<PAGE>

================================================================================

                                  United States

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    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, 2004

                                       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 1-14380

                           CITGO PETROLEUM CORPORATION
             (Exact name of registrant as specified in its charter)

           DELAWARE                                      73-1173881
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                   1293 ELDRIDGE PARKWAY, HOUSTON, TEXAS 77077
               (Address of principal executive office) (Zip Code)

                                 (832) 486-4000
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: NONE

        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 [ ]

The registrant meets the conditions set forth in General Instruction (I)(1)(a)
and (b) of Form 10-K and is therefore omitting (i) the information otherwise
required by Item 601 of Regulation S-K relating to a list of subsidiaries of the
registrant as permitted by General Instruction (I)(2)(b), (ii) certain
information otherwise required by Item 10 of Form 10-K relating to directors and
executive officers as permitted by General Instruction (I)(2)(c), (iii) certain
information otherwise required by Item 11 of Form 10-K relating to executive
compensation as permitted by General Instruction (I)(2)(c) and (iv) certain
information otherwise required by Item 12 of Form 10-K relating to security
ownership of certain beneficial owners and management as permitted by General
Instruction (I)(2)(c).

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act): Yes [ ] No [X]

Aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant as of June 30, 2004: NONE

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

COMMON STOCK, $1.00 PAR VALUE                               1,000
-----------------------------                 ----------------------------------
           (Class)                            (outstanding at February 28, 2005)

                    DOCUMENTS INCORPORATED BY REFERENCE: None

================================================================================

<PAGE>

CITGO PETROLEUM CORPORATION

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                 PAGE
<S>                                                                                              <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS..................................................     1

PART I.

Items 1. and 2. Business and Properties.......................................................     2
Item 3.   Legal Proceedings...................................................................    16
Item 4.   Submission of Matters to a Vote of Security Holders.................................    17

PART II.

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters...............    18
Item 6.   Selected Financial Data.............................................................    19
Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations...............................................................    20
Item 7A.  Quantitative and Qualitative Disclosures about Market Risk..........................    37
Item 8.   Financial Statements and Supplementary Data.........................................    41
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial
          Disclosure..........................................................................    42
Item 9A.  Controls and Procedures.............................................................    42
Item 9B.  Other Information...................................................................    42

PART III.

Item 10.  Directors and Executive Officers of the Registrant..................................    43
Item 11.  Executive Compensation..............................................................    43
Item 12.  Security Ownership of Certain Beneficial Owners and Management......................    43
Item 13.  Certain Relationships and Related Transactions......................................    44
Item 14.  Principal Accountant Fees and Services..............................................    45

PART IV.

Item 15.  Exhibits and Financial Statement Schedules..........................................    46
</TABLE>

<PAGE>

                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

      Except for the historical information contained in this Report, certain of
the matters discussed in this Report may be deemed to be "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Specifically, all statements
under the caption "Items 1 and 2 - Business and Properties" and "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations" pertaining to capital expenditures and investments related to
environmental compliance, strategic planning, purchasing patterns of refined
products and capital resources available to CITGO (as defined herein) are
forward looking statements. Words such as "anticipate," "estimate," "expect,"
"project," "believe" and similar expressions generally identify a
forward-looking statement.

      We caution readers that these forward looking statements are subject to
known and unknown risks and uncertainties that may cause actual results to
differ materially from the results that are projected, expressed or implied.
Some of those risks and uncertainties include:

   -  the availability and cost of crude oil, feedstocks, blending components
      and refined products, which can affect our ability to operate our
      refineries and our costs;

   -  accidents, interruptions in transportation, inclement weather and other
      events that cause unscheduled shutdowns or otherwise adversely affect our
      refineries, pipelines or equipment, or those of our suppliers or
      customers;

   -  prices or demand for CITGO products, which are influenced by general
      economic activity, weather patterns (including seasonal fluctuations),
      prices of alternative fuels, energy conservation efforts and actions by
      competitors;

   -  environmental and other regulatory requirements, which affect the content
      of our products and our operations, operating costs and capital
      expenditure requirements;

   -  costs and uncertainties associated with technological change and
      implementation;

   -  inflation: and

   -  continued access to capital markets and commercial bank financing on
      favorable terms, which can affect our ability to finance capital
      improvements, our costs and our flexibility.

      CITGO purchases approximately one-half of its crude oil requirements from
Petroleos de Venezuela, S.A. (as defined herein), its ultimate parent
corporation, under long-term supply agreements and spot purchases. The table on
page 8 shows the history of deliveries of crude oil from PDVSA over the past
three years and can be compared to contract volume deliveries shown on page 9.

      Readers are cautioned not to place undue reliance on these forward looking
statements, which apply only as of the date of this Report. CITGO disclaims any
duty to publicly release any revision to these forward looking statements to
reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

      The public may read and copy any reports or other information that we file
with the SEC at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. These documents
are also available to the public from commercial document retrieval services,
the web site maintained by the SEC at http://www.sec.gov and our web site at
http://www.citgo.com. Copies may be obtained from our web site free of charge.

                                       1

<PAGE>

                                     PART I

ITEMS 1. AND 2. BUSINESS AND PROPERTIES

OVERVIEW

      CITGO Petroleum Corporation ("CITGO" or the "Company") is a direct wholly
owned operating subsidiary of PDV America, Inc. ("PDV America"), a wholly owned
subsidiary of PDV Holding, Inc. ("PDV Holding"). The Company's ultimate parent
is Petroleos de Venezuela, S.A. ("PDVSA", which may also be used herein to refer
to one or more of its subsidiaries), the national oil company of the Bolivarian
Republic of Venezuela. CITGO and its subsidiaries are engaged in the refining,
marketing and transportation of 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. The Company
operates as a single segment. (See Consolidated Financial Statements of CITGO in
Item 15a).

      CITGO's transportation fuel customers include CITGO branded wholesale
marketers, convenience stores and airlines located mainly east of the Rocky
Mountains. Asphalt is generally marketed to independent paving contractors on
the East and Gulf Coasts and in the Midwest of the United States. Lubricants are
sold principally in the United States to independent marketers, mass marketers
and industrial customers. 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. CITGO also
sells lubricants, gasoline and distillates in various Latin American markets
including Puerto Rico, Brazil, Ecuador and Mexico.

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 how companies conduct their operations and formulate their
products. Demand for crude oil and its products is largely driven by the
condition 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, brand image
and, in some areas, product quality.

                                       2

<PAGE>
REFINING

      CITGO's aggregate net interest in rated crude oil refining capacity is 865
thousand barrels per day ("MBPD"). The following table shows the capacity of
each refinery in which CITGO holds an interest and CITGO's share of such
capacity as of December 31, 2004.

                             CITGO REFINING CAPACITY

<TABLE>
<CAPTION>
                                                           TOTAL         NET
                                                           RATED        CITGO        SOLOMON
                                                           CRUDE       OWNERSHIP     PROCESS
                                                CITGO     REFINING    IN REFINING   COMPLEXITY
                                 OWNER         INTEREST   CAPACITY     CAPACITY       RATING
                                 -----         --------   --------    -----------   ----------
                                                 (%)       (MBPD)       (MBPD)
<S>                              <C>           <C>        <C>         <C>           <C>
LOCATION
   Lake Charles, LA              CITGO           100         320          320          18.2
   Corpus Christi, TX            CITGO           100         157          157          16.5
   Lemont, IL                    CITGO           100         167          167          11.7
   Paulsboro, NJ                 CITGO           100          84           84             -
   Savannah, GA                  CITGO           100          28           28             -
                                                           -----          ---
   CITGO Wholly owned                                        756          756

   Houston, TX               LYONDELL-CITGO       41         265          109          15.5
                                                           -----          ---

     Total Rated Crude Refining Capacity                   1,021          865
                                                           =====          ===
</TABLE>

      The Lake Charles, Corpus Christi and Lemont refineries and the Houston
refinery each have the capability to process large volumes of heavy crude oil
into a flexible slate of refined products. They have Solomon Process Complexity
Ratings of 18.2, 16.5, 11.7 and 15.5, respectively, as compared to an average of
14.0 for U.S. refineries in the most recently available Solomon Associates, Inc.
survey. The rating is an industry measure of a refinery's ability to produce
higher value products from a lower value feedstock, with a higher rating
indicating a greater capability to produce such products from such feedstocks.

                                       3

<PAGE>

         The following table shows CITGO's aggregate interest in refining
capacity, refinery input, and product yield for the three years ended December
31, 2004.

                          CITGO REFINERY PRODUCTION (1)

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                 ---------------------------------------------------
                                                      2004                 2003             2002
                                                 ---------------       ------------     ------------
                                                        (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                              <C>         <C>       <C>      <C>     <C>      <C>
RATED REFINING CRUDE CAPACITY AT YEAR END        865                   865              865
Refinery Input
  Crude oil                                      796          84%      801       84%    674       84%
  Other feedstocks                               155          16%      152       16%    131       16%
                                                 ---         ---       ---      ---     ---      ---
    Total                                        951         100%      953      100%    805      100%
                                                 ===         ===       ===      ===     ===      ===

Product Yield
  Light fuels
    Gasoline                                     404          42%      414       43%    379       46%
    Jet fuel                                      71           7%       75        8%     76        9%
    Diesel/#2 fuel                               188          20%      193       20%    153       19%
  Asp halt                                        52           5%       43        4%     16        2%
  Petrochemicals and industrial products         246          26%      241       25%    194       24%
                                                 ---         ---       ---      ---     ---      ---
    Total                                        961         100%      966      100%    818      100%
                                                 ===         ===       ===      ===     ===      ===

UTILIZATION OF RATED CRUDE REFINING CAPACITY                  92%                93%              78%
</TABLE>

----------
(1) Includes 41.25% of the Houston refinery production.

      CITGO produces its light fuels and petrochemicals primarily through its
Lake Charles, Corpus Christi and Lemont refineries. Asphalt refining operations
are carried out through CITGO's Paulsboro and Savannah refineries.

                                       4

<PAGE>

      Lake Charles, Louisiana Refinery. This refinery 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 following table shows the rated refining capacity, refinery input and
product yield at the Lake Charles refinery for the three years ended December
31, 2004.

                        LAKE CHARLES REFINERY PRODUCTION

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                  --------------------------------------------
                                                      2004           2003             2002
                                                  -----------     -----------     ------------
                                                     (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                               <C>     <C>     <C>     <C>     <C>      <C>
RATED REFINING CRUDE CAPACITY AT YEAR END         320             320             320
Refinery Input
  Crude oil                                       309      88%    313      85%    320       92%
  Other feedstocks                                 42      12%     56      15%     28        8%
                                                  ---     ---     ---     ---     ---      ---
    Total                                         351     100%    369     100%    348      100%
                                                  ===     ===     ===     ===     ===      ===

Product Yield
  Light fuels
    Gasoline                                      177      49%    179      47%    184       51%
    Jet fuel                                       64      18%     67      18%     68       19%
    Diesel/#2 fuel                                 53      15%     55      15%     45       13%
  Petrochemicals and industrial products           64      18%     77      20%     60       17%
                                                  ---     ---     ---     ---     ---      ---
    Total                                         358     100%    378     100%    357      100%
                                                  ===     ===     ===     ===     ===      ===

Utilization of Rated Crude Refining Capacity               97%             98%             100%
</TABLE>

      A project to increase the crude oil distillation capacity of the Lake
Charles refinery by 105 MBPD was completed in February 2005.

      The Lake Charles refinery's Gulf Coast location provides it with access to
crude oil deliveries from multiple sources; imported crude oil and feedstock
supplies are delivered by ship directly to the Lake Charles refinery, while
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. 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 to load
refined products for shipment.

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

                                       5

<PAGE>

      Corpus Christi, Texas Refinery. The Corpus Christi refinery processes
heavy crude oil into a flexible slate of refined products. This refinery complex
consists of the East and West Plants, located within five miles of each other.

      The following table shows rated refining capacity, refinery input and
product yield at the Corpus Christi refinery for the three years ended December
31, 2004.

                       CORPUS CHRISTI REFINERY PRODUCTION

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                  --------------------------------------------
                                                      2004             2003            2002
                                                  -----------      -----------      ----------
                                                      (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                               <C>     <C>      <C>     <C>      <C>    <C>
RATED REFINING CRUDE CAPACITY AT YEAR END         157              157              157
Refinery Input
  Crude oil                                       138      66%     154      71%     154     73%
  Other feedstocks                                 71      34%      62      29%      57     27%
                                                  ---     ---      ---     ---      ---    ---
    Total                                         209     100%     216     100%     211    100%
                                                  ===     ===      ===     ===      ===    ===

Product Yield
  Light fuels
    Gasoline                                       86      42%      95      44%      93     44%
    Diesel/#2 fuel                                 56      27%      60      28%      59     28%
  Petrochemicals and industrial products           65      31%      60      28%      58     28%
                                                  ---     ---      ---     ---      ---    ---
    Total                                         207     100%     215     100%     210    100%
                                                  ===     ===      ===     ===      ===    ===

Utilization of Rated Crude Refining Capacity               88%              98%             98%
</TABLE>

      CITGO operates the West Plant under a sublease agreement (the "Sublease")
from Anadarko Petroleum Corporation ("Anadarko"). The basic term of the Sublease
ended on January 1, 2004, but CITGO renewed the lease for a two year term and
may continue to renew the Sublease for successive renewal terms through January
31, 2011. CITGO has the right to purchase the West Plant from Anadarko at the
end of the basic term, the end of any renewal term, or on January 31, 2011 at a
nominal price. (See Consolidated Financial Statements of CITGO - Note 13 in Item
15a).

      The Corpus Christi refinery's main petrochemical products include cumene,
cyclohexane, and aromatics (including benzene, toluene and xylenes). These
products are used in the manufacture of plastic and building materials.

                                       6

<PAGE>

      Lemont, Illinois Refinery. The Lemont refinery produces a flexible slate
of refined products from a crude slate which includes approximately 50% heavy
Canadian crude oil.

      The following table shows the rated refining capacity, refinery input and
product yield at the Lemont refinery for the three years ended December 31,
2004.

                           LEMONT REFINERY PRODUCTION

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                  --------------------------------------------
                                                     2004             2003             2002
                                                  -----------      -----------      ----------
                                                      (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                               <C>     <C>      <C>     <C>      <C>    <C>
RATED REFINING CRUDE CAPACITY AT YEAR END         167              167              167
Refinery Input
  Crude oil                                       160      89%     162      92%      69     73%
  Other feedstocks                                 20      11%      15       8%      25     27%
                                                  ---     ---      ---     ---      ---    ---
    Total                                         180     100%     177     100%      94    100%
                                                  ===     ===      ===     ===      ===    ===

Product Yield
  Light fuels
    Gasoline                                       94      53%      92      52%      54     59%
    Diesel/#2 fuel                                 40      22%      43      25%      16     17%
  Petrochemicals and industrial products           44      25%      41      23%      22     24%
                                                  ---     ---      ---     ---      ---    ---
    Total                                         178     100%     176     100%      92    100%
                                                  ===     ===      ===     ===      ===    ===

Utilization of Rated Refining Crude Capacity               96%              97%             41%
</TABLE>

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

      In August 2001, a fire occurred at the crude oil distillation unit of the
Lemont refinery. A new crude unit was operational in May 2002. See Consolidated
Financial Statements of CITGO - Note 15 in Item 15a for further information.

                                       7

<PAGE>

      LYONDELL-CITGO Refining LP. Subsidiaries of CITGO and Lyondell Chemical
Company ("Lyondell") are partners in LYONDELL-CITGO Refining LP
("LYONDELL-CITGO"), which owns and operates a 265 MBPD refinery previously owned
by Lyondell and located on the ship channel in Houston, Texas. At December 31,
2004, CITGO's investment in LYONDELL-CITGO was $410 million. In addition, at
December 31, 2004, CITGO held a note receivable from LYONDELL-CITGO in the
approximate amount of $35 million. (See Consolidated Financial Statements of
CITGO -- Note 3 in Item 15a). A substantial amount of the crude oil processed by
this refinery is supplied by PDVSA under a long-term crude oil supply agreement
that expires in the year 2017. For the years ended December 31, 2004 and 2002,
LYONDELL-CITGO constituted a significant investment for CITGO as defined under
SEC regulations. As such, the financial statements for LYONDELL-CITGO are
included in this annual report. See separate financial statements for
LYONDELL-CITGO in Item 15a.

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. Crude oil is CITGO's primary raw material. CITGO buys and sells
crude oil to facilitate procurement and delivery of a desired type or grade of
crude oil to a desired location to supply our refineries, not as an independent
business activity to generate profit. CITGO believes that reflecting the net
result of this activity in cost of sales is an appropriate reflection of the
nature of these transactions as efforts undertaken to acquire raw material. In
addition, because CITGO's refinery operations do not produce sufficient refined
products to meet the demands of its marketers, CITGO purchases refined products,
primarily gasoline, from other refiners, including a number of affiliated
companies. (See "Item 13. Certain Relationships and Related Transactions").

      Crude Oil Purchases. The following chart shows CITGO's net purchases of
crude oil for the three years ended December 31, 2004:

                            CITGO CRUDE OIL PURCHASES

<TABLE>
<CAPTION>
                   LAKE CHARLES, LA       CORPUS CHRISTI, TX        LEMONT, IL          PAULSBORO, NJ        SAVANNAH, GA
                  ------------------      ------------------    -------------------   ------------------   -----------------
                  2004   2003   2002      2004   2003   2002    2004    2003   2002   2004    2003  2002   2004   2003  2002
                  ----   ----   ----      ----   ----   ----    ----    ----   ----   ----    ----  ----   ----   ----  ----
                        (MBPD)                  (MBPD)                 (MBPD)                (MBPD)             (MBPD)
<S>               <C>    <C>    <C>       <C>    <C>    <C>     <C>     <C>    <C>    <C>     <C>   <C>    <C>    <C>   <C>
SUPPLIERS
PDVSA (2)         155    139    125       115    134    126       -       3     11     51      39    36     26     21    22
Other sources     155    178    190        24     20     29     160     158     62      1       2     7      -      -     -
                  ---    ---    ---       ---    ---    ---     ---     ---     --     --      --    --     --     --    --
   Total (1)      310    317    315       139    154    155     160     161     73     52      41    43     26     21    22
                  ===    ===    ===       ===    ===    ===     ===     ===     ==     ==      ==    ==     ==     ==    ==
</TABLE>

(1)   Total crude oil purchases do not equal crude oil refinery inputs because
      of changes in inventory.

(2)   Includes total of contract volume and volume purchased on a spot basis.
      Contract volumes for each refinery are shown in the table on page 9. PDVSA
      works very closely with CITGO to assure total volume commitments are met.

                                       8

<PAGE>

      CITGO's largest single supplier of crude oil is PDVSA. CITGO has entered
into long-term crude oil supply agreements with PDVSA with respect to the crude
oil requirements for each of CITGO's Lake Charles, Corpus Christi, Paulsboro and
Savannah refineries. 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, 2004.

                   CITGO CRUDE OIL SUPPLY CONTRACTS WITH PDVSA

<TABLE>
<CAPTION>
                                                             VOLUMES OF
                                                         CRUDE OIL PURCHASED
                                  CONTRACT CRUDE         FOR THE YEAR ENDED
                                    OIL VOLUME              DECEMBER 31,                  CONTRACT
                               --------------------    ----------------------            EXPIRATION
                               BASE   INCREMENTAL(1)   2004     2003     2002               DATE
                               ----   --------------   ----     ----     ----            ----------
                                      (MBPD)                    (MBPD)                     (YEAR)
<S>                            <C>    <C>              <C>      <C>      <C>             <C>
LOCATION
Lake Charles, LA (2)           120         70          122      123      109                2006
Corpus Christi, TX (2)         130          -          129      134      114                2012
Paulsboro, NJ (2)               30          -           29       29       27                2010
Savannah, GA (2)                12          -           11       12       12                2013
</TABLE>

----------
(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 as shown on this table do not equal purchases from PDVSA
      (shown in the previous table) as a result of transfers between refineries
      of contract crude purchases included here and spot purchases from PDVSA
      which are included in the previous table.

      These crude oil supply agreements require PDVSA to supply minimum
quantities of crude oil and other feedstocks to CITGO for a fixed period. The
supply agreements differ somewhat for each refinery but generally incorporate
formula prices based on the market value of a slate of refined products deemed
to be produced from each particular grade of crude oil or feedstock, less (i)
specified deemed refining costs; (ii) specified actual costs, including
transportation charges, actual cost of natural gas and electricity, 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 CITGO under the various supply agreements
will vary depending on, among other things, the efficiency with which CITGO
conducts its operations during such period. These crude supply agreements
contain force majeure provisions which excuse the performance by either party of
its obligations under the agreement under specified circumstances. The price we
pay for crude oil purchased under these crude oil supply agreements is not
directly related to the market price of any other crude oil. Thus there are
periods in which the price paid for crude oil purchased under those agreements
may be higher or lower than the price that might have been paid in the spot
market.

      PDVSA and we have been evaluating possible changes to certain terms and
conditions of these supply agreements, including the price mechanisms, volumes
and term. If PDVSA and we determine to pursue those changes and we are able to
successfully negotiate any related amendments to the supply agreements, the
effectiveness of those amendments may require the consent of some of the holders
of our outstanding debt.

                                       9

<PAGE>

      Refined Product Purchases. The marketing and sale of refined petroleum
products represents CITGO's revenue generating activity. The demand for those
products in CITGO's market areas exceeds the capacity of its refineries to
produce them so it purchases significant quantities of refined products from
affiliated and non-affiliated suppliers. CITGO must have the right refined
products in the right locations and in the right quantities in order to satisfy
customer supply arrangements and market requirements. Thus, CITGO purchases and
sells refined products of various grades in various locations from other
suppliers. Sales of refined products are reported as revenue upon transfer of
title to the buyer. Purchases of refined product are treated as acquisitions, a
component of cost of sales, upon transfer of title to CITGO.

      The following table shows CITGO's purchases of refined products for the
three years ended December 31, 2004.

                         CITGO REFINED PRODUCT PURCHASES

<TABLE>
<CAPTION>
                                YEAR ENDED DECEMBER 31,
                             ------------------------------
                             2004        2003          2002
                             ----        ----          ----
                                        (MBPD)
<S>                          <C>         <C>           <C>
LIGHT FUELS
   Gasoline                  573         636           689
   Jet fuel                   86          83            61
   Diesel/ #2 fuel           235         246           239
                             ---         ---           ---
     Total                   894         965           989
                             ===         ===           ===
</TABLE>

      As of December 31, 2004, CITGO purchased substantially all of the
gasoline, diesel/ #2 fuel, and jet fuel produced at the LYONDELL-CITGO refinery
under a contract which extends through the year 2017. LYONDELL-CITGO was a major
supplier in 2004 providing CITGO with 113 MBPD of gasoline, 95 MBPD of diesel/#2
fuel, and 17 MBPD of jet fuel. See "--Refining--LYONDELL-CITGO Refining LP".

      In October 1998, PDVSA V.I., Inc., an affiliate of PDVSA, acquired a 50%
equity interest in HOVENSA, L.L.C. ("HOVENSA"), a joint venture that owns and
operates a refinery in St. Croix, U.S. Virgin Islands. Under the related product
sales agreement, CITGO acquired approximately 128 MBPD of refined products from
the refinery during 2004, approximately one-half of which was gasoline.

                                       10

<PAGE>

MARKETING

      CITGO's major products are light fuels (including gasoline, jet fuel, and
diesel fuel), industrial products and petrochemicals, asphalt, lubricants and
waxes. The following table shows revenues and volumes of each of these product
categories for the three years ended December 31, 2004.

                CITGO REFINED PRODUCT SALES REVENUES AND VOLUMES

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,                YEAR ENDED DECEMBER 31,
                                           -------------------------------------      -----------------------------
                                             2004          2003          2002          2004       2003        2002
                                           ---------    ----------    ----------      ------     ------      ------
                                                      ($ IN MILLIONS)                     (GALLONS IN MILLIONS)
<S>                                        <C>          <C>           <C>             <C>        <C>         <C>
LIGHT FUELS
   Gasoline                                $  17,597    $   14,320    $   11,758      14,194     15,257      15,026
   Jet fuel                                    2,707         1,951         1,402       2,318      2,315       2,003
   Diesel / #2 fuel                            6,590         5,287         3,462       5,854      6,238       5,031
ASPHALT                                          971           711           597       1,300        990         902
PETROCHEMICALS AND INDUSTRIAL PRODUCTS         3,369         2,272         1,485       2,865      2,643       2,190
LUBRICANTS AND WAXES                             684           598           561         280        261         261
                                           ---------    ----------    ----------      ------     ------      ------
     Total                                 $  31,918    $   25,139    $   19,265      26,811     27,704      25,413
                                           =========    ==========    ==========      ======     ======      ======
</TABLE>

      Light Fuels. Gasoline sales accounted for 55% of CITGO's refined product
sales revenue in 2004, 57% in 2003, and 61% in 2002. CITGO supplies CITGO
branded gasoline to approximately 14,000 independently owned and operated CITGO
branded retail outlets located throughout the United States, primarily east of
the Rocky Mountains. CITGO purchases gasoline to supply this marketing network,
as the gasoline production from the Lake Charles, Corpus Christi and Lemont
refineries was only equivalent to approximately 54%, 57% and 54% of the volume
of CITGO branded gasoline sold in 2004, 2003 and 2002, respectively. Purchases
of gasoline from CITGO's affiliates, PDVSA, LYONDELL-CITGO and Hovensa, provide
32%, 36% and 32% of the volume of CITGO branded gasoline sold in 2004, 2003 and
2002, respectively. See "--Crude Oil and Refined Product Purchases -- Refined
Product Purchases".

      CITGO's strategy is to enhance the value of the CITGO brand by delivering
quality products and services to the consumer through a large network of
independently owned and operated CITGO branded retail locations. This
enhancement is accomplished through a commitment to quality, dependability and
excellent 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 August 31, 2006. Under this
contract, CITGO arranges all transportation and delivery of motor fuels and
handles all product ordering.

      CITGO markets jet fuel directly to airline customers at 20 airports,
including such major hub cities as Chicago, Dallas/Fort Worth, Miami, and New
York.

      CITGO's delivery of light fuels to its customers is accomplished in part
through 52 refined product terminals located throughout CITGO's primary market
territory. Of these terminals, 42 are wholly-owned by CITGO and 10 are jointly
owned. Eleven of CITGO's product terminals have waterborne docking facilities,
which greatly enhance the flexibility of CITGO's logistical system. Refined
product terminals owned or operated by CITGO provide a total storage capacity of
approximately 21 million barrels. Also, CITGO has active exchange relationships
with over 300 other refined product terminals, providing flexibility and timely
response capability to meet distribution needs.

                                       11

<PAGE>

      Petrochemicals and Industrial Products. CITGO sells petrochemicals in bulk
to a variety of U.S. manufacturers as raw material for finished goods. The
majority of CITGO's cumene production is sold to Mount Vernon Phenol Plant
Partnership, a joint venture phenol production plant in which CITGO and General
Electric Company are partners. This 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 industries;
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 TCP Petcoke Corporation, a joint
venture, for use as kiln and boiler fuel; and residual fuel blendstocks are sold
to a variety of fuel oil blenders.

      Asphalt. CITGO asphalt is generally marketed to independent paving
contractors on the East and Gulf Coasts and in the Midwest of the United States
for use in the construction and resurfacing of roadways. CITGO delivers asphalt
through three wholly-owned terminals and twenty-three leased terminals. Demand
for asphalt is seasonal and 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.

INTERNATIONAL OPERATIONS

      CITGO, through its wholly-owned subsidiary, CITGO International, Inc.,
sells lubricants, gasoline and distillates in various Latin American markets
including Puerto Rico, Brazil, Ecuador and Mexico.

PIPELINE OPERATIONS

      CITGO owns and operates a crude oil pipeline and three products pipeline
systems. CITGO also has equity interests in three crude oil pipeline companies
and six refined product pipeline companies. 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 refined
products from the Gulf Coast to the mid-Atlantic and eastern seaboard states.
CITGO has a 15.8 percent ownership interest in Colonial Pipeline.

EMPLOYEES

      CITGO and its subsidiaries have a total of approximately 4,000 employees,
approximately 1,500 of whom are covered by union contracts. Most of the union
employees are employed in refining operations. The remaining union employees are
located primarily at a lubricant plant and various refined product terminals.
All our union contracts will expire between November 2005 and July 2006.

