant and retail properties, a $5.8 write-off of a capital
project, $5.8 million in fees related to the sale of trade accounts, notes and
credit card receivables in June and November 1997 and a $2.6 million write-off
of miscellaneous assets. These items were offset by a net $8.3 million property
insurance recovery relating to the Corpus Christi alkylation unit fire during
the third quarter and a $1.3 million gain on the sale of pipeline assets in the
first quarter of 1997.

                  Cost of sales and operating expenses. Cost of sales and
operating expenses increased by $507 million, or 4% from 1996 to 1997. (See PDV
America Cost of Sales and Operating Expense table above.)

                  The Companies purchase refined products to supplement the
production from their refineries to meet marketing demands and resolve
logistical issues. The refined product purchases represented 52% and 57% of cost
of sales for the years 1997 and 1996, respectively. These refined product
purchases included purchases from LYONDELL-CITGO, and Chalmette.

                                       24

<PAGE>


                  Gross margin. The gross margin for 1997 was $625 million, or
4.6%, compared to $461 million, or 3.6%, for 1996. Gross margins in 1997 were
positively affected by high crude runs during periods of strong refining margins
as well as asphalt and petrochemical activities and the positive contribution
from PDVMR's refining operations.

                  Selling, general and administrative expenses. Selling, general
and administrative expenses increased $42 million, or 25%, due primarily to
increased selling expenses in 1997, including the effect of the change in focus
of the Companies' marketing programs initiated in April 1996 and increases in
several other areas including purchasing, administrative services, information
systems, corporate executive, credit card and other charges, none of which
increased more than $6 million individually, but in the aggregate increased
approximately $30 million for the year. Additionally, the effect of including
PDVMR's expenses from May 1, 1997 to December 31, 1997 contributed to the
increase.

                  Interest expense. Interest expense increased $15 million from
1996 to 1997. The increase was primarily due to the public debt and certain
industrial revenue bonds which were outstanding for the entire year in 1997
compared to only a partial year during 1996 and CITGO's revolving bank loan,
which had a higher outstanding balance during most of 1997 as compared to 1996.
The increase was also due to debt related to PDVMR.

                  Income taxes. PDV America's provision for income taxes in 1997
was $106 million, representing an effective tax rate of 32%. In 1996, PDV
America's provision for income taxes was $78 million, representing an effective
tax rate of 36%. The decrease is due primarily to the favorable resolution with
the Internal Revenue Service of a significant tax issue, related to
environmental expenditures, in the second quarter of 1997. The decrease was
partially offset by the recording of a valuation allowance related to a capital
loss carryforward.

Liquidity and Capital Resources

                  For the year ended December 31, 1998, PDV America's net cash
provided by operating activities totaled approximately $711 million, primarily
reflecting $231 million of net income and $265 million of depreciation and
amortization, a lower of cost or market adjustment to inventory of $172 million
and the net effect of other items of $43 million. The more significant changes
in other items included the decrease in accounts receivable, including
receivables from affiliates, of approximately $86 million, a decrease in
accounts payable and other liabilities, including payables to affiliates, of
approximately $78 million and the increase of other assets of approximately $79
million.

                  Net cash used in investing activities in 1998 totaled $232
million, consisting primarily of capital expenditures of $230 million, loans to
PDVSA Finance Ltd. in the aggregate amount of $260 million, and a loan to
LYONDELL-CITGO of $20 million offset by $250 million of proceeds from notes
receivable from PDVSA and $27 million of proceeds from sales of property, plant
and equipment.

                  During the same period, consolidated net cash used in
financing activities totaled approximately $479 million, consisting primarily of
$309 million of payments on private placement notes, $269 million of dividends
paid to PDV Holding, $59 million of repayment on term bank loan offset by $50
million of capital contribution from PDV Holding and the net additional
borrowings of $108 million.


                                       25

<PAGE>


                  PDV America currently estimates capital expenditures for the
years 1999-2003 will total approximately $2.2 billion, exclusive of investments
in LYONDELL-CITGO, as shown in the following table.

              Estimated Capital Expenditures--1999 through 2003(1)


     Strategic                                                $1,320 million
     Maintenance                                                 503 million
     Regulatory/Environmental                                    332 million
                                                                 -----------
     Total                                                    $2,155 million
     -------------                                            ==============
     (1)     These estimates may change as future regulatory events unfold.

                  PDV America's $750 million senior notes issued in 1993 are
comprised of (i) $250 million of 7 3/4% Senior Notes due August 1, 2000 and (ii)
$500 million 7 7/8% Senior Notes due August 1, 2003 (collectively, the "Senior
Notes"). Interest on these notes is payable in semiannual installments. PDV
America repaid on August 1, 1998 the $250 million 7 1/4% Senior Notes due August
1, 1998, with the proceeds received from the maturity of $250 million of Mirror
Notes due from PDVSA on July 31, 1998.


                  PDV America's $260 million loan to PDVSA Finance Ltd., a
wholly owned subsidiary of Petroleos de Venezuela, S.A., was issued on November
10, 1998 and is comprised of two promissory notes of $130 million. PDVSA Finance
shall repay the outstanding principal amount of the loan commencing on February
10, 2009, in 20 equal quarterly installments of principal. Interest shall be
payable in arrears quarterly commencing on February 10, 1999, at a rate per
annum equal to 8.558%.

                  As of December 31, 1998, CITGO had an aggregate of $1,343
million of indebtedness outstanding that matures on various dates through the
year 2028. As of December 31, 1998, the contractual commitments to make
principal payments on this indebtedness were $84 million, $47 million and $47
million for 1999, 2000 and 2001, respectively. CITGO's bank credit facility
consists of a $400 million, five-year revolving bank loan and a $150 million,
364-day revolving bank loan, both of which are unsecured and have various
borrowing maturities, of which $165 million was outstanding at December 31,
1998. Cit-Con has a separate credit agreement under which $21 million was
outstanding at December 31, 1998. Other principal indebtedness consists of (i)
$200 million in senior notes issued in 1996, (ii) $260 million in senior notes
issued pursuant to a master shelf agreement with an insurance company, (iii)
$177 million in senior notes issued in 1991, (iv) $276 million in obligations
related to tax exempt bonds issued by various governmental units, and (v) $208
million in obligations related to taxable bonds issued by a governmental unit.
(See Consolidated Financial Statements of PDV America - Notes 9 and 10 in Item
14a.)

                  As of December 31, 1998, PDVMR had an aggregate of $65 million
of indebtedness that matures on various dates through the year 2008. PDVMR's
bank credit facility consists of a $125 million revolving credit facility,
committed through April 2002, of which $45 million was outstanding at December
31, 1998. Other indebtedness consists of $20 million in pollution control bonds.
(See Consolidated Financial Statements of PDV America - Note 10 in Item 14a.)


                                       26

<PAGE>


                  The debt instruments of PDV America, PDVMR and CITGO impose
restrictions on PDV America's, PDVMR's and CITGO's ability to incur additional
debt, grant liens, make investments, sell or acquire fixed assets, make
restricted payments and engage in other transactions. In addition, restrictions
exist over the payment of dividends and other distributions to PDV America from
CITGO. PDV America, PDVMR and CITGO were in compliance with all their respective
covenants under such debt instruments at December 31, 1998.

                  As of December 31, 1998, capital resources available to the
Companies included cash on hand, available borrowing capacity under CITGO's
revolving credit facility of $385 million, $138 million in unused availability
under CITGO's uncommitted short-term borrowing facilities with various banks and
$80 million in unused availability under PDVMR's revolving credit facility with
various banks. Additionally, the remaining $400 million from CITGO's shelf
registration with the Securities and Exchange Commission for $600 million of
debt securities may be offered and sold from time to time. The Companies'
management believes that they have sufficient capital resources to carry out
planned capital spending programs, including regulatory and environmental
projects in the near term, and to meet anticipated operating needs, debt service
and currently anticipated future obligations as they arise. In addition, PDV
America intends that payments received from PDVSA under the Mirror Notes will
provide funds to service PDV America's Senior Notes. The Companies periodically
evaluate other sources of capital in the marketplace and anticipate that
long-term capital requirements will be satisfied with current capital resources
and future financing arrangements. The Companies' ability to obtain such
financing will depend on numerous factors, including market conditions and the
perceived creditworthiness of the Companies at that time. See "Factors Affecting
Forward Looking Statements".

                  PDV America and its direct subsidiaries are also party to a
tax allocation agreement, which is designed to provide PDV America with
sufficient cash to pay its consolidated income tax liabilities.

New Accounting Standards

                  Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income". The
Company had no items of other comprehensive income during the three years ended
December 31, 1998.

                  In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS No. 131"), which is effective for the fiscal year
ending December 31, 1998. SFAS No. 131 modifies current segment reporting
requirements and establishes, for public companies, criteria for reporting
disclosures about a company's products and services, geographic areas and major
customers in annual and interim financial statements. The Company has determined
that its operations comprise a single reportable segment.

                  In February 1998, the FASB issued Statement of Financial
Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS No. 132") which is effective for the Company's
fiscal year ending December 31, 1998. The statement revises current employers'
disclosure requirements for pensions and other postretirement benefits. It does
not change the measurement or recognition of costs or liabilities associated
with those plans.

                  In June 1998, the FASB issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). The statement

                                       27

<PAGE>


establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives, at
fair value, as either assets or liabilities in the statement of financial
position with an offset either to shareholder's equity and comprehensive income
or income depending upon the classification of the derivative. The Company has
not determined the impact on its financial statements that may result from
adoption of SFAS No. 133, which is required no later than January 1, 2000.

Year 2000 Readiness

                  General. The inability of computers, software and other
equipment using microprocessors to recognize and properly process data fields
containing a two-digit year is commonly referred to as the Year 2000 issue. As
the Year 2000 approaches, such systems may be unable to accurately process
certain date-based information.

                  To mitigate any adverse impact this may cause, the Companies
have established a company-wide Year 2000 Project ("Project") to address the
issue of computer programs and embedded computer chips which may be unable to
correctly function with the Year 2000. The Project is proceeding on schedule. In
addition, CITGO is updating major elements of their information systems by
implementing programs purchased from SAP. The first phase of SAP implementation,
which included the financial reporting and materials management systems, was
brought into production on January 1, 1998. Additional SAP modules including
plant maintenance work order and cost tracking were implemented throughout 1998.
The implementation will continue in 1999. The total cost of the SAP
implementation is estimated to be approximately $110 million, which includes
software, hardware, reengineering and change management. Management has
determined that SAP is an appropriate solution to the Year 2000 issue related to
the systems for which SAP is implemented. Such systems comprise approximately
80% of the Companies' total information systems. The implementation of SAP is 70
to 75% complete, and is on schedule and on budget as of December 31, 1998.
Remaining business software systems are expected to be made Year 2000 ready
through the Year 2000 Project or they will be replaced.

                  The Project. The Companies' Year 2000 Project Team is divided
into two groups. One group is working with Information Systems ("I.S.") and
Information Technology ("I.T.") related matters, while the other is analyzing
non-I.S. and non-I.T. business and asset integrity matters. A risk-based
approach toward Year 2000 readiness was applied to non-SAP systems and
processes, with most fix-or-replace decisions made by year-end 1998. The
strategy for achieving Year 2000 business and asset integrity is focused on
equipment, software and relationships that are critical to the Companies'
primary business operations, including refinery operations, terminal operations,
crude oil purchase and shipment operations, and refined product distribution
operations. The Companies engaged third party consultants to review and validate
the methodology and organization of the Project. The Project strategy involves a
number of phases: Inventory and Assessment of Critical Equipment, Software and
Relationships, Contingency Planning, Remediation, Testing and Readiness.

                  The Inventory and Assessment of Critical Equipment and
Software phase of the Project has been completed. The Inventory and Assessment
of business relationships with customers and suppliers to assure continuity of
purchases, sales and intercompany communications began in June 1998. The
Companies now require that all new contracts with vendors, suppliers or business
partners include a clause covering Year 2000 readiness. The Companies also seek
evidence of Year 2000 readiness from service providers prior to procuring new
services.

                                       28

<PAGE>


                  While the Project is systematically assessing the Year 2000
readiness of third party suppliers and customers, there can be no guarantee that
third parties of business importance to the Companies will successfully and
timely reprogram, replace or test all of their own computer hardware, software
and process control systems. The Companies have therefore chosen to continue
assessment and reevaluation of third party relationships beyond the deadline for
completion of other aspects of Inventory and Assessment phases of the Project.
Reviews of third party Year 2000 readiness will continue through 1999.

                  The Companies have also established a Year 2000 Contingency
Planning Team. The strategy for Contingency Planning includes a review and
analysis of existing contingency plans for the Companies' refineries, terminals,
pipelines and other operations, in light of potential Year 2000 issues
discovered in the Inventory and Assessment phases of the Project. The
Contingency Planning phase will also evaluate and implement changes to the
existing contingency plans. Contingency plans based on this process are
scheduled to be enacted in phases, with completion scheduled for June 30, 1999.
Additional planning is under way for the Remediation phase of the Project.
Remediation has begun and includes technical analysis, testing and, if
necessary, retrofitting or replacement of systems and equipment determined to be
incapable of reliable operations in the Year 2000. Target for completion of the
Remediation phase is August 1, 1999. The final phase of the Project, Readiness,
is being conducted concurrently with other Project phases. As systems,
equipment, processes and business relationships are determined and documented as
Year 2000 ready, Project resources are being shifted to pursue Readiness in
remaining areas of the enterprise.

          The following is the Companies' definition of Year 2000
Readiness:

          o    Correctly and accurately handle date information before, during
               and after midnight, December 31, 1999.

          o    Function correctly and accurately, and without disruption,
               before, during and after January 1, 2000.

          o    Respond to two-digit year date input in a way that resolves
               ambiguity as to the century in a disclosed, defined and
               predetermined manner.

          o    Process all date data to reflect the year 2000 as a leap year.

          o    Correctly and accurately recognize and process any date with a
               year specified as "99" and "00".

                  Costs. The estimated total cost of the Project is not more
than $28 million, down from an original estimate of $35 million. The reduction
is due to less than expected need for remediation of embedded systems and
refinements in expense estimates. This estimate does not include the Companies'
potential share of Year 2000 costs that may be incurred by partnerships and
joint ventures in which the Companies participate but are not the managing
partner or operator. The total amount expended through December 31, 1998 was
approximately $7.1 million. Approximately 65% of these expenditures were for
internal costs to conduct the company-wide Inventory and Assessment phases of
the Project. The remaining 35% of the cost was for consultants in the
specialized areas of Project Management,

                                       29

<PAGE>


Contingency Planning, Information Technology, Database Administration and
Operations Analysis, as well as fees paid to third parties for Quality
Assessment analysis of Project organization and methodology.

                  The costs of the Project are being funded with cash from
operations. No existing or planned I.T. projects have been deferred or delayed
due to Year 2000 readiness initiatives. The cost of implementing SAP replacement
systems is not included in these estimates.

                  The majority of estimated future costs for completing the
Project are anticipated to be directed toward the replacement and repair of
systems and equipment found to be incapable of reliable operation in the Year
2000. Estimates for replacement and repair costs will be refined over time as
the Remediation phase progresses.

                  Risks. The failure to correct a material Year 2000 problem
could result in an interruption, or failure of, certain normal business
activities or operations. Because the Companies are dependent, to a very
substantial degree, upon the proper functioning of their computer systems and
their interaction with third parties, including vendors and customers and their
computer systems, a failure of any of these systems to be Year 2000 compliant
could have a material adverse effect on the Companies. Failure of this kind
could, for example, cause disruption in the supply of crude oil, cause
disruption in refinery operations, cause disruption in the distribution of
refined products, lead to incomplete or inaccurate accounting, recording, or
processing of purchases of supplies or sales of refined products, or result in
generation of erroneous results. If not remedied, potential risks include
business interruption, financial loss, regulatory actions, reputational harm,
and legal liability. Such failures could adversely affect the Companies' results
of operations, liquidity and financial condition. Unlike other business
interruption scenarios, Year 2000 implications could include multiple,
simultaneous events which could result in unpredictable outcomes.