                                       12

<PAGE>

ENVIRONMENT AND SAFETY

      Environment

      CITGO is subject to the federal Clean Air Act ("CAA") which includes the
New Source Review ("NSR") program as well as the Title V air permitting program;
the federal Clean Water Act which includes the National Pollution Discharge
Elimination System program; the Toxic Substances Control Act; and the federal
Resource Conservation and Recovery Act and their equivalent state programs.
CITGO is required to obtain permits under all of these programs and believes it
is in material compliance with the terms of these permits. CITGO does not have
any material Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") liability because the former owners of many of CITGO's assets
have by explicit contractual language assumed all or the material portion of
CERCLA obligations related to those assets. This includes the Lake Charles
refinery and the Lemont refinery.

      The U.S. refining industry is required to comply with increasingly
stringent product specifications under the 1990 Clean Air Act Amendments for
reformulated gasoline and low sulfur gasoline and diesel fuel that require
additional capital and operating expenditures, and alters significantly the U.S.
refining industry and the return realized on refinery investments.

      In addition, CITGO is subject to various other federal, state and local
environmental laws and regulations that may require CITGO to take additional
compliance actions and also actions to remediate the effects on the environment
of prior disposal or release of petroleum, hazardous substances and other waste
and/or pay for natural resource damages. Maintaining compliance with
environmental laws and regulations could require significant capital
expenditures and additional operating costs. Also, numerous other factors affect
the Company's plans with respect to environmental compliance and related
expenditures.

      CITGO's accounting policy establishes environmental reserves as probable
site restoration and remediation obligations become reasonably capable of
estimation. Environmental liabilities are not discounted to their present value
and are recorded without consideration of potential recoveries from third
parties. Subsequent adjustments to estimates, to the extent required, will be
made as more refined information becomes available. CITGO believes the amounts
provided in its consolidated financial statements, as prescribed by generally
accepted accounting principles, are adequate in light of probable and estimable
liabilities and obligations. However, there can be no assurance that the actual
amounts required to discharge alleged liabilities and obligations and to comply
with applicable laws and regulations will not exceed amounts provided for or
will not have a material adverse affect on CITGO's consolidated results of
operations, financial condition and cash flows.

      In 1992, CITGO reached an agreement with the Louisiana Department of
Environmental Quality ("LDEQ") to cease usage of certain surface impoundments at
the Lake Charles refinery by 1994. A mutually acceptable closure plan was filed
with the LDEQ in 1993. The remediation commenced in December 1993. CITGO is
complying with a June 2002 LDEQ administrative order about the development and
implementation of a corrective action or closure plan. CITGO and the former
owner of the refinery are participating in the closure and sharing the related
costs based on estimated contributions of waste and ownership periods.

      CITGO's Corpus Christi, Texas refinery and current and former employees
are being investigated by state and federal agencies for alleged criminal
violations of federal environmental statutes and regulations, including the CAA
and the Migratory Bird Act. CITGO is cooperating with the investigation. CITGO
believes that it has defenses to any such charges. At this time, CITGO cannot
predict the outcome of or the amount or range of any potential loss that would
ensue from any such charges.

      In June 1999, CITGO and numerous other industrial companies received
notice from the United States Environmental Protection Agency ("U.S. EPA") that
the U.S. EPA believes these companies have

                                       13

<PAGE>

contributed to contamination in the Calcasieu Estuary, near Lake Charles,
Louisiana and are potentially responsible parties ("PRPs") under CERCLA. The
U.S. EPA made a demand for payment of its past investigation costs from CITGO
and other PRPs and since 1999 has been conducting a remedial
investigation/feasibility study ("RI/FS") under its CERCLA authority. While
CITGO disagrees with many of the U.S. EPA's earlier allegations and conclusions,
CITGO and other industrial companies signed in December 2003, a Cooperative
Agreement with the LDEQ on issues relative to the Bayou D'Inde tributary section
of the Calcasieu Estuary, and the companies are proceeding with a Feasibility
Study Work Plan. CITGO will continue to deal separately with the LDEQ on issues
relative to its refinery operations on another section of the Calcasieu Estuary.
The Company still intends to contest this matter if necessary.

      In January and July 2001, CITGO received notices of violation ("NOVs")
from the U.S. EPA alleging violations of the CAA. The NOVs are an outgrowth of
an industry-wide and multi-industry U.S. EPA enforcement initiative alleging
that many refineries, electric utilities and other industrial sources modified
air emission sources. Without admitting any violation CITGO reached a settlement
with the United States and the states of Louisiana, Illinois, New Jersey, and
Georgia. A Consent Decree was approved in the District court for the Southern
District of Texas in January 2005. The Consent Decree requires the
implementation of control equipment at CITGO's refineries and a Supplemental
Environment Project at CITGO's Corpus Christi, Texas refinery. CITGO estimates
that the costs of the settlement could range up to $325 million which includes a
civil penalty of $3.6 million, split between the U.S. EPA and the states. CITGO
accrued for the civil penalty during 2003 and paid it in February 2005. The
capital costs will be incurred over a period of time, primarily between 2004 and
2009.

      In June 1999, an NOV was issued by the U.S. EPA alleging violations of the
National Emission Standards for Hazardous Air Pollutants regulations covering
benzene emissions from wastewater treatment operations at CITGO's Lemont,
Illinois refinery. This matter has been consolidated with the matters described
in the previous paragraph.

      In June 2002, a Consolidated Compliance Order and Notice of Potential
Penalty was issued by the LDEQ alleging violations of the Louisiana air quality
regulations at CITGO's Lake Charles, Louisiana refinery during 2001. The
majority of the alleged violations related to the leak detection and repair
program. This matter has been consolidated with the matters described in the
previous paragraph related to the U.S. EPA's enforcement initiative.

      In October 2004, the New Jersey Land Trust voted to reject the donation by
CITGO of a conservation easement covering the 365 acre Petty's Island, which is
located in the Delaware River in Pennsauken, New Jersey and owned by CITGO.
Petty's Island contains a CITGO closed petroleum terminal and other industrial
facilities, but it is also the habitat for the bald eagle and other wildlife.
The City of Pennsauken through a private developer wants to condemn Petty's
Island through eminent domain and to redevelop Petty's Island into residential
and commercial uses. The granting of the conservation easement would have
mitigated the amount of remediation that CITGO would have to perform on Petty's
Island. The ultimate outcome cannot be determined at this time.

      At December 31, 2004, CITGO's balance sheet included an environmental
accrual of $65 million compared with $63 million at December 31, 2003. Results
of operations reflect an increase in the accrual during 2004 due primarily to a
revision of the Company's estimated share of costs related to two sites
indicating higher costs offset in part, by spending on environmental projects.
CITGO estimates that an additional loss of $33 million is reasonably possible in
connection with environmental matters.

      Various regulatory authorities have the right to conduct, and from time to
time do conduct, environmental compliance audits or inspections of CITGO and its
subsidiaries' facilities and operations. Those compliance audits or inspections
have the potential to reveal matters that those authorities believe represent
non-compliance in one or more respects with regulatory requirements and for
which those authorities may seek corrective actions and/or penalties in an
administrative or judicial proceeding. Based

                                       14

<PAGE>

upon current information, CITGO does not believe that any such prior compliance
audit or inspection or any resulting proceeding will have a material adverse
effect on its future business and operating results, other than matters
described above.

      Conditions which require additional expenditures may exist with respect to
CITGO's various sites including, but not limited to, its operating refinery
complexes, former refinery sites, service stations and crude oil and petroleum
product storage terminals. Based on currently available information, CITGO
cannot determine the amount of any such future expenditures.

      Increasingly stringent environmental regulatory provisions and obligations
periodically require additional capital expenditures. During 2004, CITGO spent
approximately $113 million for environmental and regulatory capital improvements
in its operations. Management currently estimates that CITGO will spend
approximately $1.1 billion for environmental and regulatory capital projects
over the five-year period 2005-2009.

<TABLE>
<CAPTION>
                                      2005       2006     2007      2008       2009      TOTAL
                                     -------   -------   -------   -------   -------    -------
                                                          (IN MILLIONS)
<S>                                  <C>       <C>       <C>       <C>       <C>        <C>
Tier 2 gasoline (1)                  $    59   $    54   $     -   $     -   $     -    $   113
Ultra low sulfur diesel (2)               47       121        45       120       225        558
Other environmental (3)                  155       146        42        77        27        447
                                     -------   -------   -------   -------   -------    -------
   Total regulatory/environmental    $   261   $   321   $    87   $   197   $   252    $ 1,118
                                     =======   =======   =======   =======   =======    =======
</TABLE>
----------
(1)   In February 2000, the EPA promulgated the Tier 2 Motor Vehicle Emission
      Standards Final Rule for all passenger vehicles, establishing standards
      for sulfur content in gasoline. These regulations mandate that the average
      sulfur content of gasoline for highway use produced at any refinery not
      exceed 30 parts per million during any calendar year by January 1, 2006,
      with a phase-in beginning January 1, 2004. In order to comply with these
      regulations, CITGO is installing additional hydroprocessing facilities at
      its refineries. (Hydroprocessing facilities remove sulfur from oil by
      means of a chemical reaction which occurs when the oil is mixed with
      hydrogen, heated and processed over a catalyst.)

(2)   Spending on Ultra Low Sulfur Diesel ("ULSD") assumes the EPA will require
      ULSD for on-road diesel in 2006 and ULSD for off-road diesel use in 2010.
      The ULSD program will require CITGO to make additional capital investments
      at its refineries. The estimates shown here are based on the installation
      of traditional hydroprocessing facilities. These regulations are not final
      and spending could be reduced if certain alternative regulatory schemes
      proposed by EPA are adopted. CITGO continues to evaluate new technological
      innovations which may reduce the required investment.

(3)   Other environmental spending assumes approximately $289 million in
      spending to comply with New Source Review standards under the Clean Air
      Act.

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".

      Safety

      Due to the nature of petroleum refining and distribution, CITGO is subject
to stringent federal and state occupational health and safety laws and
regulations. We strive to achieve excellent safety and health performance. We
believe that safety is tied directly to productivity in our facilities and
financial results. We maintain comprehensive safety management systems including
policies, procedures, recordkeeping, internal reviews, training, incident
reviews and corrective actions. We track not only accidents, but also "near
miss" events and conditions, equipment malfunctions, first aid events and
medical treatments. Each employee in

                                       15

<PAGE>

CITGO's facilities has a role in maintaining safe work conditions and has the
authority to stop unsafe acts or unsafe conditions.

ITEM 3. LEGAL PROCEEDINGS

      Various lawsuits and claims arising in the ordinary course of business 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 given reporting period. The most significant lawsuits
and claims are discussed below.

      In September 2002, a Texas court ordered CITGO to pay property owners and
their attorneys approximately $6 million based on an alleged settlement of class
action property damage claims as a result of alleged air, soil and groundwater
contamination from emissions released from CITGO's Corpus Christi, Texas
refinery. CITGO has appealed the ruling to the Texas Court of Appeals.

      CITGO, along with most of the other major oil companies, is a defendant in
a number of federal and state lawsuits alleging contamination of private and
public water supplies by methyl tertiary butyl ether ("MTBE"), a gasoline
additive. In general, the plaintiffs claim that MTBE renders the water not
potable. In addition to compensatory and punitive damages, plaintiffs seek
injunctive relief to abate the contamination. CITGO intends to defend all of the
MTBE lawsuits vigorously. CITGO's MTBE litigation can be divided into two
categories--pre and post-September 30, 2003 litigation. Of the pre-September 30,
2003 cases, CITGO is defending itself in Madison County, Illinois state court
and in a New York county state court. As of early October 2004, settlements in
principle had been reached in both Madison County, Illinois cases and one of the
cases has been settled subsequent to year-end. There will be no effect on
results of operations because the accrual for these cases was adequate. The
post-September 30, 2003 cases were filed after new federal legislation was
proposed that would have precluded plaintiffs from filing lawsuits based on the
theory that gasoline with MTBE is a defective product. These approximately 72
cases, the majority of which were filed by municipal authorities, were removed
to federal court and at the defendants' request consolidated in Multi-District
Litigation ("MDL") 1358. On March 16, 2004, the judge in MDL 1358 denied the
plaintiffs' motion to remand the cases to state court. Subsequently, the judge
denied the plaintiffs' motion to certify her rulings on the remand motion for an
interlocutory appeal. It is not possible to estimate the loss or range of loss,
if any, related to these cases.

      Claims have been made against CITGO in approximately 350 asbestos lawsuits
pending in state and federal courts. These cases, most of which involve multiple
defendants, are brought by former employees or contractor employees seeking
damages for asbestos related illnesses allegedly caused, at least in part, from
exposure at refineries owned or operated by CITGO in Lake Charles, Louisiana,
Corpus Christi, Texas and Lemont, Illinois. In many of these cases, the
plaintiffs' alleged exposure occurred over a period of years extending back to a
time before CITGO owned or operated the premises at issue. CITGO does not
believe that the resolution of these cases will have a material adverse effect
on its financial condition or results of operations.

      In 2001, Miami-Dade County sued seventeen defendants for the costs of
remediation of pollution rising from jet fuel operations during the past decades
at the Miami International Airport ("the Airport"). Although not a defendant in
this case, CITGO along with approximately 250 other former jet fuel operators at
the Airport has received a payment demand from Miami-Dade County for the
remediation costs for alleged pollution occurring while CITGO had jet fuel
operations at the Airport. CITGO is exploring settlement discussions with
Miami-Dade County. CITGO is contesting the amount of damages that Miami-Dade
County claims are attributed CITGO's jet fuel operations at the Airport and will
vigorously defend itself should no settlement be reached. CITGO does not believe
that the resolution of this matter will have a material adverse effect on its
financial condition or results of operations.

                                       16

<PAGE>

      At December 31, 2004, CITGO's balance sheet included an accrual for
lawsuits and claims of $24 million compared with $27 million at December 31,
2003. CITGO estimates that an additional loss of $35 million is reasonably
possible in connection with such lawsuits and claims.

      In mid-March 2005, representatives of a special commission of the
Venezuelan National Assembly (the "VNA Commission") visited CITGO's Houston,
Texas offices for the purpose of interviewing several CITGO employees as part of
an investigation that the VNA Commission had been charged with conducting. CITGO
has not received any direct statements from the VNA Commission describing the
scope of their investigation. CITGO understands from the interviewed employees
that the questions were directed at the rationale for, and analysis underlying,
note financings that CITGO completed in 2003 and 2004, the relocation of its
corporate headquarters to Houston, Texas, and several minor transactions. The
questions did not identify any unlawful or unrecorded activities, and CITGO is
not aware of any such activities. CITGO is cooperating with the VNA Commission's
investigation. Shortly following the VNA Commission's visit, a CITGO employee
sent a memorandum to both CITGO's auditors and the SEC referencing the VNA
Commission's investigation and other matters. CITGO is not aware of any improper
activities, but has engaged counsel to investigate the employee's allegations.

      See also "ITEMS 1. and 2. Business and Properties -- Environment and
Safety" for information regarding various enforcement actions.

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

      The registrant meets the conditions set forth in General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting the information
otherwise required by Item 4 of Form 10-K relating to submission of matters to a
vote of security holders as permitted by General Instructions (I)(2)(c).

                                       17

<PAGE>

                                     PART II

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

Market

      The Company's common stock is not traded on any market. All of the
Company's common stock is held by PDV America.

Dividends

      On December 10, 2004, CITGO made a $400 million dividend payment to PDV
America.

      See Consolidated Financial Statements of CITGO - Note 9 in Item 15a for a
description of restrictions applicable to dividend payments by CITGO.

                                       18

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

      The following table sets forth certain selected historical consolidated
financial and operating data of CITGO as of the end of and for each of the five
years in the period ended December 31, 2004. The following table should be read
in conjunction with the consolidated financial statements of CITGO as of
December 31, 2004 and 2003, and for each of the three years in the period ended
December 31, 2004, included in "Item 8. Financial Statements and Supplementary
Data".

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                    ------------------------------------------------------------------------
                                                        2004           2003           2002            2001           2000
                                                    -----------     ----------     ----------      ----------     ----------
                                                                              (DOLLARS IN MILLIONS)
<S>                                                 <C>             <C>            <C>             <C>            <C>
INCOME STATEMENT DATA
   Net sales and sales to affiliates                $    32,028     $   25,216     $   19,358      $   19,601     $   22,157
   Equity in earnings of affiliates                         242            118            101             109             59
   Other income (including insurance recoveries)              7            162            387              (5)           (26)
   Net revenues                                          32,277         25,496         19,846          19,705         22,190
   Income before cumulative effect of change
     in accounting principle                                625            439            180             392            312
   Net income                                               625            439            180             405            312
   Other comprehensive income (loss)                         (4)             4            (22)             (1)             1
   Comprehensive income                                     621            443            158             404            313
Ratio of Earnings to Fixed Charges (1)                     4.23 x         5.53 x         3.66 x          7.08 x         5.62 x
BALANCE SHEET DATA
   Total assets                                     $     7,644     $    7,273     $    6,987      $    6,509     $    6,806
   Long-term debt (excluding current portion)(2)          1,164          1,468          1,134           1,351          1,087
   Total debt (3)                                         1,180          1,502          1,347           1,479          1,199
   Shareholder's equity                                   2,722          2,501          2,559           2,401          2,476
</TABLE>

----------
(1)   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.
      Interest expense in 2004 includes one-time prepayment premiums for the
      early retirement of the senior secured term loan and the tender of the
      11-3/8% senior notes.

(2)   Includes long-term debt to third parties and capital lease obligations.

(3)   Includes short-term bank loans, current portion of capital lease
      obligations and long-term debt, long-term debt and capital lease
      obligations.

                                       19

<PAGE>

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

EXECUTIVE SUMMARY

      CITGO is in the refining and marketing business. We refine crude oil and
other feedstocks into a variety of products which include gasoline, diesel, fuel
oil, and jet fuel, petrochemicals and industrial products, lubricants and waxes,
and asphalt. Products are transported from our refineries primarily by pipeline
and barge and then through terminals to our customers. These products are sold
to wholesale marketers, convenience stores, airlines, end-users and to other
manufacturers as feedstock. We sell more of these products than we refine and as
a result, we supplement our own production with purchases from others.

      We evaluate our operating performance by attention to the utilization
rates of the refinery equipment, the yield of products from the crude oil input
and the cost of other key components such as natural gas and electricity. We
evaluate our financial performance by focusing on gross margin, i.e., the sales
price of the products above the cost of crude, on products sold. We evaluate the
performance of our specialty products such as petrochemicals and lubricants
against the alternate use value of the hydrocarbons used to produce these
products. In most cases, this alternate use value relates to the price of
gasoline.

      CITGO's financial results are a function of making full use of its
refining capacity, maintaining margins on the products it sells, operating its
facilities in a safe manner and maintaining strong cost control wherever
possible. We assess our financial condition by various liquidity measures
including interest coverage, debt coverage, debt-to-capitalization, return on
capital employed and available borrowing capacity.

      CITGO's primary opportunities currently are based on enhancing our
revenues through increasing our crude oil refining capacity, expanding the
processing capacity of other refinery equipment and increasing the sales volume
of fuels and asphalt and through reduction of expenses.

      Changes in environmental regulations present the most difficult challenges
to CITGO management for the intermediate term. The regulations include site
specific measures as well as more stringent product specifications. Site
specific changes are aimed at reducing emission from CITGO facilities such as
refineries, pipelines, terminals and other industrial facilities. On the product
front, Tier II Gasoline, Ultra Low Sulfur Diesel, and the switch from MTBE to
ethanol for oxygen addition for Reformulated Gasoline required by certain states
are all examples of changes in fuels regulations. In addition, Group II and III
Lube base oils and high performance asphalts are being required by the market
place over the next 4 to 6 years. As stated above, some of these changes are
being mandated by federal and state regulatory agencies, others are the indirect
result of regulations, but ultimately our customers will require all these
products plus possibly others not currently defined.

      The challenges to being able to supply this new generation of products
include: planning and executing multi-million dollar capital projects; financing
these projects; and adjusting operating practices and procedures to assure
reliable, high quality supplies to our customers. All this must be done without
impacting our profit and efficiency improvement initiatives.

      CITGO has taken a systems approach to addressing the need for new quality
products. Capital projects at our refineries have been scheduled over several
years, taking advantage of flexibility written into the regulations, to avoid
extreme capital spending spikes which could create financing difficulties.

      CITGO continues to evaluate technology improvements, and believes that by
staggering our implementation of new quality fuels production capabilities, we
will benefit from technology improvements over time. We have estimated we will
spend $1.1 billion in regulatory capital between 2005 and 2009, of which,
approximately 70% is aimed at producing new quality products. This estimate is
based on the cost of current technology. We believe our systems approach to this
challenge increases the likelihood that we may reduce this cost.

                                       20

<PAGE>

      The refined products business is inherently volatile, and the primary
business risk for any company engaged in the business is a sudden and radical
movement in market prices. CITGO's supply and distribution of feedstocks and
acquired and produced refinery products results in a significant number of
marine chartered movements. Regulations and limited vessel availability may from
time to time cause fluctuations in transportation expenses. These expenses are
typical of our industry but can be a large portion of overall manufacturing
expenditures. Another major risk in the refined products business is operational
risk, that is the risk of mechanical failure at any operating asset used to
serve customers. A final area of risk is political risk. In the short term,
geopolitical actions could upset the availability or price of crude oil or
products creating market upsets. Over the longer term, changes in laws or
regulations could radically increase the cost of being in the refined products
business.

      CITGO operates to minimize our exposure to volatility in the refined
products market place by avoiding significant inventory positions or forward
price commitments.

      Operating risk is first addressed at CITGO by sound and stringent
operating practices and procedures. However, in addition to striving for
operational excellence, CITGO carries significant levels of property damage and
business interruption insurance.

      Political risk is almost impossible to totally avoid. However, CITGO's
large and diverse refining and distribution system provides the flexibility to
react to crude and product shortages should they occur. CITGO's refineries are
complex and flexible enough to process almost any type of crude oil traded on
the world market. CITGO can compete for supply with any U.S based refiner. And
while Lemont currently processes primarily Canadian crude, it can be and
periodically is supplied from the U.S. mid-continent or the Gulf Coast as
dictated by economics. CITGO also operates product terminals with import
capability in New York Harbor, Miami-Fort Lauderdale, Tampa, Boston and a number
of other locations if it becomes necessary to further supplement refinery
production with increased product imports.

      Risk associated with increased regulation can only be addressed on an
issue specific basis. CITGO is active in several industry and state specific
associations to monitor statutory and regulatory trends which might affect the
business.

      The refined products business continues to be very competitive. Industry
analysts predict demand growth at 1% to 2% per year in the U.S. market and
approximately double these numbers for the world market over the next 5 to 10
years. This forecasted demand growth creates opportunities for U.S. refineries
which are currently operating at near capacity throughput. While this growth
trend would appear to be positive for refining and marketing companies, the
industry has always exhibited strong competitive tendencies, and recent
corporate consolidations have resulted in cost reduction synergies and economies
of scale which translated to competitive pricing in the market place.

      As noted above, the production of lower sulfur content fuels and higher
quality lubricant base stocks and asphalts is definitely a trend for the future.
The high capital requirements associated with facilities equipped to produce
these products may lead to further consolidation of refining capacity into the
hands of financially strong companies. CITGO will continue to monitor these
trends and will take advantage of economic opportunities as they occur.

      Major uncertainties for CITGO generally coincide with market and political
risks. While CITGO can only make educated guesses about the future of the
refined products market and political actions which might affect it, the Company
can prepare itself for potential contingencies. By maintaining an adequate level
of financial liquidity, by assuring that its refineries and distribution assets
are flexible and have multiple sources of supply and by monitoring and analyzing
the market on a continuous basis, CITGO believes it is prepared to adjust to
most market contingencies in ways that will not have a significant negative
impact on its performance or future.

                                       21

<PAGE>

      Financially, 2004 was an excellent year for CITGO as a result of a high
utilization rate of refining capacity, excellent safety performance and
favorable market conditions. As CITGO continues to emphasize the importance of
efficient refinery operations and its commitment to safety and environmental
stewardship, we will again take advantage of expected favorable market
conditions in 2005. However, CITGO operates in an industry subject to volatility
in earnings. Conditions can change quickly and results may differ markedly from
management's expectations. For example, because CITGO does not produce any of
the crude oil processed at its refineries, it is exposed to the risk of supply
disruption or price spikes resulting from world events. A supply disruption
could require CITGO to reduce its rate of crude oil processing and/or purchase
higher priced crude oils and feedstocks. This would have a negative effect on
profitability. In a similar manner, a spike in crude oil prices that was not
quickly followed by a similar increase in product prices would reduce
profitably. In addition, reactions to perceived credit risks by CITGO's
suppliers and creditors can quickly affect the Company's liquidity should credit
lines or payment terms be restricted.

      In February 2003, CITGO issued $550 million of 11-3/8% unsecured senior
notes due in 2011 and CITGO closed on a three year, $200 million senior secured
term loan. In July 2003, CITGO made a dividend payment of $500 million to its
parent, PDV America. In June 2004, CITGO retired the $200 million senior secured
term loan. In October 2004, CITGO issued $250 million of 6% unsecured senior
notes due October 15, 2011. In connection with this transaction, CITGO
repurchased approximately $540 million principal amount of its 11-3/8% senior
notes due 2011 as part of a tender offer for such notes. In December 2004, CITGO
made a dividend payment of $400 million to its parent, PDV America.

      CITGO has sufficient liquidity (defined as cash, available borrowing
capacity and access to an accounts receivable sales facility) to maintain its
current operations and to complete capital projects that are underway. Estimated
capital expenditures for 2005 are approximately $515 million. Of this amount,
$261 million is for regulatory projects, $162 million for strategic projects and
$92 million is for maintenance projects. Liquidity at year end was approximately
$553 million. Although CITGO has debt maturities during 2005 of approximately
$11 million, it routinely evaluates financing opportunities that not only mature
in 2005 but also future years.

OVERVIEW

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

      Petroleum refining industry operations and profitability are influenced by
a large number of factors, some of which individual petroleum refining and
marketing companies cannot control. Governmental regulations and policies,
particularly in the areas of taxation, energy and the environment (as to which,
see "ITEMS 1. and 2. Business and Properties - Environment and Safety"), have a
significant impact on petroleum activities, regulating how companies conduct
their operations and formulate their products. 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. CITGO'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 CITGO.

                                       22

<PAGE>

      In general, prices for refined products are influenced by the price of
crude oil, feedstocks and blending components, inventory levels and consumer
demand. Although an increase or decrease in the price for crude oil, feedstocks
and blending components generally results in a corresponding increase or
decrease in prices for refined products, inventory levels and consumer demand
can create 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
CITGO's consolidated operating results therefore depends in part on how quickly
refined product prices adjust to reflect these changes. Although the pricing
formulas under CITGO's crude supply agreements with PDVSA are designed to
provide a measure of stability to CITGO's refining margins, CITGO receives
approximately 40% of its crude oil requirements under these agreements.
Therefore, a substantial or prolonged increase in crude oil prices without a
corresponding increase in refined product prices, or 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 CITGO's earnings and cash flows.

      CITGO also purchases significant volumes of refined products to supplement
the production from its refineries to meet marketing demands and to resolve
logistical issues. CITGO's earnings and cash flows are also affected by the
cyclical nature of petrochemical prices. As a result of the factors described
above, the earnings and cash flows of CITGO may experience substantial
fluctuations. Inflation was not a significant factor in the operations of CITGO
during the three years ended December 31, 2004.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      The preparation of financial statements in conformity with Generally
Accepted Accounting Principles in the United States of America requires that
management apply accounting policies and make estimates and assumptions that
affect results of operations and the reported amounts of assets and liabilities.
The following areas are those that management believes are important to the
financial statements and which require significant judgment and estimation
because of inherent uncertainty.

      Environmental Expenditures. The costs to comply with environmental
regulations are significant. Environmental expenditures incurred currently that
relate to present or future revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations and
that do not contribute to current or future revenue generation are expensed. The
Company constantly monitors its compliance with environmental regulations and
responds promptly to issues raised by regulatory agencies. 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 and are recorded without consideration of potential
recoveries from third parties. Subsequent adjustments to estimates, to the
extent required, may be made as more refined information becomes available.

      Litigation and Injury Claims. Various lawsuits and claims arising in the
ordinary course of business are pending against the Company. The status of these
lawsuits and claims are continually reviewed by external and internal legal
counsel. These reviews provide the basis for which the Company determines
whether or not to record accruals for potential losses. Accruals for losses are
recorded 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 given reporting period.