                  Due to the general uncertainty inherent in the Year 2000
problem, resulting in part from the uncertainty of the Year 2000 readiness of
third party suppliers and customers, PDV America's management is unable to
determine at this time whether the consequences of Year 2000 failures will have
a material impact on the Companies' operations, liquidity or financial position.
The Project is expected to significantly reduce the Companies' level of
uncertainty about the Year 2000 impact. PDV America's management believes that,
with the implementation of new SAP business systems and completion of the
Project as scheduled, the possibility of significant interruptions of normal
operations should be minimized.  See also "Factors Affecting Forward Looking 
Statements".


       ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                  Introduction. The Companies have exposure to price
fluctuations of crude oil and refined products as well as fluctuations in
interest rates. To manage these exposures, the Companies have defined certain
benchmarks consistent with their preferred risk profile for the environment in
which the Companies operate and finance their assets. The Companies do not
attempt to manage the price risk related to all of their inventories of crude
oil and refined products. As a result, at December 31, 1998, the Companies were
exposed to the risk of broad market price declines with respect to a substantial
portion of their crude oil and refined product inventories. The following
disclosures do not attempt to quantify the price risk associated with such
commodity inventories.


                                       30

<PAGE>


                  Commodity Instruments. CITGO balances its crude oil and
petroleum product supply/demand and manages a portion of its price risk by
entering into petroleum futures contracts, options and other over-the-counter
commodity derivatives. Generally, CITGO's management strategies qualify as
hedges. However, certain strategies do not qualify as hedges. CITGO may take
commodity positions based on its views or expectations of specific commodity
prices or price differentials between commodity types.

                        Non-Trading Commodity Derivatives
                       Open Positions at December 31, 1998


<TABLE>
<CAPTION>
                                                    Maturity          Volumes of           Contract          Market
Commodity                      Derivative             Date           Contracts(1)          Value(2)           Value
---------                      ----------             ----           ------------          --------           -----
                                                                                                 ($ in millions)
<S>                       <C>                         <C>                 <C>                <C>              <C>
No Lead Gasoline          Futures Purchased           1999                500                $ 8              $ 8

Heating Oil               Futures Purchased           1999                371                $ 7              $ 6
                          Futures Sold                1999                110                $ 2              $ 2

------------------------
<FN>
(1)  1000 barrels per contract
(2)  Weighted average price
</FN>
</TABLE>

                  Debt Related Instruments. CITGO has fixed and floating U.S.
currency denominated debt. CITGO uses interest rate swaps to manage its debt
portfolio toward a benchmark of 40 to 60 percent fixed rate debt to total fixed
and floating rate debt. These instruments have the effect of changing the
interest rate with the objective of minimizing CITGO's long-term costs. At
December 31, 1998, CITGO's primary exposures were to U.S. dollar LIBOR and U.S.
Treasury rates.

                  For interest rate swaps, the table below presents notional
amounts and weighted average interest rates by expected (contractual) maturity
dates. Notional amounts are used to calculate the contractual payments to be
exchanged under the contract.

                      Non-Trading Interest Rate Derivatives
                       Open Positions at December 31, 1998


                               Notional
                             Expiration         Fixed Rate          Principal
Variable Rate Index             Date               Paid              Amount
-------------------            ------             ------          -----------
                                                                 ($ in millions)

One-month LIBOR             May 2000               6.28%            $  25
J.J. Kenny                  May 2000               4.72%               25
J.J. Kenny                  February 2005          5.30%               12
J.J. Kenny                  February 2005          5.27%               15
J.J. Kenny                  February 2005          5.49%               15
                                                                    -----
                                                                    $  92
                                                                    =====

                  For debt obligations, the table below presents principal cash
flows and related weighted average interest rates by expected maturity dates.
Weighted average variable rates are based on implied forward rates in the yield
curve at the reporting date.



                                       31

<PAGE>


                                 Long-Term Debt
                              At December 31, 1998


                                                                       Average
                          Fixed      Average Fixed     Variable      Variable
Expected Maturities     Rate Debt    Interest Rate    Rate Debt    Interest Rate
-------------------     ---------    -------------    ---------    -------------
1999                      $ 40           9.11%          $ 44            5.01%
2000                       290           7.94%             7            5.09%
2001                        40           9.11%             7            5.23%
2002                        36           8.78%            45            5.31%
2003                       559           7.98%           165            5.44%
Thereafter                 422           8.02%           501            6.00%
                        ------           -----          ----            -----
     Total              $1,387           8.07%          $769            5.77%
                        ======           =====          ====            =====
Fair Value              $1,356                          $769
                        ======                          ====




















                                       32

<PAGE>


                        ITEM 8. FINANCIAL STATEMENTS AND
                               SUPPLEMENTARY DATA

                  The Consolidated Financial Statements, the Notes to
Consolidated Financial Statements and the Independent Auditors' Report are
included in Item 14a of this report. The Quarterly Results of Operations are
reported in Note 16 of Notes to Consolidated Financial Statements included in
Item 14a.


                      ITEM 9. CHANGES IN AND DISAGREEMENTS
             WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


                  None.




















                                       33

<PAGE>


                                    PART III

                    ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
                                OF THE REGISTRANT

                  The directors and executive officers of PDV America are as
follows:


Name                        Age         Position
----                        ---         --------
Luis Urdaneta                57         Chairman of the Board and Director,
                                        President, Chief Executive and Financial
                                        Officer
Jose I. Moreno               40         Secretary and Director

Theodore Helmes              43         Treasurer and Chief Accounting Officer

                  Directors are elected to serve until their successors are duly
elected and qualified. Executive officers are appointed by and serve at the
discretion of the Board of Directors.

                  Luis Urdaneta has been a director of PDV America and Chairman
of the Board, President, Chief Executive and Financial Officer, since July 1998.
From March 1994 to May 1998 he was designated member of the Board of Directors
and Executive Vice-President of PDVSA. He has been Chairman of the Board of
Directors of CITGO since 1994.

                  Jose I. Moreno has been a director of PDV America and
Secretary since August 1998. He has served as legal counsel to various
subsidiaries of PDVSA in Venezuela and as member of the Board of Directors in
subsidiaries of PVDSA located outside Venezuela, since 1991.

                  Theodore Helmes has been Treasurer and Chief Accounting
Officer of PDV America since March 1999. He has been the International Finance
Manager of PDV America since June 1991.

                  PDV America's Board of Directors currently has no committees.

                         ITEM 11. EXECUTIVE COMPENSATION

                  For the year ended December 31, 1998, the directors and
executive officers of PDV America received compensation in the aggregate of
approximately $1,300,000.

                         ITEM 12. SECURITY OWNERSHIP OF
                    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                  Not applicable.




                                       34

<PAGE>


                       ITEM 13. CERTAIN RELATIONSHIPS AND
                              RELATED TRANSACTIONS

                  PDV America is a wholly owned indirect subsidiary of PDVSA. As
a result, PDVSA, either directly or indirectly, nominates and selects the
members of the Board of Directors of PDV America and its subsidiaries. Certain
members of the Board of Directors of PDV America are also directors or executive
officers of PDVSA.

                  CITGO has entered into several transactions with PDVSA or
other affiliates of PDVSA, including crude oil and feedstock supply agreements,
agreements for the purchase of refined products and transportation agreements.
These crude oil supply agreements require PDVSA to supply minimum quantities of
crude oil and other feedstocks to CITGO for a fixed period, usually 20 to 25
years. The supply agreements differ somewhat for each entity and each refinery
but generally incorporate formula prices based on the market value of a slate of
refined products deemed to be produced for each particular grade of crude oil or
feedstock, less (i) certain deemed refining costs; (ii) certain actual costs,
including transportation charges, import duties and taxes; and (iii) a deemed
margin, which varies according to the grade of crude oil or feedstock delivered.
Under each supply agreement, deemed margins and deemed costs are adjusted
periodically by a formula primarily based on the rate of inflation. Because
deemed operating costs and the slate of refined products deemed to be produced
for a given barrel of crude oil or other feedstock do not necessarily reflect
the actual costs and yields in any period, the actual refining margin earned by
a purchaser under the various supply agreements will vary depending on, among
other things the efficiency with which such purchaser conducts its operations
during such period. These supply agreements are designed to reduce the inherent
earnings volatility of the refining operations of CITGO. Prior to 1995, certain
costs were used in the CITGO supply agreement formulas, aggregating
approximately $70 million per year, which were to cease being deductible after
1996. Commencing in the third quarter of 1995, a portion of such deductions were
deferred from 1995 and 1996 to the years 1997 through 1999. In 1998, the effect
of the adjustments to the original modifications was to reduce the price of
crude oil purchased from PDVSA by approximately $25 million. The Company
anticipates that the effect of the adjustments to the original modifications
will be to reduce the price of crude oil purchased from PDVSA under these
agreements by approximately $25 million in 1999, as compared to the original
modification and without giving effect to any other factors that may affect the
price payable for crude oil under these agreements. Due to the pricing formula
under the supply agreements, the aggregate price actually paid for crude oil
purchased from PDVSA under these agreements depends primarily upon the current
prices for refined products and certain actual costs of CITGO. This estimate is
based on the assumption that CITGO will purchase the base volumes of crude oil
under the agreements. See also "Factors Affecting Forward Looking Statements".

         PDVMR is party to a Contract For Purchase and Sale Of Crude Oil dated
April 23, 1997, with CITGO and Maraven S.A. ("Maraven"), a corporation organized
and existing, at the date of the contract, under the laws of the Republic of
Venezuela. In accordance with the contract, Maraven (or its successor) is
obligated to provide a base volume of up to 100,000 barrels per day of
Venezuelan crude, and CITGO as operator is responsible for administering the
purchase of additional volumes of crude for the refinery. The Venezuelan crude
is priced in accordance with a formula based upon posted crude prices less a
quality differential. Maraven (or its successor), CITGO and PDVMR can change the
amount and type of crude supplied in order to capture additional economic
opportunities. The term of the agreement is sixty months with renewal periods of
twelve months.


                                       35

<PAGE>


                  LYONDELL-CITGO owns and operates a 265 MBPD refinery in
Houston, Texas. LYONDELL-CITGO was formed in 1993 by subsidiaries of CITGO and
Lyondell, referred to as the owners. CITGO contributed cash during the years
1993 through 1997 for a participation interest and other commitments related to
LYONDELL-CITGO's refinery enhancement project, and Lyondell contributed the
Houston refinery and related assets for the remaining participation interest.
The refinery enhancement project to increase the refinery's heavy crude oil high
conversion capacity was substantially completed at the end of 1996 with an
in-service date of March 1, 1997. The heavy crude oil processed by the Houston
refinery is supplied by PDVSA under a long-term crude oil supply agreement
through the year 2017, and CITGO purchases substantially all of the refined
products produced at the Houston refinery under a long-term contract (See
Consolidated Financial Statements of PDV America -- Notes 2 and 3 in Item 14a).

                  Under long-term supply agreements and refined product purchase
agreements, CITGO, PDVMR and LYONDELL-CITGO purchased approximately $1.4
billion, $0.2 billion and $0.5 billion, respectively, of crude oil, feedstocks
and refined products at market related prices from PDVSA in 1998. At December
31, 1998, $91 million was included in due to affiliates as a result of the
Companies transactions with PDVSA.

                  CITGO's participation interest in LYONDELL-CITGO was
approximately 41% at December 31, 1998, in accordance with agreements between
the owners concerning such interest. CITGO has a one-time option exercisable
after January 1, 2000 but before September 30, 2000, to increase, for an
additional investment, its participation interest to 50%.

                  CITGO loaned $19.8 million and $16.5 million to LYONDELL-CITGO
during 1998 and 1997, respectively. The notes bear interest at market rates
which were approximately 5.9% at December 31, 1998 and 1997, and are due July 1,
2003. These notes are included in other assets at December 31, 1998 and 1997.

                  CITGO accounts for its investment in LYONDELL-CITGO using the
equity method of accounting and records its share of the net earnings of
LYONDELL-CITGO based on allocations of income agreed to by the owners.

                  An affiliate of PDVSA acquired a 50 percent equity interest in
Chalmette in October 1997 and has assigned to CITGO its option to purchase up to
50 percent of the refined products produced at the refinery through December 31,
1999. (See Consolidated Financial Statements of PDV America -- Note 3 in Item
14a.) CITGO exercised this option on November 1, 1997, and acquired
approximately 65 MBPD of refined products from the refinery during 1998,
approximately one-half of which was gasoline.


                  In October 1998, an affiliate of PDVSA acquired a 50 percent
equity interest in HOVENSA and has the right under a product sales agreement to
assign periodically to CITGO, or other related parties, its option to purchase
50% of the refined products produced by HOVENSA (less a certain portion of such
products that HOVENSA will market directly in the local and Caribbean markets).
In addition, under the product sales agreement, the PDVSA affiliate has
appointed CITGO as its agent in designating which of its affiliates shall from
time to time take deliveries of the refined products available to it. The
product sales agreement will be in effect for the life of the joint venture,
subject to termination events based on default or mutual agreement. (See
Consolidated Financial Statements of PDV America -- Note 3 in Item 14a.)
Pursuant to the above arrangement, CITGO began acquiring approximately 120


                                       36

<PAGE>


MBPD of refined products from HOVENSA on November 1, 1998, approximately
one-half of which was gasoline.

                  The purchase agreements with LYONDELL-CITGO, Chalmette and
HOVENSA incorporate various formula prices based on published market prices and
other factors. Such purchases totaled $2.1 billion for 1998. At December 31,
1998, $44 million was included in payables to affiliates as a result of these
transactions.

                  The notes receivable from PDVSA are unsecured and consist of
(i) $250 million 7.75% Notes due August 1, 2000 and (ii) $500 million 7.995%
Notes due August 1, 2003. Interest on these notes is payable semiannually by
PDVSA to PDV America on February 1 and August 1 of each year, less one business
day. For the year ended December 31, 1998, approximately $70 million of interest
income is attributable to such notes with $25 million included in "Due from
affiliates" at December 31, 1998.

                  The notes receivable from PDVSA Finance Ltd. are unsecured and
are comprised of two $130 million 8.558% Notes maturing on November 10, 2013.
Interest on these notes is payable quarterly, starting February 10, 1999.
Interest income attributable to such notes was approximately $3 million at
December 31, 1998, with the entire amount included in "Due from affiliates" at
December 31, 1998.

                  CITGO had refined product, feedstock and crude oil and other
product sales of $164 million to affiliates, including LYONDELL-CITGO and MVPPP,
in 1998. At December 31, 1998, $34 million was included in "Due from affiliates"
as a result of these transactions.

                  The Company has entered into a service agreement with PDVSA to
provide financial and foreign agency services. Income from these services was
$1.7 million in 1998.

                  CITGO has guaranteed approximately $99 million of debt of
certain affiliates, including $50 million related to HOVENSA and $11 million
related to Nelson Industrial Steam Company. (See Consolidated Financial
Statements of PDV America -- Note 13 in Item 14a.)

                  Under a separate guarantee of rent agreement, PDVSA has
guaranteed payment of rent, stipulated loss value and termination value due
under the lease of the Corpus Christi Refinery West Plant facilities. (See
Consolidated Financial Statements of PDV America -- Note 14 in Item 14a.)

                  The Company and PDV America are parties to a tax allocation
agreement that is designed to provide PDV America with sufficient cash to pay
its consolidated income tax liabilities.










                                       37

<PAGE>


                                     PART IV

                   ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND
                               REPORTS ON FORM 8-K


a.   Certain Documents Filed as Part of this Report

     (1)      Financial Statements:
                                                                            Page
                                                                            ----
              Independent Auditors' Report...................................F-1
              Consolidated Balance Sheets at December 31, 1998
                       and 1997..............................................F-2
              Consolidated Statements of Income for the years ended
                       December 31, 1998, 1997 and 1996......................F-4
              Consolidated Statements of Shareholder's Equity for the
                       years ended December 31, 1998, 1997 and 1996..........F-5
              Consolidated Statements of Cash Flows
                       for the years ended December 31, 1998, 1997
                       and 1996..............................................F-6

              Notes to Consolidated Financial Statements.....................F-9

     (2)      None

     (3)      Exhibits:

              The Exhibit Index in part c., below, lists the exhibits that
              are filed as part of, or incorporated by reference into, this
              report.

b.   Reports on Form 8-K

              None.

c.   Exhibits

       *3.1       Certificate of Incorporation, Certificate of Amendment of
                  Certificate of Incorporation and By-laws of PDV America

-------------------
*    Previously filed in connection with the Registrant's Registration Statement
     on Form F-1, Registration No. 33-63742, originally filed with the
     Commission on June 2, 1993.


                                       38

<PAGE>


       *4.1       Indenture, dated as of August 1, 1993, among PDV America,
                  Propernyn, PDVSA and Citibank, N.A., as trustee, relating to
                  PDV America's 7-1/4% Senior Notes Due 1998, 7-3/4% Senior
                  Notes Due 2000 and 7-7/8% Senior Notes Due 2003

       *4.2       Form of Senior Note (included in Exhibit 4.1)

      *10.1       Crude Supply Agreement, dated as of September 30, 1986,
                  between CITGO Petroleum Corporation and Petroleos de
                  Venezuela, S.A.

      *10.2       Supplemental Crude Supply Agreement, dated as of September 30,
                  1986, between CITGO Petroleum Corporation and Petroleos de
                  Venezuela, S.A.

      *10.3       Crude Oil and Feedstock Supply Agreement, dated as of March
                  31, 1987, between Champlin Refining Company and Petroleos de
                  Venezuela, S.A.

      *10.4       Supplemental Crude Oil and Feedstock Supply Agreement, dated
                  as of March 31, 1987, between Champlin Refining Company and
                  Petroleos de Venezuela, S.A.

      *10.5       Contract for the Purchase/Sale of Boscan Crude Oil, dated as
                  of June 2, 1994, between Tradecal, S.A., and CITGO Asphalt
                  Refining Company

      *10.6       Restated Contract for the Purchase/Sale of Heavy/Extra Heavy
                  Crude Oil, dated December 28, 1990, among Maraven, S.A.,
                  Lagoven, S.A., and Seaview Oil Company

      *10.7       Sublease Agreement, dated as of March 31, 1987, between
                  Champlin Petroleum Company, as Sublessor, and Champlin
                  Refining Company, as Sublessee

      *10.8       Operating Agreement, dated as of May 1, 1984, among Cit-Con
                  Oil Corporation, CITGO Petroleum Corporation and Conoco, Inc.

      *10.9       Amended and Restated Limited Liability Company Regulations of
                  LYONDELL-CITGO Refining Company, Ltd. dated July 1, 1993

     *10.10       Contribution Agreement among Lyondell Petrochemical Company,
                  LYONDELL-CITGO Refining Company, Ltd. and Petroleos de
                  Venezuela, S.A.


-------------------
*          Previously filed in connection with the Registrant's Registration
           Statement on Form F-1, Registration No. 33-63742, originally filed
           with the Commission on June 2, 1993.


                                       39

<PAGE>


     *10.11       Crude Oil Supply Agreement, dated as of May 5, 1993, between
                  LYONDELL-CITGO Refining Company, Ltd. and Lagoven, S.A.

     *10.12       Supplemental Supply Agreement, dated as of May 5, 1993,
                  between LYONDELL-CITGO Refining Company, Ltd. and
                  Petroleos de Venezuela, S.A.

     *10.13       The UNO-VEN Company Partnership Agreement, dated as of
                  December 4, 1989, between Midwest 76, Inc. and VPHI Midwest,
                  Inc.

     *10.14       Supply Agreement, dated as of December 1, 1989, between The
                  UNO-VEN Company and Petroleos de Venezuela, S.A.

     *10.15       Supplemental Supply Agreement, dated as of December 1, 1989,
                  between The UNO-VEN Company and Petroleos de Venezuela, S.A.

     *10.16       Tax Allocation Agreement, dated as of June 24, 1993, among PDV
                  America, Inc., VPHI Midwest, Inc., CITGO Petroleum Corporation
                   and PDV USA, Inc., as amended

    **10.17       Amendment and Supplement to Supply Agreement, dated as of May
                  11, 1994, between The UNO-VEN Company and Tradecal, S.A., as
                  assignee of Petroleos de Venezuela, S.A.

   ***10.18       $150,000,000 Credit Agreement, dated May 13, 1998 between
                  CITGO Petroleum Corporation and the Bank of America National
                  Trust and Savings Association, The Bank of New York, the Royal
                  Bank of Canada and Other Financial Institutions

   ***10.19       $400,000,000 Credit Agreement, dated May 13, 1998 between
                  CITGO Petroleum Corporation and the Bank of America National
                  Trust and Savings Association, The Bank of New York, the Royal
                  Bank of Canada and Other Financial Institutions

   ***10.20       Limited Partnership Agreement of LYONDELL-CITGO Refining LP,
                  dated December 31, 1998


-------------------
*        Previously filed in connection with the Registrant's Registration
         Statement on Form F-1, Registration No. 33-63742, originally filed with
         the Commission on June 2, 1993.

**       Previously filed in connection with the Registrant's Annual Report on
         Form 10-K for the fiscal year ended December 31, 1994.

***      Previously filed as an Exhibit to CITGO Petroleum Corporation's
         ("CITGO") Form 10-K (File No. 1-14380) and incorporated herein by this
         reference.


                                                         40

<PAGE>


      10.21       Loan agreement with PDVSA Finance Ltd. consisting of a
                  Promissory Note in the amount of $130,000,000, dated November
                  10, 1998

      10.22       Loan agreement with PDVSA Finance Ltd. consisting of
                  Promissory Note in the amount of $130,000,000, dated November
                  10, 1998

       12.1       Computation of Ratio of Earnings to Fixed Charges

       21.1       List of Subsidiaries of the Registrant

       27.1       Financial Data Schedule


-------------------
*        Previously filed in connection with the Registrant's Registration
         Statement on Form F-1, Registration No. 33-63742, originally filed with
         the Commission on June 2, 1993.

**       Previously filed in connection with the Registrant's Annual Report on
         Form 10-K for the fiscal year ended December 31, 1994.

***      Previously filed as an Exhibit to CITGO Petroleum Corporation's
         ("CITGO") Form 10-K (File No. 1-14380) and incorporated herein by this
         reference.















                                       41

<PAGE>


                                   SIGNATURES

                  Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on March 30,
1999.

                                PDV AMERICA, INC.


                                By     /s/ Luis Urdaneta
                                   ----------------------------
                                           Luis Urdaneta
                                President, Chief Executive and
                                    Financial Officer

                  Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.

      Signatures                             Title                    Date
      ----------                             -----                    ----


By     /s/ Luis Urdaneta           President, Chief Executive     March 30, 1999
   --------------------------      and Financial Officer,
       Luis Urdaneta               Director


By     /s/ Jose I. Moreno          Secretary, Director            March 30, 1999
   --------------------------
       Jose I. Moreno


By     /s/ Theodore Helmes         Treasurer, Chief Accounting    March 30, 1999
   --------------------------      Officer
       Theodore Helmes










                                       42

<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
PDV America, Inc.

We have audited the accompanying consolidated balance sheets of PDV America,
Inc. and subsidiaries (the "Company") as of December 31, 1998 and 1997, and the
related consolidated statements of income, shareholder's equity and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of PDV America, Inc. and subsidiaries
at December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.


Deloitte & Touche LLP

February 5, 1999





                                       F-1

<PAGE>


PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(Dollars in Thousands)
--------------------------------------------------------------------------------


ASSETS                                                    1998            1997
CURRENT ASSETS:
   Cash and cash equivalents                           $   34,822     $   35,268
   Accounts receivable - net                              592,315        666,264
   Due from affiliates                                     52,666         55,883
   Inventories                                            835,128      1,000,498
   Current portion of notes receivable
     from PDVSA                                              --          250,000
   Prepaid expenses and other                              85,571         20,872
                                                       ----------     ----------
         Total current assets                           1,600,502      2,028,785

NOTES RECEIVABLE FROM PDVSA AND AFFILIATE               1,010,000        750,000
PROPERTY, PLANT AND EQUIPMENT - Net                     3,420,053      3,427,983
RESTRICTED CASH                                             9,436          6,920
INVESTMENTS IN AFFILIATES                                 807,659        841,323
OTHER ASSETS                                              227,760        188,511
                                                       ----------     ----------
TOTAL                                                  $7,075,410     $7,243,522
                                                       ==========     ==========

LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
   Short-term bank loans                               $   37,000     $    3,000
   Accounts payable                                       492,090        491,977
   Due to affiliates                                      158,956        231,152
   Taxes other than income                                219,642        180,143
   Other current liabilities                              247,966        275,086
   Income taxes payable                                     1,607           --
   Current portion of long-term debt                       47,078        345,099
   Current portion of capital lease
     obligation                                            14,660         13,140
                                                       ----------     ----------
         Total current liabilities                      1,218,999      1,539,597


                                       F-2

<PAGE>


CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(Dollars in Thousands) (continued)
--------------------------------------------------------------------------------

                                                          1998            1997
LONG-TERM DEBT                                          2,071,843      2,047,708
CAPITAL LEASE OBLIGATION                                  101,926        116,586
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS               200,281        199,765
OTHER NONCURRENT LIABILITIES                              230,007        234,710
DEFERRED INCOME TAXES                                     621,463        487,727
MINORITY INTEREST                                          29,559         28,337
COMMITMENTS AND CONTINGENCIES (Note 13)

SHAREHOLDER'S EQUITY:
   Common stock, $1.00 par value-authorized, 
      issued and outstanding, 1,000 shares                      1              1
   Additional capital                                    1,532,435     1,482,435
   Retained earnings                                     1,068,896     1,106,656
                                                        ----------    ----------
         Total shareholder's equity                      2,601,332     2,589,092
                                                        ----------    ----------
TOTAL                                                   $7,075,410    $7,243,522
                                                        ==========    ==========

See notes to consolidated financial statements.





                                       F-3

<PAGE>


PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
THREE YEARS ENDED DECEMBER 31, 1998
(Dollars in Thousands)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                         1998            1997            1996
REVENUES:
<S>                                                  <C>             <C>             <C>         
   Net Sales                                         $ 10,780,691    $ 13,394,608    $ 12,698,366
   Sales to affiliates                                    179,556         227,595         253,694
                                                     ------------    ------------    ------------
                                                       10,960,247      13,622,203      12,952,060

   Equity in earnings (losses) of affiliates - net         82,338          68,930          44,906
   Interest income from PDVSA                              73,152          77,725          77,725
   Other income (expense) - net                            (8,669)        (14,487)         (3,373)
                                                     ------------    ------------    ------------
                                                       11,107,068      13,754,371      13,071,318
                                                     ------------    ------------    ------------
COST OF SALES AND EXPENSES:
   Cost of sales and operating expenses (including
      purchases of $3,576,056, $4,275,607 and
      $4,001,471 from affiliates)                      10,305,535      12,997,592      12,491,003
   Selling, general and administrative expenses           258,366         211,423         169,159
   Interest expense:
      Capital leases                                       14,235          15,597          16,818
      Other                                               166,006         193,868         177,544
   Minority interest                                        1,223           1,706           1,013
                                                     ------------    ------------    ------------
                                                       10,745,365      13,420,186      12,855,537
                                                     ------------    ------------    ------------

INCOME BEFORE INCOME TAXES                                361,703         334,185         215,781

INCOME TAXES                                              130,985         106,168          77,758
                                                     ------------    ------------    ------------
NET INCOME                                           $    230,718    $    228,017    $    138,023
                                                     ============    ============    ============
</TABLE>

See notes to consolidated financial statements.




                                       F-4

<PAGE>


PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
THREE YEARS ENDED DECEMBER 31, 1998
(Amounts in Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                   Total
                                                   Common Stock    Additional    Retained     Shareholder's
                                                Shares     Amount    Capital     Earnings         Equity
<S>              <C>                             <C>      <C>     <C>           <C>            <C>        
BALANCE, JANUARY 1, 1996                           1      $   1   $ 1,232,435   $   740,616    $ 1,973,052
   Net income                                     --         --            --       138,023        138,023
                                                ----      -----   -----------   -----------    -----------
BALANCE, DECEMBER 31, 1996                         1          1     1,232,435       878,639      2,111,075
   Capital contributions received from                    
      parent                                      --         --       250,000            --        250,000
   Net income                                     --         --            --       228,017        228,017
                                                ----      -----   -----------   -----------    -----------
BALANCE, DECEMBER 31, 1997                         1          1     1,482,435     1,106,656      2,589,092
   Capital contributions received from                    
      Parent                                      --         --        50,000            --         50,000
   Dividend distribution                          --         --            --      (268,500)      (268,500)
   Other                                          --         --            --            22             22
   Net income                                     --         --            --       230,718        230,718
                                                ----      -----   -----------   -----------    -----------
BALANCE, DECEMBER 31, 1998                         1      $   1   $ 1,532,435   $ 1,068,896    $ 2,601,332
                                                ====      =====   ===========   ===========    ===========
</TABLE>

See notes to consolidated financial statements.