      Health Care Costs. The cost of providing health care to current employees
and retired employees continues to increase at a significant rate. Historically,
CITGO has absorbed the majority of these cost increases which reduce
profitability and increase the Company's liability. There is no indication that
the trend of increasing health care costs will be reversed in future periods. In
2003, federal legislation introduced a prescription drug benefit under Medicare
as well as a federal subsidy to sponsors of certain

                                       23

<PAGE>

retiree health care benefit plans. In May 2004, the FASB Staff issued FASB Staff
Position No. FAS 106-2, "Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003". The
Staff Position permits a sponsor to report the effects of Medicare Reform
prospectively in the third quarter of 2004 or retrospectively to the measurement
date following enactment of the legislation. CITGO has chosen to use the
retrospective method to reflect Medicare Reform as of January 1, 2004. The
effect of this legislation at that date was to reduce the benefit obligation by
approximately $40 million. The Company's liability for such health care costs is
based on actuarial calculations that could be subject to significant revision as
the underlying assumptions regarding future health care costs and interest rates
change.

      Pensions. CITGO's pension cost and liability are based on actuarial
calculations, which are dependent on assumptions concerning discount rates,
expected rates of return on plan assets, employee turnover, estimated retirement
dates, salary levels at retirement and mortality rates. In addition, differences
between actual experience and the assumptions also affect the actuarial
calculations. While management believes that the assumptions used are
appropriate, differences in actual experience or changes in assumptions may
significantly affect the Company's future pension cost and liability.

                                       24

<PAGE>

RESULTS OF OPERATIONS -- 2004 COMPARED TO 2003

<TABLE>
<CAPTION>
                                                 FOR THE YEAR ENDED         INCREASE
                                                     DECEMBER 31,          (DECREASE)
                                                 2004          2003         FROM 2003
                                               ---------    ----------   ---------------
<S>                                            <C>          <C>          <C>         <C>
(DOLLARS IN MILLIONS)

Net sales                                      $  31,572    $   24,829   $   6,743
Sales to affiliates                                  456           387          69
                                               ---------    ----------   ---------
                                                  32,028        25,216       6,812   27%
                                               ---------    ----------   ---------

Equity in earnings of affiliates                     242           118         124
Insurance recoveries                                   -           146        (146)
Other income (expense), net                            7            16          (9)
                                               ---------    ----------   ---------
                                                  32,277        25,496       6,781   27%
                                               ---------    ----------   ---------

Cost of sales and operating expenses              30,767        24,391       6,376
Selling, general and administrative expenses         328           296          32
Interest expense, excluding capital lease            255           120         135
Capital lease interest charge                          4             5          (1)
                                               ---------    ----------   ---------
                                                  31,354        24,812       6,542   26%
                                               ---------    ----------   ---------

Income before income taxes                           923           684         239
Income taxes                                         298           245          53
                                               ---------    ----------   ---------
Net income                                     $     625    $      439   $     186   42%
                                               =========    ==========   =========

Gulf Coast 3/2/1 crack spread ($ per bbl)(1)   $    6.31    $     4.46   $    1.85   41%
Average price per gallon of gasoline (2)       $    1.24    $     0.94   $    0.30   32%
Average cost per barrel of crude oil (3)       $   35.37    $    26.41   $    8.96   34%
</TABLE>

----------
(1)   The Gulf Coast 3/2/1 crack spread is the value of two-thirds barrel of
      gasoline plus one-third barrel of distillate minus one barrel of crude
      (West Texas Intermediate or "WTI"). Heavy crude refiners also evaluate the
      light/heavy crude spread (WTI minus Maya). The sum of these benchmarks is
      the heavy crack spread. During 2004, the heavy crack spread was $17.82 per
      barrel versus $11.27 per barrel during 2003. The values used to calculate
      the Gulf Coast 3/2/1 crack spread and the heavy crack spread are obtained
      from Platts using an average of daily prices for the annual period ended
      December 31, 2004 and 2003 (excluding weekends and holidays).

(2)   The average price per gallon of gasoline is based on CITGO gasoline sales
      revenue divided by CITGO gasoline sales volume. See the "CITGO Sales
      Revenues and Volumes" table that follows.

(3)   The average cost per barrel of crude oil is based on CITGO's crude oil
      cost divided by CITGO refinery crude inputs. See the "CITGO Cost of
      Sales and Operating Expenses" table that follows.

                                       25

<PAGE>

      Sales revenues and volumes. Sales increased $6.8 billion, or approximately
27%, in 2004 as compared to 2003. This increase was primarily due to an increase
in average sales price of 31%. The following table summarizes the sources of our
sales revenues and sales volumes for 2004, 2003 and 2002:

                        CITGO SALES REVENUES AND VOLUMES

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,                 YEAR ENDED DECEMBER 31,
                                            -------------------------------------      -------------------------------
                                               2004         2003          2002          2004         2003        2002
                                            ---------    -----------   ----------      ------       ------      ------
                                                        (IN MILLIONS)                       (GALLONS IN MILLIONS)
<S>                                         <C>          <C>           <C>             <C>          <C>         <C>
Gasoline                                    $  17,597    $    14,320   $   11,758      14,194       15,257      15,026
Jet fuel                                        2,707          1,951        1,402       2,318        2,315       2,003
Diesel / #2 fuel                                6,590          5,287        3,462       5,854        6,238       5,031
Asphalt                                           971            711          597       1,300          990         902
Petrochemicals and industrial products          3,369          2,272        1,485       2,865        2,643       2,190
Lubricants and waxes                              684            598          561         280          261         261
                                            ---------    -----------   ----------      ------       ------      ------
   Total refined product sales              $  31,918    $    25,139   $   19,265      26,811       27,704      25,413
Other sales                                       110             77           93           -            -           -
                                            ---------    -----------   ----------      ------       ------      ------
   Total sales                              $  32,028    $    25,216   $   19,358      26,811       27,704      25,413
                                            =========    ===========   ==========      ======       ======      ======
</TABLE>

Equity in earnings of affiliates. The table below shows the changes during 2004
compared to 2003 in the equity in earnings of affiliates. The increase in
LYONDELL-CITGO's earnings in 2004 as compared to 2003 was due primarily to
higher margins on crude oil refining and aromatics. LYONDELL-CITGO also
benefited from higher crude processing rates in 2004 as compared to 2003.

<TABLE>
<CAPTION>
                              FOR THE YEAR
                                 ENDED
                              DECEMBER 31,           INCREASE
                         ---------------------      (DECREASE)
                          2004          2003         OVER 2003
                         ------        -------      ----------
                            ($ in millions)
<S>                      <C>           <C>          <C>
LYONDELL-CITGO           $  197        $    84        $  113
Pipeline investments         39             36             3
Other                         6             (2)            8
                         ------        -------        ------
   Total                 $  242        $   118        $  124
                         ======        =======        ======
</TABLE>

                                       26

<PAGE>

      Cost of sales and operating expenses. The following table summarizes our
cost of sales and operating expenses for 2004, 2003 and 2002:

                   CITGO COST OF SALES AND OPERATING EXPENSES

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                    2004          2003         2002
                                                                 ----------     ---------    ---------
                                                                             ($ IN MILLIONS)
<S>                                                              <C>            <C>          <C>
Crude oil                                                        $    8,883     $   6,807    $   5,098
Refined products                                                     17,096        14,075       11,077
Intermediate feedstocks                                               2,697         1,657        1,489
Refining and manufacturing costs                                      1,509         1,307        1,233
Other operating costs and expenses and inventory changes                582           545          314
                                                                 ----------     ---------    ---------
   Total cost of sales and operating expenses                    $   30,767     $  24,391    $  19,211
                                                                 ==========     =========    =========
</TABLE>

      We purchase refined products to supplement the production from our
refineries in order to meet marketing demands and to optimize distribution.
Refined product purchases represented 56% and 58% of total cost of sales and
operating expenses for 2004 and 2003, respectively. Margins on purchased
products, on average, are lower than margins on refinery produced products
because refinery produced products benefit from the whole supply chain upgrade
and purchased refined products do not. However, purchased products are not
segregated from our produced products and margins may vary due to market
conditions and other factors beyond our control. In the near term, other than
normal refinery turnaround maintenance, we 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 our
control which impact the volume of refined products purchased. (See also
"Factors Affecting Forward Looking Statements".)

      Gross margin. The gross margin for 2004 was $1.3 billion, or 3.9% of net
sales, compared to $825 million or 3.3% of net sales, for 2003. The gross margin
increased from 3.0 cents per gallon in 2003 to 4.7 cents per gallon in 2004 as a
result of general market conditions and a high utilization rate of refining
capacity.

      A change in the price of crude oil, feedstocks and blending products
generally results in a corresponding change in the sales price of refined
products. The impact of changes in crude oil and feedstock prices on our
consolidated income before taxes depends, in part, on how quickly refined
product prices are adjusted to reflect these changes in feedstock costs.

      Our 57% increase in gross margin for 2004 versus 2003 compares to the 58%
increase in the industry heavy crack spread over the same period.

      Selling, general and administrative expenses. Selling, general and
administrative expenses increased $32 million, or 11% from $296 million in 2003
to $328 million in 2004. The increase is primarily a result of the decision to
relocate the corporate headquarters.

      Interest expense. Interest expense, including capital lease interest
charge, increased $134 million in 2004 as compared to 2003. The increase in
interest expense for 2004 is primarily attributable to prepayment premiums paid
in connection with the early retirement of the $200 million senior secured term
loan in the second quarter of 2004 and costs associated with a tender for the
$550 million 11-3/8% senior notes in the fourth quarter of 2004, which resulted
in the repurchase of approximately $543 million of such notes. Those prepayment
premiums and tender costs are included in interest expense. Future years will
reflect the lower amount of outstanding debt and the lower associated interest
cost.

                                       27

<PAGE>

      Income taxes. CITGO's provision for income taxes in 2004 was $298 million
representing an effective tax rate of 32%. In 2003, CITGO's provision for income
taxes was $245 million, representing an effective tax rate of 36%. The decrease
in the effective tax rate in 2004 is attributable to the permanent tax
difference related to the Medicare subsidy under the Medicare Prescription Drug,
Improvement and Modernization Act of 2003, as well as an adjustment to the
deferred state tax balance.

RESULTS OF OPERATIONS -- 2003 COMPARED TO 2002

<TABLE>
<CAPTION>
                                                   FOR THE YEAR ENDED              INCREASE
                                                      DECEMBER 31,                (DECREASE)
                                                  2003            2002             FROM 2002
                                               ----------      ----------      -----------------
<S>                                            <C>             <C>             <C>           <C>
(DOLLARS IN MILLIONS)

Net sales                                      $   24,829      $   19,081      $   5,748
Sales to affiliates                                   387             277            110
                                               ----------      ----------      ---------
                                                   25,216          19,358          5,858      30%
                                               ----------      ----------      ---------

Equity in earnings of affiliates                      118             101             17
Insurance recoveries                                  146             407           (261)
Other income (expense), net                            16             (20)            36
                                               ----------      ----------      ---------
                                                   25,496          19,846          5,650      28%
                                               ----------      ----------      ---------

Cost of sales and operating expenses               24,391          19,211          5,180
Selling, general and administrative expenses          296             285             11
Interest expense, excluding capital lease             120              67             53
Capital lease interest charge                           5               7             (2)
                                               ----------      ----------      ---------
                                                   24,812          19,570          5,242      27%
                                               ----------      ----------      ---------

Income before income taxes                            684             276            408
Income taxes                                          245              96            149
                                               ----------      ----------      ---------
Net income                                     $      439      $      180      $     259     144%
                                               ==========      ==========      =========

Gulf Coast 3/2/1 crack spread ($ per bbl)(1)   $     4.46      $     3.15      $    1.31      42%
Average price per gallon of gasoline (2)       $     0.94      $     0.78      $    0.16      21%
Average cost per barrel of crude oil (3)       $    26.41      $    23.01      $    3.40      15%
</TABLE>

----------
(1)   The Gulf Coast 3/2/1 crack spread is the value of two-thirds barrel of
      gasoline plus one-third barrel of distillate minus one barrel of crude
      (West Texas Intermediate or "WTI"). Heavy crude refiners also evaluate the
      light/heavy crude spread (WTI minus Maya). The sum of these benchmarks is
      the heavy crack spread. During 2003, the heavy crack spread was $11.27 per
      barrel versus $8.37 per barrel during 2002. The values used to calculate
      the Gulf Coast 3/2/1 crack spread and the heavy crack spread are obtained
      from Platts using an average of daily prices for the annual period ended
      December 31, 2004 and 2003 (excluding weekends and holidays).

(2)   The average price per gallon of gasoline is based on CITGO gasoline sales
      revenue divided by CITGO gasoline sales volume. See the "CITGO Sales
      Revenues and Volumes" table that follows.

(3)   The average cost per barrel of crude oil is based on CITGO's crude oil
      cost divided by CITGO refinery crude inputs. See the preceding "CITGO Cost
      of Sales and Operating Expenses" table at page 27.

      Sales revenues and volumes. Sales increased $5.9 billion, representing a
30% increase from 2002 to 2003. This was due to an increase in average sales
price of 19% and an increase in sales volume of 9%. The primary volume increase
was in diesel/#2 fuel sales. We had an increase in refinery production of
diesel/#2 fuel sales due primarily to the recovery of the Lemont, Illinois
refinery, as well as increased availability of product from our related parties'
refineries (See Item 13. Certain Relationships and Related Transactions).

                                       28

<PAGE>

This along with an increase in marketing demand led to an increase in sales of
diesel/#2 fuel. (See CITGO Sales Revenues and Volumes table above.)

      Equity in earnings of affiliates. Equity in earnings of affiliates
increased by approximately $17 million, or 17%, from $101 million in 2002 to
$118 million in 2003. The increase was primarily attributable to an increase of
$7 million from CITGO's investment in pipelines, an increase of $6 million from
CITGO's investment in LYONDELL-CITGO and other earnings from affiliates of $4
million.

      Insurance recoveries. We recorded insurance recoveries of $146 million in
2003 compared to $407 million in 2002. The recoveries related primarily to a
fire which occurred on August 14, 2001 at the Lemont refinery. These recoveries
are, in part, reimbursements for expenses incurred in 2002 and 2001 to mitigate
the effect of the fire on our earnings. We do not expect any additional
insurance recoveries related to the Lemont fire.

      Other income (expense) net. Other income (expense) increased $36 million
from $(20) million in 2002 to $16 million in 2003. The change relates primarily
to miscellaneous income recorded during 2003 for the sale of use tax credits and
a gain on the early retirement of debt. In contrast, during 2002, miscellaneous
expenses were recorded primarily relating to the loss on the sale and retirement
of assets.

      Cost of sales and operating expenses. Cost of sales and operating expenses
increased by $5.2 billion, or 27%, from 2002 to 2003. The increase is due
primarily to a 34% increase in crude oil purchases and a 27% increase in refined
product purchases. The increase in crude oil purchases is due to an increase in
crude oil prices and an increase in volumes purchased, which is due to the
Lemont refinery's increased utilization during 2003. The increase in refined
product purchases is due largely to the increase in refined product prices
during 2003. (See CITGO Cost of Sales and Operating Expenses table above.)

      CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. The refined
product purchases represented 58% of cost of sales for both 2003 and 2002. These
refined product purchases included purchases from LYONDELL-CITGO and HOVENSA.
CITGO estimates that margins on purchased products, on average, are lower than
margins on produced products due to the fact that CITGO can only receive the
marketing portion of the total margin received on the produced refined products.
However, purchased products are not segregated from CITGO produced products and
margins may vary due to market conditions and other factors beyond the Company's
control. As such, it is difficult to measure the effects on profitability of
changes in volumes of purchased products. In the near term, other than normal
refinery turnaround maintenance, CITGO does 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 CITGO which impact the volume of refined products purchased. (See
also "Factors Affecting Forward Looking Statements".)

      Gross margin. The gross margin for 2003 was $825 million, or 3.3% of net
sales, compared to $147 million or 0.8% of net sales, for 2002. The gross margin
increased from 0.6 cents per gallon in 2002 to 3.0 cents per gallon in 2003 as a
result of general market conditions and a high utilization rate of refining
capacity.

      Selling, general and administrative expenses. Selling, general and
administrative expenses increased $11 million, or 4% in 2003. The increase is
primarily related to an increase in benefit costs, incentive compensation, and
expenses related to an early retirement program.

      Interest expense. Interest expense increased by $52 million or 78% in
2003. This was due primarily to the net increase in the outstanding debt balance
and higher overall interest rates resulting from the issuance of the $550
million senior notes and the closing of the $200 million secured term loan in
February 2003.

                                       29

<PAGE>

      Income taxes. CITGO's provision for income taxes in 2003 was $245 million,
representing an effective tax rate of 36%. In 2002, CITGO's provision for income
taxes was $96 million, representing an effective tax rate of 35%.

LIQUIDITY AND CAPITAL RESOURCES

      The following summarizes cash flows during the years ended December 31,
2004 and 2003:

<TABLE>
<CAPTION>
                                             For the Year Ended
                                                 December 31,
                                            ---------------------
                                              2004          2003
                                            ---------     -------
                                               ($ in millions)
<S>                                         <C>           <C>
Net cash provided by/(used in):
   Operating activities                     $     933     $   995
   Investing activities                     $    (382)    $  (418)
   Financing activities                     $    (730)    $  (408)
</TABLE>

Cash Provided by Operating Activities

      Consolidated net cash provided by operating activities totaled
approximately $933 million in 2004. Operating cash flows were derived primarily
from net income of $625 million, depreciation and amortization of $375 million,
distributions in excess of equity in earnings of affiliates of $67 million and
changes in working capital of $(146) million. The change in working capital is
primarily the result of increases in accounts receivable and due from affiliates
and inventory offset, in part, by increases in accounts payable and current
liabilities. The change in distributions in excess of equity in earnings of
affiliates is primarily due to the cash distributions received in 2004 from
LYONDELL-CITGO, of which approximately $15 million related to distributions
which were payable to CITGO at December 31, 2003. Accounts receivable increased
primarily due to the rising price of refined product prices in 2004 versus the
price of products at the end of 2003. The increase in inventories is due to a
build of 2.6 million barrels during 2004 related to operational needs and
anticipated market demands for 2005. The increase in accounts payable was
primarily attributable to the increase in prices of crude oil, feedstocks, and
refined products in 2004 as compared to 2003.

Cash Used in Investing Activities

      Net cash used in investing activities in 2004 totaled $382 million
consisting primarily of capital expenditures of $341 million. These capital
expenditures consisted of:

<TABLE>
<CAPTION>
                                            For the year ended
                                             December 31, 2004
                                            ------------------
                                              ($ in millions)
<S>                                         <C>
Regulatory requirements                          $    113
Maintenance capital projects                           93
Strategic capital expenditures                        135
                                                 --------
   Total capital expenditures                    $    341
                                                 ========
</TABLE>

                                       30

<PAGE>

Cash Used in Financing Activities

      Net cash used in financing activities in 2004 totaled $730 million,
consisting primarily of dividend payments of $400 million to PDV America; the
payment of the $200 million senior secured term loan; and the redemption of $543
million of the 11-3/8% senior notes due 2011. These payments were offset by the
proceeds from our 6% senior notes due in 2011 of $248 million and proceeds of
$127 million from tax-exempt bonds.

      As of December 31, 2004, we had an aggregate of $1.1 billion of
indebtedness outstanding that matures on various dates through the year 2033. As
of December 31, 2004, our contractual commitments to make principal payments on
this indebtedness were $11 million, $201 million and $62 million for 2005, 2006
and 2007, respectively. As of December 31, 2004, we have a $260 million, three
year, unsecured revolving bank loan which matures in December 2005. There was no
outstanding balance under this credit agreement at December 31, 2004. As of
December 31, 2004, our other principal indebtedness consisted of (i) $248
million in 6% senior notes issued in 2004, (ii) $7 million in 11-3/8% senior
notes issued in 2003, (iii) $150 million in 7-7/8% senior notes issued in 1996,
(iv) $165 million in senior notes issued pursuant to a master shelf agreement
with an insurance company, (v) $23 million in private placement senior notes
issued in 1991, (vi) $459 million in obligations related to tax exempt bonds
issued by various governmental units, and (vii) $80 million in obligations
related to taxable bonds issued by various governmental units. (See Consolidated
Financial Statements of CITGO - Note 9 in Item 15a.)

      As of December 31, 2004, capital resources available to us included cash
on hand totaling $23 million generated by operations and other sources, and
available borrowing capacity under our committed bank facilities of $255
million.

      On October 22, 2004, we issued $250 million aggregate principal amount of
our 6% unsecured senior notes due October 15, 2011. On that date, we used the
net proceeds from that note issue, together with cash on hand, to repurchase
approximately $540 million aggregate principal amount of our 11-3/8% senior
notes due 2011 that had been tendered to us in accordance with a tender offer we
made for those notes. We also received the necessary consents of the holders of
those notes to amend the indenture governing those notes to remove substantially
all of the restrictive covenants and specified events of default. We recorded,
as charges to interest expense in the fourth quarter of 2004, a $121.9 million
tender premium, $10.6 million unamortized fees and $2.7 million unamortized
discounts. However, this transaction will reduce annual interest expense by
approximately $50 million and our weighted average cost of fixed rate borrowing
was reduced from 8.8% to 6.7%. In addition, this transaction removes some and
modifies other restrictive covenants provided for in the $550 million 11-3/8%
senior notes.

      Our various debt instruments require maintenance of a specified minimum
net worth and impose restrictions on its ability to:

   -  incur additional debt unless it meets specified interest coverage and debt
      to capitalization ratios;

   -  place liens on its property, subject to specified exceptions;

   -  sell assets, subject to specified exceptions;

   -  make restricted payments, including dividends, repurchases of capital
      stock and specified investments; and

   -  merge, consolidate or transfer assets.

      Upon the occurrence of a change of control of our Company, as defined in
the indenture governing our 6% senior notes due 2011, coupled with a rating
decline on these notes, the holders of those notes have

                                       31

<PAGE>

the right to require us to repurchase them at a price equal to 101% of the
principal amount plus accrued interest. In addition, our bank credit agreements
and the reimbursement agreements governing various of the letters of credit
issued to provide liquidity support for our tax-exempt bonds provide that,
unless lenders holding two-thirds of the commitments there under otherwise
agree, a change in control of our Company, as defined in those agreements, will
constitute a default under those credit agreements.

      Various of our debt agreements, including the agreements governing the
Private Placement Senior Notes and the Master Shelf Agreement Senior Notes and
the reimbursement agreements relating to various letters of credit that provide
liquidity support for our tax-exempt bonds, contain provisions requiring that we
equally and ratably secure those instruments if we issue secured debt other than
as permitted by those instruments.

      CITGO is in compliance with its obligations under its debt financing
arrangements at December 31, 2004.

      Capital expenditure projected amounts for 2005 and 2006 through 2009 are
as follows:

            CITGO ESTIMATED CAPITAL EXPENDITURES - 2005 THROUGH 2009

<TABLE>
<CAPTION>
                                                     2006-
                                      2005           2009
                                  PROJECTED(1)     PROJECTED         TOTAL
                                  ------------     ---------        --------
                                                (IN MILLIONS)
<S>                               <C>              <C>              <C>
Strategic                           $   162        $     648        $    810
Maintenance                              92              393             485
Regulatory / Environmental              261              857           1,118
                                    -------        ---------        --------
   Total                            $   515        $   1,898        $  2,413
                                    =======        =========        ========
</TABLE>

----------
(1)   These estimates may change as future regulatory events unfold. See
      "Factors Affecting Forward Looking Statements."

                                       32

<PAGE>

      Estimated capital expenditures necessary to comply with the Clean Air Act
and other environmental laws and regulations are summarized below. See "Factors
Affecting Forward Looking Statements."

<TABLE>
<CAPTION>
                                     2005       2006      2007      2008      2009       TOTAL
                                    -------   --------   -------   -------   -------    --------
                                                      (IN MILLIONS)
<S>                                 <C>       <C>        <C>       <C>       <C>        <C>
Tier 2 gasoline (1)                 $    59   $     54   $     -   $     -   $     -    $    113
Ultra low sulfur diesel (2)              47        121        45       120       225         558
Other environmental (3)                 155        146        42        77        27         447
                                    -------   --------   -------   -------   -------    --------
   Total regulatory/environmental   $   261   $    321   $    87   $   197   $   252    $  1,118
                                    =======   ========   =======   =======   =======    ========
</TABLE>

----------
(1)   In February 2000, the EPA promulgated the Tier 2 Motor Vehicle Emission
      Standards Final Rule for all passenger vehicles, establishing standards
      for sulfur content in gasoline. These regulations mandate that the average
      sulfur content of gasoline for highway use produced at any refinery not
      exceed 30 parts per million during any calendar year by January 1, 2006,
      with a phase-in beginning January 1, 2004. In order to comply with these
      regulations, CITGO is installing additional hydroprocessing facilities at
      its refineries. (Hydroprocessing facilities remove sulfur from oil by
      means of a chemical reaction which occurs when the oil is mixed with
      hydrogen, heated and processed over a catalyst.)

(2)   Spending on Ultra Low Sulfur Diesel ("ULSD") assumes the EPA will require
      ULSD for on-road diesel in 2006 and ULSD for off-road diesel use in 2010.
      The ULSD program will require CITGO to make additional capital investments
      at its refineries. The estimates shown here are based on the installation
      of traditional hydroprocessing facilities. These regulations are not final
      and spending could be reduced if certain alternative regulatory schemes
      proposed by EPA are adopted. CITGO continues to evaluate new technological
      innovations which may reduce the required investment.

(3)   Other environmental spending assumes approximately $289 million in
      spending to comply with New Source Review standards under the Clean Air
      Act.

      We believe that we will have sufficient resources to carry out planned
capital spending programs, including regulatory and environmental projects in
the near term, and to meet currently anticipated future obligations and other
planned expenditures as they arise. We 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, including the issuance of debt securities. Our ability to obtain
such financing will depend on numerous factors, including market conditions,
compliance with existing debt covenants and the perceived creditworthiness of
the Company at that time. See also "Factors Affecting Forward Looking
Statements."

      CITGO is a member of the PDV Holding consolidated Federal income tax
return. CITGO has a tax allocation agreement with PDV Holding, which is designed
to provide PDV Holding with sufficient cash to pay its consolidated income tax
liabilities. (See Consolidated Financial Statements of CITGO -- Note 1 and Note
4 in Item 15a).

      We have outstanding letters of credit that support taxable and tax-exempt
bonds that were issued previously for our benefit. During 2003, we repurchased
$90 million of taxable bonds and $165 million of tax-exempt bonds due to the
non-renewal of these letters of credit. We have not repurchased any bonds in
2004. We have reissued the bonds that were repurchased during 2003 with
replacement letters of credit in support or, alternatively, we have replaced
these bonds with new bonds that do not require letter of credit support. As of
December 31, 2004, we have $409 million of letters of credit outstanding that
back or support bond issues that we have issued through governmental entities,
which are subject to renewal during the year ending December 31, 2005.

      In August 2002, three of the Company's affiliates entered into agreements
to advance excess cash to CITGO from time to time under demand notes. These
notes provide for maximum amounts of $10 million from PDV Texas, Inc., $30
million from PDV America and $10 million from PDV Holding. At December

                                       33

<PAGE>

31, 2004, the amounts outstanding on these notes were $7 million, $14 million
and $5 million from PDV Texas, PDV America and PDV Holding, respectively. There
were no amounts outstanding on these notes at December 31, 2003.

      As of December 31, 2004, CITGO had an effective shelf registration with
the SEC under which it could have publicly offered up to $400 million principal
amount of debt securities. Due to CITGO's current credit ratings, the shelf
registration statement is not presently available.

      Our unsecured debt ratings, as currently assessed by the three major debt
rating agencies, are as follows:

                    Moody's Investor's Services             Ba2
                    Standard & Poor's Ratings Group         BB
                    Fitch Investors Services, Inc.          BB

      CITGO's debt instruments do not contain any covenants that trigger
increased costs or burdens as a result of a change in its securities ratings.
However, certain of CITGO's guarantee agreements, which support approximately
$33 million of PDV Texas, Inc., an affiliate, letters of credit, require CITGO
to cash collateralize the applicable letters of credit upon a reduction of
CITGO's credit rating below a stated level.

      CITGO believes that it has adequate liquidity from existing sources to
support its operations for the foreseeable future.

                                       34

<PAGE>
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

      The following table summarizes future payments for CITGO's contractual
obligations at December 31, 2004.

                             CONTRACTUAL OBLIGATIONS
                              AT DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                               2005      2006       2007       2008       2009     THEREAFTER
                                            ---------   -------    -------   --------   ---------  ----------
                                                                     ($ in millions)
<S>                                         <C>         <C>        <C>       <C>        <C>        <C>
Long-term debt (1)                          $      11   $   201    $    62   $     45   $      50  $     763
Interest expense (2)                               72        63         51         48          44        472
Capital lease obligations (3)                       8         8          8          8           7         33
Operating leases (4)                              100        61         32         21           6         25
Estimated crude purchase obligations (5)        3,641     3,003      1,960      1,964       1,960      4,074
Estimated product purchase obligations (6)      7,405     3,799      3,799      3,797       3,797          *
Estimated capital project spending
   commitments                                     54         -          -          -           -          -
Other commitments (7)                             387       265        111        105         104        235
                                            ---------   -------    -------   --------   ---------  ---------
Total contractual cash obligations          $  11,678   $ 7,400    $ 6,023   $  5,988   $   5,968  $   5,602 *
                                            =========   =======    =======   ========   =========  =========
</TABLE>

----------
(1)   Includes maturities of principal, but excludes interest payments.