                                       F-5

<PAGE>


PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1998
(Dollars in Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                1998          1997         1996
<S>                                                           <C>          <C>          <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                 $ 230,718    $ 228,017    $ 138,023
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation and amortization                             265,125      240,523      192,585
      Provision for losses on accounts receivable                13,826       17,827       13,275
      Gain on sale of Petro-Chemical Transport                   (2,590)          --           --
      Deferred income taxes                                      72,593       82,145        5,159
      Distributions in excess of (less than) equity in
         earnings (losses) of affiliates                         46,180       33,506       (8,672)
   Inventory adjustment to market                               171,600           --           --
   Postretirement benefits                                          516      (10,605)      15,465
   Other adjustments                                               (259)       7,397        2,549
   Change in operating assets and liabilities,
      exclusive of acquisitions of businesses:
      Accounts receivable                                       103,893      328,000     (199,333)
      Due from affiliates                                       (17,963)      (2,642)       1,253
      Inventories                                                (6,456)     (95,107)     (47,916)
      Prepaid expenses and other current assets                  (9,687)       6,380        6,525
      Accounts payable and other current liabilities            (25,383)    (246,846)      92,265
      Income taxes payable                                       (9,867)     (15,934)       3,725
      Due to affiliates                                         (87,705)     (73,417)      98,580
      Other assets                                              (79,118)     (86,934)     (83,874)
      Other liabilities                                          45,236       34,417       35,833
                                                              ---------    ---------    ---------

         Net cash provided by operating activities              710,659      446,727      265,442
                                                              ---------    ---------    ---------
</TABLE>

                                       F-6

<PAGE>


PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1998
(Dollars in Thousands) (continued)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                1998          1997         1996
<S>                                                           <C>          <C>          <C>      
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                        (230,195)    (264,377)    (437,763)
   Proceeds from sales of property, plant and equipment          26,722       28,194        3,929
   Loan to affiliate                                           (260,000)          --           --
   Proceeds from notes receivable from PDVSA                    250,000           --           --
   (Increase) decrease in restricted cash                        (2,516)       2,449       (8,111)
   Investments in LYONDELL-CITGO Refining LP                         --      (45,635)    (142,638)
   Loans to LYONDELL-CITGO Refining LP                          (19,800)     (16,509)          --
   Proceeds from sale of Petro-Chemical Transport                 7,160           --           --
   Investments in subsidiary and advances to other
      affiliates                                                 (3,247)      (2,442)         (10)
                                                              ---------    ---------    ---------

         Net cash used in investing activities                 (231,876)    (298,320)    (584,593)
                                                              ---------    ---------    ---------


CASH FLOWS FROM FINANCING ACTIVITIES:
   Net (repayments of) borrowings from revolving bank loans   $ (47,000)   $(106,000)   $  60,000
   Net proceeds from (repayments of) short-term bank loans       34,000      (50,000)      28,000
   Payments on term bank loan                                   (58,823)     (29,412)     (29,412)
   Payments on private placement senior notes                  (308,686)     (58,685)     (58,685)
   Payments on UHS business purchase liability                   (7,169)          --           --
   Proceeds from issuance of senior notes                            --           --      199,694
   Proceeds from issuance of taxable bonds                      100,000           --      120,000
   Proceeds from issuance of tax-exempt bonds                    47,200           --       25,000
   Dividends paid to parent                                    (268,500)          --           --
   Payments of capital lease obligations                        (13,140)     (11,778)     (11,252)
   Repayments of other debt                                      (7,111)      (5,109)      (7,143)
   Capital contributions received from parent                    50,000      250,000           --
   Payment of UNO-VEN notes                                          --     (135,000)          --
                                                              ---------    ---------    ---------

      Net cash (used in) provided by financing
          activities                                           (479,229)    (145,984)     326,202
                                                              ---------    ---------    ---------
</TABLE>
                                       F-7

<PAGE>


PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1998
(Dollars in Thousands) (continued)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                1998          1997         1996
<S>                                                           <C>          <C>          <C>      
(DECREASE) INCREASE IN CASH AND CASH
   EQUIVALENTS                                                     (446)       2,423        7,051

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
                                                                 35,268       32,845       25,794
                                                              ---------    ---------    ---------

CASH AND CASH EQUIVALENTS, END OF YEAR                        $  34,822    $  35,268    $  32,845
                                                              =========    =========    =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
   Cash paid during the year for:
      Interest (net of amount capitalized)                    $ 184,376    $ 212,355    $ 197,798
                                                              =========    =========    =========

      Income taxes (net of refunds)                           $  60,392    $  48,639    $  58,492
                                                              =========    =========    =========
</TABLE>

See notes to consolidated financial statements.



                                       F-8

<PAGE>


PDV AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------------


1.       SIGNIFICANT ACCOUNTING POLICIES

         Basis of Presentation - PDV America, Inc. (the "Company") was
         incorporated on November 14, 1986 and is a wholly-owned subsidiary,
         effective April 21, 1997, of PDV Holding, Inc. ("PDV Holding"), a
         Delaware corporation (see below). The Company's ultimate parent is
         Petroleos de Venezuela, S.A. ("PDVSA"), the national oil company of the
         Republic of Venezuela.

         On April 21, 1997, Propermyn B.V. ("Propermyn"), a Dutch limited
         liability company whose ultimate parent is PDVSA and which held all of
         the Company's common stock, contributed its shares of the Company to
         PDV Holding.

         Description of Business - The Companies (as defined below) manufacture
         or refine and market quality transportation fuels as well as
         lubricants, refined waxes, petrochemicals, asphalt and other industrial
         products. CITGO (as defined below) owns and operates two modern, highly
         complex crude oil refineries (Lake Charles, Louisiana, and Corpus
         Christi, Texas) and two asphalt refineries (Paulsboro, New Jersey, and
         Savannah, Georgia) with a combined aggregate rated crude oil refining
         capacity of 582 thousand barrels per day ("MBPD"). CITGO also owns a
         minority interest in LYONDELL-CITGO Refining L.P., a limited
         partnership that owns and operates a refinery in Houston, Texas, with a
         rated crude oil refining capacity of 265 MBPD. CITGO also operates a
         167 MBPD refinery in Lemont, Illinois, owned by PDVMR (as defined
         below). CITGO's assets also include a 65 percent owned lubricant and
         wax plant, pipelines, and equity interests in pipelines, pipeline
         companies and petroleum storage terminals. Transportation fuel
         customers include primarily CITGO branded wholesale marketers,
         convenience stores and airlines located primarily east of the Rocky
         Mountains. Asphalt is generally marketed to independent paving
         contractors on the east coast of the United States. Lubricants are sold
         to independent marketers, mass marketers and industrial customers and
         petrochemical feedstocks and industrial products are sold to various
         manufacturers and industrial companies throughout the United States.
         Petroleum coke is sold primarily in international markets.

         Principles of Consolidation - The consolidated financial statements
         include the accounts of the Company, its wholly-owned subsidiaries
         (including CITGO Petroleum Corporation ("CITGO") and its wholly-owned
         subsidiaries, Cit-Con Oil Corporation, which is 65% owned by CITGO and
         VPHI Midwest, Inc. ("Midwest") and its wholly-owned subsidiary, PDV
         Midwest Refining, L.L.C. ("PDVMR") (collectively, the "Companies"). All
         material intercompany transactions and accounts have been eliminated.

         Prior to May 1, 1997, Midwest had a 50% interest in the UNO-VEN Company
         ("UNO-VEN"), an Illinois general partnership. Beginning May 1, 1997,
         pursuant to the Partnership Interest Retirement Agreement (Note 8),
         PDVMR now owns certain UNO-VEN assets, as defined. Accordingly, the
         consolidated financial statements reflect the equity in earnings of
         UNO-VEN

                                       F-9

<PAGE>


         through April 30, 1997 (see Note 8) and the results of operations of
         PDVMR on a consolidated basis since May 1, 1997.

         The Companies' investments in less than majority owned affiliates are
         accounted for by the equity method. In addition, the excess of the
         carrying value of the investments over the equity in the underlying net
         assets of the affiliates is amortized on a straight-line basis over 40
         years, which is based upon the estimated useful lives of the
         affiliates' assets.

         Estimates, Risks and Uncertainties - The preparation of financial
         statements in conformity with generally accepted accounting principles
         requires management to make estimates and assumptions that affect the
         reported amounts of assets and liabilities and disclosure of contingent
         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.

         The Companies' operations are sensitive to domestic and international
         political, legislative, regulatory and legal environments. In addition,
         significant changes in the prices or availability of crude oil and
         refined products could have a significant impact on the results of
         operations for any particular year.

         Impairment of Long-Lived Assets - The Company periodically evaluates
         the carrying value of long-lived assets to be held and used when events
         and circumstances warrant such a review. The carrying value of a
         long-lived asset is considered impaired when the anticipated
         undiscounted cash flow from such asset is separately identifiable and
         is less than its carrying value. In that event, a loss is recognized
         based on the amount by which the carrying value exceeds the fair market
         value of the long-lived asset. Fair market value is determined
         primarily using the anticipated cash flows discounted at a rate
         commensurate with the risk involved. Losses on long-lived assets to be
         disposed of are determined in a similar manner, except the fair market
         values are reduced for the cost to dispose.

         Revenue Recognition - Revenue is recognized upon transfer of title to
         products sold, based upon the terms of delivery.

         Supply and Marketing Activities - The Companies engage in the buying
         and selling of crude oil to supply their refineries. The net results of
         this activity are recorded in cost of sales. The Companies also engage
         in the buying and selling of refined products to facilitate the
         marketing of their refined products. The results of this activity are
         recorded in cost of sales and sales.

         Refined product exchange transactions that do not involve the payment
         or receipt of cash are not accounted for as purchases or sales. Any
         resulting volumetric exchange balances are accounted for as inventory
         in accordance with the Companies' last-in, first-out ("LIFO") method.
         Exchanges that are settled through payment or receipt of cash are
         accounted for as purchases or sales.

         Excise Taxes - The Companies collect excise taxes on sales of gasoline
         and other motor fuels. Excise taxes of approximately $3 billion, $3.2
         billion and $2.7 billion were collected from customers and paid to
         various governmental entities in 1998, 1997 and 1996, respectively.
         Excise taxes are not included in sales.


                                      F-10

<PAGE>


         Cash and Cash Equivalents - Cash and cash equivalents consist of highly
         liquid short-term investments and bank deposits with initial maturities
         of three months or less.

         Restricted Cash - Restricted cash represents highly liquid short-term
         investments held in trust accounts in accordance with a tax-exempt bond
         agreement. Funds are released solely for financing construction of
         environmental facilities as defined in the bond agreements.

         Inventories - Crude oil and refined product inventories are stated at
         the lower of cost or market and cost is primarily determined using the
         LIFO inventory method. Materials and supplies are valued primarily
         using the average cost method.

         Property, Plant and Equipment - Property, plant and equipment is
         reported at cost, less accumulated depreciation. Depreciation is based
         upon the estimated useful lives of the related assets using the
         straight-line method. Depreciable lives are generally as follows:
         buildings and leaseholds - 10 to 25 years; machinery and equipment - 3
         to 25 years; and vehicles - 3 to 10 years.

         Upon disposal or retirement of property, plant and equipment, the cost
         and related accumulated depreciation are removed from the accounts and
         any resulting gain or loss is recognized in income.

         The Companies capitalize interest on projects when construction takes
         considerable time and entails major expenditures. Such interest is
         allocated to property, plant and equipment and amortized over the
         estimated useful lives of the related assets. Capitalized interest
         approximated $5 million, $8 million and $12 million in 1998, 1997 and
         1996, respectively.

         Commodity and Interest Rate Derivatives - The Companies use commodity
         and financial instrument derivatives to manage defined interest rate
         and commodity price risks arising out of the Companies' core
         activities. The Companies have only limited involvement with other
         derivative financial instruments, and do not use them for trading
         purposes.

         The Companies enter into petroleum futures contracts, options and other
         over the counter commodity derivatives, primarily to hedge a portion of
         the price risk associated with crude oil and refined products. In order
         for a transaction to qualify for hedge accounting, the Companies
         require that the item to be hedged exposes the Companies to price risk
         and that the commodity contract reduces that risk and is designated as
         a hedge. The high correlation between price movements of a product and
         the commodity contract in that product is well demonstrated in the
         petroleum industry and, generally, the Companies rely on those
         historical relationships and on periodic comparisons of market price
         changes to price changes of futures and options contracts accounted for
         as hedges. Gains or losses on contracts which qualify as hedges are
         recognized when the related inventory is sold or the hedged transaction
         is consummated. Changes in the market value of commodity derivatives
         which are not hedges are recorded as gains or losses in the period in
         which they occur.

         The Companies also enter into various interest rate swap and cap
         agreements to manage their risk related to interest rate changes on
         their debt. Premiums paid for purchased interest rate swap and cap
         agreements are amortized to interest expense over the terms of the
         agreements. Unamortized premiums are included in other assets. The
         interest rate differentials received or paid by the Companies related
         to these agreements are recognized as adjustments to interest expense
         over the

                                      F-11

<PAGE>


         term of the agreements. Gains or losses on terminated swap agreements
         are either amortized over the original term of the swap agreement if
         the hedged borrowings remain in place or are recognized immediately if
         the hedged borrowings are no longer held.

         In June 1998, the Financial Accounting Standards Board Issued Statement
         of Financial Accounting Standards No. 133, Accounting for Derivative
         Instruments and Hedging Activities ("SFAS No. 133"). The statement
         establishes accounting and reporting standards for derivative
         instruments and for hedging activities. It requires that an entity
         recognize all derivatives, at fair value, as either assets or
         liabilities in the statement of financial position with an offset
         either to shareholder's equity and comprehensive income or income
         depending upon the classification of the derivative. The Company has
         not determined the impact on its financial statements that may result
         from adoption of SFAS No. 133, which is required no later than January
         1, 2000.

         Refinery Maintenance - Costs of major refinery turnaround maintenance
         are charged to operations over the estimated period between
         turnarounds. Turnaround periods range approximately from one to eight
         years. Unamortized costs are included in other assets. Amortization of
         refinery turnaround costs is included in depreciation and amortization
         expense. Amortization was $58 million, $57 million and $53 million for
         1998, 1997 and 1996, respectively. Ordinary maintenance is expensed as
         incurred.

         Environmental Expenditures - Environmental expenditures that relate to
         current or future revenues are expensed or capitalized as appropriate.
         Expenditures that relate to an existing condition caused by past
         operations and do not contribute to current or future revenue
         generation are expensed. Liabilities are recorded when environmental
         assessments and/or cleanups are probable, and the costs can be
         reasonably estimated. Environmental liabilities are not discounted to
         their present value. Subsequent adjustments to estimates, to the extent
         required, may be made as more refined information becomes available.

         Income Taxes - The Companies account for income taxes using an asset
         and liability approach, in accordance with Statement of Financial
         Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.

         Comprehensive Income - Effective January 1, 1998, the Company adopted
         Statement of Financial Accounting Standards No. 130, "Reporting
         Comprehensive Income" (SFAS No. 130). The Company had no items of other
         comprehensive income during the three years ended December 31, 1998.

         Reclassifications - Certain reclassifications have been made to the
         1997 financial statements to conform with the classifications used in
         1998.

2.       INVESTMENT IN LYONDELL-CITGO REFINING LP

         LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265
         thousand barrel per day refinery in Houston, Texas. LYONDELL-CITGO was
         formed in 1993 by subsidiaries of CITGO and Lyondell Company
         ("Lyondell"), referred to as the owners. CITGO has contributed cash for
         a participation interest and other commitments related to
         LYONDELL-CITGO's refinery enhancement project, and Lyondell contributed
         the Houston

                                      F-12

<PAGE>


         refinery and related assets for the remaining participation interest.
         The refinery enhancement project to increase the refinery's heavy crude
         oil high conversion capacity was substantially completed at the end of
         1996 with an in-service date of March 1, 1997. The heavy crude oil
         processed by the Houston refinery is supplied by a subsidiary of PDVSA
         under a long-term crude oil supply contract through 2017, and CITGO
         purchases substantially all of the refined products produced at the
         Houston refinery under a long-term contract (Note 3).

         CITGO's participation interest in LYONDELL-CITGO increased from 13% at
         December 31, 1996, to approximately 42% on April 1, 1997, in accordance
         with agreements between the owners concerning such interest. CITGO has
         a one time option to increase, for an additional investment, its
         participation interest to 50%. This option may be exercised after
         January 1, 2000 but no later than September 30, 2000.

         CITGO loaned $19.8 million and $16.5 million to LYONDELL-CITGO during
         1998 and 1997, respectively. The notes bear interest at market rates
         which were approximately 5.9% at December 31, 1998 and 1997, and are
         due July 1, 2003. These notes are included in other assets in the
         accompanying consolidated balance sheets.

         CITGO accounts for its investment in LYONDELL-CITGO using the equity
         method of accounting and records its share of the net earnings of
         LYONDELL-CITGO based on allocations of income agreed to by the owners.
         Information on CITGO's investment in LYONDELL-CITGO follows:


                                           1998            1997          1996
                                                      (000s Omitted)
Carrying value of investment 
   at December 31                        $  597,373    $  630,060    $  604,729
Notes receivable at December 31              36,309        16,509            --
Participation interest at December 31            41%           42%           13%
Equity in net income                     $   58,827    $   44,429    $    1,254
Cash distributions received                  91,763        64,734            --

Summary of financial position:
   Current assets                        $  197,000    $  243,000    $  273,000
   Noncurrent assets                      1,440,000     1,438,000     1,434,000
   Current liabilities                      203,000       293,000       373,000
   Noncurrent liabilities                   785,000       715,000       671,000
   Member's equity                          649,000       673,000       663,000

Summary of operating results:
   Revenue                               $2,055,000    $2,697,000    $2,823,000
   Gross profit                             291,000       255,000        70,000
   Net income                               169,000       147,000        11,000


                                      F-13

<PAGE>


 3.      RELATED PARTY TRANSACTIONS

         CITGO purchases approximately two-thirds of the crude oil processed in
         its refineries from subsidiaries of PDVSA under long-term supply
         agreements. These supply agreements extend through the year 2006 for
         the Lake Charles refinery, 2010 for the Paulsboro refinery, 2012 for
         the Corpus Christi refinery and 2013 for the Savannah refinery. CITGO
         purchased $1.4 billion, $2 billion and $2.4 billion of crude oil,
         feedstocks and other products from wholly-owned subsidiaries of PDVSA
         in 1998, 1997 and 1996, respectively, under these and other purchase
         agreements. The crude supply contracts include force majeure clauses
         that have been exercised on various occasions. Exercise of these
         clauses requires that CITGO locate alternatives sources of supply for
         its crude oil requirements, and such action may result in lower
         operating margins.

         The crude oil supply contracts incorporate formula prices based on the
         market value of a number of refined products deemed to be produced from
         each particular crude oil, less (i) certain deemed refining costs
         adjustable for inflation, (ii) certain actual costs, including
         transportation charges, import duties and taxes and (iii) a deemed
         margin, which varies according to the grade of crude oil. At December
         31, 1998 and 1997, $74 million and $138 million, respectively, were
         included in payables to affiliates as a result of these transactions.

         An affiliate of PDVSA acquired a 50% equity interest in a refinery in
         Chalmette, Louisiana ("Chalmette"), in October 1997 and has assigned to
         CITGO its option to purchase up to 50% of the refined products produced
         at the refinery, through December 31, 1999. CITGO exercised this option
         on November 1, 1997, and is acquiring approximately 65 thousand barrels
         per day of refined products from the refinery, approximately one-half
         of which is gasoline.

         Other affiliates of PDVSA entered into an agreement to acquire a
         combined 50% equity interest in an integrated vacuum/cover facility at
         Phillips' oil refinery under construction in Sweeny, Texas ("Sweeny"),
         on October 30, 1998.

         In October 1998, an affiliate of PDVSA acquired a 50% equity interest
         in a joint venture that owns and operates a refinery in St. Croix, U.S.
         Virgin Islands ("HOVENSA") and has the right under a product sales
         agreement to assign periodically to CITGO, or other related parties,
         its option to purchase 50% of the refined products produced by HOVENSA
         (less a certain portion of such products that HOVENSA will market
         directly in the local and Caribbean markets). In addition, under the
         product sales agreement, the PDVSA affiliate has appointed CITGO as its
         agent in designating which of its affiliates shall from time to time
         take deliveries of the refined products available to it. The product
         sales agreement will be in effect for the life of the joint venture,
         subject to termination events based on default or mutual agreement
         (Note 3). Pursuant to the above arrangement, CITGO began acquiring
         approximately 120 MBPD of refined products from HOVENSA on November 1,
         1998, approximately one-half of which was gasoline.

         CITGO also purchases refined products from various other affiliates
         including LYONDELL-CITGO, HOVENSA and Chalmette under long-term
         contracts. These agreements incorporate various formula prices based on
         published market prices and other factors. Such purchases totaled $2.1
         billion, $2.0 billion and $1.6 billion for 1998, 1997 and 1996,
         respectively. At December 31, 1998 and 1997, $44 million and $39
         million, respectively, were included in payables to affiliates as a
         result of these transactions.

                                      F-14

<PAGE>


         CITGO had refined product, feedstock, and other product sales to
         affiliates of $164 million, $221 million, and $190 million, in 1998,
         1997 and 1996, respectively. CITGO's sales of crude oil to affiliates
         were $18 million, $3 million, and $64 million in 1998, 1997 and 1996,
         respectively. At December 31, 1998 and 1997, $34 million and $23
         million, respectively, were included in due from affiliates as a result
         of these and related transactions.

         Pursuant to the Refinery Agreement with PDVMR (Note 8), on May 1, 1997,
         CITGO has been appointed operator of the PDVMR refinery. The term of
         the agreement is 60 months and shall be automatically renewed for
         periods of 12 months (subject to early termination as provided in the
         agreement). CITGO employed the substantial majority of employees
         previously employed by UNO-VEN and, as a result, CITGO assumed a
         liability for post retirement benefits other than pensions of $27
         million related to those employees. CITGO also purchases the products
         produced at the refinery.

         PDVMR is party to a Contract For Purchase and Sale Of Crude Oil dated
         April 23, 1997, with Maraven S.A. ("Maraven"), a corporation organized
         and existing, at the date of the contract, under the laws of the
         Republic of Venezuela, and CITGO. In accordance with the contract,
         Maraven (or its successor) is obligated to provide a base volume of up
         to 100,000 barrels per day of Venezuelan crude, and CITGO as operator
         is responsible for administering the purchase of additional volumes of
         crude for the refinery. The Venezuelan crude is priced in accordance
         with a formula based upon posted crude prices less a quality
         differential. Maraven (or its successor), CITGO and PDVMR can change
         the amount and type of crude supplied in order to capture additional
         economic opportunities. The term of the agreement is 60 months with
         renewal periods of 12 months.

         During 1995, the Company entered into a service agreement with PDVSA to
         provide financial and foreign agency services. Income from these
         services was $1.7 million, $0.9 million and $0.3 million in 1998, 1997
         and 1996, respectively.

         Under a separate guarantee of rent agreement, PDVSA has guaranteed
         payment of rent, stipulated loss value and terminating value due under
         the lease of the Corpus Christi refinery facilities described in Note
         14. The Company has also guaranteed debt of certain affiliates (Note
         13).

         The notes receivable from PDVSA are unsecured and are comprised of $250
         million of 7.75% notes maturing on August 1, 2000 and $500 million of
         7.995% notes maturing on August 1, 2003. Interest on these notes is
         payable semiannually by PDVSA to the Company on February 1 and August 1
         of each year, less one business day. Interest income attributable to
         such notes was approximately $70 million, $78 million and $78 million
         for the years ended December 31, 1998, 1997 and 1996, respectively,
         with approximately $25 million and $32 million included in due from
         affiliates at December 31, 1998 and 1997, respectively. The notes
         receivable from affiliate are unsecured and are comprised of two $130
         million of 8.558% notes maturing on November 10, 2013. Interest on
         these notes is payable quarterly starting February 10, 1999. Interest
         income attributable to such notes was approximately $3 million at
         December 31, 1998, with the entire amount included in due from
         affiliates at December 31, 1998. Due to the related party nature of
         these notes receivable, it is not practicable to estimate their fair
         value.


                                      F-15

<PAGE>


4.       ACCOUNTS RECEIVABLE


                                                          1998           1997
                                                              (000s Omitted)
Trade                                                  $ 541,613      $ 580,247
Credit card                                               47,096         45,896
Other                                                     23,051         65,374
                                                       ---------      ---------
                                                         611,760        691,517
Less allowance for uncollectible accounts                (19,445)       (25,253)
                                                       ---------      ---------
                                                       $ 592,315      $ 666,264
                                                       =========      =========


         Sales are made primarily on account, based on pre-approved unsecured
         credit terms established by management, except sales to airlines, which
         are made primarily on a prepaid basis. CITGO also has a proprietary
         credit card program and a Companion VISA bank card program, which allow
         retail consumers to purchase fuel and convenience items at CITGO
         branded outlets. Allowances for uncollectible accounts are established
         based on several factors, which include, but are not limited to,
         analysis of specific customers, historical trends, current economic
         conditions and other information.

         Effective June 27, 1997 and November 19, 1997, CITGO established two
         new limited purpose subsidiaries, CITGO Funding Corporation and CITGO
         Funding Corporation II, which entered into nonrecourse agreements to
         sell trade accounts and credit card receivables. Under the terms of the
         agreements, new receivables are added to the pool as collections reduce
         previously sold receivables. The amounts sold at any one time are
         limited to a maximum of $125 million of trade accounts receivable and
         $150 million of credit card receivables. These agreements are renewable
         for successive one-year terms by mutual agreement. Both agreements were
         renewed during 1998. Fees and expenses of $16.1 million and $5.8
         million related to the agreements were recorded as other expense during
         the years ended December 31, 1998 and 1997, respectively. Proceeds of
         approximately $275 million from the initial sales in 1997 were used
         primarily to make payments on CITGO's revolving bank loan.

5.       INVENTORIES



                                                      1998               1997
                                                           (000s Omitted)
Refined product                                    $  580,666         $  734,261
Crude Oil                                             186,503            196,349
Materials and supplies                                 67,959             69,888
                                                   ----------         ----------
                                                   $  835,128         $1,000,498
                                                   ==========         ==========

                                      F-16

<PAGE>


         Inventories at December 31, 1998 are carried at estimated net
         realizable value and results of operations for 1998 include a charge of
         $171.6 million representing the excess of cost over net market value.
         At December 31, 1997, replacement costs approximated LIFO carrying
         values.

6.       PROPERTY, PLANT AND EQUIPMENT


                                                      1998               1997
                                                           (000s Omitted)
Land                                                $   140,047     $   153,448
Building                                                520,698         512,012
Machinery and equipment                               3,486,873       3,350,957
Vehicles                                                 34,434          47,952
Constitution in progress                                186,436         135,406
                                                    -----------     -----------
                                                      4,368,488       4,199,775
Accumulation depreciation and amortization             (948,435)       (771,792)
                                                    -----------     -----------
                                                    $ 3,420,053     $ 3,427,983
                                                    ===========     ===========

         Depreciation expense for 1998, 1997 and 1996 was $203 million, $178
         million and $136 million, respectively.

         In 1997, CITGO incurred property damages from a fire at the Company's
         Corpus Christi, Texas refinery (Note 13). As a result, CITGO
         capitalized $14.5 million of replacement machinery and equipment in
         1997. Other income (expense) included in 1997, $9.4 million of
         insurance recoveries related to this event.

         Other income (expense) includes gains and losses on disposals and
         retirements of property, plant and equipment. Such net losses were
         approximately $2 million, $14 million and $2 million in 1998, 1997, and
         1996, respectively.

7.       INVESTMENT IN AFFILIATES

         CITGO - In addition to LYONDELL-CITGO (Note 2), CITGO's investments in
         affiliates consist of equity interests of 6.8 to 50% in joint interest
         pipelines and terminals, including a 13.98% interest in Colonial
         Pipeline Company; a 49.5% partnership interest in Nelson Industrial
         Steam Company ("NISCO"), which is a qualified cogeneration facility;
         and a 49% partnership interest in Mount Vernon Phenol Plant. The
         carrying value of these investments exceeded CITGO's equity in the
         underlying net assets by approximately $151 million and $155 million at
         December 31, 1998 and 1997, respectively.

         At December 31, 1998 and 1997, NISCO had a partnership deficit. CITGO's
         share of this deficit, as a general partner, was $56.5 million and
         $49.6 million at December 31, 1998 and 1997,

                                      F-17

<PAGE>


         respectively, which is included in other noncurrent liabilities in the
         accompanying consolidated balance sheets.

         Information on CITGO's investments, including LYONDELL-CITGO, follows:


<TABLE>
<CAPTION>
                                                           1998         1997         1996
                                                                    (000s Omitted)
<S>                                                    <C>          <C>          <C>       
Investments in affiliates (excluding NISCO)            $  781,481   $  813,923   $  790,576
Equity in net income of affiliates                         77,105       64,460       21,481
Dividends and distributions received from affiliates      122,044       91,742       31,157

</TABLE>

Selected financial information provided by the affiliates is summarized as
follows:

<TABLE>
<CAPTION>
                                                           1998         1997         1996
                                                                    (000s Omitted)
<S>                                                    <C>          <C>          <C>       
Summary of financial position:
   Current assets                                      $  464,047   $  511,848   $  543,692
   Noncurrent assets                                    2,817,165    2,830,568    2,859,091
   Current liabilities                                    670,045      627,296      697,046
   Noncurrent liabilities                               1,934,378    2,025,709    1,999,276
Summary of operating results:
   Revenues                                            $3,337,449   $4,076,429   $4,158,684
   Gross profit                                           757,678      628,559      475,227
   Net income                                             384,810      371,006      242,434
</TABLE>

         PDVMR - PDVMR has a 25% interest in The Needle Coker Company
         ("Needle"), which is accounted for using the equity method. The Company
         received cash distributions of approximately $6.5 and $5.5 million in
         1998 and 1997, respectively, from Needle.


                                      F-18

<PAGE>


Selected financial information for 1998 and 1997 provided by Needle is shown
below:


                                                        1998          1997
                                                      (Dollars in Thousands)
Summary of financial position:
   Current assets                                      $17,162       $17,099
   Noncurrent assets                                    66,149        70,219
   Current liabilities                                   5,086         4,127
   Noncurrent liabilities                                   --            --

Summary of operating results (full year):
   Revenues                                             74,150        85,441
   Gross profit                                         23,292        28,450
   Net earnings                                         20,933        25,510

8.       DISTRIBUTION OF UNO-VEN ASSETS

         Since 1989, the Company through various subsidiaries had a 50% interest
         in UNO-VEN. On May 1, 1997 pursuant to a Partnership Interest
         Retirement Agreement, PDV America and Union Oil Company of California
         ("UNOCAL") transferred certain assets and liabilities of UNO-VEN to
         PDVMR, a subsidiary of the Company, as a result of the liquidation of
         the Company's 50% ownership interest in UNO-VEN. The assets included a
         153 thousand barrel per day refinery in Lemont, Illinois, as well as
         eleven product distribution terminals and 89 retail sites located in
         the Midwest. CITGO operates these facilities and purchases the products
         produced at the refinery (Note 3).

         In connection with the transaction, the Company received a capital
         contribution of $250,000,000 from PDV Holding, the Company's parent.
         This contribution was used, in part, to pay off UNO-VEN's senior notes
         and to provide working capital.

         The transaction, for accounting purposes, has been treated as a
         purchase and, accordingly, the allocation of fair values to the
         underlying assets and liabilities acquired is based upon management's
         estimates and appraisals. Pro forma results of operations for this
         acquisition were not material.


                                      F-19

<PAGE>


         The allocation of the Company's basis in the partnership and the
         acquisition cost was as follows:


                                                               (000s Omitted)

Accounts receivable                                              $   26,300
Inventory                                                            72,200
Property, plant and equipment                                       576,800
Investment in The Needle Coker Company                               28,800
Other assets                                                         35,300
Working capital facility with bank                                  (13,000)
Other current liabilities                                          (257,600)
Long-term debt                                                     (154,900)
Other noncurrent liabilities                                        (68,700)
                                                                 -----------
PDVMR's equity                                                   $  245,200
                                                                 ==========


         Information with respect to UNO-VEN for the four months ended April 30,
         1997 and as of and for the year ended December 31, 1996 is as follows:


                                                  1997            1996
Investment in UNO-VEN                                N/A       $  249,949
Equity in net income                            $    450           23,425
Distributions received from UNO-VEN                5,194            5,076


         Financial information of UNO-VEN is as follows:


                                                  1997            1996
                                                      (000s Omitted)
Summary of financial position:
   Current assets                                    N/A       $  360,900
   Noncurrent assets                                 N/A          562,700
   Current liabilities                               N/A          265,800
   Noncurrent liabilities                            N/A          158,000
                                                
Summary of operating results:
   Revenues                                   $  567,500       $1,663,277
   Gross profit                                   37,400          150,000
   Net income                                        900           46,890



                                      F-20

<PAGE>


         Under a long-term crude oil supply agreement, terminated by UNO-VEN's
         liquidation, and vessel transportation contracts, UNO-VEN purchased
         $964 million of crude oil from a wholly-owned subsidiary of PDVSA in
         1996. The terms and pricing formulas were similar to the Company's
         subsidiaries' crude oil supply agreements (see Note 3).