(2)   Includes interest on fixed and variable rate debt. Variable rate debt was
      estimated using the all-in rate at December 31, 2004.

(3)   Includes amounts classified as interest.

(4)   Represents future minimum lease payments for noncancelable operating
      leases.

(5)   Represents an estimate of contractual crude oil purchase commitments which
      assure a portion of CITGO's supply requirements. These supply contracts
      specify minimum volumes to be purchased. Prices were estimated using
      actual prices paid in December 2004.

(6)   Represents an estimate of contractual refined product purchase commitments
      which assure a portion of CITGO's supply requirements. These supply
      contracts specify minimum volumes to be purchased. Prices were estimated
      using actual prices paid in December 2004 or December 2004 market prices
      as appropriate.

(7)   Represents an estimate of contractual commitments to purchase various
      commodities and services including hydrogen, electricity, steam, fuel gas
      and vessel freight service.

  *   CITGO intends to continue purchasing a portion of its refined product
      supply from related parties. Such purchases currently amount to
      approximately $4 billion annually.

(See Consolidated Financial Statements of CITGO--Notes 4, 9 and 13 in Item 15a).

      The following table summarizes CITGO's contingent commitments at December
31, 2004.

                          OTHER COMMERCIAL COMMITMENTS
                              AT DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                 2005    2006    2007    2008      2009  THEREAFTER
                                 ----    ----    ----    ----      ----  ----------
                                                  ($ in millions)
<S>                              <C>     <C>     <C>     <C>       <C>   <C>
Letters of credit (1)            $  6    $  -    $  -    $  -      $  -     $  -
Guarantees                         39       1       -      10         -        -
Surety bonds                       47       7       3       -         -        -
                                 ----    ----    ----    ----      ----     ----
Total commercial commitments     $ 92    $  8    $  3    $ 10      $  -     $  -
                                 ====    ====    ====    ====      ====     ====
</TABLE>

----------
(1)   The Company has outstanding letters of credit totaling approximately $415
      million, which includes $409 million related to the Company's tax-exempt
      and taxable revenue bonds shown in the table of contractual obligations
      above.

(See Consolidated Financial Statements of CITGO--Note 12 in Item 15a).

                                       35

<PAGE>

NEW ACCOUNTING STANDARDS

      In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"),
which clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements." FIN 46 defines variable interest entities
and how an enterprise should assess its interests in a variable interest entity
to decide whether to consolidate that entity. In December 2003, the FASB issued
a revision of FIN 46 (FIN 46R), primarily to clarify the required accounting for
investments in variable interest entities. This standard replaces FIN 46. For
CITGO, which meets the definition of a nonpublic enterprise for purposes of
applying FIN 46R, application is required immediately for variable interest
entities created after December 31, 2003 and for variable interest entities in
which an interest is acquired after that date, and to all entities that are
subject to FIN 46R by January 1, 2005. The interpretation requires certain
minimum disclosures with respect to variable interest entities in which an
enterprise holds significant variable interest but which it does not
consolidate. FIN 46R may be applied prospectively with a cumulative-effect
adjustment as of the date on which it is first applied or by restating
previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year restated. The
applicable provisions of FIN 46R had no impact on financial position or results
of operations for the year ended December 31, 2004 and CITGO expects that the
application of FIN 46R to interests currently held in other entities will not
have a material impact on its financial position or results of operations in the
future.

                                       36

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Introduction. CITGO has exposure to price fluctuations of crude oil and
refined products as well as fluctuations in interest rates. To manage these
exposures, management has defined certain benchmarks consistent with its
preferred risk profile for the environment in which the Company operates and
finances its assets. CITGO does not attempt to manage the price risk related to
all of its inventories of crude oil and refined products. As a result, at
December 31, 2004, CITGO was exposed to the risk of broad market price declines
with respect to a substantial portion of its crude oil and refined product
inventories. As of December 31, 2004 CITGO's total crude and refined products
inventory was 49 million barrels. Aggregate commodity derivative positions
entered into for price risk management purposes at that date totaled 1.4 million
barrels. The following disclosures do not attempt to quantify the price risk
associated with such commodity inventories.

      Commodity Instruments. CITGO balances its crude oil and petroleum product
supply/demand and manages a portion of its price risk by entering into petroleum
commodity derivatives. Generally, CITGO's risk management strategies qualified
as hedges through December 31, 2000. Effective January 1, 2001, the Company's
policy is to elect hedge accounting only under limited circumstances involving
derivatives with initial terms of 90 days or greater and notional amounts of $25
million or greater. At December 31, 2004, none of the Company's commodity
derivatives were accounted for as hedges.

                        NON TRADING COMMODITY DERIVATIVES
                       OPEN POSITIONS AT DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                                    NUMBER OF     CONTRACT     MARKET
                                                                    CONTRACTS      VALUE      VALUE (2)
                                                     MATURITY      ------------   -------     ---------
     COMMODITY                  DERIVATIVE             DATE        Long/(Short)     Asset/(Liability)
--------------------    --------------------------   --------      ------------   ---------------------
                                                                                    ($ in millions)
<S>                     <C>                          <C>           <C>            <C>         <C>
No Lead Gasoline (1)    Futures Purchased              2005             600       $  33.5     $   31.1
                        Forward Purchase Contracts     2005           2,600       $  90.9     $   89.2
                        Forward Sale Contracts         2005          (1,864)      $ (67.3)    $  (64.6)

Distillates (1)         Futures Purchased              2005           1,885       $  92.2     $   96.0
                        Futures Purchased              2006              30       $   1.4     $    1.5
                        Futures Sold                   2005            (700)      $ (35.4)    $  (33.7)
                        Forward Purchase Contracts     2005           1,367       $  57.9     $   54.0
                        Forward Sale Contracts         2005          (2,457)      $(122.3)    $ (120.4)
                        Forward Sale Contracts         2006             (17)      $  (0.9)    $   (0.8)

Crude Oil (1)           Forward Purchase Contracts     2005             446       $  17.9     $   17.4
                        Forward Sale Contracts         2005            (446)      $ (18.7)    $  (18.5)
</TABLE>

----------
(1)   1,000 barrels per contract

(2)   Based on actively quoted prices.

                                       37

<PAGE>

                        NON TRADING COMMODITY DERIVATIVES
                       OPEN POSITIONS AT DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                                                     NUMBER OF      CONTRACT      MARKET
                                                                     CONTRACTS        VALUE      VALUE (2)
                                                         MATURITY   ------------    --------     ---------
    COMMODITY                    DERIVATIVE                DATE     Long/(Short)       Asset/(Liability)
--------------------    -----------------------------    --------   ------------    ----------------------
                                                                                       ($ in millions)
<S>                     <C>                              <C>        <C>             <C>          <C>
No Lead Gasoline (1)    Futures Purchased                  2004          315        $   12.2     $   12.4
                        Futures Sold                       2004         (396)       $  (15.6)    $  (15.6)
                        Listed Call Options Purchased      2004          750        $      -     $    1.8
                        Listed Call Options Sold           2004         (750)       $      -     $   (1.2)
                        Forward Purchase Contracts         2004        2,117        $   80.2     $   83.0
                        Forward Sale Contracts             2004       (1,842)       $  (71.2)    $  (73.3)

Distillates (1)         Futures Purchased                  2004        2,211        $   73.6     $   82.7
                        Futures Purchased                  2005            4        $    0.1     $    0.1
                        Futures Sold                       2004         (400)       $  (15.3)    $  (15.4)
                        OTC Call Options Purchased         2004            6        $      -     $      -
                        OTC Put Options Purchased          2004            6        $      -     $      -
                        OTC Call Options Sold              2004           (6)       $      -     $      -
                        OTC Put Options Sold               2004           (6)       $      -     $      -
                        Forward Purchase Contracts         2004        1,643        $   60.5     $   60.7
                        Forward Sale Contracts             2004       (1,273)       $  (46.2)    $  (46.8)

Crude Oil (1)           Futures Purchased                  2004          100        $    3.3     $    3.3
                        Futures Sold                       2004         (100)       $   (3.3)    $   (3.3)
                        Forward Purchase Contracts         2004        1,287        $   39.0     $   39.4
                        Forward Sale Contracts             2004         (822)       $  (27.0)    $  (26.7)
</TABLE>

----------
(1)   1,000 barrels per contract

(2)   Based on actively quoted prices.

                                       38
<PAGE>

      Debt Related Instruments. CITGO has fixed and floating U.S. currency
denominated debt. CITGO uses interest rate swaps to manage its debt portfolio
and variable interest rate exposure with the objective of minimizing CITGO's
long-term costs. At December 31, 2004 and 2003, CITGO's primary exposures were
to LIBOR and floating rates on tax exempt bonds.

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

                     NON TRADING INTEREST RATE DERIVATIVES
                  OPEN POSITIONS AT DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                       NOTIONAL
                                          FIXED        PRINCIPAL
VARIABLE RATE INDEX   EXPIRATION DATE   RATE PAID       AMOUNT
-------------------   ---------------   ---------   ---------------
                                                    ($ in millions)
<S>                   <C>               <C>         <C>
J.J. Kenny            February 2005       5.30%     $            12
J.J. Kenny            February 2005       5.27%                  15
J.J. Kenny            February 2005       5.49%                  15
                                                    ---------------
                                                    $            42
                                                    ===============
</TABLE>

      Changes in the fair value of these agreements are recorded in other income
(expense). The fair value of the interest rate swap agreements in place at
December 31, 2004, based on the estimated amount that we would receive or pay to
terminate the agreements as of that date and taking into account current
interest rates, was a loss of approximately $400 thousand, the offset of which
is recorded in the balance sheet caption other current liabilities.

                                       39
<PAGE>

      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.

                                DEBT OBLIGATIONS
                              AT DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                                          EXPECTED
 EXPECTED           FIXED         AVERAGE FIXED        VARIABLE       AVERAGE VARIABLE
MATURITIES        RATE DEBT       INTEREST RATE       RATE DEBT         INTEREST RATE
----------     ---------------    -------------    ---------------    ----------------
               ($ in millions)                     ($ in millions)
<S>            <C>                <C>              <C>                <C>
  2005         $            11         9.30%       $             -             -
  2006                     201         8.10%                     -             -
  2007                      50         8.94%                    12          5.53%
  2008                      25         7.17%                    20          5.73%
  2009                      50         7.22%                     -             -
Thereafter                 403         6.77%                   360          6.95%
               ---------------         ----        ---------------          ----
  Total        $           740         7.36%       $           392          6.85%
               ===============         ====        ===============          ====
Fair Value     $           769                     $           392
               ===============                     ===============
</TABLE>

                                DEBT OBLIGATIONS
                              AT DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                                                          EXPECTED
 EXPECTED           FIXED         AVERAGE FIXED        VARIABLE       AVERAGE VARIABLE
MATURITIES        RATE DEBT       INTEREST RATE       RATE DEBT        INTEREST RATE
----------     ---------------    -------------    ---------------    ----------------
               ($ in millions)                     ($ in millions)
<S>            <C>                <C>              <C>                <C>
  2004         $            31        8.02%        $             -             -
  2005                      11        9.30%                      -             -
  2006                     201        8.10%                    200          7.17%
  2007                      50        8.94%                      -             -
  2008                      25        7.17%                     20          7.67%
Thereafter                 745       10.40%                    190          8.04%
               ---------------       -----         ---------------          ----
  Total        $         1,063        9.74%        $           410          7.60%
               ===============       =====         ===============          ====
Fair Value     $         1,195                     $           410
               ===============                     ===============
</TABLE>

                                       40
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The Consolidated Financial Statements, the Notes to Consolidated Financial
Statements and the Report of Independent Registered Public Accounting Firm are
included in Item 15a of this report.

QUARTERLY RESULTS OF OPERATIONS

      The following is a summary of the quarterly results of operations for the
years ended December 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                            1ST QTR.         2ND QTR.          3RD QTR.           4TH QTR.
                                                                   ($ IN THOUSANDS)
<S>                                      <C>              <C>               <C>               <C>
2004

Sales                                    $   6,655,229    $    8,065,182    $    8,879,290    $     8,427,947
                                         =============    ==============    ==============    ===============
Cost of sales and operating
  expenses, as previously reported       $   6,540,842    $    7,734,801    $    8,532,015    $     7,974,766
Effect of Medicare subsidy (1)                  (7,525)           (7,525)                -                  -
                                         -------------    --------------    --------------    ---------------
Cost of sales and operating
  expenses, as adjusted                  $   6,533,317    $    7,727,276    $    8,532,015    $     7,974,766
                                         =============    ==============    ==============    ===============

Gross margin, as previously reported     $     114,387    $      330,381    $      347,275    $       453,181
Effect of Medicare subsidy (1)                   7,525             7,525                 -                  -
                                         -------------    --------------    --------------    ---------------
Gross margin, as adjusted                $     121,912    $      337,906    $      347,275    $       453,181
                                         =============    ==============    ==============    ===============

Net income, as previously reported       $      34,689    $      172,096    $      205,010    $       194,693
Effect of Medicare subsidy (1)                   7,482            11,033                 -                  -
                                         -------------    --------------    --------------    ---------------
Net income, as adjusted                  $      42,171    $      183,129    $      205,010    $       194,693
                                         =============    ==============    ==============    ===============
</TABLE>

(1) In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 ("Medicare Reform") was signed into law. Medicare
Reform introduces a prescription drug benefit under Medicare (Medicare Part D)
as well as a non-taxable federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least actuarially equivalent to
Medicare Part D. In May 2004, the FASB Staff issued FASB Staff Position No. FAS
106-2, "Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003". The Staff
Position permits a sponsor to report the effects of Medicare Reform
prospectively in the third quarter of 2004 or retrospectively to the measurement
date following enactment of the legislation. CITGO has chosen to use the
retrospective method to reflect Medicare Reform as of January 1, 2004. The first
and second quarter financial information included herein has been adjusted to
retrospectively reflect the effects of Medicare Reform in accordance with the
Staff Position. The effect of this legislation at that date was to reduce the
benefit obligation by approximately $40 million. The service cost and interest
cost components of that reduction total approximately $3 million. Under CITGO's
accounting policy for recognizing actuarial gains, net periodic benefit cost for
the year ended December 31, 2004 has been reduced $40 million related to this
actuarial gain.

<TABLE>
<CAPTION>
                                           1ST QTR.          2ND QTR.          3RD QTR.           4TH QTR.
                                                                  ($ IN THOUSANDS)
<S>                                     <C>               <C>               <C>               <C>
2003

Sales                                   $    6,375,681    $    6,021,068    $    6,502,331    $     6,317,280
                                        ==============    ==============    ==============    ===============

Cost of sales and operating expenses    $    6,205,790    $    5,811,233    $    6,267,004    $     6,106,916
                                        ==============    ==============    ==============    ===============

Gross margin                            $      169,891    $      209,835    $      235,327    $       210,364
                                        ==============    ==============    ==============    ===============

Net income                              $      139,811    $      108,709    $      102,869    $        87,385
                                        ==============    ==============    ==============    ===============
</TABLE>

                                       41
<PAGE>

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

      None.

ITEM 9A. CONTROLS AND PROCEDURES

      During the fourth quarter of 2004, the Company's management, including the
principal executive officer and principal financial officer, evaluated the
Company's disclosure controls and procedures related to the recording,
processing, summarization and reporting of information in the Company's periodic
reports that it files with the Securities and Exchange Commission ("SEC"). These
disclosure controls and procedures have been designed to ensure that (a)
material information relating to the Company, including its consolidated
subsidiaries, is accumulated and made known to the Company's management,
including these officers, by other employees of the Company and its subsidiaries
as appropriate to allow timely decisions regarding required disclosure, and (b)
this information is recorded, processed, summarized, evaluated and reported, as
applicable, within the time periods specified in the SEC's rules and forms. Due
to the inherent limitations of control systems, not all misstatements may be
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. Also, the Company does not control or manage certain of
its unconsolidated entities and thus its access and ability to apply its
disclosure controls and procedures to entities that it does not control or
manage are more limited than is the case for the subsidiaries it controls and
manages.

      Accordingly, as of December 31, 2004, these officers (principal executive
officer and principal financial officer) concluded that the Company's disclosure
controls and procedures were effective to accomplish their objectives.

      There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.

ITEM 9B. OTHER INFORMATION

      None.

                                       42

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The registrant meets the conditions set forth in General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting the information
otherwise required by Item 10 of Form 10-K relating to directors and executive
officers as permitted by General Instruction (I)(2)(c).

ITEM 11. EXECUTIVE COMPENSATION

      The registrant meets the conditions set forth in General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting the information
otherwise required by Item 11 of Form 10-K relating to executive compensation as
permitted by General Instruction (I)(2)(c).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The registrant meets the conditions set forth in General Instructions
(I)(1)(a) and (b) of Form 10-K and is therefore omitting the information
otherwise required by Item 12 of Form 10-K relating to security ownership of
certain beneficial owners and management as permitted by General Instruction
(I)(2)(c).

                                       43

<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      CITGO has entered into several transactions with PDVSA or affiliates of
PDVSA, including crude oil and feedstock supply agreements, agreements for the
purchase of refined products and transportation agreements. Under these
agreements, CITGO purchased approximately $5.8 billion of crude oil, feedstocks
and refined products at market related prices from PDVSA in 2004. At December
31, 2004, $429 million was included in CITGO's current payable to affiliates as
a result of its transactions with PDVSA.

      Most of the crude oil and feedstocks purchased by CITGO from PDVSA are
delivered on tankers owned by PDV Marina, S.A., a wholly-owned subsidiary of
PDVSA. In 2004, 74% of the PDVSA contract crude oil delivered to the Lake
Charles and Corpus Christi refineries was delivered on tankers operated by this
PDVSA subsidiary.

      LYONDELL-CITGO owns and operates a 265 MBPD refinery in Houston, Texas.
LYONDELL-CITGO was formed in 1993 by subsidiaries of CITGO and Lyondell ("the
Owners"). 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. Under
this agreement, LYONDELL-CITGO purchased approximately $2.6 billion of crude oil
and feedstocks at market related prices from PDVSA in 2004. CITGO purchases
substantially all of the gasoline, diesel and jet fuel produced at the Houston
refinery under a long-term contract. (See Consolidated Financial Statements of
CITGO -- Notes 3 and 4 in Item 15a). Various disputes exist between
LYONDELL-CITGO and the Owners and their affiliates concerning the interpretation
of these and other agreements between the parties relating to the operation of
the refinery.

      CITGO's participation interest in LYONDELL-CITGO was approximately 41% at
December 31, 2004, in accordance with agreements between the Owners concerning
such interest. CITGO held a note receivable from LYONDELL-CITGO of $35 million
at December 31, 2004. The note bears interest at market rates which were
approximately 2.7% at December 31, 2004. Principal and interest are due January
1, 2008.

      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. Cash distributions are
allocated to the owners based on participation interest.

      In October 1998, PDVSA V.I., Inc., 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 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 CITGO -- Notes 2 and 4 in Item 15a).
Pursuant to the above arrangement, CITGO acquired approximately 128 MBPD of
refined products, approximately one-half of which was gasoline, and 34 MBPD of
intermediates from the refinery during 2004.

      The refined product purchase agreements with LYONDELL-CITGO and HOVENSA
incorporate various formula prices based on published market prices and other
factors. Such purchases totaled $6.8 billion for 2004. At December 31, 2004,
$183 million was included in payables to affiliates as a result of these
transactions.

      CITGO had refined product, feedstock, crude oil and other product sales of
$456 million to affiliates, including LYONDELL-CITGO and Mount Vernon Phenol
Plant Partnership, in 2004. At December 31, 2004, $107 million was included in
due from affiliates as a result of these and related transactions.

                                       44

<PAGE>

      CITGO has guaranteed approximately $50 million of debt of certain
affiliates, including $10 million related to NISCO and $33 million related to
PDV Texas, Inc. (See Consolidated Financial Statements of CITGO -- Note 12 in
Item 15a).

      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 CITGO -- Note 4 in Item 15a).

      In August 2002, three affiliates entered into agreements to advance excess
cash to CITGO from time to time under demand notes for amounts of up to a
maximum of $10 million with PDV Texas, Inc., $30 million with PDV America and
$10 million with PDV Holding. The notes bear interest at rates equivalent to
30-day LIBOR plus 0.875% payable quarterly. At December 31, 2004, the amounts
outstanding on these notes were $7 million, $14 million and $5 million from PDV
Texas, PDV America and PDV Holding, respectively.

      The Company and PDV Holding are parties to a tax allocation agreement that
is designed to provide PDV Holding with sufficient cash to pay its consolidated
income tax liabilities. PDV Holding appointed CITGO as its agent to handle the
payment of such liabilities on its behalf. As such, CITGO calculates the taxes
due, allocates the payments among the members according to the agreement and
bills each member accordingly. Each member records its amounts due or payable to
CITGO in a related party payable account. At December 31, 2004, CITGO had net
related party receivables related to federal income taxes of $28 million.

ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

      The following table presents fees for professional audit services rendered
for the audit of the Company's financial statements for the years ended December
31, 2004 and 2003, respectively, and fees billed for other services rendered
during the same periods.

<TABLE>
<CAPTION>
                                    2004          2003
                                  ---------      -------
                                       (000s omitted)
<S>                               <C>            <C>
Audit fees                        $   2,718      $ 1,899
Audit related fees (1)                  244          450
Tax fees                                132          127
All other fees                           69            -
                                  ---------      -------
    Total                         $   3,163      $ 2,476
                                  =========      =======
</TABLE>

----------
(1)   Audit related fees in 2004 include approximately $139 thousand in fees
      related to CITGO's registration of $250 million 6% unsecured senior notes.
      Audit related fees in 2003 include approximately $360 thousand in fees
      related to CITGO's registration of $550 million 11-3/8% unsecured senior
      notes.

      CITGO has an audit committee of its board of directors. That committee, in
accordance with their pre-approval policy, pre-approves each engagement of the
independent accountants for any audit or non-audit services before the
accountants are engaged to render those services. A committee member has been
designated to represent the entire committee for purposes of approving any
services not previously approved by the committee. Any services approved by the
designated committee member are reported to the full committee at the next
scheduled audit committee meeting. No de minimis exceptions to this approval
process are allowed under the audit committee's pre-approval policy, and thus,
none of the services described in the preceding table were approved pursuant to
Rule 2-01(c)(7)(i)(C) of Regulation S-X.

                                       45

<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. CERTAIN DOCUMENTS FILED AS PART OF THIS REPORT

      (1) Financial Statements:

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<S>                                                                                            <C>
CITGO Petroleum Corporation

 Report of Independent Registered Public Accounting Firm - KPMG LLP                            F-1
 Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP               F-2
 Consolidated Balance Sheets at December 31, 2004 and 2003                                     F-3
 Consolidated Statements of Income and Comprehensive Income
    for the years ended December 31, 2004, 2003 and 2002                                       F-4
 Consolidated Statements of Shareholder's Equity for the years
    ended December 31, 2004, 2003 and 2002                                                     F-5
 Consolidated Statements of Cash Flows for the years ended
    December 31, 2004, 2003 and 2002                                                           F-6
 Notes to Consolidated Financial Statements                                                    F-8

LYONDELL-CITGO Refining LP

 Report of Independent Registered Public Accounting Firm                                       F-33
 Statements of Income for the years ended December 31, 2004, 2003 and 2002                     F-34
 Balance Sheets at December 31, 2004 and 2003                                                  F-35
 Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002                 F-36
 Statements of Partners' Capital for the years ended December 31, 2004, 2003 and 2002          F-37
 Notes to Financial Statements                                                                 F-38
</TABLE>

      (2) Exhibits:

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

                                       46

<PAGE>

b. EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number                                     Description
------                                     -----------
<S>         <C>
3.1         Restated Certificate of Incorporation, as amended (incorporated by
            reference to the Registrant's Registration Statement on Form 10, File No.
            333-3226, Exhibit 3.1 filed with the Commission on April 4, 1996).

3.2         By-laws of CITGO Petroleum Corporation as amended on March 13, 2001
            (incorporated by reference to Registrant's 2000 Form 10-K, File No.
            1-14380, Exhibit 3.1(i) filed with the Commission on March 21, 2001).

4.1         Master Shelf Agreement (1994) by and between Prudential Insurance Company
            of America and CITGO Petroleum Corporation ($100,000,000), dated March 4,
            1994 (incorporated by reference to the Registrant's Registration Statement
            on Form 10, File No. 333-3226, Exhibit 10.16 filed with the Commission on
            April 4, 1996).

4.2         Letter Agreement by and between the Company and Prudential Insurance
            Company of America, dated March 4, 1994 (incorporated by reference to the
            Registrant's Registration Statement on Form 10, File No. 333-3226, Exhibit
            10.17(i) filed with the Commission on April 4, 1996).

4.3         Letter Amendment No. 1 to Master Shelf Agreement with Prudential Insurance
            Company of America, dated November 14, 1994 (incorporated by reference to
            the Registrant's Registration Statement on Form 10, File No. 333-3226,
            Exhibit 10.17(ii) filed with the Commission on April 4, 1996).

4.4         CITGO Senior Debt Securities (1991) Agreement (incorporated by reference
            to PDV America, Inc.'s Registration Statement on Form F-1, File No.
            33-63742, Exhibit 10.18 filed with the Commission on June 2, 1993).

4.5         Indenture, dated as of May 1, 1996, between CITGO Petroleum Corporation
            and the First National Bank of Chicago, relating to the 7-7/8% Senior
            Notes due 2006 of CITGO Petroleum Corporation, including the form of
            Senior Note (incorporated by reference to the Registrant's Registration
            Statement on Form 10, File No. 333-3226, Exhibit 4.1 filed with the
            Commission on April 4, 1996).

4.6         Indenture, dated as of February 27, 2003, between CITGO Petroleum
            Corporation, as Issuer, and The Bank of New York, as Trustee, relating to
            the $550,000,000 11-3/8% Senior Notes due 2011 of CITGO Petroleum
            Corporation (incorporated by reference to the Registrant's 2002 Form 10-K,
            File No. 1-14380, Exhibit 4.2 filed with the Commission on March 24,
            2003).

4.7         Supplemental Indenture dated as of October 20, 2004 between CITGO
            Petroleum Corporation, as Issuer, and The Bank of New York, as Trusted,
            relating to the $550,000,000 11-3/8% Senior Notes due 2011 of CITGO
            Petroleum Corporation (incorporated by reference to the Registrant's Form
            8-K dated October 22, 2004, File No. 1-14380, Exhibit 4.1 filed with the
            Commission on October 28, 2004).

4.8         Indenture, dated as of October 22, 2004, between CITGO Petroleum
            Corporation, as Issuer, and J.P. Morgan Trust Company, National
            Association, as Trustee, relating to the $250,000,000 6% Senior Notes due
            2011 of CITGO Petroleum Corporation (incorporated by reference to the
            Registrant's Registration Statement on Form S-4, File No. 333-122100,
            Exhibit 4.1 filed with the Commission on January 18, 2005).

10.1        Crude Supply Agreement between CITGO Petroleum Corporation and Petroleos
            de Venezuela, S.A., dated as of September 30, 1986 (incorporated by
            reference to PDV America, Inc.'s Registration Statement on Form F-1, File
            No. 33-63742, Exhibit 10.1 filed with the Commission on June 2, 1993).
</TABLE>

                                       47

<PAGE>

<TABLE>
<S>         <C>
10.2        Supplemental Crude Supply Agreement dated as of September 30, 1986 between
            CITGO Petroleum Corporation and Petroleos de Venezuela, S.A (incorporated
            by reference to PDV America, Inc.'s Registration Statement on Form F-1,
            File No. 33-63742, Exhibit 10.2 filed with the Commission on June 2,
            1993).

10.3        Crude Oil and Feedstock Supply Agreement dated as of March 31, 1987
            between Champlin Refining Company and Petroleos de Venezuela, S.A
            (incorporated by reference to PDV America, Inc.'s Registration Statement
            on Form F-1, File No. 33-63742, Exhibit 10.3 filed with the Commission on
            June 2, 1993).

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. (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.4 filed with the
            Commission on June 2, 1993).

10.5        Contract for the Purchase/Sale of Boscan Crude Oil dated as of June 2,
            1993 between Tradecal, S.A. and CITGO Asphalt Refining Company
            (incorporated by reference to PDV America, Inc.'s Registration Statement
            on Form F-1, File No. 33-63742, Exhibit 10.1 filed with the Commission on
            June 2, 1993).

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 (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.6 filed with the
            Commission on June 2, 1993).

10.7        Sublease Agreement dated as of March 31, 1987 between Champlin Petroleum
            Company, Sublessor, and Champlin Refining Company, Sublessee (incorporated
            by reference to PDV America, Inc.'s Registration Statement on Form F-1,
            File No. 33-63742, Exhibit 10.7 filed with the Commission on June 2,
            1993).

10.8        Amended and Restated Limited Liability Company Regulations of
            LYONDELL-CITGO Refining Company, Ltd., dated July 1, 1993 (incorporated by
            reference to PDV America, Inc.'s Registration Statement on Form F-1, File
            No. 33-63742, Exhibit 10.9 filed with the Commission on June 2, 1993).

10.9        Contribution Agreement among Lyondell Petrochemical Company and
            LYONDELL-CITGO Refining Company, Ltd. and Petroleos de Venezuela, S.A
            (incorporated by reference to PDV America, Inc.'s Registration Statement
            on Form F-1, File No. 33-63742, Exhibit 10.10 filed with the Commission on
            June 2, 1993).

10.10       Crude Oil Supply Agreement between LYONDELL-CITGO Refining Company, Ltd.
            and Lagoven, S.A. dated as of May 5, 1993 (incorporated by reference to
            PDV America, Inc.'s Registration Statement on Form F-1, File No. 33-63742,
            Exhibit 10.11 filed with the Commission on June 2, 1993).

10.11       Supplemental Supply Agreement dated as of May 5, 1993 between
            LYONDELL-CITGO Refining Company, Ltd. and Petroleos de Venezuela, S.A
            (incorporated by reference to PDV America, Inc.'s Registration Statement
            on Form F-1, File No. 33-63742, Exhibit 10.12 filed with the Commission on
            June 2, 1993).

10.12       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 (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.13 filed with the
            Commission on June 2, 1993).

10.13       Second Amendment to the Tax Allocation Agreement among PDV America, Inc.,
            VPHI Midwest, Inc., CITGO Petroleum Corporation and PDV USA, Inc., dated
            as of January 1, 1997 (incorporated
</TABLE>

                                       48

<PAGE>

<TABLE>
<S>         <C>
            by reference to Registrant's 2001 Form 10-K, File No. 1-14380,
            Exhibit 10.13(i) filed with the Commission on March 28, 2002).

10.14       Limited Partnership Agreement of LYONDELL-CITGO Refining LP, dated
            December 31, 1998 (incorporated by reference to the Registrant's 1998 Form
            10-K, File No. 1-14380, Exhibit 10.24 filed with the Commission on March
            17, 1999).

10.15       $260,000,000 Three-Year Credit Agreement dated as of December 11, 2002
            among CITGO Petroleum Corporation, Bank of America, N.A., as
            Administrative Agent, JP Morgan Chase Bank, as Syndication Agent, Societe
            Generale, as Documentation Agent and the other lenders party thereto
            (incorporated by reference to the Registrant's 2002 Form 10-K, File No.
            1-14380, Exhibit 10.22 filed with the Commission on March 24, 2003).

10.16       First Amendment to Three-Year Credit Agreement entered into January 29,
            2003, but effective as of December 11, 2002, among CITGO Petroleum
            Corporation, Bank of America, N.A., as Administrative Agent and the other
            lenders party thereto (incorporated by reference to the Registrant's 2002
            Form 10-K, File No. 1-14380, Exhibit 10.23 filed with the Commission on
            March 24, 2003).

10.17       Purchase and Sale Agreement dated as of February 28, 2003 between CITGO
            Petroleum Corporation and CITGO Funding Company, L.L.C. (incorporated by
            reference to the Registrant's 2003 Form 10-K, File No. 1-14380, Exhibit
            10.23 filed with the Commission on March 30, 2004).

10.18       Amendment No. 1 dated as of November 26, 2003 to Purchase and Sale
            Agreement dated as of February 28, 2003 (incorporated by reference to the
            Registrant's 2003 Form 10-K, File No. 1-14380, Exhibit 10.24 filed with
            the Commission on March 30, 2004).

10.19       Receivables Purchase Agreement dated as of February 28, 2003 among CITGO
            Funding Company, L.L.C., CITGO Petroleum Corporation, Asset One
            Securitization, LLC and Societe Generale (incorporated by reference to the
            Registrant's 2003 Form 10-K, File No. 1-14380, Exhibit 10.25 filed with
            the Commission on March 30, 2004).

10.20       Amendment No. 1 dated as of November 26, 2003 to Receivables Purchase
            Agreement dated as of February 28, 2003 (incorporated by reference to the
            Registrant's 2003 Form 10-K, File No. 1-14380, Exhibit 10.26 filed with
            the Commission on March 30, 2004).

10.21       Amendment No. 2 dated as of November 24, 2004 to Receivables Purchase
            Agreement dated as of February 28, 2003.

12.1*       Computation of Ratio of Earnings to Fixed Charges.

23.1*       Consent of Independent Registered Public Accounting Firm of CITGO
            Petroleum Corporation.

23.2*       Consent of Independent Registered Public Accounting Firm of CITGO
            Petroleum Corporation.

23.3*       Consent of Independent Registered Public Accounting Firm of CITGO
            Petroleum Corporation.

23.4*       Consent of Independent Registered Public Accounting Firm of CITGO
            Petroleum Corporation.

23.5*       Consent of Independent Registered Public Accounting Firm of LYONDELL-CITGO
            Refining LP.

23.6*       Consent of Independent Registered Public Accounting Firm of LYONDELL-CITGO
            Refining LP.

31.1*       Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities
            Exchange Act of 1934 as to the Annual Report on Form 10-K for the fiscal
            year ended December 31, 2004 filed by Felix Rodriguez, President and Chief
            Executive Officer.
</TABLE>

                                       49

<PAGE>

<TABLE>
<S>         <C>
31.2*       Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities
            Exchange Act of 1934 as to the Annual Report on Form 10-K for the fiscal
            year ended December 31, 2004 filed by Larry E. Krieg, Chief Financial
            Officer.

32.1*       Certification Pursuant to Section 1350 of Chapter 63 of Title 18 United
            States Code as to the Annual Report on Form 10-K for the fiscal year ended
            December 31, 2004 filed by Felix Rodriguez, President and Chief Executive
            Officer.

32.2*       Certification Pursuant to Section 1350 of Chapter 63 of Title 18 United
            States Code as to the Annual Report on Form 10-K for the fiscal year ended
            December 31, 2004 filed by Larry E. Krieg, Chief Financial Officer.
</TABLE>

----------
* Filed Herewith

                                       50
<PAGE>

                                   SIGNATURES

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

                                           CITGO PETROLEUM CORPORATION

                                           /s/ PAUL LARGESS
                                           -------------------------------------
                                           Paul Largess
                                           Controller (Chief Accounting Officer)

Date: March 30, 2005

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/ ALEJANDRO GRANADO        Chairman of the Board         March 30, 2005
   ------------------------     and Director
       Alejandro Granado

By /s/ JUAN CARLOS BOUE         Director                      March 30, 2005
   -----------------------
       Juan Carlos Boue

By /s/ EUDOMARIO CARRUYO        Director                      March 30, 2005
   ------------------------
      Eudomario Carruyo

By /s/ ASDRUBAL CHAVEZ          Director                      March 30, 2005
   ------------------------
       Asdrubal Chavez

By /s/ BERNARD MOMMER           Director                      March 30, 2005
   ------------------------
       Bernard Mommer

By /s/ FELIX RODRIGUEZ          President, Chief Executive    March 30, 2005
   ------------------------     Officer and Director
       Felix Rodriguez

By /s/ LARRY E. KRIEG           Vice President Finance and    March 30, 2005
   ------------------------     Chief Financial Officer
       Larry E. Krieg

                                       51
<PAGE>

CITGO PETROLEUM
CORPORATION

Consolidated Financial Statements as of December 31, 2004 and 2003, and for Each
of the Three Years in the Period Ended December 31, 2004, and Reports of
Independent Registered Public Accounting Firms

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
 CITGO Petroleum Corporation:

We have audited the accompanying consolidated balance sheets of CITGO Petroleum
Corporation and subsidiaries ("the Company") as of December 31, 2004 and 2003,
and the related consolidated statements of income and comprehensive income,
shareholder's equity, and cash flows for the years then ended. 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 did not audit the financial statements of LYONDELL-CITGO
Refining, LP ("LCR"), a 41.25 percent owned investee company. The Company's
investment in LCR at December 31, 2004 and 2003 was $410 million and $455
million, respectively, and its equity in earnings of LCR was $197 million and
$84 million for the years then ended, respectively. The financial statements of
LCR were audited by other auditors whose report has been furnished to us, and
our opinion, insofar as it relates to the amounts included for LCR, is based
solely on the report of the other auditors.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 and the report of
the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of CITGO Petroleum Corporation and subsidiaries as of
December 31, 2004 and 2003, and the results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

KPMG LLP

Tulsa, Oklahoma
March 3, 2005, except as to Note 17,
which is as of March 30, 2005

                                       F-1
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
CITGO Petroleum Corporation:

We have audited the accompanying consolidated statements of income and
comprehensive income, shareholder's equity and cash flows of CITGO Petroleum
Corporation and subsidiaries for the year ended December 31, 2002. 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 standards of the Public Company
Accounting Oversight Board (United States). 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 results of operations, changes in shareholder's equity,
and cash flows of CITGO Petroleum Corporation and subsidiaries for the year
ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.

DELOITTE & TOUCHE LLP

Tulsa, Oklahoma
February 14, 2003

                                       F-2
<PAGE>

CITGO PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,
                                                                                  -----------------------------------
                                                                                       2004                 2003
                                                                                  --------------       --------------
<S>                                                                               <C>                  <C>
ASSETS

CURRENT ASSETS:
 Cash and cash equivalents                                                        $       23,033       $      202,008
 Accounts receivable, net                                                              1,292,751            1,060,333
 Due from affiliates                                                                     106,514               71,336
 Inventories                                                                           1,165,660            1,017,613
 Prepaid expenses and other                                                               77,696               28,003
                                                                                  --------------       --------------
   Total current assets                                                                2,665,654            2,379,293

PROPERTY, PLANT AND EQUIPMENT - Net                                                    4,038,505            3,907,203
RESTRICTED CASH                                                                            2,315                6,886
INVESTMENTS IN AFFILIATES                                                                580,647              647,649
OTHER ASSETS                                                                             356,551              332,462
                                                                                  --------------       --------------
                                                                                  $    7,643,672       $    7,273,493
                                                                                  ==============       ==============
LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
 Accounts payable                                                                 $      888,030       $      766,331
 Payables to affiliates                                                                  674,997              486,058
 Taxes other than income                                                                 290,456              173,932
 Other                                                                                   251,451              255,953
 Current portion of long-term debt                                                        11,364               31,364
 Current portion of capital lease obligation                                               4,404                2,336
                                                                                  --------------       --------------
   Total current liabilities                                                           2,120,702            1,715,974

LONG-TERM DEBT                                                                         1,120,527            1,442,100
CAPITAL LEASE OBLIGATION                                                                  43,755               25,969
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                              359,707              319,911
OTHER NONCURRENT LIABILITIES                                                             337,250              308,248
DEFERRED INCOME TAXES                                                                    939,299              959,807
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDER'S EQUITY:
 Common stock - $1.00 par value, 1,000 shares authorized, issued and outstanding               1                    1
 Additional capital                                                                    1,659,698            1,659,698
 Retained earnings                                                                     1,088,096              863,093
 Accumulated other comprehensive loss                                                    (25,363)             (21,308)
                                                                                  --------------       --------------
   Total shareholder's equity                                                          2,722,432            2,501,484
                                                                                  --------------       --------------
                                                                                  $    7,643,672       $    7,273,493
                                                                                  ==============       ==============
</TABLE>

See notes to consolidated financial statements.

                                      F-3
<PAGE>
CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2004
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                              2004               2003               2002
<S>                                                                    <C>                  <C>               <C>
REVENUES:
  Net sales (1)                                                         $      31,571,937    $   24,829,305    $     19,080,845
  Sales to affiliates                                                            455,711           387,055             277,477
                                                                       -----------------    --------------    ----------------
                                                                              32,027,648        25,216,360          19,358,322

  Equity in earnings of affiliates                                               242,108           118,268             101,326
  Insurance recoveries                                                                 -           146,165             406,570
  Other income (expense), net                                                      7,319            14,965             (19,735)
                                                                       -----------------    --------------    ----------------
                                                                              32,277,075        25,495,758          19,846,483
                                                                       -----------------    --------------    ----------------

COST OF SALES AND EXPENSES:
  Cost of sales and operating expenses (including purchases
    of $12,334,523, $9,109,938 and $6,779,798 from affiliates) (1)            30,767,374        24,390,943          19,211,316
  Selling, general and administrative expenses                                   327,830           295,597             284,871
  Interest expense, excluding capital lease                                      254,923           119,737              67,394
  Capital lease interest charge                                                    3,522             5,271               7,017
                                                                       -----------------    --------------    ----------------
                                                                              31,353,649        24,811,548          19,570,598
                                                                       -----------------    --------------    ----------------

INCOME BEFORE INCOME TAXES                                                       923,426           684,210             275,885
INCOME TAXES                                                                     298,423           245,436              95,873
                                                                       -----------------    --------------    ----------------
NET INCOME                                                                       625,003           438,774             180,012

OTHER COMPREHENSIVE INCOME (LOSS):
  Cash flow hedges:
    Reclassification adjustment for derivative losses included
      in net income, net of related income taxes of $177 in 2004,
      $172 in 2003 and $182 in 2002                                                  315               304                 310

  Foreign currency translation gain (loss), net of related
    income taxes of $114 in 2004, $168 in 2003, and $(78) in 2002                    211               302                (172)

  Minimum pension liability adjustment, net of related
    taxes of $(2,633) in 2004, $2,151 in 2003 and $(12,835) in 2002               (4,581)            3,741             (22,328)
                                                                       -----------------    --------------    ----------------

             Total other comprehensive income (loss)                              (4,055)            4,347             (22,190)
                                                                       -----------------    --------------    ----------------

COMPREHENSIVE INCOME                                                   $         620,948    $      443,121    $        157,822
                                                                       =================    ==============    ================
</TABLE>

Supplemental information (billions of dollars)

<TABLE>
<S>                                                                    <C>                  <C>               <C>
(1) Includes amounts related to buy/sell arrangements:
     Net sales                                                         $             3.7    $          3.9                   *
     Cost of sales and operating expenses                              $             3.7    $          3.8                   *
</TABLE>

*Information is not available for 2002.

See notes to consolidated financial statements.

                                      F-4
<PAGE>

CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2004
(DOLLARS AND SHARES IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                     ACCUMULATED OTHER
                                                                                COMPREHENSIVE INCOME (LOSS)
                                                                     ------------------------------------------------
                             COMMON STOCK                              MINIMUM      FOREIGN       CASH                    TOTAL
                            --------------   ADDITIONAL   RETAINED     PENSION      CURRENCY      FLOW                SHAREHOLDER'S
                            SHARES  AMOUNT    CAPITAL     EARNINGS    LIABILITY   TRANSLATION    HEDGES      TOTAL        EQUITY
<S>                         <C>     <C>     <C>         <C>          <C>          <C>          <C>        <C>         <C>
BALANCE, JANUARY 1, 2002      1     $    1  $ 1,659,698 $   745,102  $    (2,484) $         -  $    (981) $   (3,465) $   2,401,336

Net income                    -          -            -     180,012            -            -          -           -        180,012

Other comprehensive (loss)
  income                      -          -            -           -      (22,328)        (172)       310     (22,190)       (22,190)
                             --     ------  ----------- -----------  -----------  -----------  ---------  ----------  -------------

BALANCE, DECEMBER 31, 2002    1          1    1,659,698     925,114      (24,812)        (172)      (671)    (25,655)     2,559,158

Net income                    -          -            -     438,774            -            -          -           -        438,774

Other comprehensive income    -          -            -           -        3,741          302        304       4,347          4,347

Dividends paid to
 parent, PDV America          -          -            -    (500,795)           -            -          -           -       (500,795)
                             --     ------  ----------- -----------  -----------  -----------  ---------  ----------  -------------

BALANCE, DECEMBER 31, 2003    1          1    1,659,698     863,093      (21,071)         130       (367)    (21,308)     2,501,484

Net income                    -          -            -     625,003            -            -          -           -        625,003

Other comprehensive (loss)
  income                      -          -            -           -       (4,581)         211        315      (4,055)        (4,055)

Dividends paid to
 parent, PDV America          -          -            -    (400,000)           -            -          -           -       (400,000)
                             --     ------  ----------- -----------  -----------  -----------  ---------  ----------  -------------

BALANCE, DECEMBER 31, 2004    1     $    1  $ 1,659,698 $ 1,088,096  $   (25,652) $       341  $     (52) $  (25,363) $   2,722,432
                             ==     ======  =========== ===========  ===========  ===========  =========  ==========  =============
</TABLE>

See notes to consolidated financial statements.

                                      F-5
<PAGE>

CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2004
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   2004            2003             2002
<S>                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                     $   625,003     $   438,774     $    180,012
 Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization                                     375,213         333,626          298,686
  Provision for losses on accounts receivable                        12,415          15,066           17,458
  Deferred income taxes                                             (10,519)        159,791           37,642
  Distributions in excess of equity in earnings of affiliates        67,146         100,071           22,313
  Other adjustments                                                   9,142          18,329            3,992
  Changes in operating assets and liabilities:
   Accounts receivable and due from affiliates                     (291,141)       (155,126)         (40,009)
   Inventories                                                     (148,047)         73,302           18,431
   Prepaid expenses and other current assets                        (49,248)          6,478           62,465
   Accounts payable and other current liabilities                   394,102         (68,508)         315,266
   Other assets                                                    (121,114)        (98,568)        (128,466)
   Other liabilities                                                 69,567         171,794           30,483
                                                                -----------     -----------     ------------
    Total adjustments                                               307,516         556,255          638,261
                                                                -----------     -----------     ------------
    Net cash provided by operating activities                       932,519         995,029          818,273
                                                                -----------     -----------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                                              (341,349)       (413,704)        (711,834)
 Proceeds from sales of property, plant and equipment                   599           4,015              919
 Decrease (increase) in restricted cash                               4,571          16,600          (23,486)
 Investments in LYONDELL-CITGO Refining LP                          (30,690)        (21,208)         (32,000)
 Investments in and advances to other affiliates                    (14,882)         (3,800)         (22,484)
                                                                -----------     -----------     ------------
    Net cash used in investing activities                          (381,751)       (418,097)        (788,885)
                                                                -----------     -----------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net (repayments of) proceeds from revolving bank loans                   -        (279,300)        (112,200)
 Proceeds from 6% senior notes due 2011                             248,250               -                -
 (Payments on) proceeds from 11-3/8% senior notes due 2011         (543,355)        546,590                -
 (Payments on) proceeds from senior secured term loan              (200,000)        200,000                -
 Repurchase of senior notes due 2006                                      -         (47,500)               -
 Proceeds from (payments on) loans from affiliates                   26,100         (39,000)          39,000
 Payments on private placement senior notes                         (11,364)        (11,364)         (11,364)
 Payments of master shelf agreement notes                           (20,000)        (50,000)         (25,000)
 Proceeds from (payments on) taxable bonds                           55,000         (90,000)         (31,000)
 Proceeds from (payments on) tax-exempt bonds                       126,805         (93,400)          68,502
 Payments of capital lease obligations                               (4,131)        (23,601)         (20,358)
 Repayments of other debt                                                 -               -           (8,305)
 Dividends paid to parent, PDV America                             (400,000)       (500,795)               -
 Debt issuance costs                                                 (7,048)        (19,579)               -
                                                                -----------     -----------     ------------
    Net cash used in financing activities                          (729,743)       (407,949)        (100,725)
                                                                -----------     -----------     ------------
</TABLE>

                                                                     (Continued)

                                      F-6
<PAGE>

CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2004
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                          2004             2003              2002
<S>                                                  <C>              <C>               <C>
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     $    (178,975)   $      168,983    $      (71,337)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD             202,008            33,025           104,362
                                                     -------------    --------------    --------------

CASH AND CASH EQUIVALENTS, END OF PERIOD             $      23,033    $      202,008    $       33,025
                                                     =============    ==============    ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
  Cash paid during the period for:
    Interest, net of amounts capitalized             $     271,851    $      100,492    $       72,970
                                                     =============    ==============    ==============
    Income taxes, net of refunds of $441 in 2004
      $45,794 in 2003 and $50,733 in 2002            $     348,470    $      110,965    $      (45,745)
                                                     =============    ==============    ==============

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING ACTIVITIES:
  Investment in LYONDELL-CITGO Refining LP (Note 3)  $           -    $       (6,840)   $            -
                                                     =============    ==============    ==============

  Assets received upon dissolution of a partnership  $      16,265    $            -    $            -
                                                     =============    ==============    ==============

SUPPLEMENTAL SCHEDULE OF NONCASH
  FINANCING ACTIVITIES:
  Capital leases (Note 13)                           $      22,740    $            -    $            -
                                                     =============    ==============    ==============
</TABLE>

See notes to consolidated financial statements.                      (Concluded)

                                      F-7
<PAGE>

CITGO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2004

1.    SIGNIFICANT ACCOUNTING POLICIES

      DESCRIPTION OF BUSINESS - CITGO Petroleum Corporation ("CITGO") is a
      subsidiary of PDV America, Inc. ("PDV America"), an indirect wholly owned
      subsidiary of Petroleos de Venezuela, S.A. ("PDVSA"), the national oil
      company of the Bolivarian Republic of Venezuela.

      CITGO manufactures or refines and markets transportation fuels as well as
      lubricants, refined waxes, petrochemicals, asphalt and other industrial
      products. CITGO owns and operates three crude oil refineries (Lake
      Charles, Louisiana, Corpus Christi, Texas, and Lemont, Illinois) and two
      asphalt refineries (Paulsboro, New Jersey, and Savannah, Georgia) with a
      combined aggregate rated crude oil refining capacity of 756 thousand
      barrels per day ("MBPD"). CITGO also owns a minority interest in
      LYONDELL-CITGO Refining LP, a limited partnership that owns and operates a
      refinery in Houston, Texas, with a rated crude oil refining capacity of
      265 MBPD. CITGO's consolidated financial statements also include accounts
      relating to a lubricant and wax plant, pipelines, and equity interests in
      pipeline companies and petroleum storage terminals.

      CITGO's transportation fuel customers include CITGO branded wholesale
      marketers, convenience stores and airlines located mainly east of the
      Rocky Mountains. Asphalt is generally marketed to independent paving
      contractors on the East and Gulf Coasts and the Midwest of the United
      States. Lubricants are sold principally in the United States to
      independent marketers, mass marketers and industrial customers.
      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. CITGO also
      sells lubricants, gasoline and distillates in various Latin American
      markets including Puerto Rico, Brazil, Ecuador and Mexico.

      PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
      include the accounts of CITGO and its subsidiaries (collectively referred
      to as the "Company"). All subsidiaries are wholly owned. All material
      intercompany transactions and accounts have been eliminated.

      The Company's investments in less than majority-owned affiliates are
      accounted for by the equity method. 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 accounting principles generally accepted in
      the United States of America 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.

      CITGO's operations can be influenced by 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 CITGO's 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

                                      F-8
<PAGE>
      long-lived asset is considered impaired when the separately identifiable
      anticipated undiscounted net cash flow from such asset 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 value of the long-lived asset.
      Fair value is determined primarily using the anticipated net 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 that fair values are reduced for disposal costs.

      REVENUE RECOGNITION - Revenue is generated from the sale of refined
      petroleum products to bulk purchasers, wholesale purchasers and final
      consumers. CITGO's transportation fuel customers include CITGO branded
      wholesale marketers, convenience stores and airlines located mainly east
      of the Rocky Mountains. Asphalt is generally marketed to independent
      paving contractors on the East and Gulf Coasts and the Midwest of the
      United States. Lubricants are sold principally in the United States to
      independent marketers, mass marketers and industrial customers.
      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. CITGO also
      sells lubricants, gasoline and distillates in various Latin American
      markets including Puerto Rico, Brazil, Ecuador and Mexico.

      Revenue recognition occurs at the point that title to the refined
      petroleum product is transferred to the customer. That transfer is
      determined from the delivery terms of the customer's contract. In the case
      of bulk purchasers, delivery and title transfer may occur while the
      refined petroleum products are in transit, if agreed by the purchaser; or
      may occur when the hydrocarbons are transferred into a storage facility at
      the direction of the purchaser. In the case of wholesale purchasers,
      delivery and title transfer generally occurs when the refined petroleum
      products are transferred from a storage facility to the transport truck.
      Direct sales to the final consumer make up an immaterial portion of
      revenue recognized by CITGO.

      SUPPLY AND MARKETING ACTIVITIES - The Company engages in the buying and
      selling of crude oil to supply its refineries. In order to obtain crude
      oil of a specific grade and quantity in a certain location, the Company
      may enter a contract to sell a different grade and quantity at a different
      location. In the event that the Company does not have the specified crude
      oil to satisfy its counterparty's needs, it must purchase that crude oil
      from a third party and sell it to the counterparty. The net results of
      this activity are recorded in cost of sales.

      The Company also engages in the buying and selling of refined products to
      facilitate the marketing of its refined products. The results of this
      activity are recorded in cost of sales and sales.

      In a typical refined product buy/sell transaction, the Company enters into
      a contract to buy a particular type of refined product at a specified
      location and date from a particular counterparty and simultaneously agrees
      to sell a particular type of refined product at a different location on
      the same or another specified date, generally with the same counterparty.
      The value of the purchased volume may not equal the value of the sold
      volume due to grade or quality differentials, location differentials or
      timing differences.

      The characteristics of the refined product buy/sell transactions include
      gross invoicing between the Company and its counterparties and cash
      settlement of the transactions. Nonperformance by one party to deliver
      does not relieve the other party of its obligation to perform. Both
      transactions require physical delivery of the product. The risks and
      rewards of ownership are evidenced by title transfer, assumption of risk
      of loss and credit risk.

      The Company believes that these refined product buy/sell transactions are
      monetary in nature and thus outside the scope of APB Opinion No. 29,
      "Accounting for Nonmonetary Transactions" (APB No. 29"). Additionally, the
      Company has evaluated Emerging Issues Task Force Issue No. 99-19,
      "Reporting Revenue Gross as a Principal versus Net as an Agent", ("EITF
      No. 99-19") and, based on that evaluation believes that the recording of
      these transactions on a gross basis is appropriate.

      The Emerging Issues Task Force ("EITF") is currently considering Issue No.
      04-13, "Accounting for Purchases and Sales of Inventory with the Same
      Counterparty," ("EITF 04-13") which relates to transactions in which an
      entity sells inventory to another entity in the same line of business from
      which it also purchases inventory. The following questions have been
      raised regarding the accounting for these types of transactions and are
      expected to be addressed by the EITF:

      a)    Under what circumstances should two or more transactions with the
            same counterparty (counterparties) be viewed as a single nonmonetary
            transaction within the scope of APB No. 29?

      b)    If nonmonetary transactions within the scope of APB No. 29 involve
            inventory, are there any circumstances under which the transactions
            should be recognized at fair value?

      Depending on the EITF's conclusions on this issue, it is possible that net
      sales and cost of sales and expenses on the consolidated statement of
      income would both be reduced by the amount of refined product buy/sell
      transactions. The Company believes that the impact of such a reduction on
      net income would result from changes to LIFO inventory calculations and
      would not be material to the Company's consolidated financial statements.

      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 Company's last-in, first-out ("LIFO") inventory method. Exchanges
      that are settled through payment or receipt of cash are accounted for as
      purchases or sales.

      EXCISE TAXES - The Company collects excise taxes on sales of gasoline and
      other motor fuels. Excise taxes of approximately $3.8 billion, $3.5
      billion, and $3.2 billion were collected from customers and paid to
      various governmental entities in 2004, 2003, and 2002, respectively.
      Excise taxes are not included in sales revenue.

      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.

      INVENTORIES - Crude oil and refined product inventories are stated at the
      lower of cost or market and cost is determined using the LIFO method.
      Materials and supplies are valued 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 24 years; machinery and equipment - 5 to 24 years; and
      vehicles - 3 to 10 years.

                                      F-9
<PAGE>

      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.

      The Company capitalizes interest on projects when construction entails
      major expenditures over extended time periods. Such interest is allocated
      to property, plant and equipment and amortized over the estimated useful
      lives of the related assets. Interest capitalized totaled $7 million, $9
      million, and $4 million, during 2004, 2003, and 2002, respectively.