         UNO-VEN bought and sold refined products from/to Unocal. Agreements
         underlying these transactions defined the obligations and
         responsibilities of the parties. Pricing was in accordance with
         formulas based, in part, upon market-related prices of finished
         products. UNO-VEN also had a number of agreements with Unocal covering
         certain marketing, administrative, and technical functions.

9.       SHORT-TERM BANK LOANS

         As of December 31, 1998, CITGO has established $175 million of
         uncommitted, unsecured, short-term borrowing facilities with various
         banks. Interest rates on these facilities are determined daily based
         upon the Federal funds' interest rates, and maturity options vary up to
         30 days. The weighted average interest rates actually incurred in 1998,
         1997 and 1996 were 5.8%, 5.9% and 5.7%, respectively. CITGO had $37
         million and $3 million of borrowings outstanding under these facilities
         at December 31, 1998 and 1997, respectively.



                                      F-21

<PAGE>


10.      LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                  1998           1997
                                                                       (000s Omitted)
<S>                                                             <C>           <C>
Senior Notes:
 7.25% Senior Notes $250 million face amount paid 1998          $       --    $   249,859

 7.75% Senior Notes $250 million face amount due 2000              250,000        250,000

 7.875% Senior Notes $500 million face amount due 2003             497,723        497,330

Shelf registration:
 7.875% Senior Notes $200 million face amount due 2006             199,776        199,745

Revolving bank loans:
 Bank of America                                                   165,000        135,000
 Various banks                                                      45,000        122,000

Term bank loan                                                          --         58,823

Private Placement:
 8.75% Series A Senior Notes due 1998                                   --         18,750
 9.03% Series B Senior Notes due 1998-2001                          85,714        114,286
 9.30% Series C Senior Notes due 1998-2006                          90,909        102,273

Master Shelf Agreement:
 8.55% Senior Notes due 2002                                        25,000         25,000
 8.68% Senior Notes due 2003                                        50,000         50,000
 7.29% Senior Notes due 2004                                        20,000         20,000
 8.59% Senior Notes due 2006                                        40,000         40,000
 8.94% Senior Notes due 2007                                        50,000         50,000
 7.17% Senior Notes due 2008                                        25,000         25,000
 7.22% Senior Notes due 2009                                        50,000         50,000

Tax Exempt Bonds:
 Pollution control revenue bonds due 2004                           15,800         15,800
 Port facilities revenue bonds due 2007                             11,800         11,800
 Louisiana wastewater facility revenue bonds due 2023                3,020          3,020
 Louisiana wastewater facility revenue bonds due 2024               20,000         20,000
 Louisiana wastewater facility revenue bonds due 2025               40,700         40,700
 Gulf Coast solid waste facility revenue bonds due 2025             50,000         50,000
 Gulf Coast solid waste facility revenue bonds due 2026             50,000         50,000
 Port of Corpus Christi sewage and solid waste disposal
   revenue bonds due 2026                                           25,000         25,000
 Louisiana wastewater facility revenue bonds due 2026               12,000          2,000
 Gulf Coast Solid Waste Facility revenue bonds due 2028             25,000             --
 Industrial Development Facilities revenue bonds due 2028           22,200             --

Taxable Louisiana wastewater facility revenue bonds due 2026       108,000        118,000
Taxable Gulf Coast environmental facility bonds due 2028           100,000             --
PDVMR - Pollution control bonds due 2008                            19,850         19,850

Cit-Con bank credit agreement                                       21,429         28,571
                                                               -----------    -----------

                                                                 2,118,921      2,392,807

Less current portion of long-term debt                             (47,078)      (345,099)
                                                               -----------    -----------

                                                               $ 2,071,843    $ 2,047,708
                                                               ===========    ===========
</TABLE>


                                      F-22

<PAGE>


         In August 1993, the Company issued $1 billion principal amount of
         Senior Notes (the "Senior Notes") with interest rates ranging from 7.25
         to 7.875% with due dates ranging from 1998 to 2003. Interest on the
         Senior Notes is payable semiannually, commencing February 1, 1994. The
         Senior Notes represent senior unsecured indebtedness of the Company,
         and are structurally subordinated to the liabilities of the Company's
         subsidiaries. The Senior Notes are guaranteed by Propernyn and PDVSA.
         The Senior Notes contain certain covenants that restrict, among other
         things, the ability of the Company and its subsidiaries to incur
         additional debt, to pay dividends, place liens on property, and sell
         certain assets. The Company was in compliance with the debt covenants
         at December 31, 1998.

         In April 1996, CITGO filed a registration statement with the Securities
         and Exchange Commission relating to the shelf registration of $600
         million of debt securities that may be offered and sold from time to
         time. In May 1996, the registration became effective and CITGO sold a
         tranche of debt securities with an aggregate offering price of $200
         million. On October 28, 1997, CITGO entered into a Selling Agency
         Agreement with Salomon Brothers Inc. and Chase Securities Inc.
         providing for the sale of up to an additional $235 million in aggregate
         principal amount of notes in tranches from time to time by CITGO under
         the shelf registration. No amounts were sold under this agreement as of
         December 31, 1998.

         On May 13, 1998 CITGO terminated its $675 million revolving bank loan
         and replaced it with a credit agreement with various banks consisting
         of (i) a $400 million, five-year, revolving bank loan and (ii) a $150
         million, 364-day, revolving bank loan, both of which are unsecured and
         have various borrowing maturities and interest rate options. Interest
         rates on the revolving bank loans were 7.5% and 6.9% at December 31,
         1998 and 1997, respectively.

         On September 3, 1998 CITGO terminated its term bank loan.

         PDVMR has a revolving credit facility with a consortium of banks which
         is committed through April 28, 2002 and allows for borrowings up to
         $125 million at various interest rates. Inventories and accounts
         receivable of PDVMR are pledged as collateral. The facility contains
         certain covenants that impose limitations on the PDVMR for paying
         distributions, incurring additional debt, placing liens on property,
         making investments and loans, and modifying or terminating certain
         supply, sales and operating agreements (Note 3). PDVMR was in
         compliance with these covenants at December 31, 1998. The weighted
         average interest rates at December 31, 1998 and 1997 were 6.60% and
         6.72%, respectively.

         At December 31, 1998, CITGO has outstanding approximately $177 million
         of privately placed, unsecured Senior Notes. Principal amounts are
         payable in annual installments in November and interest is payable
         semiannually in May and November.

         At December 31, 1998, CITGO has outstanding $260 million of privately
         placed senior notes under an unsecured Master Shelf Agreement with an
         insurance company. The notes have various fixed interest rates and
         maturities.

         The various agreements above contain certain covenants that, depending
         upon the level of the Companies' capitalization and earnings, could
         impose limitations on the Companies for paying

                                      F-23

<PAGE>


         dividends, incurring additional debt, placing liens on property, and
         selling fixed assets. The Companies were in compliance with the debt
         covenants at December 31, 1998.

         Through state entities, CITGO has issued $49.8 million of industrial
         development bonds for certain Lake Charles, Louisiana port facilities
         and pollution control equipment and $226 million of environmental
         revenue bonds to finance a portion of the Company's environmental
         facilities at its Lake Charles, Louisiana and Corpus Christi, Texas
         refineries and at the LYONDELL-CITGO refinery. Additional credit
         support for these bonds is provided through letters of credit. The
         bonds bear interest at various floating rates which ranged from 4.1% to
         6% at December 31, 1998, and 3.7% to 5.2% at December 31, 1997.

         Through state entities, CITGO has issued and currently outstanding $208
         million of taxable environmental revenue bonds to finance a portion of
         CITGO's environmental facilities at its Lake Charles, Louisiana
         refinery and at the LYONDELL-CITGO refinery. Such bonds are secured by
         letters of credit and have floating interest rates (5.3% at December
         31, 1998 and 5.8% at December 31, 1997). At the option of CITGO and
         upon the occurrence of certain specified conditions, all or any portion
         of such taxable bonds may be converted to tax-exempt bonds. At December
         31, 1998, $12 million of the original $120 million in taxable Louisiana
         revenue bonds had been converted to tax-exempt bonds.

         PDVMR has nontaxable variable rate pollution control bonds, with
         interest, currently paid monthly. The bonds have one payment at
         maturity in the year 2008 to retire the principal, and principal and
         interest payments are guaranteed by a $20.3 million letter of credit.
         An interest rate swap agreement, based upon a notional amount of $19.9
         million fixed the variable rate at 5.36% until October 26, 1998.

         The Cit-Con bank credit agreement consists of a term loan
         collateralized by throughput agreements of the owner companies. The
         loan contains various interest rate options (weighted average effective
         rates of 6.7% and 6.5% at December 31, 1998 and 1997, respectively),
         and requires quarterly principal payments through December 2001.

         Future maturities of long-term debt as of December 31, 1998 are:
         1999-$47.1 million; 2000-$297.1 million; 2001-$47.1 million; 2002-$81.4
         million; 2003 - $724.1 million; and $922.1 million thereafter.



                                      F-24

<PAGE>


CITGO has entered into the following interest rate swap agreements to reduce the
impact of interest rate changes on its variable interest rate debt:


CITGO'S interest rateswap agreements:
<TABLE>
<CAPTION>
                                                                    Notional Principal
                                                                          Amount
                                   Expiration       Fixed Rate      1998           1997
Variable Rate Index                   Date             Paid            (000s Omitted)

<S>                               <C>                  <C>        <C>            <C>      
One-month LIBOR                   September 1998       4.85%      $     --       $  25,000
One-month LIBOR                   November 1998        5.09             --          25,000
One-month LIBOR                   May 2000             6.28         25,000          25,000
J.J. Kenny                        May 2000             4.72         25,000          25,000
J.J. Kenny                        February 2005        5.30         12,000          12,000
J.J. Kenny                        February 2005        5.27         15,000          15,000
J.J. Kenny                        February 2005        5.49         15,000          15,000
                                                                  --------       ---------
                                                                  $ 92,000       $ 142,000
                                                                  ========       =========
</TABLE>


PDVMR'S interest rate swap
agreements:
<TABLE>
<CAPTION>
                                                                    Notional Principal
                                                                          Amount
                                   Expiration       Fixed Rate      1998           1997
Variable Rate Index                   Date             Paid            (000s Omitted)

<S>                               <C>                  <C>        <C>            <C>      

J.J. Kenny                        October 26, 1998     5.36%      $     --       $  19,850
                                                                  ========       =========
</TABLE>

Interest expense includes $1.0 million, $0.8 million and $1.1 million in 1998,
1997 and 1996, respectively, related to interest paid on these agreements.

11.      EMPLOYEE BENEFIT PLANS

         Employee Savings - CITGO sponsors three qualified defined contribution
         retirement and savings plans covering substantially all eligible
         salaried and hourly employees. Participants make voluntary
         contributions to the plans and CITGO makes contributions, including
         matching of employee contributions, based on plan provisions. CITGO
         charged $19 million, $19 million and $16 million to operations related
         to its contributions to these plans in 1998, 1997 and 1996,
         respectively.

         Pension Benefits - CITGO sponsors three qualified noncontributory
         defined benefit pension plans, two of which cover eligible hourly
         employees and one of which covers eligible salaried employees. CITGO
         also sponsors three nonqualified defined benefit plans for certain
         eligible employees. The qualified plans' assets include corporate
         securities, a fixed income mutual fund, two collective funds and a
         short-term investment fund. The nonqualified plans are not funded.

         CITGO's policy is to fund the qualified pension plans in accordance
         with applicable laws and regulations and not to exceed the tax
         deductible limits. The nonqualified plans are funded as necessary to
         pay retiree benefits. The plan benefits for each of the qualified
         pension plans are primarily based on an employee's years of plan
         service and compensation as defined by each plan.

                                      F-25

<PAGE>


         Postretirement Benefits Other Than Pensions - In addition to pension
         benefits, the Companies also provide certain health care and life
         insurance benefits for eligible salaried and hourly employees at
         retirement. These benefits, are subject to deductibles, copayment
         provisions and other limitations and are primarily funded on a
         pay-as-you-go basis. The Company reserves the right to change or to
         terminate the benefits at any time.

         The following sets forth the changes in benefit obligations and plan
         assets for the pension and postretirement plans for the years ended
         December 31, 1998 and 1997 and the funded status of such plans
         reconciled with amounts reported in the Company's consolidated balance
         sheets:

<TABLE>
<CAPTION>
                                               Pension Benefits            Other Benefits
                                               ----------------            --------------
                                             1998           1997         1998         1997
                                                (000s Omitted)             (000s Omitted)
<S>                                         <C>          <C>          <C>          <C>      
Change in benefit obligation:
 Benefit obligation, beginning of year      $ 233,486    $ 193,074    $ 180,406    $ 149,150
 Service cost                                  17,742       15,759        6,610        6,786
 Interest cost                                 16,058       14,246       12,770       12,359
 Actuarial gain (loss)                         11,958       17,911        1,631      (12,218)
 Assumption of affiliate's postretirement
   liability (Note 3)                              --           --           --       26,975
 Benefits paid                                 (8,862)      (7,504)      (5,489)      (2,646)
                                            ---------    ---------    ---------    ---------

Benefit obligation, end of year               270,382      233,486      195,928      180,406
                                            ---------    ---------    ---------    ---------

Change in plan assets:
 Fair value of plan assets, beginning
   of year                                    221,261      184,236          889          843
 Acutal return on plan assets                  38,139       42,727           50           46
 Employer contribution                          4,110        1,802        5,489        2,646
 Benefits paid                                 (8,862)      (7,504)      (5,489)      (2,646)
                                            ---------    ---------    ---------    ---------

Fair value of plan assets, end of year        254,648      221,261          939          889
                                            ---------    ---------    ---------    ---------

Funded status                                 (15,734)     (12,225)    (194,989)    (179,517)
Unrecognized net acturial gain                (41,146)     (36,249)     (11,896)     (23,948)
Unrecognized prior service cost                   147          186           --           --
Net gain at date of adoption                   (1,280)      (1,548)          --           --
                                            ---------    ---------    ---------    ---------

Net amount recognized                       $ (58,013)   $ (49,836)   $(206,885)   $(203,465)
                                            =========    =========    =========    =========

Amounts recognized in the Company's 
 consolidated balance sheets consist of:
  Accrued benefit liability                 $ (61,991)   $ (53,953)   $(206,885)   $(203,465)
  Intangible asset                              3,978        4,117           --           --
                                            ---------    ---------    ---------    ---------

Net amount recognized                       $ (58,013)   $ (49,836)   $(206,885)   $(203,465)
                                            =========    =========    =========    =========


</TABLE>

                                      F-26
<PAGE>


                                           Pension Benefits      Other Benefits
                                           ----------------      --------------
                                            1998     1997        1998      1997

Weighted-average assumptions as of
 December 31:
 Discount rate                              6.75%     7.0%       6.75%     7.0%
 Expected return on plan assets             9.0%      9.0%       6.0%      6.0%
 Rate of compensation increase              5.0%      5.0%       --        --

         For measurement purposes, a 7.5% annual rate of increase in the per
         capita cost of covered health care benefits was assumed for 1998. The
         rate was assumed to decrease gradually to 5.5% for 2002 and remain at
         that level thereafter.