      RESTRICTED CASH - The Company has restricted cash consisting of highly
      liquid investments held in trust accounts in accordance with tax exempt
      revenue bonds due 2031. Funds are released solely for financing the
      qualified capital expenditures as defined in the bond agreement.

      COMMODITY AND INTEREST RATE DERIVATIVES - The Company uses futures,
      forwards, swaps and options primarily to reduce its exposure to market
      risk. The Company also enters into various interest rate swap agreements
      to manage its risk related to interest rate change on its debt.

      Fair values of derivatives are recorded in other current assets or other
      current liabilities, as applicable, and changes in the fair value of
      derivatives not designated in hedging relationships are recorded in
      income. The Company's policy is to elect hedge accounting only under
      limited circumstances involving derivatives with initial terms of 90 days
      or greater and notional amounts of $25 million or greater.

      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 seven years.
      Unamortized costs are included in other assets. Amortization of refinery
      turnaround costs is included in depreciation and amortization expense.
      Amortization was $94 million, $88 million, and $75 million for 2004, 2003,
      and 2002, 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 that 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 and are recorded without consideration of potential recoveries from
      third parties. Subsequent adjustments to estimates, to the extent
      required, may be made as more refined information becomes available.

      INCOME TAXES - The Company is included in the consolidated U.S. federal
      income tax return filed by PDV Holding, Inc., the direct parent of PDV
      America. The Company's current and deferred income tax expense has been
      computed on a stand-alone basis using an asset and liability approach.

      NEW ACCOUNTING STANDARDS - In January 2003, the Financial Accounting
      Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of
      Variable Interest Entities" ("FIN 46"), which clarifies the application of
      Accounting Research Bulletin No. 51, "Consolidated Financial Statements."
      FIN 46 defines variable interest entities and how an enterprise should
      assess its interests in a variable interest entity to decide whether to
      consolidate that entity. In December 2003, the FASB issued a revision of
      FIN 46 (FIN 46R), primarily to clarify the required accounting for
      investments in variable interest entities. This standard replaces FIN 46.
      For CITGO, which meets the definition of a nonpublic enterprise for
      purposes of applying FIN 46R, application is required immediately for
      variable interest entities created after December 31, 2003 and for
      variable interest entities in which an interest is acquired after that
      date, and to all entities that are subject to FIN 46R by January 1, 2005.
      The interpretation requires certain minimum disclosures with respect to
      variable interest entities in which an enterprise holds significant
      variable interest but which it does not consolidate. FIN 46R may be
      applied prospectively with a cumulative-effect adjustment as of the date
      on which it is first applied or by restating previously issued financial
      statements for one or more years

                                      F-10
<PAGE>

      with a cumulative-effect adjustment as of the beginning of the first year
      restated. The applicable provisions of FIN 46R had no impact on financial
      position or results of operations for the year ended December 31, 2004 and
      CITGO expects that the application of FIN 46R to interests currently held
      in other entities will not have a material impact on its financial
      position or results of operations in the future.

2.    REFINERY AGREEMENTS

      An affiliate of PDVSA has a 50 percent 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
      percent 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 4). Pursuant to the above arrangement,
      CITGO acquired approximately 162 MBPD, 149 MBPD, and 100 MBPD of refined
      products from HOVENSA during 2004, 2003, and 2002, respectively,
      approximately one-half of which was gasoline.

3.    INVESTMENT IN LYONDELL-CITGO REFINING LP

      LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265 MBPD
      refinery in Houston, Texas and is owned by subsidiaries of CITGO (41.25%)
      and Lyondell Chemical Company (58.75%) ("the Owners"). This refinery
      processes heavy crude oil supplied by PDVSA under a long-term supply
      contract that expires in 2017. CITGO purchases substantially all of the
      gasoline, diesel and jet fuel produced at the refinery under a long-term
      contract (Note 4).

      As of December 31, 2004 and 2003, CITGO has a note receivable from
      LYONDELL-CITGO of $35 million. The note bears interest at market rates,
      which were approximately 2.7 percent and 1.9 percent at December 31, 2004
      and 2003. Principal and interest are due in January 1, 2008. Accordingly,
      the note and related accrued interest are included in the balance sheet
      caption other assets, noncurrent in the accompanying consolidated balance
      sheets. In addition, during 2003, CITGO converted $6.8 million of accrued
      interest related to this note to investments in LYONDELL-CITGO.

                                      F-11
<PAGE>

      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
      which differ from participation interests. Cash distributions are
      allocated to the Owners based on participation interest. Information on
      CITGO's investment in LYONDELL-CITGO follows:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                       --------------------------------------------
                                                           2004           2003             2002
                                                                      (000s OMITTED)
<S>                                                    <C>            <C>              <C>
Carrying value of investment                           $   409,782    $     454,679    $    518,279
Notes receivable                                            35,278           35,278          35,278
Participation interest                                          41%              41%             41%
Equity in net income                                   $   196,889    $      83,503    $     77,902
Cash distributions received                                270,713          177,799          88,663

Summary of LYONDELL-CITGO's financial position:
 Current assets                                        $   359,000    $     316,000    $    357,000
 Noncurrent assets                                       1,288,000        1,321,000       1,400,000
 Current liabilities:
  Current portion of long-term debt                          5,000                -               -
  Distributions payable to partners                        133,000           36,000         181,000
  Other                                                    450,000          350,000         333,000
 Noncurrent liabilities (including debt of $443,000
  at December 31, 2004 and $450,000 at                     819,000          828,000         840,000
  December 31, 2003 and 2002)
 Partners' capital                                         240,000          423,000         403,000

Summary of operating results:
 Revenue                                               $ 5,603,000    $   4,162,000    $  3,392,000
 Gross profit                                              575,000          320,000         299,000
 Net income                                                500,000          228,000         213,000
</TABLE>

      On May 21, 2004, LYONDELL-CITGO closed on a three-year, $550 million
      credit facility to replace its expiring $520 million credit facility. The
      new credit facility is comprised of a $450 million senior secured term
      loan and a $100 million senior secured revolver, both with an interest
      rate of the London Interbank Offered Rate ("LIBOR") plus 2.5 percent. The
      facility is secured by substantially all of the assets of LYONDELL-CITGO
      and contains covenants that require LYONDELL-CITGO to maintain specified
      financial ratios. In September 2004, LYONDELL-CITGO obtained an amendment
      to the new facility which reduces the interest rate to LIBOR plus 2
      percent and eases certain financial covenants, including the debt to total
      capitalization ratio. There was no outstanding balance under the working
      capital revolving credit facility at December 31, 2004.

4.    RELATED PARTY TRANSACTIONS

      The Company purchases approximately one-half of the crude oil processed in
      its refineries from subsidiaries of PDVSA under long-term supply
      agreements and spot purchases. 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.
      The Company purchased $5.8 billion, $4.2 billion, and $3.3 billion of
      crude oil, feedstocks and other products from wholly owned subsidiaries of
      PDVSA in 2004, 2003, and 2002, respectively, under these and other
      purchase agreements. At

                                      F-12
<PAGE>

      December 31, 2004 and 2003, $429 million and $335 million, respectively,
      were included in payables to affiliates as a result of these transactions.

      These crude oil supply agreements require PDVSA to supply minimum
      quantities of crude oil and other feedstocks to CITGO. The supply
      agreements differ somewhat for each refinery but generally incorporate
      formula prices based on the market value of a slate of refined products
      deemed to be produced from each particular grade of crude oil or
      feedstock, less (i) specified deemed refining costs; (ii) specified actual
      costs, including transportation charges, actual cost of natural gas and
      electricity, 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 CITGO under the various supply agreements will
      vary depending on, among other things, the efficiency with which CITGO
      conducts its operations during such period. The price CITGO pays for crude
      oil purchased under these crude oil supply agreements is not directly
      related to the market price of any other crude oil. Thus there are periods
      in which the price paid for crude oil purchased under those agreements may
      be higher or lower than the price that might have been paid in the spot
      market.

      The Company also purchases refined products from various other affiliates
      including LYONDELL-CITGO and HOVENSA, under long-term contracts. These
      agreements incorporate various formula prices based on published market
      prices and other factors. Such purchases totaled $6.8 billion, $4.9
      billion, and $3.5 billion for 2004, 2003, and 2002, respectively. At
      December 31, 2004 and 2003, $183 million and $148 million, respectively,
      were included in payables to affiliates as a result of these transactions.

      The Company had refined product, feedstock, and other product sales to
      affiliates, primarily at market-related prices, of $456 million, $387
      million, and $277 million in 2004, 2003, and 2002, respectively. At
      December 31, 2004 and 2003, $107 million and $71 million, respectively,
      was included in due from affiliates as a result of these and related
      transactions.

      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 13. The
      Company has also guaranteed debt of certain affiliates (Note 12).

      In August 2002, three affiliates entered into agreements to advance cash
      to CITGO from time to time under demand notes for amounts of up to a
      maximum of $10 million with PDV Texas, Inc. ("PDV Texas"), $30 million
      with PDV America and $10 million with PDV Holding, Inc. ("PDV Holding").
      The notes bear interest at rates equivalent to 30-day LIBOR plus 0.875%,
      payable quarterly. At December 31, 2004, the amounts outstanding on these
      notes were $7 million, $14 million and $5 million from PDV Texas, PDV
      America and PDV Holding, respectively. There were no amounts outstanding
      on these notes at December 31, 2003.

      The Company and PDV Holding are parties to a tax allocation agreement that
      is designed to provide PDV Holding with sufficient cash to pay its
      consolidated income tax liabilities. PDV Holding appointed CITGO as its
      agent to handle the payment of such liabilities on its behalf. As such,
      CITGO calculates the taxes due, allocates the payments among the members
      according to the agreement and bills each member accordingly. Each member
      records its amounts due from or payable to CITGO in a related party
      payable account. At December 31, 2004 and 2003, CITGO had net related
      party receivables related to federal income taxes of $28 million and $35
      million, respectively, which is included in due from affiliates.

                                      F-13
<PAGE>

      At December 31, 2004, CITGO has federal income tax prepayments of $39
      million included in other current assets. At December 31, 2003, CITGO has
      federal income taxes payable of $5 million included in other current
      liabilities.

5.    ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                           2004           2003
                                              (000s OMITTED)
<S>                                     <C>            <C>
Trade                                   $ 1,146,274    $  972,534
Credit card                                 133,586        93,830
Other                                        40,745        18,468
                                        -----------    ----------
                                          1,320,605     1,084,832
Allowance for uncollectible accounts        (27,854)      (24,499)
                                        -----------    ----------

                                        $ 1,292,751    $1,060,333
                                        ===========    ==========
</TABLE>

      Sales are made on account, based on pre-approved unsecured credit terms
      established by CITGO management. The Company also has a proprietary credit
      card program which allows commercial customers to purchase fuel at CITGO
      branded outlets. Allowances for uncollectible accounts are established
      based on several factors that include, but are not limited to, analysis of
      specific customers, historical trends, current economic conditions and
      other information.

      The Company has a limited purpose consolidated subsidiary, CITGO Funding
      Company L.L.C. ("CITGO Funding"), which established a non-recourse
      agreement to sell an undivided interest in specified trade accounts
      receivables ("pool") to independent third parties. Under the terms of the
      agreement, new receivables are added to the pool as collections
      (administered by CITGO) reduce previously sold receivables. CITGO pays
      specified fees related to its sale of receivables under the program. The
      outstanding invested amount of the interest sold to third-parties at any
      one time under the trade accounts receivable sales agreement is limited to
      a maximum of $275 million (increased from $200 million through an
      amendment in November 2003).

      As of December 31, 2004 and 2003, $755 million and $652 million,
      respectively, of CITGO's accounts receivable comprised the designated pool
      of trade receivables owned by CITGO Funding. The pool of receivables had a
      weighted average life of 2.9 and 4.7 days at December 31, 2004 and 2003,
      respectively. As of December 31, 2004 and 2003, no outstanding investment
      in the receivables in the designated pool had been sold to the third party
      and the entire amount of the receivables was retained by CITGO Funding.
      This retained interest, which is included in receivables, net in the
      consolidated balance sheets, is recorded at fair value. Due to (i) a short
      average collection cycle for such trade receivables, (ii) CITGO's positive
      collection history, and (iii) the characteristics of such trade accounts
      receivables, the fair value of CITGO's retained interest approximates the
      total amount of trade accounts receivable reduced by the outstanding
      invested amount of the third parties in the trade accounts receivable in
      which interests are sold to the third-party under the facility.

      CITGO recorded no gains or losses associated with the sales in the years
      ended December 31, 2004 and 2003 other than the fees incurred by CITGO
      related to this facility, which were included in other income (expense),
      net in the consolidated statements of income. Such fees were $4 million,
      $6 million and $3 million for the years ended December 31, 2004, 2003 and
      2002, respectively. The third party's outstanding investments in CITGO
      trade accounts receivables were never in excess of the sales facility
      limits at any time under this program.

                                      F-14
<PAGE>

      CITGO is responsible for servicing the transferred receivables for which
      it receives a monthly servicing fee equal to 1% per annum times the
      average outstanding amount of receivables in the program for the prior
      month. Because the servicing fee is an intercompany obligation from CITGO
      Funding to CITGO, CITGO does not believe that it incurs incremental costs
      associated with the activity. CITGO has not, on a consolidated basis,
      recorded any servicing assets or liabilities related to this servicing
      activity.

6.    INVENTORIES

<TABLE>
<CAPTION>
                                2004           2003
                                  (000s OMITTED)
<S>                         <C>            <C>
Refined product             $   787,795    $    686,483
Crude oil                       284,301         239,974
Materials and supplies           93,564          91,156
                            -----------    ------------

                            $ 1,165,660    $  1,017,613
                            ===========    ============
</TABLE>

      At December 31, 2004 and 2003, estimated net market values exceeded
      historical cost by approximately $1.3 billion and $707 million,
      respectively.

      The reduction of hydrocarbon LIFO inventory quantities resulted in a
      liquidation of prior years' LIFO layers and decreased cost of goods sold
      by $3 million and $66 million in 2004 and 2003, respectively.

7.    PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                 2004            2003
                                                   (000s OMITTED)
<S>                                          <C>             <C>
Land                                         $   132,189     $   137,010
Buildings and leaseholds                         445,224         442,765
Machinery and equipment                        5,295,813       4,985,068
Vehicles                                          13,520          35,209
Construction in process                          392,533         300,361
                                             -----------     -----------
                                               6,279,279       5,900,413
Accumulated depreciation and amortization     (2,240,774)     (1,993,210)
                                             -----------     -----------

                                             $ 4,038,505     $ 3,907,203
                                             ===========     ===========
</TABLE>

      Depreciation expense for 2004, 2003, and 2002 was $258 million, $237
      million, and $223 million, respectively.

      Net losses on disposals and retirements of property, plant and equipment
      were approximately $4 million, $3 million, and $5 million in 2004, 2003,
      and 2002, respectively.

                                      F-15

<PAGE>

8.    INVESTMENTS IN AFFILIATES

      In addition to LYONDELL-CITGO, the Company's investments in affiliates
      consist primarily of equity interests of 6.8 percent to 50 percent in
      joint interest pipelines and terminals, including a 15.79 percent interest
      in Colonial Pipeline Company; a 49.5 percent partnership interest in
      Nelson Industrial Steam Company ("NISCO"), which is a qualified
      cogeneration facility; and a 49 percent partnership interest in Mount
      Vernon Phenol Plant. The carrying value of these investments exceeded the
      Company's equity in the underlying net assets by approximately $121
      million and $125 million at December 31, 2004 and 2003, respectively.

      At December 31, 2004 and 2003, NISCO had a partnership deficit. CITGO's
      share of this deficit, as a general partner, was $23 million and $31
      million at December 31, 2004 and 2003, respectively, which is included in
      other noncurrent liabilities in the accompanying consolidated balance
      sheets.

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

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                       ---------------------------------
                                                          2004        2003       2002
                                                                 (000s OMITTED)
<S>                                                    <C>         <C>         <C>
Company's investments in affiliates
   (excluding NISCO)                                   $ 580,647   $ 647,649   $ 716,469
Company's equity in net income of affiliates             242,108     118,268     101,326
Dividends and distributions received from affiliates     313,721     218,338     123,639
</TABLE>

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

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                    ------------------------------------------------
                                                        2004               2003              2002
                                                                    (000s OMITTED)
<S>                                                 <C>                <C>                <C>
Summary of financial position:
   Current assets                                   $    705,057       $    636,379       $  740,019
   Noncurrent assets                                   3,253,469          3,372,509        3,396,209
   Current liabilities (including debt of
     $175,870, $43,902 and $52,417 at
     December 31, 2004, 2003, and 2002,
     respectively)                                     1,099,324            778,974          846,623
   Noncurrent liabilities (including debt of
     $1,940,898, $2,121,018 and $2,185,502
     at December 31, 2004, 2003, and 2002,
     respectively)                                     2,702,698          2,830,317        2,863,505

Summary of operating results:
   Revenues                                         $  7,630,497       $  5,909,974       $4,906,397
   Gross profit                                        1,194,205            918,327          879,907
   Net income                                            802,436            504,548          449,779
</TABLE>

                                      F-16

<PAGE>

9.    LONG-TERM DEBT AND FINANCING ARRANGEMENTS

<TABLE>
<CAPTION>
                                                                                                 2004             2003
                                                                                                    (000s OMITTED)
<S>                                                                                         <C>               <C>
Senior Secured Term Loan, due 2006 with variable interest rate                              $           -     $    200,000

Senior Notes, $250 million face amount, due 2011
   interest rate of 6%                                                                            248,299                -

Senior Notes, $200 million face amount, due 2006 with
   interest rate of 7-7/8%                                                                        149,969          149,946

Senior Notes, $550 million face amount, due 2011 with
   interest rate of 11-3/8%                                                                         6,613          546,949

Private Placement Senior Notes, due 2004 to 2006 with an
   interest rate of 9.30%                                                                          22,727           34,091

Master Shelf Agreement Senior Notes, due 2004 to 2009 with interest
   rates from 7.17% to 8.94%                                                                      165,000          185,000

Tax-Exempt Bonds, due 2004 to 2033 with variable and fixed interest rates                         459,283          332,478

Taxable Bonds, due 2026 to 2028 with variable interest rates                                       80,000           25,000
                                                                                            -------------     ------------

                                                                                                1,131,891        1,473,464
Current portion of long-term debt                                                                 (11,364)         (31,364)
                                                                                            -------------     ------------

                                                                                            $   1,120,527     $  1,442,100
                                                                                            =============     ============
</TABLE>

      REVOLVING BANK LOANS - The Company has a $260 million, three-year,
      unsecured revolving bank loan maturing in December 2005. There was no
      outstanding balance under this credit agreement at December 31, 2004 and
      2003.

      SENIOR SECURED TERM LOAN - The Company had a senior secured term loan
      under an agreement with a syndication of various lenders. The senior loan
      was secured by CITGO's equity interest in two pipeline companies. CITGO
      retired the senior loan on June 25, 2004. The costs to retire the senior
      loan prior to the maturity date of February 2006 included a prepayment
      charge of $4 million.

      SHELF REGISTRATION - SENIOR NOTES - In October 2004, the Company issued
      $250 million of 6% unsecured senior notes due October 15, 2011. In
      connection with this transaction, CITGO repurchased approximately $543
      million principal amount of its 11-3/8% senior notes due 2011 as part of a
      tender offer for such notes. CITGO recorded, as charges to interest
      expense, a $121.9 million tender premium, $10.6 million unamortized fees
      and $2.7 million unamortized discounts.

      In February 2003, the Company issued $550 million aggregate principal
      amount of 11-3/8% unsecured senior notes due February 1, 2011. In
      connection with this debt issuance, CITGO redeemed $50 million principal
      amount of its 7-7/8% senior notes due 2006. After the tender offer for the
      11-3/8% notes in October 2004, approximately $6.6 million remain
      outstanding at December 31, 2004.

                                      F-17

<PAGE>

In April 1996, the Company filed a registration statement with the Securities
and Exchange Commission relating to the shelf registration of $600 million of
debt securities. In May 1996, CITGO issued $200 million aggregate principle
amount of 7-7/8% unsecured senior notes due 2006. Due to CITGO's credit ratings,
the shelf registration is not presently available.

PRIVATE PLACEMENT - At December 31, 2004, the Company has outstanding
approximately $23 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.

MASTER SHELF AGREEMENT - At December 31, 2004, the Company has outstanding $165
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.

COVENANTS - The various debt agreements above contain certain covenants that,
depending upon the level of the Company's capitalization and earnings, could
impose limitations on the Company's ability to pay dividends, incur additional
debt, place liens on property, and sell fixed assets. The Company's debt
instruments described above do not contain any covenants that trigger prepayment
or increased costs as a result of a change in its debt ratings. The Company was
in compliance with the debt covenants at December 31, 2004.

TAX-EXEMPT BONDS - At December 31, 2004, through state entities, CITGO has
outstanding $196 million of industrial development bonds for certain Lake
Charles, Corpus Christi and Lemont port facilities and pollution control
equipment and $263 million of environmental revenue bonds to finance a portion
of the Company's environmental facilities at its Lake Charles, Corpus Christi
and Lemont refineries and at the LYONDELL-CITGO refinery. The bonds bear
interest at various fixed and floating rates, which ranged from 2.2 percent to
8.0 percent at December 31, 2004 and ranged from 2.1 percent to 8.3 percent at
December 31, 2003. Additional credit support for the variable rate bonds is
provided through letters of credit.

TAXABLE BONDS - At December 31, 2004, through a state entity, the Company has
outstanding $80 million of taxable environmental revenue bonds to finance a
portion of the environmental facilities at the Lake Charles refinery. Such bonds
are secured by letter of credit and have a floating interest rate (ranged from
2.3 percent to 2.4 percent at December 31, 2004 and 2.3 percent at December 31,
2003). At the option of the Company and upon the occurrence of certain specified
conditions, all or any portion of such taxable bonds may be converted to
tax-exempt bonds. During 2004 and 2002, $35 million and $31 million of
originally issued taxable bonds were converted to tax-exempt bonds. There were
no taxable bonds converted to tax-exempt bonds during 2003.

DEBT MATURITIES - Future maturities of long-term debt as of December 31, 2004,
are: 2005 - $11.4 million, 2006 - $201.3 million, 2007 - $61.8 million, 2008 -
$44.9 million, 2009 - $50 million and $762.5 million thereafter.

                                      F-18

<PAGE>

      INTEREST RATE SWAP AGREEMENTS - The Company has entered into the following
      interest rate swap agreements to reduce the impact of interest rate
      changes on its variable interest rate debt:

<TABLE>
<CAPTION>
                                                          NOTIONAL PRINCIPAL AMOUNT
                                                          --------------------------
                         EXPIRATION       FIXED RATE          2004            2003
VARIABLE RATE INDEX         DATE             PAID                (000s OMITTED)
<S>                    <C>                <C>             <C>              <C>
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
                                                          -----------      ---------

                                                          $    42,000      $  42,000
                                                          ===========      =========
</TABLE>

      Effective January 1, 2001, changes in the fair value of these agreements
      are recorded in other income (expense). The fair value of these agreements
      at December 31, 2004, based on the estimated amount that CITGO would
      receive or pay to terminate the agreements as of that date and taking into
      account current interest rates, was a loss of approximately $400 thousand,
      the offset of which is recorded in the balance sheet caption other current
      liabilities.

10.   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 expensed $22 million, $22
      million and $23 million related to its contributions to these plans in
      2004, 2003 and 2002, respectively.

      PDV Midwest Refining, L.L.C. ("PDVMR") is a subsidiary of CITGO. It
      sponsors a defined contribution plan. This plan was frozen as of May 1,
      1997 and no further contributions to the plan could be made after that
      date and there will be no new participants in the plan.

      PENSION BENEFITS - CITGO sponsors three qualified noncontributory defined
      benefit pension plans, two covering eligible hourly employees and one
      covering eligible salaried employees. CITGO also sponsors three
      nonqualified defined benefit plans for certain eligible employees.

      In 2003, CITGO offered an enhanced retirement program to eligible salaried
      and hourly employees. Approximately $21 million of incremental pension
      benefits were expensed under this program.

      PDVMR sponsors a qualified and a nonqualified plan, frozen at their then
      current levels on April 30, 1997. The plans cover former employees of the
      partnership who were participants in the plans as of April 30, 1997.

      POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - In addition to pension
      benefits, CITGO also provides 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. CITGO
      reserves the right to change or to terminate the benefits at any time.

                                      F-19

<PAGE>

OBLIGATIONS AND FUNDED STATUS - December 31 is the measurement date used to
determine pension and other post retirement benefit measurements for the plans.
The following sets forth the changes in benefit obligations and plan assets for
the CITGO and PDVMR pension and the CITGO postretirement plans for the years
ended December 31, 2004 and 2003, and the funded status of such plans reconciled
with amounts reported in the Company's consolidated balance sheets:

<TABLE>
<CAPTION>
                                                                      PENSION BENEFITS                   OTHER BENEFITS
                                                               ------------------------------     ----------------------------
                                                                    2004             2003             2004            2003
                                                                       (000s OMITTED)                    (000s OMITTED)
<S>                                                            <C>                <C>             <C>             <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year                        $     515,900      $   449,655     $    414,525    $    334,151
Service cost                                                          22,972           19,901            9,139           8,800
Interest cost                                                         31,814           29,330           23,069          22,223
Amendments                                                                 -           (8,764)               -          (4,020)
Actuarial liability (gain) loss                                       34,915           39,183          (18,331)         62,320
Plan merger/acquisitions                                                   -            5,337                -               -
Curtailment loss                                                           -                -              381               -
Benefits paid                                                        (19,439)         (18,742)         (10,666)         (8,949)
                                                               -------------      -----------     ------------    ------------

Benefit obligation at end of year                                    586,162          515,900          418,117         414,525
                                                               -------------      -----------     ------------    ------------

CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year                       343,341          290,594            1,173           1,182
Actual return on plan assets                                          34,549           59,519               52              (9)
Plan merger/acquisitions                                                   -            4,594                -               -
Employer contribution                                                 44,130           23,747           10,666           8,949
Benefits paid                                                        (19,439)         (18,742)         (10,666)         (8,949)
Enhanced retirement program benefits paid                             (4,670)         (16,371)               -               -
                                                               -------------      -----------     ------------    ------------

Fair value of plan assets at end of year                             397,911          343,341            1,225           1,173
                                                               -------------      -----------     ------------    ------------

Funded status                                                       (188,251)        (172,559)        (416,892)       (413,352)
Unrecognized net actuarial loss                                      120,472           89,564           49,503          87,461
Unrecognized prior service cost                                       (5,299)          (6,070)          (3,318)         (4,020)
Unrecognized net asset                                                   (59)            (104)               -               -
                                                               -------------      -----------     ------------    ------------

Net amount recognized                                          $     (73,137)     $   (89,169)    $   (370,707)   $   (329,911)
                                                               =============      ===========     ============    ============

Amounts recognized in the Company's consolidated
   balance sheets consist of:
   Accrued benefit liability                                   $    (109,812)     $  (114,250)    $   (370,707)   $   (329,911)
   Intangible asset                                                    6,144                -                -               -
   Accumulated other comprehensive income                             30,531           25,081                -               -
                                                               -------------      -----------     ------------    ------------

Net amount recognized                                          $     (73,137)     $   (89,169)    $   (370,707)   $   (329,911)
                                                               =============      ===========     ============    ============
</TABLE>

The accumulated benefit obligation for all defined benefit plans was $500
million and $435 million at December 31, 2004 and 2003, respectively.

                                      F-20

<PAGE>

COMPONENTS OF NET PERIODIC BENEFIT COST

<TABLE>
<CAPTION>
                                                           PENSION BENEFITS                              OTHER BENEFITS
                                              -------------------------------------------      ----------------------------------
                                                 2004             2003            2002           2004      2003            2002
                                                             (000s OMITTED)                              (000s OMITTED)
<S>                                           <C>              <C>             <C>             <C>       <C>             <C>
Components of net periodic benefit cost:
   Service cost                               $   22,972       $   19,901      $   17,171      $  9,139  $   8,800       $  7,191
   Interest cost                                  31,814           29,330          27,880        23,069     22,223         18,603
   Expected return on plan assets                (29,142)         (26,254)        (30,293)          (70)       (71)           (67)
   Amortization of prior service cost               (771)            (766)            350          (521)         -              -
   Amortization of net gain at date
      of adoption                                    (46)            (152)           (268)            -          -              -
   Recognized net actuarial loss                   3,271            3,224             534        19,645     50,145         11,288
                                              ----------       ----------      ----------      --------  ---------       --------

Net periodic benefit cost                     $   28,098       $   25,283      $   15,374      $ 51,262  $  81,097       $ 37,015
                                              ==========       ==========      ==========      ========  =========       ========
</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 percent of the
accumulated postretirement benefit obligation.

ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
                                                       PENSION BENEFITS               OTHER BENEFITS
                                                      -------------------             --------------
                                                      2004           2003             2004      2003
<S>                                                   <C>            <C>              <C>       <C>
WEIGHTED-AVERAGE ASSUMPTIONS USED TO
DETERMINE BENEFIT OBLIGATIONS AT DECEMBER 31:

   Discount rate                                      5.75%          6.25%            5.75%     6.25%
   Rate of compensation increase                      4.48%          4.46%            4.48%     4.50%
</TABLE>

<TABLE>
<CAPTION>
                                                       PENSION BENEFITS               OTHER BENEFITS
                                                      -------------------             --------------
                                                      2004           2003             2004      2003
<S>                                                   <C>            <C>              <C>       <C>
WEIGHTED-AVERAGE ASSUMPTIONS USED
TO DETERMINE NET PERIODIC BENEFIT COSTS
FOR THE YEARS ENDED DECEMBER 31:

   Discount rate                                      6.25%          6.75%            6.25%     6.75%
   Expected long-term return on plan assets           8.25%          8.50%            6.00%     6.00%
   Rate of compensation increase                      4.48%          5.00%            4.50%     5.00%
</TABLE>

CITGO's expected long-term rate of return on plan assets is intended to
generally reflect the historical returns of the assets in its investment
portfolio. The weighted average return at December 31, 2004 on indices
representing CITGO's investment portfolio is 8.99% over the past 10 years and
8.32% over the past 15 years.

For measurement purposes, a 10 percent pre-65 and an 11 percent post-65 annual
rate of increase in the per capita cost of covered health care benefits was
assumed for 2004. These rates are assumed to increase by 10 percent in 2005 for
both pre-65 and post-65 and then to decrease 1 percent per year to an ultimate
level of 5 percent by 2010, and to remain at that level thereafter.

                                      F-21

<PAGE>

Assumed health care cost trend rates 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:

<TABLE>
<CAPTION>
                                                               1-PERCENTAGE-       1-PERCENTAGE-
                                                               POINT INCREASE      POINT DECREASE
                                                               --------------      --------------
                                                                         (000s OMITTED)
<S>                                                            <C>                 <C>
Increase (decrease) in total of service and interest cost
   components                                                     $  6,119            $  (4,820)

Increase (decrease) in postretirement benefit obligation            70,948              (56,607)
</TABLE>

In December 2003, the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 ("Medicare Reform") was signed into law. Medicare Reform introduces
a prescription drug benefit under Medicare (Medicare Part D) as well as a
non-taxable federal subsidy to sponsors of retiree health care benefit plans
that provide a benefit that is at least actuarially equivalent to Medicare Part
D. In May 2004, the FASB Staff issued FASB Staff Position No. FAS 106-2,
"Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003". The Staff Position permits a
sponsor to report the effects of Medicare Reform prospectively in the third
quarter of 2004 or retrospectively to the measurement date following enactment
of the legislation. CITGO has chosen to use the retrospective method to reflect
Medicare Reform as of January 1, 2004. The effect of this legislation at that
date was to reduce the benefit obligation by approximately $40 million. The
service cost and interest cost components of that reduction total approximately
$3 million. Under CITGO's accounting policy for recognizing actuarial gains, net
periodic benefit cost for the year ended December 31, 2004 has been reduced $40
million related to this actuarial gain.

CASH FLOWS

<TABLE>
<CAPTION>
                                                                           OTHER BENEFITS
                                                                 -----------------------------------
                                                                 GROSS BENEFIT      IMPLIED MEDICARE
                                           PENSION BENEFITS        PAYMENTS             SUBSIDY
                                           ----------------      -------------      ----------------
                                                                (000s OMITTED)
<S>                                        <C>                   <C>                <C>
Expected employer contributions
   for the year ended December 31, 2005       $    12,453          $  12,289

Expected benefit payments for the
   years ended December 31:
      2005                                    $    17,095          $  12,289                    -
      2006                                    $    18,451          $  14,035            $     850
      2007                                    $    20,047          $  15,784            $     993
      2008                                    $    22,097          $  17,588            $   1,150
      2009                                    $    24,517          $  19,693            $   1,300
   Five years thereafter                      $   171,557          $ 126,703            $   9,272
</TABLE>

                                      F-22
<PAGE>

PLAN ASSETS

The qualified plans' assets include:

<TABLE>
<CAPTION>
                                PERCENTAGE OF PLAN ASSETS
                                    AS OF DECEMBER 31,
                                -------------------------
                    TARGET
                  ALLOCATION       2004           2003
                  ----------    ----------     ----------
<S>               <C>           <C>            <C>
ASSET CATEGORY:
  Equity           56% - 66%        63.12%       62.15%
  Fixed income     34% - 44%        36.08%       37.27%
  Other             0% -  5%         0.80%        0.58%
                                   ------       ------
                                   100.00%      100.00%
                                   ======       ======
</TABLE>

The investment return objective for these assets is to achieve returns that meet
or exceed the actuarial discount rate over time. This is to be accomplished
using a well-diversified portfolio structure. The Company periodically reviews
the asset allocation to determine whether it remains appropriate for achieving
the investment return objective.

CONTRIBUTIONS - 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. CITGO estimates that it will contribute $12 million to these
plans in 2005. 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.

CITGO's policy is to fund its postretirement benefits other than pension
obligation on a pay-as-you-go basis. CITGO estimates that it will contribute $12
million to these plans in 2005.

                                      F-23
<PAGE>

11. INCOME TAXES

   The provisions for income taxes are comprised of the following:

<TABLE>
<CAPTION>
                   2004            2003          2002
                              (000s OMITTED)
<S>             <C>             <C>           <C>
Current:
   Federal      $ 301,184       $  86,139     $  47,087
   State            7,584           1,924           751
   Foreign            174              70           222
                ---------       ---------     ---------
                  308,942          88,133        48,060
Deferred          (10,519)        157,303        47,813
                ---------       ---------     ---------

                $ 298,423       $ 245,436     $  95,873
                =========       =========     =========
</TABLE>

   The federal statutory tax rate differs from the effective tax rate due to the
   following:

<TABLE>
<CAPTION>
                                          2004          2003        2002
<S>                                       <C>           <C>         <C>
Federal statutory tax rate                35.0%         35.0%       35.0%
State taxes, net of federal benefit        0.8%          1.3%        2.4%
Dividend exclusions                       (1.2)%        (1.4)%      (3.0)%
Medicare subsidy                          (1.5)%           -           -
Other                                     (0.8)%         1.0%        0.4%
                                          ----          ----        ----

Effective tax rate                        32.3%         35.9%       34.8%
                                          ====          ====        ====
</TABLE>

   Deferred income taxes reflect the net tax effects of (i) temporary
   differences between the financial and tax bases of assets and liabilities,
   and (ii) loss and tax credit carryforwards. The tax effects of significant
   items comprising the Company's net deferred tax liability as of December 31,
   2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                         2004            2003
                                                            (000s OMITTED)
<S>                                                   <C>             <C>
Deferred tax liabilities:
   Property, plant and equipment                      $  817,973      $  779,481
   Inventories                                            79,327          95,495
   Investments in affiliates                             200,090         192,458
   Other                                                 172,841         155,646
                                                      ----------      ----------
                                                       1,270,231       1,223,080
                                                      ----------      ----------

Deferred tax assets:
   Postretirement benefit obligations                    154,530         124,272
   Employee benefit accruals                              92,726          58,345
   Other                                                  71,690          75,281
                                                      ----------      ----------
                                                         318,946         257,898
                                                      ----------      ----------

Net deferred tax liability (of which $11,986 and
   $5,375 is included in current liabilities at
   December 31, 2004 and 2003, respectively.)         $  951,285      $  965,182
                                                      ==========      ==========
</TABLE>

                                      F-24
<PAGE>

12. COMMITMENTS AND CONTINGENCIES

   LITIGATION AND INJURY CLAIMS - Various lawsuits and claims arising in the
   ordinary course of business are pending against CITGO. CITGO 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 CITGO, and in amounts greater than CITGO's accruals,
   then such determinations could have a material adverse effect on CITGO's
   results of operations in a given reporting period. The most significant
   lawsuits and claims are discussed below.

   In September 2002, a Texas court ordered CITGO to pay property owners and
   their attorneys approximately $6 million based on an alleged settlement of
   class action property damage claims as a result of alleged air, soil and
   groundwater contamination from emissions released from CITGO's Corpus
   Christi, Texas refinery. CITGO has appealed the ruling to the Texas Court of
   Appeals.

   CITGO, along with most of the other major oil companies, is a defendant in a
   number of federal and state lawsuits alleging contamination of private and
   public water supplies by methyl tertiary butyl ether ("MTBE"), a gasoline
   additive. In general, the plaintiffs claim that MTBE renders the water not
   potable. In addition to compensatory and punitive damages, plaintiffs seek
   injunctive relief to abate the contamination. CITGO intends to defend all of
   the MTBE lawsuits vigorously. CITGO's MTBE litigation can be divided into two
   categories--pre and post-September 30, 2003 litigation. Of the pre-September
   30, 2003 cases, CITGO is defending itself in Madison County, Illinois state
   court and in a New York county state court. As of early October 2004,
   settlements in principle had been reached in both Madison County, Illinois
   cases and one of the cases has been settled subsequent to year-end. There
   will be no effect on results of operations because the accrual for these
   cases was adequate. The post-September 30, 2003 cases were filed after new
   federal legislation was proposed that would have precluded plaintiffs from
   filing lawsuits based on the theory that gasoline with MTBE is a defective
   product. These approximately 72 cases, the majority of which were filed by
   municipal authorities, were removed to federal court and at the defendants'
   request consolidated in Multi-District Litigation ("MDL") 1358. On March 16,
   2004, the judge in MDL 1358 denied the plaintiffs' motion to remand the cases
   to state court. Subsequently, the judge denied the plaintiffs' motion to
   certify her rulings on the remand motion for an interlocutory appeal. It is
   not possible to estimate the loss or range of loss, if any, related to these
   cases.

   Claims have been made against CITGO in approximately 350 asbestos lawsuits
   pending in state and federal courts. These cases, most of which involve
   multiple defendants, are brought by former employees or contractor employees
   seeking damages for asbestos related illnesses allegedly caused, at least in
   part, from exposure at refineries owned or operated by CITGO in Lake Charles,
   Louisiana, Corpus Christi, Texas and Lemont, Illinois. In many of these
   cases, the plaintiffs' alleged exposure occurred over a period of years
   extending back to a time before CITGO owned or operated the premises at
   issue. CITGO does not believe that the resolution of these cases will have a
   material adverse effect on its financial condition or results of operations.

   In 2001, Miami-Dade County sued seventeen defendants for the costs of
   remediation of pollution rising from jet fuel operations during the past
   decades at the Miami International Airport ("the Airport"). Although not a
   defendant in this case, CITGO along with approximately 250 other former jet
   fuel operators at the Airport has received a payment demand from Miami-Dade
   County for the remediation costs for alleged pollution occurring while CITGO
   had jet fuel operations at the Airport. CITGO is exploring settlement
   discussions with Miami-Dade County. CITGO is contesting the amount of damages
   that Miami-Dade County claims are attributed CITGO's jet fuel operations at
   the Airport and will vigorously defend itself should no settlement be
   reached. CITGO does not believe that the resolution of this matter will have
   a material adverse effect on its financial condition or results of
   operations.

                                      F-25
<PAGE>

   At December 31, 2004, CITGO's balance sheet included an accrual for lawsuits
   and claims of $24 million compared with $27 million at December 31, 2003.
   CITGO estimates that an additional loss of $35 million is reasonably possible
   in connection with such lawsuits and claims.

   ENVIRONMENTAL COMPLIANCE AND REMEDIATION - CITGO is subject to the federal
   Clean Air Act ("CAA"), which includes the New Source Review ("NSR") program
   as well as the Title V air permitting program; the federal Clean Water Act,
   which includes the National Pollution Discharge Elimination System program;
   the Toxic Substances Control Act; and the federal Resource Conservation and
   Recovery Act and their equivalent state programs. CITGO is required to obtain
   permits under all of these programs and believes it is in material compliance
   with the terms of these permits. CITGO does not have any material
   Comprehensive Environmental Response, Compensation and Liability Act
   ("CERCLA") liability because the former owners of many of CITGO's assets have
   by explicit contractual language assumed all or the material portion of
   CERCLA obligations related to those assets. This includes the Lake Charles
   refinery and the Lemont refinery.

   The U.S. refining industry is required to comply with increasingly stringent
   product specifications under the 1990 Clean Air Act Amendments for
   reformulated gasoline and low sulfur gasoline and diesel fuel that require
   additional capital and operating expenditures, and alters significantly the
   U.S. refining industry and the return realized on refinery investments.

   In addition, CITGO is subject to various other federal, state and local
   environmental laws and regulations that may require CITGO to take additional
   compliance actions and also actions to remediate the effects on the
   environment of prior disposal or release of petroleum, hazardous substances
   and other waste and/or pay for natural resource damages. Maintaining
   compliance with environmental laws and regulations could require significant
   capital expenditures and additional operating costs. Also, numerous other
   factors affect CITGO's plans with respect to environmental compliance and
   related expenditures.

   CITGO's accounting policy establishes environmental reserves as probable site
   restoration and remediation obligations become reasonably capable of
   estimation. Environmental liabilities are not discounted to their present
   value and are recorded without consideration of potential recoveries from
   third parties. Subsequent adjustments to estimates, to the extent required,
   will be made as more refined information becomes available. CITGO believes
   the amounts provided in its consolidated financial statements, as prescribed
   by generally accepted accounting principles, are adequate in light of
   probable and estimable liabilities and obligations. However, there can be no
   assurance that the actual amounts required to discharge alleged liabilities
   and obligations and to comply with applicable laws and regulations will not
   exceed amounts provided for or will not have a material adverse affect on
   CITGO's consolidated results of operations, financial condition and cash
   flows.

   In 1992, CITGO reached an agreement with the Louisiana Department of
   Environmental Quality ("LDEQ") to cease usage of certain surface impoundments
   at the Lake Charles refinery by 1994. A mutually acceptable closure plan was
   filed with the LDEQ in 1993. The remediation commenced in December 1993.
   CITGO is complying with a June 2002 LDEQ administrative order about the
   development and implementation of a corrective action or closure plan. CITGO
   and the former owner of the refinery are participating in the closure and
   sharing the related costs based on estimated contributions of waste and
   ownership periods.

   CITGO's Corpus Christi, Texas refinery and current and former employees are
   being investigated by state and federal agencies for alleged criminal
   violations of federal environmental statutes and regulations, including the
   CAA and the Migratory Bird Act. CITGO is cooperating with the investigation.
   CITGO believes that it has defenses to any such charges. At this time, CITGO
   cannot predict the outcome of or the amount or range of any potential loss
   that would ensue from any such charges.

                                      F-26
<PAGE>

   In June 1999, CITGO and numerous other industrial companies received notice
   from the United States Environmental Protection Agency ("U.S. EPA") that the
   U.S. EPA believes these companies have contributed to contamination in the
   Calcasieu Estuary, near Lake Charles, Louisiana and are potentially
   responsible parties ("PRPs") under CERCLA. The U.S. EPA made a demand for
   payment of its past investigation costs from CITGO and other PRPs and since
   1999 has been conducting a remedial investigation/feasibility study ("RI/FS")
   under its CERCLA authority. While CITGO disagrees with many of the U.S. EPA's
   earlier allegations and conclusions, CITGO and other industrial companies
   signed in December 2003, a Cooperative Agreement with the LDEQ on issues
   relative to the Bayou D'Inde tributary section of the Calcasieu Estuary, and
   the companies are proceeding with a Feasibility Study Work Plan. CITGO will
   continue to deal separately with the LDEQ on issues relative to its refinery
   operations on another section of the Calcasieu Estuary. The Company still
   intends to contest this matter if necessary.

   In January and July 2001, CITGO received notices of violation ("NOVs") from
   the U.S. EPA alleging violations of the CAA. The NOVs are an outgrowth of an
   industry-wide and multi-industry U.S. EPA enforcement initiative alleging
   that many refineries, electric utilities and other industrial sources
   modified air emission sources. Without admitting any violation CITGO reached
   a settlement with the United States and the states of Louisiana, Illinois,
   New Jersey, and Georgia. A Consent Decree was approved in the District court
   for the Southern District of Texas in January 2005. The Consent Decree
   requires the implementation of control equipment at CITGO's refineries and a
   Supplemental Environment Project at CITGO's Corpus Christi, Texas refinery.
   CITGO estimates that the costs of the settlement could range up to $325
   million which includes a civil penalty of $3.6 million, split between the
   U.S. EPA and the states. CITGO accrued for the civil penalty during 2003 and
   paid it in February 2005. The capital costs will be incurred over a period of
   time, primarily between 2004 and 2009.

   In June 1999, an NOV was issued by the U.S. EPA alleging violations of the
   National Emission Standards for Hazardous Air Pollutants regulations covering
   benzene emissions from wastewater treatment operations at CITGO's Lemont,
   Illinois refinery. This matter has been consolidated with the matters
   described in the previous paragraph.

   In June 2002, a Consolidated Compliance Order and Notice of Potential Penalty
   was issued by the LDEQ alleging violations of the Louisiana air quality
   regulations at CITGO's Lake Charles, Louisiana refinery during 2001. The
   majority of the alleged violations related to the leak detection and repair
   program. This matter has been consolidated with the matters described in the
   previous paragraph related to the U.S. EPA's enforcement initiative.

   In October 2004, the New Jersey Land Trust voted to reject the donation by
   CITGO of a conservation easement covering the 365 acre Petty's Island, which
   is located in the Delaware River in Pennsauken, New Jersey and owned by
   CITGO. Petty's Island contains a CITGO closed petroleum terminal and other
   industrial facilities, but it is also the habitat for the bald eagle and
   other wildlife. The City of Pennsauken through a private developer wants to
   condemn Petty's Island through eminent domain and to redevelop Petty's Island
   into residential and commercial uses. The granting of the conservation
   easement would have mitigated the amount of remediation that CITGO would have
   to perform on Petty's Island. The ultimate outcome cannot be determined at
   this time.

   At December 31, 2004, CITGO's balance sheet included an environmental accrual
   of $65 million compared with $63 million at December 31, 2003. Results of
   operations reflect an increase in the accrual during 2004 due primarily to a
   revision of the Company's estimated share of costs related to two sites
   indicating higher costs offset in part, by spending on environmental
   projects. CITGO estimates that an additional loss of $33 million is
   reasonably possible in connection with environmental matters.

   Various regulatory authorities have the right to conduct, and from time to
   time do conduct, environmental compliance audits or inspections of CITGO and
   its subsidiaries' facilities and operations. Those

                                      F-27
<PAGE>

   compliance audits or inspections have the potential to reveal matters that
   those authorities believe represent non-compliance in one or more respects
   with regulatory requirements and for which those authorities may seek
   corrective actions and/or penalties in an administrative or judicial
   proceeding. Based upon current information, CITGO does not believe that any
   such prior compliance audit or inspection or any resulting proceeding will
   have a material adverse effect on its future business and operating results,
   other than matters described above.

   Conditions which require additional expenditures may exist with respect to
   CITGO's various sites including, but not limited to, its operating refinery
   complexes, former refinery sites, service stations and crude oil and
   petroleum product storage terminals. Based on currently available
   information, CITGO cannot determine the amount of any such future
   expenditures.

   Increasingly stringent environmental regulatory provisions and obligations
   periodically require additional capital expenditures. During 2004, CITGO
   spent approximately $113 million for environmental and regulatory capital
   improvements in its operations. Management currently estimates that CITGO
   will spend approximately $1.1 billion for environmental and regulatory
   capital projects over the five-year period 2005-2009. These estimates may
   vary due to a variety of factors.

   SUPPLY AGREEMENTS - The Company purchases the crude oil processed at its
   refineries and also purchases refined products to supplement the production
   from its refineries to meet marketing demands and resolve logistical issues.
   In addition to supply agreements with various affiliates (Notes 2 and 4), the
   Company has various other crude oil, refined product and feedstock purchase
   agreements with unaffiliated entities with terms ranging from monthly to
   annual renewal. The Company believes these sources of supply are reliable and
   adequate for its current requirements.

   THROUGHPUT AGREEMENTS - The Company has throughput agreements with certain
   pipeline affiliates (Note 8). These throughput agreements may be used to
   secure obligations of the pipeline affiliates. Under these agreements, the
   Company may be required to provide its pipeline affiliates with additional
   funds through advances against future charges for the shipping of petroleum
   products. The Company currently ships on these pipelines and has not been
   required to advance funds in the past. At December 31, 2004, the Company has
   no fixed and determinable, unconditional purchase obligations under these
   agreements.

   COMMODITY DERIVATIVE ACTIVITY - As of December 31, 2004 the Company's
   petroleum commodity derivatives included exchange traded futures contracts,
   forward purchase and sale contracts, exchange traded and over-the-counter
   options, and over-the-counter swaps. At December 31, 2004 and 2003, the
   balance sheet captions other current assets and other current liabilities
   include the following amounts related to the fair values of open commodity
   derivatives:

<TABLE>
<CAPTION>
                                 2004        2003
                               -------      -------
                                  (000S OMITTED)
<S>                            <C>          <C>
Other current asset            $16,046      $16,368
Other current liabilities       14,145        5,714
</TABLE>

                                      F-28
<PAGE>

   GUARANTEES - As of December 31, 2004, the Company has guaranteed the debt of
   others in a variety of circumstances including letters of credit issued for
   an affiliate, bank debt of an equity investment, bank debt of customers,
   customer debt related to the acquisition of marketing equipment and financing
   debt incurred by an equity investment as shown in the following table:

                                                       Expiration
                                                          Date
                                                       ---------

                                        (000s omitted)

Letters of credit                         $  32,981         2005

Bank debt
      Equity investment                       5,500         none
      Customers                               1,494         2006

Financing debt of customers
      Customer equipment acquisition            272    2005-2007
      Equipment acquisition - NISCO           9,550         2008
                                          ---------

      Total                               $  49,797
                                          =========

   In each case, if the debtor fails to meet its obligation, CITGO could be
   obligated to make the required payment. The Company has not recorded any
   amounts on the Company's balance sheet relating to these guarantees.

   In the event of debtor default on the letters of credit, CITGO has been
   indemnified by PDV Holding, Inc., the direct parent of PDV America, which is
   CITGO's direct parent. In the event of debtor default on the equity
   investment bank debt, CITGO has no recourse. In the event of debtor default
   on customer bank debt, CITGO generally has recourse to personal guarantees
   from principals or liens on property. In the event of debtor default on
   financing debt incurred by customers, CITGO would receive an interest in the
   equipment being financed after making the guaranteed debt payment. In the
   event of debtor default on financing debt incurred by an equity investee,
   CITGO has no recourse.

   CITGO has granted indemnities to the buyers in connection with past sales of
   product terminal facilities. These indemnities provide that CITGO will accept
   responsibility for claims arising from the period in which CITGO owned the
   facilities. Due to the uncertainties in this situation, the Company is not
   able to estimate a liability relating to these indemnities.

   The Company has not recorded a liability on its balance sheet relating to
   product warranties because historically, product warranty claims have not
   been significant.

   OTHER CREDIT AND OFF-BALANCE SHEET RISK INFORMATION AS OF DECEMBER 31, 2004 -
   The Company has outstanding letters of credit totaling approximately $415
   million, which includes $409 million related to CITGO's tax-exempt and
   taxable revenue bonds (Note 9).

   The Company has also acquired surety bonds totaling $57 million primarily due
   to requirements of various government entities. The Company does not expect
   liabilities to be incurred related to such letters of credit or surety bonds.

   Neither the Company nor the counterparties are required to collateralize
   their obligations under interest rate swaps or over-the-counter derivative
   commodity agreements. The Company is exposed to credit loss in the

                                      F-29
<PAGE>

   event of nonperformance by the counterparties to these agreements. The
   Company does not anticipate nonperformance by the counterparties, which
   consist primarily of major financial institutions.

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

13. LEASES

   The Company leases certain of its Corpus Christi refinery facilities under a
   capital lease. The basic term of the lease expired on January 1, 2004;
   however, the Company renewed the lease for a two year term and may continue
   to renew the lease until January 31, 2011, the date of its option to purchase
   the facilities for a nominal amount. A portion of an operating unit at the
   Corpus Christi refinery is also considered a capital lease. The basic term of
   the lease expires on February 1, 2009 at which time the Company may purchase
   the leased unit for a nominal amount. A portion of the Lemont refinery's
   assets are under two separate capital leases. The leases expire on July 1,
   2008 and August 1, 2032. Capitalized costs included in property, plant and
   equipment related to the leased assets were approximately $238 million at
   December 31, 2004 and $215 million at December 31, 2003. Accumulated
   amortization related to the leased assets was approximately $152 million and
   $143 million at December 31, 2004 and 2003, respectively. Amortization is
   included in depreciation expense.

   The Company also has various noncancelable operating leases, primarily for
   product storage facilities, office space, computer equipment, vessels and
   vehicles. Rent expense on all operating leases totaled $122 million in 2004,
   $116 million in 2003, and $102 million in 2002. Future minimum lease payments
   for the capital lease and noncancelable operating leases are as follows:

<TABLE>
<CAPTION>
                                    CAPITAL      OPERATING
                                     LEASE         LEASES         TOTAL
    YEAR                                       (000s OMITTED)
<S>                                <C>           <C>            <C>
    2005                           $   8,309     $ 100,169      $ 108,478
    2006                               8,309        61,310         69,619
    2007                               8,309        32,449         40,758
    2008                               8,098        21,098         29,196
    2009                               7,089         5,619         12,708
Thereafter                            32,703        24,788         57,491
                                   ---------     ---------      ---------

Total minimum lease payments          72,817     $ 245,433      $ 318,250
Amount represents interest           (24,658)    =========      =========
                                   ---------
Present value of lease payments       48,159
Current portion                       (4,404)
                                   ---------

                                   $  43,755
                                   =========
</TABLE>

                                      F-30
<PAGE>

14. FAIR VALUE INFORMATION

   The following estimated fair value amounts have been determined by the
   Company, 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 Company 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 equivalents approximate fair values. The
   carrying amounts and estimated fair values of the Company's other financial
   instruments are as follows:

<TABLE>
<CAPTION>
                                             2004                        2003
                                   ------------------------   -------------------------
                                    CARRYING        FAIR        CARRYING        FAIR
                                     AMOUNT        VALUE         AMOUNT        VALUE
                                       (000s OMITTED)              (000s OMITTED)
<S>                                <C>          <C>           <C>           <C>
LIABILITIES:
   Long-term debt                  $1,131,891   $ 1,160,971   $ 1,473,464   $ 1,605,835

DERIVATIVE AND OFF-BALANCE
   SHEET FINANCIAL INSTRUMENTS -
   UNREALIZED LOSSES:
   Interest rate swap agreements         (388)         (388)       (2,106)       (2,106)
   Guarantees of debt                       -        (1,782)            -        (1,805)
   Letters of credit                        -       (12,855)            -        (7,664)
   Surety bonds                             -          (331)            -          (422)
</TABLE>

   LONG-TERM DEBT - The fair value of long-term debt is based on interest rates
   that are currently available to the Company for issuance of debt with similar
   terms and remaining maturities.

   INTEREST RATE SWAP AGREEMENTS - The fair value of these agreements is based
   on the estimated amount that the Company would receive or pay to terminate
   the agreements at the reporting dates, 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.

   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.

                                      F-31
<PAGE>

15. INSURANCE RECOVERIES

   On August 14, 2001, a fire occurred at the crude oil distillation unit of the
   Lemont refinery. A new crude unit was operational at the end of May 2002.

   On September 21, 2001, a fire occurred at the hydrocracker unit of the Lake
   Charles refinery. Operations at the hydrocracker resumed on November 22,
   2001.

   The Company recognizes property damage insurance recoveries in excess of the
   amount of recorded losses and related expenses, and business interruption
   insurance recoveries when such amounts are realized. During the years ended
   December 31, 2003 and 2002, the Company recorded $146 million and $407
   million of insurance recoveries primarily related to these fires. The Company
   received cash proceeds of $146 million and $442 million during the years
   ended December 31, 2003 and 2002, respectively. In July 2003, the Company
   received the final payment related to the Lemont fire.