<TABLE>
<CAPTION>
                                                Pension Benefits                          Other Benefits
                                        ------------------------------------    ------------------------------------
                                         1998          1997         1996          1998         1997         1996
                                                 (000s Omitted)                           (000s Omitted)
<S>                                      <C>           <C>          <C>           <C>          <C>          <C>     
Components of net periodic benefit cost:
   Service Cost                          $ 17,742      $ 15,759     $ 13,356      $  6,610     $  6,786     $  7,047
   Interest cost                           16,058        14,246       12,787        12,770       12,359       11,982
   Expected return on plan assets         (19,660)      (15,453)     (13,520)          (53)         (47)         (50)
   Amortization of prior service
      cost                                     40            40           39            --           --           --
   Amortization of net gain at date
      of adoption                            (268)         (268)        (268)           --           --           --
   Recognized net actuarial (gain)                                                                                   
      loss                                 (1,625)       (1,228)        (828)       (8,823)     (27,581)          --
                                         --------      --------     --------      --------     --------     --------
   Net periodic benefit cost (credit)    $ 12,287      $ 13,096     $ 11,566      $ 10,504     $ (8,483)    $ 18,979
                                         ========      ========     ========      ========     ========     ========
</TABLE>

         Actuarial gains (or losses) related to the postretirement benefit
         obligation are recognized as a component of net postretirement benefit
         cost by the amount the beginning of year unrecognized net gain (or
         loss) exceeds 7.5% of the accumulated postretirement benefit
         obligation.

         The projected benefit obligation, accumulated benefit obligation, and
         fair value of plan assets for the pension plan with accumulated benefit
         obligations in excess of plan assets were $18.2 million, $17.5 million
         and $0, respectively, as of December 31, 1998 and $16.2 million, $16
         million and $0, respectively, as of December 31, 1997.

         Assumed health care cost trend rate have a significant effect on the
         amounts reported for the health care plans. A one-percentage point
         change in assumed health care cost trend rates would have the following
         effects:


                                             1-Percentage-        1-Percentage-
                                             Point Increase       Point Decrease
Increase (decrease) in total of service 
   and interest cost components               $ 3,930,100          $ (3,268,000)
Increase (decrease) in postretirement 
   benefit obligation                          35,267,000           (29,887,000)

         Employee Separation Programs - During 1997, CITGO's senior management
         implemented a Transformation Program which resulted in certain
         personnel reductions (the "Separation

                                      F-27

<PAGE>


         Programs"). CITGO expensed approximately $8 million and $22 million for
         the years ended December 31, 1998 and 1997, respectively, relating to
         the Separation Programs.

         In accordance with the transfer of UNO-VEN's assets to PDVMR (Note 8),
         PDVMR assumed the responsibility for UNO-VEN's pension plans, which
         include both a qualified and a nonqualified plan which were frozen at
         their current levels on April 30, 1997. The plans cover former UNO-VEN
         employees who were eligible for participation in the plans as of April
         30, 1997. At December 31, 1998 and 1997, plan assets consisted of
         equity securities, bonds and cash.

         The following sets forth the changes in benefit obligations and plan
         assets for the years ended December 31, 1998 and 1997 and the funded
         status of the plans reconciled with amounts reported in the company's
         balance sheets:



                                                          Dollars in Thousands
                                                            1998          1997
Change in benefit obligation:
  Benefit obligation, beginning of year                  $ 61,018      $ 64,639
  Interest cost                                             4,348         2,853
  Actuarial loss                                            5,735         4,649
  Benefits paid                                            (6,330)      (11,123)
                                                         --------      --------
Benefit obligation, end of year                            64,771        61,018
                                                         --------      --------

Change in plan assets:
  Fair value of plan assets, beginning of year             65,792        68,374
  Actual return on plan assets                              8,148         8,383
  Employer contribution                                       447           158
  Benefits paid                                            (6,330)      (11,123)
                                                         --------      --------
Fair value of plan assets, end of year                     68,057        65,792
                                                         --------      --------
Funded status                                               3,286         4,774
Unrecognized net actuarial loss                             2,997            92
                                                         --------      --------
Prepaid benefit cost                                     $  6,283      $  4,866
                                                         ========      ========


                                      F-28

<PAGE>


                                                           1998           1997
Weighted-average assumptions as of December 31:
  Discount rate                                            6.75%          7.00%
  Expected return on plan assets                           9.50%          9.50%

                                                           1998           1997
Components of net periodic benefit cost:
  Interest cost                                         $ 4,348        $ 2,853
  Expected return on plan assets                         (5,482)        (3,657)
  Recognized net actuarial loss                             215             --
                                                        -------        -------
  Net periodic benefit cost (credit)                    $  (919)       $  (804)
                                                        =======        =======

         The accumulated benefit obligation of the nonqualified plan exceeds the
         related plan assets. The projected benefit obligation (which equals the
         accumulated benefit obligation for this plan) and fair value of plan
         assets for such plan were $423,802 and $0, respectively, as of December
         31, 1998 and $775,208 and $0, respectively, as of December 31, 1997.

12.      INCOME TAXES

         The provisions for income taxes are comprised of the following:


                                           1998            1997           1996
                                                     (000s Omitted)
Current:                            
  Federal                               $  41,085       $  24,369      $  69,698
  State                                     5,896            (346)         2,901
                                        ---------       ---------      ---------
                                           46,981          24,023         72,599
Deferred                                   84,004          82,145          5,159
                                        ---------       ---------      ---------
                                        $ 130,985       $ 106,168      $  77,758
                                        =========       =========      =========
                                 
         The Federal statutory tax rate differs from the effective rate due to
         the following:


                                             1998            1997          1996
Federal statutory tax rate                   35.0%           35.0%         35.0%
State taxes, net of Federal benefit           1.7             2.7           3.2
Dividend exclusions                          (2.0)           (2.3)         (3.5)
Tax settlement                                 --            (4.9)           --
Other                                         1.5             1.2           1.3
                                             ----            ----          ----
Effective tax rate                           36.2%           31.7%         36.0%
                                             ====            ====          ====

         The effective tax rate during 1997 was lower than during 1996 and 1998
         due primarily to the favorable resolution of a significant tax issue,
         related to environmental expenditures, with the IRS in 1997.


                                      F -29

<PAGE>


         Deferred income taxes reflect the net tax effects of (a) temporary
         differences between the carrying amounts of assets and liabilities for
         financial reporting purposes and the amounts used for income tax
         purposes, and (b) loss and tax credit carryforwards. The tax effects of
         significant items comprising the Company's net deferred tax liability
         as of December 31, 1998 and 1997 are as follows:


                                                                December 31,
                                                            1998          1997
                                                               (000s Omitted)
Deferred tax liabilities:
  Property, plant and equipment                            $625,204     $546,726
  Inventories (including effect of adjustment
    to market)                                               21,091       88,079
  Investments in affiliates                                 120,480       93,201
  Other                                                      63,641       47,082
                                                           --------     --------
                                                            830,416      775,088
                                                           --------     --------
Deferred tax assets:
  Postretirement benefit obligations                         74,331       72,412
  Marketing and promotional accruals                         12,773       19,139
  Employee benefit accruals                                  34,029       34,229
  Alternative minimum tax credit carryforward                45,678       74,117
  Other                                                      97,589       91,940
                                                           --------     --------
                                                            264,400      291,837
                                                           --------     --------
Net deferred tax liability (of which $55,447
  and $4,476 is included in prepaid expenses and
  other at December 31, 1998 and 1997, respectively)       $566,016     $483,251
                                                           ========     ========

         At December 31, 1998, the Company has capital loss carryforwards of
         $6.7 million, $2.5 million of which expire in 1999, $0.4 million of
         which expire in 2000, $2.3 million of which expire in 2001, and $1.5
         million of which expire in 2002. At December 31, 1998 and 1997, a
         valuation allowance of $1.0 million and $1.4 million, respectively, was
         established related to that portion of the carryforwards for which it
         was considered more likely than not that the related tax benefits would
         not be realized before expiration.

         The Company's alternative minimum tax credit carryforwards are
         available to offset regular Federal income taxes in future years
         without expiration, subject to certain alternative minimum tax
         limitations.

13.      COMMITMENTS AND CONTINGENCIES

         Litigation and Injury Claims - Various lawsuits and claims are pending
         against the Company. The Company records accruals for potential losses
         when, in management's opinion, such losses are probable and reasonably
         estimable. If known lawsuits and claims were to be determined in a
         manner adverse to the Company, and in amounts greater than the
         Company's accruals, then such determinations could have a material
         adverse effect on the Company's results of operations in a

                                      F-30

<PAGE>


         given reporting period. However, in management's opinion, the ultimate
         resolution of these lawsuits and claims will not exceed, by a material
         amount, the amount of the accruals and the insurance coverages
         available to the Company. This opinion is based upon management's and
         counsel's current assessment of these lawsuits and claims. The most
         significant lawsuits and claims are discussed below.

         Litigation is pending in federal court in Lake Charles, Louisiana,
         against CITGO by a number of current and former Lake Charles refinery
         employees and applicants on behalf of themselves and others asserting
         claims of racial discrimination in connection with the Company's
         employment practices. The trial court's denial of class certification
         has been upheld on appeal; the plaintiffs are seeking review by the
         U.S. Supreme Court. Trials in this case are set for fall, 1999.

         In a pending case in the United States District Court for the Northern
         District of Illinois, Oil Chemical and Atomic Workers, Local 7-517
         ("Local 7-517") amended its complaint against UNO-VEN to assert claims
         against CITGO, PDVSA, the Company, PDVMR and UNOCAL pursuant to Section
         301 of the Labor Management Relations Act ("LMRA"). This complaint
         alleges that the Company and the other defendants constitute a single
         employer, joint employers or alter-egos for purposes of the LMRA, and
         are therefore bound by the terms of a collective bargaining agreement
         between UNO-VEN and Local 7-517 covering certain production and
         maintenance employees at a Lemont, Illinois, petroleum refinery. On May
         1, 1997, in a transaction involving the former partners of UNO-VEN, the
         Lemont refinery was acquired by PDVMR. Pursuant to an operating
         agreement with PDVMR, CITGO became the operator of the Lemont refinery,
         and employed the substantial majority of employees previously employed
         by UNO-VEN pursuant to its initial terms and conditions of employment,
         but did not assume the existing labor agreement. The union seeks
         compensation for monetary differences in medical, pension and other
         benefits between the CITGO and UNO-VEN plans and reinstatement of all
         of the UNO-VEN benefit plans. The union also seeks to require CITGO to
         abide by the terms of the collective bargaining agreement between the
         union and UNO-VEN. As an alternative claim against all defendants but
         CITGO, the union alleges that if the labor agreement is not binding on
         CITGO, there was a violation of the Federal Workers Adjustment
         Retraining and Notification Act by failure to give 60 days' written
         notice of termination to approximately 400 UNO-VEN employees; this
         would allegedly entitle such workers to 60 days' pay and benefits,
         which is estimated to be approximately $6 million. On June 18, 1998 the
         trial court granted the motions for summary judgment filed by CITGO and
         the other defendants; the union has appealed this ruling.

         PDVMR and PDV America, jointly and severally, have agreed to indemnify
         UNO-VEN and certain other related entities against certain liabilities
         and claims, including the preceding two matters.

         In May 1997, an explosion and fire occurred at CITGO's Corpus Christi
         refinery. There were no reports of serious personal injuries. CITGO has
         received approximately 7,500 individual claims for personal injury and
         property damage, allegedly arising from the incident. Approximately
         1,300 of these claims have been resolved for amounts which individually
         and collectively are not material. There are presently six lawsuits
         pending against CITGO in federal and state courts alleging property
         damage, personal injury and punitive damages. A trial in October 1998
         involving 10 bellwether plaintiffs out of approximately 400 plaintiffs
         in one of the

                                      F-31

<PAGE>


         federal court lawsuits resulted in a verdict for the Company. The trial
         of another 10 plaintiffs is scheduled for February 1999; the remaining
         cases are not currently scheduled for trial.

         A class action lawsuit is pending in Corpus Christi, Texas state court
         against CITGO and other operators and owners of nearby industrial
         facilities which claims damages for reduced value of residential
         properties located in the vicinity of the industrial facilities as a
         result of air, soil and groundwater contamination. In 1997, CITGO
         offered to purchase about 275 properties in a neighborhood adjacent to
         CITGO's Corpus Christi refinery, which were included in the lawsuit.
         Related to this offer, $15.7 million was expensed in 1997. To date,
         CITGO has reached agreements to buy all but 18 of such properties,
         which include settlements of property damage claims, and has offers
         open to purchase the remaining properties. Two related personal injury
         and wrongful death lawsuits were filed against the same defendants in
         1996 and are in preliminary stages of discovery.

         Environmental Compliance and Remediation - The Companies are subject to
         various Federal, state and local environmental laws and regulations
         which may require the Companies to take action to correct or improve
         the effects on the environment of prior disposal or release of
         petroleum substances by the Companies or other parties. Management
         believes the Companies are in compliance with these laws and
         regulations in all material respects. Maintaining compliance with
         environmental laws and regulations in the future could require
         significant capital expenditures and additional operating costs.

         In 1992, CITGO reached an agreement with a state agency to cease usage
         of certain surface impoundments at CITGO's Lake Charles refinery by
         1994. A mutually acceptable closure plan was filed with the state in
         1993. CITGO and a former owner are participating in the closure and
         sharing the related costs based on estimated contributions of waste and
         ownership periods. The remediation commenced in December 1993. In 1997,
         CITGO presented a proposal to a state agency revising the 1993 closure
         plan. In 1998, the Company amended its 1997 proposal as requested by
         the state agency. A ruling on the proposal, as amended, is expected in
         1999 with final closure to begin in 2000.

         In 1992, an agreement was reached between CITGO and a former owner
         concerning a number of environmental issues. The agreement consisted,
         in part, of payments to CITGO totaling $46 million. The former owner
         will continue to share the costs of certain specific environmental
         remediation and certain tort liability actions based on ownership
         periods and specific terms of the agreement.

         Based on currently available information, including the continuing
         participation of the former owner in remediation actions, management
         believes its accruals for potential environmental liabilities are
         adequate. Conditions which would require additional expenditures may
         exist for various Company sites including, but not limited to, the
         Company's operating refinery complexes, former refinery sites, service
         stations and crude oil and petroleum product storage terminals. The
         amount of such future expenditures, if any, is indeterminable.

         IRS Examination - On January 25, 1999, the IRS completed its
         examination of the consolidated income tax returns of PDV America, Inc.
         and subsidiaries for tax years 1993 through 1995 and issued to the
         Company an Income Tax Examination Changes Report.

                                      F-32

<PAGE>


         The IRS claim amounts to approximately $18 million, consisting
         primarily of temporary differences, over the three-year period
         examined. The Company believes that it has meritorious defenses against
         certain of the issues comprising the majority of the IRS claim amount;
         however, the likelihood of a favorable outcome is not reasonably
         predictable, and the amount of additional tax liability, if any, that
         may ultimately result is not reasonably estimable. Management of the
         Companies believes that the ultimate resolution of these tax issues
         will not be material.

         Capital Expenditures - The Company's anticipated capital expenditures,
         excluding CITGO's investments in LYONDELL-CITGO, for the five-year
         period 1999 to the year 2003 total approximately $2.1 billion
         (unaudited). The expenditures include environmental and regulatory
         capital projects as well as strategic capital expenditures. At December
         31, 1998, authorized expenditures on incomplete capital projects
         totaled approximately $304 million.

         Supply Agreements - CITGO purchases the crude oil processed at its
         refineries and also purchases refined products to supplement the
         production from its refineries to meet market demands and resolve
         logistical issues. In addition to supply agreements with various
         affiliates (Note 3), CITGO has various other crude oil, refined product
         and feedstock purchase agreements with unaffiliated entities with terms
         ranging from monthly to annual renewal. CITGO believes these sources of
         supply are reliable and adequate for its current requirements.

         Throughput Agreements - CITGO has throughput agreements with certain
         pipeline affiliates (Note 7). These throughput agreements may be used
         to secure obligations of the pipeline affiliates. Under these
         agreements, CITGO may be required to provide its pipeline affiliates
         with additional funds through advances against future charges for the
         shipping of petroleum products. CITGO currently ships on these
         pipelines and has not been required to advance funds in the past. At
         December 31, 1998, CITGO has no fixed and determinable, unconditional
         purchase obligations under these agreements.

         Commodity Derivative Activity - The Companies' commodity derivatives
         are generally entered into through major brokerage houses and traded on
         national exchanges and although usually settled in cash, can be settled
         through delivery of the commodity. Such contracts generally qualify for
         hedge accounting and correlate to price movements of crude oil and
         refined products. Resulting gains or losses, therefore, will generally
         be offset by gains and losses on the Companies' hedged inventory or
         future purchases and sales. The Companies' derivative commodity
         activity is closely monitored by management and contract periods are
         generally less than 30 days. Unrealized and deferred gains and losses
         on these contracts at December 31, 1998 and 1997 and the effects on
         cost of sales and pretax earnings for 1998, 1997 and 1996 were not
         material. At times during 1998 and 1996, the Companies entered into
         commodity derivatives activities that were not related to the hedging
         program discussed above. This activity and its results were not
         material in 1998 or 1996. There was no nonhedging activity in 1997.

         Other Credit and Off-Balance-Sheet Risk Information as of December 31,
         1998 - CITGO has guaranteed approximately $8 million of debt of certain
         of its marketers and an affiliate. Such debt is substantially
         collateralized by assets of these entities. CITGO and PDVMR have
         outstanding letters of credit totaling approximately $541.3 million
         which includes $520.3 million related to their tax-exempt and taxable
         revenue bonds and pollution control bonds (Note 10). CITGO has also
         guaranteed approximately $99 million of debt of certain affiliates,
         including $50 million

                                      F-33

<PAGE>


         related to HOVENSA and $11 million related to NISCO (Note 7). CITGO has
         also acquired surety bonds totaling $42 million primarily due to
         requirements of various government entities. CITGO does not expect
         liabilities to be incurred related to such guarantees, letters of
         credit or surety bonds.

         Neither CITGO nor the counterparties are required to collateralize
         their obligations under interest rate swaps or caps or over-the-counter
         derivative commodity agreements. CITGO is exposed to credit loss in the
         event of nonperformance by the counterparties to these agreements, but
         has no off-balance-sheet risk of accounting loss for the notional
         amounts. CITGO does not anticipate nonperformance by the
         counterparties, which consist primarily of major financial
         institutions.

         Management considers the market risk to the Companies related to its
         commodity and interest rate derivatives to be insignificant during the
         periods presented.

14.      LEASES

         CITGO leases certain of its Corpus Christi refinery facilities under a
         capital lease. The basic term of the lease expires on January 1, 2004;
         however, CITGO may renew the lease until January 31, 2011, the date of
         its purchase option. Capitalized costs included in property, plant and
         equipment related to the leased assets were approximately $209 million
         at December 31, 1998 and 1997. Accumulated amortization related to the
         leased assets was approximately $102 million and $94 million at
         December 31, 1998 and 1997, respectively. Amortization is included in
         depreciation expense.

         The Companies also have various noncancelable operating leases,
         primarily for product storage facilities, office space, computer
         equipment and vehicles. Rent expense on all operating leases totaled
         $34 million, $39 million and $33 million in 1998, 1997 and 1996,
         respectively. Future minimum lease payments for the capital lease and
         noncancelable operating leases are as follows:


                                             Capital     Operating      Total
                                              Lease     Leases Year
Year                                                   (000s Omitted)
1999                                        $  27,375    $  27,020   $  54,395
2000                                           27,375       22,811      50,186
2001                                           27,375       20,393      47,768
2002                                           27,375       18,020      45,395
2003                                           27,375       13,618      40,993
Thereafter                                     36,000       24,018      60,018
                                            ---------    ---------   ---------
Total minimum lease payments                  172,875    $ 125,880   $ 298,755
                                                         =========   =========
Amount representing interest                  (56,289)
                                            ---------
Present value of minimum lease payments       116,586
Current portion                                14,660
                                            ---------
                                            $ 101,926
                                            =========


                                      F-34

<PAGE>


15.      FAIR VALUE INFORMATION

         The following disclosure of the estimated fair value of financial
         instruments is made in accordance with the requirements of SFAS No.
         107, Disclosures about Fair Value of Financial Instruments. The
         estimated fair value amounts have been determined by the Companies,
         using available market information and appropriate valuation
         methodologies. However, considerable judgment is necessarily required
         in interpreting market data to develop the estimates of fair value.
         Accordingly, the estimates presented herein are not necessarily
         indicative of the amounts that the Companies could realize in a current
         market exchange. The use of different market assumptions and/or
         estimation methodologies may have a material effect on the estimated
         fair value amounts.

         The carrying amounts of cash and cash equivalents, restricted cash and
         variable-rate debt approximate fair values because of the short
         maturity of these instruments. The carrying amounts and estimated fair
         values of the Companies' other financial instruments are as follows:


<TABLE>
<CAPTION>
                                               1998                         1997
                                     -------------------------     -----------------------   
                                      Carrying      Fair Value     Carrying     Fair Value
                                       Amount                       Amount
                                             (000s Omitted)             (000s Omitted)
<S>                                  <C>           <C>            <C>           <C>        
Liabilities:
  Short-term bank loans              $    37,000   $    37,000    $     3,000   $     3,000
  Long-term debt                       2,118,921     2,087,675      2,392,807     2,454,728
Derivative and off-balance sheet
  financial instruments -
  unrealized gains (losses):
  Interest rate swap agreements               --        (2,983)            --        (3,225)
  Guarantees of debt                          --          (601)            --           (59)
  Letters of credit                           --        (3,015)            --        (1,848)
  Surety bonds                                --          (147)            --          (119)
</TABLE>

         Short-Term Bank Loans and Long-Term Debt - The fair value of short-term
         bank loans and long-term debt is based on interest rates that are
         currently available to the Companies for issuance of debt with similar
         terms and remaining maturities, except for the Company's $750 million
         principle amount senior notes which were based upon quoted market
         prices.

         Interest Rate Swap and Cap Agreements - The fair value of these
         agreements is based on the estimated amount that CITGO and PDVMR would
         receive or pay to terminate the agreements at the reporting date,
         taking into account current interest rates and the current
         creditworthiness of the counterparties.

         Guarantees, Letters of Credit and Surety Bonds - The estimated fair
         value of contingent guarantees of third-party debt, letters of credit
         and surety bonds is based on fees currently charged for similar
         one-year agreements or on the estimated cost to terminate them or
         otherwise settle the obligations with the counterparties at the
         reporting dates.


                                      F-35

<PAGE>


         The fair value estimates presented herein are based on pertinent
         information available to management as of the reporting dates. Although
         management is not aware of any factors that would significantly affect
         the estimated fair value amounts, such amounts have not been
         comprehensively revalued for purposes of these financial statements
         since that date, and current estimates of fair value may differ
         significantly from the amounts presented herein.

16.      QUARTERLY RESULTS OF OPERATIONS - UNAUDITED

         The following is a summary of the quarterly results of operations for
         the years ended December 31, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
1998                              1st Qtr.      2nd Qtr.      3rd Qtr.      4th Qtr.

<S>                             <C>           <C>           <C>           <C>        
Sales                           $ 2,748,946   $ 2,944,287   $ 2,731,898   $ 2,541,898
Cost of sales and operating
  expenses                      $ 2,536,189   $ 2,752,531   $ 2,523,825   $ 2,495,404
Net income                      $    95,338   $    70,620   $    85,369   $   (20,609)



1997                              1st Qtr.      2nd Qtr.      3rd Qtr.      4th Qtr.

Sales                           $ 3,262,726   $ 3,440,392   $ 3,564,105   $ 3,354,980
Cost of sales and operating
  expenses                      $ 3,177,759   $ 3,255,776   $ 3,313,878   $ 3,250,179
Net income                      $    15,048   $    77,993   $   104,331   $    30,645
</TABLE>


                                     ******

                                      F-36


<PAGE>


                                                Commission File Number 001-12138


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                               ------------------



                                    EXHIBITS



                                   FILED WITH



                                    FORM 10-K



              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934



                   For the fiscal year ended December 31, 1998



                               ------------------



                                PDV America, Inc.




             (Exact name of registrant as specified in its charter)




<PAGE>


                                INDEX TO EXHIBITS

                                                                 Sequential Page
Exhibits                                                                  Number
--------                                                                  ------

     (1)  Financial Statements:

          Independent Auditors' Report.......................................F-1


          Consolidated Balance Sheets at December 31, 1998
                   and 1997..................................................F-2
          Consolidated Statements of Income for the years ended
                   December 31, 1998, 1997 and 1996..........................F-4
          Consolidated Statements of Shareholder's Equity
                   for the years ended December 31, 1998, 1997
                   and 1996..................................................F-5
          Consolidated Statements of Cash Flows
                   for the years ended December 31, 1998, 1997
                   and 1996..................................................F-6

          Notes to the Consolidated Financial Statements.....................F-9


     (2)  None

     (3)  Exhibits:

          The Exhibit Index in part c., below, lists the exhibits that are filed
          as part of, or incorporated by reference into, this report.

b.   Reports on Form 8-K

          None















                                       (i)

<PAGE>


<TABLE>
<CAPTION>
c.             Exhibits

<S>                                                                                            <C>
*3.1           Certificate of Incorporation, Certificate of Amendment of Certificate of
               Incorporation and By-laws of PDV America.......................................

*4.1           Indenture, dated as of August 1, 1993, among PDV America,
               Propernyn, PDVSA and Citibank, N.A., as trustee, relating to
               PDV America's 7-1/4% Senior Notes Due 1998, 7-3/4% Senior Notes Due 2000 and
               7-7/8% Senior Notes Due 2003...................................................

*4.2           Form of Senior Note (included in Exhibit 4.1)..................................

*10.1          Crude Supply Agreement, dated as of
               September 30, 1986, between CITGO Petroleum
               Corporation and Petroleos de Venezuela, S.A....................................

*10.2          Supplemental Crude Supply Agreement, dated as of September 30,
               1986, between CITGO Petroleum Corporation and Petroleos de
               Venezuela, S.A.   .............................................................

*10.3          Crude Oil and Feedstock Supply Agreement, dated as of
               March 31, 1987, between Champlin Refining Company and
               Petroleos de Venezuela, S.A....................................................

*10.4          Supplemental Crude Oil and Feedstock Supply Agreement, dated
               as of March 31, 1987, between Champlin Refining Company and
               Petroleos de Venezuela, S.A....................................................

*10.5          Contract for the Purchase/Sale of Boscan Crude Oil, dated as of
               June 2, 1994, between Tradecal, S.A., and CITGO Asphalt
               Refining Company...............................................................

*10.6          Restated Contract for the Purchase/Sale of Heavy/Extra Heavy
               Crude Oil, dated December 28, 1990, among Maraven, S.A.,
               Lagoven, S.A., and Seaview Oil Company.........................................

*10.7          Sublease Agreement, dated as of March 31, 1987, between
               Champlin Petroleum Company, as Sublessor, and Champlin Refining
               Company, as Sublessee..........................................................

*10.8          Operating Agreement, dated as of May 1, 1984, among Cit-Con Oil
               Corporation, CITGO Petroleum Corporation and Conoco, Inc.......................


------------------
<FN>
*    Previously filed in connection with the Registrant's Registration Statement
     on Form F-1, Registration No. 33-63742, originally filed with the
     Commission on June 2, 1993.
</FN>
</TABLE>


                                      (ii)

<PAGE>


<TABLE>
<S>                                                                                            <C>
*10.9          Amended and Restated Limited Liability Company Regulations of
               LYONDELL-CITGO Refining Company, Ltd. dated July 1, 1993.......................

*10.10         Contribution Agreement among Lyondell Petrochemical Company,
               LYONDELL-CITGO Refining Company, Ltd. and Petroleos de
               Venezuela, S.A.   .............................................................

*10.11         Crude Oil Supply Agreement, dated as of May 5, 1993, between
               LYONDELL-CITGO Refining Company, Ltd. and Lagoven, S.A.

*10.12         Supplemental Supply Agreement, dated as of May 5, 1993,
               between LYONDELL-CITGO Refining Company, Ltd. and
               Petroleos de Venezuela, S.A....................................................

*10.13         The UNO-VEN Company Partnership Agreement, dated as of
               December 4, 1989, between Midwest 76, Inc. and VPHI Midwest, Inc.

*10.14         Supply Agreement, dated as of December 1, 1989, between
               The UNO-VEN Company and Petroleos de Venezuela, S.A............................

*10.15         Supplemental Supply Agreement, dated as of December 1, 1989,
               between The UNO-VEN Company and Petroleos de Venezuela, S.A.

*10.16         Tax Allocation Agreement, dated as of June 24, 1993, among PDV
               America, Inc., VPHI Midwest, Inc., CITGO Petroleum Corporation
               and PDV USA, Inc., as amended.................................................

**10.17        Amendment and Supplement to Supply Agreement, dated as of
               May 11, 1994, between The UNO-VEN Company and .................................
               Tradecal, S.A., as assignee of Petroleos de Venezuela, S.A.

*** 10.18      $150,000,000 Credit Agreement, dated May 13, 1998 between
               CITGO Petroleum Corporation and the Bank of America National
               Trust and Savings Association, The Bank of New York, the Royal
               Bank of Canada and Other Financial Institutions................................

*** 10.19      $400,000,000 Credit Agreement, dated May 13, 1998 between
               CITGO Petroleum Corporation and the Bank of America National
               Trust and Savings Association, The Bank of New York, the Royal
               Bank of Canada and Other Financial Institutions................................


------------------
<FN>
*    Previously filed in connection with the Registrant's Registration Statement
     on Form F-1, Registration No. 33-63742, originally filed with the
     Commission on June 2, 1993.

**   Previously filed in connection with the Registrant's Annual Report on Form
     10-K for the fiscal year ended December 31, 1994.

***  Previously filed as an Exhibit to CITGO Petroleum Corporation's ("CITGO")
     Form 10-K (File No. 1-14380) and incorporated herein by this reference.
</FN>
</TABLE>


                                      (iii)

<PAGE>


<TABLE>
<S>                                                                                            <C>
*** 10.20      Limited Partnership Agreement of LYONDELL-CITGO Refining LP,
               dated December 31, 1998

10.21          Loan agreement with PDVSA Finance Ltd. consisting of a Promissory Note
               in the amount of $130,000,000, dated November 10, 1998

10.22          Loan agreement with PDVSA Finance Ltd. consisting of a Promissory Note
               in the amount of $130,000,000, dated November 10, 1998

12.1           Computation of Ratio of Earnings to Fixed Charges


21.1           List of Subsidiaries of the Registrant

27.1           Financial Data Schedule


------------------
<FN>
*    Previously filed in connection with the Registrant's Registration Statement
     on Form F-1, Registration No. 33-63742, originally filed with the
     Commission on June 2, 1993.

**   Previously filed in connection with the Registrant's Annual Report on Form
     10-K for the fiscal year ended December 31, 1994.

***  Previously filed as an Exhibit to CITGO Petroleum Corporation's ("CITGO")
     Form 10-K (File No. 1-14380) and incorporated herein by this reference.
</FN>
</TABLE>















                                      (iv)