16. CORPORATE HEADQUARTERS RELOCATION

   In April 2004, CITGO announced its decision to move its corporate
   headquarters from Tulsa, Oklahoma to Houston, Texas. The transfer of
   approximately 700 positions from a total of approximately 1,000 positions in
   Tulsa began in August 2004. At December 31, 2004, 244 positions have been
   transferred. The relocation is expected to be complete in July 2005. A
   summary of relocation costs follows:

<TABLE>
<CAPTION>
                                         Expected       Amount        Cumulative
                                           Total       Incurred         Amount
                                          Amount   4th Quarter 2004    Incurred
                                         --------  ----------------   ----------
                                                    ($ in millions)
<S>                                      <C>           <C>             <C>
Relocation costs                         $     32      $      9        $     16
Severance and related costs                    21            10              13
Property and leasehold improvements            37            16              17
                                         --------      --------        --------
   Total                                 $     90      $     35        $     46
                                         ========      ========        ========
</TABLE>

   Relocation costs and severance and related costs are included in CITGO's
   consolidated statement of income and comprehensive income as a component of
   the caption selling, general and administrative expense. Costs related to
   property and leasehold improvements are included in CITGO's condensed
   consolidated balance sheet as a component of the caption property, plant and
   equipment. An accrual of $13 million related to relocation costs is included
   in CITGO's consolidated balance sheet as a component of the caption current
   liabilities other.

17. SUBSEQUENT EVENTS

   In mid-March 2005, representatives of a special commission of the Venezuelan
   National Assembly (the "VNA Commission") visited CITGO's Houston, Texas
   offices for the purpose of interviewing several CITGO employees as part of an
   investigation that the VNA Commission had been charged with conducting. CITGO
   has not received any direct statements from the VNA Commission describing the
   scope of their investigation. CITGO understands from the interviewed
   employees that the questions were directed at the rationale for, and analysis
   underlying, note financings that CITGO completed in 2003 and 2004, the
   relocation of its corporate headquarters to Houston, Texas, and several minor
   transactions. The questions did not identify any unlawful or unrecorded
   activities, and CITGO is not aware of any such activities. CITGO is
   cooperating with the VNA Commission's investigation. Shortly following the
   VNA Commission's visit, a CITGO employee sent a memorandum to both CITGO's
   auditors and the SEC referencing the VNA Commission's investigation and other
   matters. CITGO is not aware of any improper activities, but has engaged
   counsel to investigate the employee's allegations.


                                     ******

                                      F-32
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partnership Governance Committee
of LYONDELL-CITGO Refining LP:

In our opinion, the accompanying balance sheets and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of LYONDELL-CITGO Refining LP (the
"Partnership") at December 31, 2004 and 2003, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2004, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP

Houston, Texas
February 26, 2005

                                      F-33
<PAGE>

                           LYONDELL-CITGO REFINING LP

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                          FOR THE YEAR ENDED DECEMBER 31,
                                                       --------------------------------------
            MILLIONS OF DOLLARS                          2004           2003           2002
-------------------------------------------------      --------       --------       --------
<S>                                                    <C>            <C>            <C>
SALES AND OTHER OPERATING REVENUES                     $  5,603       $  4,162       $  3,392

OPERATING COSTS AND EXPENSES:
     Cost of sales:
          Crude oil and feedstock                         4,383          3,209          2,546
          Operating and other expenses                      645            633            547
     Selling, general and administrative expenses            59             56             53
                                                       --------       --------       --------
                                                          5,087          3,898          3,146
                                                       ========       ========       ========
     Operating income                                       516            264            246

Interest expense                                            (31)           (37)           (32)
Interest income                                               1              1             --
Other income (expense)                                       14             --             (1)
                                                       --------       --------       --------

NET INCOME                                             $    500       $    228       $    213
                                                       ========       ========       ========
</TABLE>

                       See Notes to Financial Statements.

                                      F-34
<PAGE>

                           LYONDELL-CITGO REFINING LP

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                        -----------------------
               MILLIONS OF DOLLARS                        2004           2003
--------------------------------------------------      --------       --------
<S>                                                     <C>            <C>
ASSETS
Current assets:
     Cash and cash equivalents                          $     45       $     43
     Accounts receivable:
            Trade, net                                        65             51
             Related parties                                 145            121
     Inventories                                              99             98
     Prepaid expenses and other current assets                 5              3
                                                        --------       --------
        Total current assets                                 359            316
                                                        --------       --------

Property, plant and equipment, net                         1,227          1,240
Other assets, net                                             61             81
                                                        --------       --------
       Total assets                                     $  1,647       $  1,637
                                                        ========       ========

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
     Accounts payable:
           Trade                                        $    132       $     71
           Related parties and affiliates                    253            224
     Distribution payable to Lyondell Partners                78             21
     Distribution payable to CITGO Partners                   55             15
     Current maturities of long-term debt                      5             --
     Accrued liabilities                                      65             55
                                                        --------       --------
        Total current liabilities                            588            386
                                                        ========       ========

Long-term debt                                               443            450
Loan payable to Lyondell Partners                            229            229
Loan payable to CITGO Partners                                35             35
Other liabilities                                            112            114
                                                        --------       --------
       Total long-term liabilities                           819            828
                                                        ========       ========

Commitments and contingencies

Partners' capital:
     Partners' accounts                                      263            442
     Accumulated other comprehensive loss                    (23)           (19)
                                                        --------       --------
        Total partners' capital                              240            423
                                                        ========       ========

           Total liabilities and partners' capital      $  1,647       $  1,637
                                                        ========       ========
</TABLE>

                       See Notes to Financial Statements.

                                      F-35
<PAGE>

                           LYONDELL-CITGO REFINING LP

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                FOR THE YEAR ENDED DECEMBER 31,
                                                                        ------------------------------------------------
                   MILLIONS OF DOLLARS                                     2004               2003               2002
----------------------------------------------------------------        ----------         ----------         ----------
<S>                                                                     <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                         $      500         $      228         $      213
     Adjustments to reconcile net income to
          cash provided by operating activities:
          Depreciation and amortization                                        115                113                116
          Net loss on disposition of assets                                     10                 27                  1
          Other                                                                 --                 --                  1
    Changes in assets and liabilities that provided (used) cash:
          Accounts receivable                                                  (37)               (19)               (59)
          Inventories                                                           (1)                (5)                37
          Accounts payable                                                      79                 14                 70
          Other assets and liabilities                                           1                 16                (18)
                                                                        ----------         ----------         ----------
               Cash provided by operating activities                           667                374                361
                                                                        ----------         ----------         ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Expenditures for property, plant and equipment                            (71)               (46)               (65)
     Proceeds from sale of property, plant and equipment                        --                 --                  2
     Other                                                                      (1)                --                 (3)
                                                                        ----------         ----------         ----------
               Cash used in investing activities                               (72)               (46)               (66)
                                                                        ----------         ----------         ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Distributions to Lyondell Partners                                       (385)              (253)              (126)
     Distributions to CITGO Partners                                          (271)              (178)               (89)
     Contributions from Lyondell Partners                                       44                 30                 46
     Contributions from CITGO Partners                                          30                 21                 32
     Payment of debt issuance costs                                             (9)                (6)               (10)
     Payment of current maturities of long-term debt                            (2)                --                 --
     Net repayment under lines of credit                                        --                 --                (50)
                                                                        ----------         ----------         ----------
               Cash used in financing activities                              (593)              (386)              (197)
                                                                        ----------         ----------         ----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 2                (58)                98
Cash and cash equivalents at beginning of period                                43                101                  3
                                                                        ----------         ----------         ----------
Cash and cash equivalents at end of period                              $       45         $       43         $      101
                                                                        ==========         ==========         ==========
</TABLE>

                       See Notes to Financial Statements.

                                      F-36
<PAGE>

                           LYONDELL-CITGO REFINING LP

                         STATEMENTS OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>


                                                PARTNERS' ACCOUNTS                   ACCUMULATED
                                    ------------------------------------------          OTHER
                                    LYONDELL           CITGO                        COMPREHENSIVE    COMPREHENSIVE
    MILLIONS OF DOLLARS             PARTNERS         PARTNERS           TOTAL       INCOME (LOSS)    INCOME (LOSS)
----------------------------        --------         --------         --------      -------------    -------------
<S>                                 <C>              <C>              <C>           <C>              <C>
BALANCE AT JANUARY 1, 2002          $     12         $    495         $    507         $    (15)

Net income                               135               78              213               --         $    213
Cash contributions                        46               32               78               --               --
Distributions to Partners               (215)            (151)            (366)              --               --
Other comprehensive loss -
  minimum pension liability                                                                 (14)             (14)
                                    --------         --------         --------         --------         --------
Comprehensive income                                                                                    $    199
                                                                                                        ========

BALANCE AT DECEMBER 31, 2002             (22)             454              432              (29)

Net income                               144               84              228               --         $    228
Cash contributions                        30               21               51               --               --
Other contributions                       10                7               17               --               --
Distributions to Partners               (168)            (118)            (286)              --               --
Other comprehensive income-
   minimum pension liability                                                                 10               10
                                    --------         --------         --------         --------         --------
Comprehensive income                                                                                    $    238
                                                                                                        ========

BALANCE AT DECEMBER 31, 2003              (6)             448              442              (19)

Net income                               304              196              500               --         $    500
Cash contributions                        44               30               74               --               --
Distributions to Partners               (442)            (311)            (753)              --               --
Other comprehensive loss -
   minimum pension liability                                                                 (4)              (4)
                                    --------         --------         --------         --------         --------
Comprehensive income                                                                                    $    496
                                                                                                        ========

BALANCE AT DECEMBER 31, 2004        $   (100)        $    363         $    263         $    (23)
                                    ========         ========         ========         ========
</TABLE>

                       See Notes to Financial Statements.

                                      F-37
<PAGE>

                           LYONDELL-CITGO REFINING LP

                         NOTES TO FINANCIAL STATEMENTS

1. THE PARTNERSHIP

LYONDELL-CITGO Refining LP ("LCR" or the "Partnership") was formed on July 1,
1993 by subsidiaries of Lyondell Chemical Company ("Lyondell") and CITGO
Petroleum Corporation ("CITGO") primarily in order to own and operate a refinery
("Refinery") located on the Houston Ship Channel in Houston, Texas.

Lyondell owns its interest in the Partnership through wholly owned subsidiaries,
Lyondell Refining Partners, LP ("Lyondell LP") and Lyondell Refining Company
("Lyondell GP"). Lyondell LP and Lyondell GP are collectively known as Lyondell
Partners. CITGO holds its interest through CITGO Refining Investment Company
("CITGO LP") and CITGO Gulf Coast Refining, Inc. ("CITGO GP"), both wholly owned
subsidiaries of CITGO. CITGO LP and CITGO GP are collectively known as CITGO
Partners. Lyondell Partners and CITGO Partners are collectively known as the
Partners. LCR will continue in existence until it is dissolved under the terms
of the Limited Partnership Agreement (the "Agreement"). Under the terms of the
Agreement, upon dissolution of the Partnership, neither partner shall have any
obligation to contribute capital to restore any negative balance in its
partner's capital account balance.

The Partners have agreed to allocate cash distributions based on an ownership
interest that was determined by certain contributions instead of allocating such
amounts based on their capital account balances. Based upon these contributions,
Lyondell Partners and CITGO Partners had ownership interests of 58.75% and
41.25%, respectively, as of December 31, 2004. Net income as shown on the
statements of partners' capital is made up of two components which are allocated
to the Partners on different bases: depreciation expense, which is allocated to
each partner in proportion to contributed assets and net income other than
depreciation expense, which is allocated to each partner based on ownership
interests.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition--Revenue from product sales is recognized as risk and title
to the product transfer to the customer, which usually occurs when shipment is
made. Under the terms of a long-term product sales agreement, CITGO buys
substantially all of the gasoline, jet fuel, low sulfur diesel, heating oils,
coke and sulfur produced at the Refinery, which represents over 70% of LCR's
revenues, at market-based prices.

Cash and Cash Equivalents--Cash equivalents consist of highly liquid debt
instruments such as certificates of deposit, commercial paper and money market
accounts. Cash equivalents include instruments with maturities of three months
or less when acquired. Cash equivalents are stated at cost, which approximates
fair value. The Partnership's policy is to invest cash in conservative, highly
rated instruments and to limit the amount of credit exposure to any one
institution.

Accounts Receivable--The Partnership sells its products primarily to CITGO and
to other industrial concerns in the petrochemical and refining industries. The
Partnership performs ongoing credit evaluations of its customers' financial
condition and in certain circumstances, requires letters of credit from them.
The Partnership's allowance for doubtful accounts receivable, which is reflected
in the Balance Sheets as a reduction of accounts receivable-trade, totaled
$25,000 at both December 31, 2004 and 2003.

Inventories--Inventories are stated at the lower of cost or market. Cost is
determined using the last-in, first-out ("LIFO") method for substantially all
inventories, except for materials and supplies, which are valued using the
average cost method.

                                      F-38
<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventory exchange transactions, which involve fungible commodities and do not
involve the payment or receipt of cash, are not accounted for as purchases and
sales. Any resulting volumetric exchange balances are accounted for as inventory
in accordance with the normal LIFO valuation policy.

Property, Plant and Equipment--Property, plant and equipment are recorded at
cost. Depreciation is computed using the straight-line method over the estimated
useful asset lives, generally, 24 years for major manufacturing equipment, 24 to
30 years for buildings, 5 to 10 years for light equipment and instrumentation,
10 years for office furniture and 5 years for information system equipment. Upon
retirement or sale, LCR removes the cost of the asset and the related
accumulated depreciation from the accounts and reflects any resulting gain or
loss in the Statement of Income. LCR's policy is to capitalize interest cost
incurred on debt during the construction of major projects exceeding one year.

Long-Lived Asset Impairment--LCR evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that a carrying amount of
an asset may not be recoverable. When it is probable that undiscounted future
cash flows will not be sufficient to recover an asset's carrying amount, the
asset is written down to its estimated fair value. Long-lived assets to be
disposed of are reported at the lower of carrying amount or estimated fair value
less costs to sell the assets.

Turnaround Maintenance and Repair Costs--Costs of maintenance and repairs
exceeding $5 million incurred in connection with turnarounds of major units at
the Refinery are deferred and amortized using the straight-line method over the
period until the next planned turnaround, generally 4 to 6 years. These costs
are necessary to maintain, extend and improve the operating capacity and
efficiency rates of the production units.

Identifiable Intangible Assets--Costs to purchase and to develop software for
internal use are deferred and amortized on a straight-line basis over a period
of 3 to 10 years. Other intangible assets are carried at amortized cost and
primarily consist of deferred debt issuance costs. These assets are amortized
using the straight-line method over their estimated useful lives or the term of
the related agreement, if shorter.

Environmental Remediation Costs--Anticipated expenditures related to
investigation and remediation of contaminated sites, which include operating
facilities and waste disposal sites, are accrued when it is probable a liability
has been incurred and the amount of the liability can reasonably be estimated.
Estimated expenditures have not been discounted to present value.

Income Taxes--The Partnership is not subject to federal income taxes as income
is reportable directly by the individual partners; therefore, there is no
provision for federal income taxes in the accompanying financial statements.

Use of Estimates--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, the
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.

                                      F-39
<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Anticipated Accounting Changes - In December 2004, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 153, Exchanges of Nonmonetary Assets, which amends APB Opinion No.
29, Accounting for Nonmonetary Transactions, to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange is defined to have commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS No. 153 becomes effective in the
third quarter 2005 and will be applied prospectively upon implementation. LCR
does not expect application of SFAS No. 153 to have a material impact on its
financial statements.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs. The statement
requires recognition of any abnormal amounts of idle facility expense, freight,
handling costs and spoilage as period costs. The provisions of SFAS No. 151 will
apply prospectively upon implementation in 2005. LCR does not expect application
of SFAS No. 151 to have a material impact on its financial statements.

Reclassifications--Certain previously reported amounts have been reclassified to
conform to classifications adopted in 2004.

3. RELATED PARTY TRANSACTIONS

LCR is party to agreements with the following related parties:

   -     CITGO

   -     CITGO Partners

   -     Equistar Chemicals, LP ("Equistar")

   -     Lyondell

   -     Lyondell Partners

   -     Petroleos de Venezuela, S.A. ("PDVSA"), the national oil company of the
         Bolivarian Republic of Venezuela

   -     PDVSA Petroleo, S.A. ("PDVSA Oil")

   -     Petrozuata Financial, Inc.

   -     TCP Petcoke Corporation

LCR has a long-term crude supply agreement ("Crude Supply Agreement" or "CSA")
with PDVSA Oil, an affiliate of CITGO (see "Crude Supply Agreement" section of
Note 11). The CSA, which expires on December 31, 2017, incorporates formula
prices to be paid by LCR for the crude oil supplied based on the market value of
a slate of refined products deemed to be produced from each particular crude oil
or raw material, less: (1) certain deemed refining costs, adjustable for
inflation and energy costs; (2) certain actual costs; and (3) a deemed margin,
which varies according to the grade of crude oil or other raw material
delivered. The actual refining margin earned by LCR may vary from the formula
amount depending on, among other things, timing differences in incorporating
changes in refined product market values and energy costs into the CSA's deemed
margin calculations and the efficiency with which LCR conducts its operations
from time to time. Although LCR believes that the CSA reduces the volatility of
LCR's earnings and cash flows over the long-term, the CSA also limits LCR's
ability to enjoy higher margins during periods when the market price of crude
oil is low relative to then-current market prices of refined products. In
addition, if the actual yields, costs or volumes of the LCR Refinery differ
substantially from

                                      F-40
<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. RELATED PARTY TRANSACTIONS (CONTINUED)

those contemplated by the CSA, the benefits of this agreement to LCR could be
substantially diminished, and could result in lower earnings and cash flow for
LCR. Furthermore, there may be periods during which LCR's costs for crude oil
under the CSA may be higher than might otherwise be available to LCR from other
sources. A disparate increase in the market price of heavy crude oil relative to
the prices of heavy crude oil under the CSA has the tendency to make continued
performance of its obligations under the CSA less attractive to PDVSA Oil.

Under the terms of a long-term product sales agreement, CITGO buys substantially
all of the finished gasoline, jet fuel, low sulfur diesel, heating oils, coke
and sulfur produced at the Refinery at market-based prices.

LCR is party to a number of raw materials, product sales and administrative
service agreements with Lyondell, CITGO and Equistar. These include a hydrogen
take-or-pay contract with Equistar (see Note 11). In addition, a processing
agreement provides for the production of alkylate and methyl tertiary butyl
ether for the Partnership at Equistar's Channelview, Texas petrochemical
complex.

As a result of Lyondell's acquisition on November 30, 2004, of the only other
remaining ownership interest holder of Equistar, Equistar became a wholly owned
subsidiary of Lyondell on November 30, 2004.

Under the terms of a lubricant facility operating agreement, CITGO operated the
lubricant blending and packing facility in Birmingport, Alabama while the
Partnership retained ownership. During 2003, a decision was made to discontinue
the lubes blending and packaging operations at the facility in Birmingport,
Alabama and the facility was permanently shut down. Lubes blending and packaging
operations are now conducted at CITGO or other locations. Under the terms of the
lubricant sales agreements, CITGO buys paraffinic lubricants base oil,
naphthenic lubricants, white mineral oils and specialty oils from the
Partnership, at market based prices.

Related party transactions are summarized as follows:

<TABLE>
<CAPTION>
                                                         FOR THE YEAR ENDED DECEMBER 31,
                                                     ----------------------------------------
            MILLIONS OF DOLLARS                        2004            2003            2002
---------------------------------------------        --------        --------        --------
<S>                                                  <C>             <C>             <C>
LCR billed related parties for the following:
  Sales of products:
    CITGO                                            $  4,141        $  3,010        $  2,488
    Equistar                                              425             227             217
    Lyondell                                               --              --               1
    TCP Petcoke Corporation                                 1              33              17
  Services and cost sharing arrangements:
    Equistar                                                1              --               1
    Lyondell                                               --               1               1
</TABLE>

                                      F-41
<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. RELATED PARTY TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                         FOR THE YEAR ENDED DECEMBER 31,
                                                     ----------------------------------------
            MILLIONS OF DOLLARS                        2004            2003            2002
---------------------------------------------        --------        --------        --------
<S>                                                  <C>             <C>             <C>
Related parties billed LCR for the following:
  Purchase of products:
    CITGO                                            $    108        $    201        $     78
    Equistar                                              725             445             324
    Lyondell                                               14               4               1
    PDVSA                                               2,594           1,742           1,259
    Petrozuata Financial, Inc.                             --              --              22
  Transportation charges:
    CITGO                                                   1               1               1
    Equistar                                                4               4               3
    PDVSA                                                  --              --               3
  Services and cost sharing arrangements:
    CITGO                                                   6               6               8
    Equistar                                               23              21              17
    Lyondell                                                3               2               3
</TABLE>

See Note 7 for information regarding LCR master notes payable to Lyondell
Partners and CITGO Partners.

4. INVENTORIES

Inventories consisted of the following components at December 31:

<TABLE>
<CAPTION>
   MILLIONS OF DOLLARS           2004          2003
------------------------        ------        ------
<S>                             <C>           <C>
Finished goods                  $   16        $   16
Raw materials                       70            69
Materials and supplies              13            13
                                ------        ------
       Total inventories        $   99        $   98
                                ======        ======
</TABLE>

In 2004 and 2003, all inventory, excluding materials and supplies, were valued
using the LIFO method. The excess of replacement cost of inventories over the
carrying value was approximately $221 million at December 31, 2004.

5. PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS

The components of property, plant and equipment, at cost, and the related
accumulated depreciation were as follows at December 31:

<TABLE>
<CAPTION>
          MILLIONS OF DOLLARS                     2004               2003
---------------------------------------        ----------         ----------
<S>                                            <C>                <C>
Land                                           $        2         $        2
Manufacturing facilities and equipment              2,528              2,493
Construction in progress                              105                 67
                                               ----------         ----------
   Total property, plant and equipment              2,635              2,562
Less accumulated depreciation                      (1,408)            (1,322)
                                               ----------         ----------
     Property, plant and equipment, net        $    1,227         $    1,240
                                               ==========         ==========
</TABLE>

                                      F-42
<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS (CONTINUED)

Maintenance and repair expenses were $50 million, $52 million and $59 million
for the years ended December 31, 2004, 2003 and 2002 respectively.

The components of other assets, at cost, and the related accumulated
amortization were as follows at December 31:

<TABLE>
<CAPTION>
                                           2004                            2003
                               ----------------------------   ------------------------------
                                        ACCUMULATED                    ACCUMULATED
MILLIONS OF DOLLARS             COST   AMORTIZATION    NET     COST    AMORTIZATION     NET
-------------------            -----   ------------   -----   -----    ------------   ------
<S>                            <C>     <C>            <C>     <C>      <C>            <C>
Intangible assets:
  Turnaround costs             $  59      $ (39)      $  20   $   58      $ (27)      $   31
  Software costs                  40        (26)         14       38        (21)          17
  Debt issuance costs             24        (17)          7       16        (11)           5
  Catalyst costs                  11         (5)          6       11         (6)           5
  Other                            3          -           3        2          -            2
                               -----      -----       -----   ------      -----       ------
Total intangible assets        $ 137      $ (87)      $  50   $  125      $ (65)      $   60
                               =====      =====               ======      =====
Company-owned life insurance                              6                                5
Other                                                     5                               16
                                                      -----                           ------
Total other assets                                    $  61                           $   81
                                                      =====                           ======
</TABLE>

Scheduled amortization of these intangible assets for the next five years is
estimated at $19 million in 2005, $16 million in 2006, $5 million in 2007, $4
million in 2008 and $2 million in 2009.

Depreciation and amortization expense is summarized as follows:

<TABLE>
<CAPTION>
                                                FOR THE YEAR ENDED DECEMBER 31,
                                             -----------------------------------
MILLIONS OF DOLLARS                           2004          2003          2002
-------------------                          -------       -------       -------
<S>                                          <C>           <C>           <C>
Property, plant and equipment                $    91       $    90       $    89
Turnaround costs                                  12            12            13
Software costs                                     5             5             5
Other                                              7             6             9
                                             -------       -------       -------
   Total depreciation and amortization       $   115       $   113       $   116
                                             =======       =======       =======
</TABLE>

In addition to the depreciation and amortization shown above, amortization of
debt issuance costs of $6 million, $11 million and $5 million in 2004, 2003 and
2002, respectively, is included in interest expense in the Statements of Income.

                                      F-43

<PAGE>
                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

6. ACCRUED LIABILITIES

Accrued liabilities consisted of the following components at December 31:

<TABLE>
<CAPTION>
MILLIONS OF DOLLARS                  2004          2003
-------------------                 ------        ------
<S>                                 <C>           <C>
Payroll and benefits                $   25        $   25
Taxes other than income                 26            25
Interest                                 6             2
Other                                    8             3
                                    ------        ------
   Total accrued liabilities        $   65        $   55
                                    ======        ======
</TABLE>

7. FINANCING ARRANGEMENTS

In May 2004, LCR refinanced its credit facilities with a new facility,
consisting of a $450 million senior secured term loan and a $100 million senior
secured revolver, which mature in May 2007. The term loan requires quarterly
amortization payments of $1.125 million which began in September 2004. The new
facility replaced LCR's $450 million term loan facility and $70 million
revolving credit facility, which were scheduled to mature in June 2004 and is
secured by substantially all of the assets of LCR. At December 31, 2004, $448
million was outstanding under the senior secured term loan with a
weighted-average interest rate of 4.2%. Interest for this facility was
determined by base rates or eurodollar rates at the Partnership's option. The
$100 million senior secured revolver is utilized for general business purposes
and for letters of credit. At December 31, 2004, no amount was outstanding under
the senior secured revolver. At December 31, 2004, LCR had outstanding letters
of credit totaling $12 million.

The new facility contains covenants that require LCR to maintain certain
financial ratios defined in the agreement. The facility also contains other
customary covenants which limit the Partnership's ability to modify certain
significant contracts, incur significant additional debt or liens, dispose of
assets, make restricted payments as defined in the agreements or merge or
consolidate with other entities.

In September 2004, LCR obtained an amendment to the new facility that reduced
the interest rate and eased certain financial covenants, including the
debt-to-total-capitalization ratio. LCR was in compliance with all such
covenants at December 31, 2004.

As part of the May 2004 refinancing, Lyondell Partners and CITGO Partners
extended the maturity of the loans payable to the Partners, including $229
million payable to Lyondell Partners and $35 million payable to CITGO Partners,
from July 2005 to January 2008. At December 31, 2004, Lyondell Partners and
CITGO Partners loans were $229 million and $35 million, respectively, and both
loans had weighted-average interest rates of 2.0%, which were based on
eurodollar rates. Interest to both Partners was paid at the end of each calendar
quarter through June 30, 1999, but is now deferred in accordance with the
restrictions included in the $450 million term loan facility.

In December 2002, LCR completed a refinancing of its credit facilities with a
new $450 million term bank loan facility and a $70 million working capital
revolving credit facility that was scheduled to mature in June 2004. The
facilities were secured by substantially all of the assets of LCR. At December
31, 2003, $450 million was outstanding under the bank term loan facility with
weighted-average interest rates of 4.1%. Interest for this facility was
determined by base rates or eurodollar rates at the Partnership's option. The
$70 million working capital revolving credit facility is utilized for general
business purposes and for letters of credit. At December 31, 2003, no amounts
were outstanding under this facility. At December 31, 2003, LCR had outstanding
letters of credit totaling $13 million.

                                      F-44



<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. FINANCING ARRANGEMENTS (CONTINUED)

Both of the December 2002 facilities contained covenants that required LCR to
maintain a minimum net worth and maintain certain financial ratios defined in
the agreements. The facilities also contained other customary covenants which
limit the Partnership's ability to modify certain significant contracts, incur
significant additional debt or liens, dispose of assets, make restricted
payments as defined in the agreements or merge or consolidate with other
entities. LCR was in compliance with all such covenants at December 31, 2003.

Also, during the December 2002 refinancing, the Partners and LCR agreed to renew
and extend a number of existing notes due to Lyondell Partners and CITGO
Partners with a master note to each Partner. The master notes extended the due
date from July 1, 2003 to December 7, 2004, and are subordinate to the two bank
credit facilities. At December 31, 2003, Lyondell Partners and CITGO Partners
loans were $229 million and $35 million, respectively, and both loans had
weighted-average interest rates of 2.2%, which were based on eurodollar rates.
Subsequent to December 31, 2003, the due date of the master notes were extended
to March 31, 2005.

8. LEASE COMMITMENTS

LCR leases crude oil storage facilities, computer equipment, office equipment
and other items under noncancelable operating lease arrangements for varying
periods. As of December 31, 2004, future minimum lease payments for the next
five years and thereafter, relating to all noncancelable operating leases with
terms in excess of one year were as follows:

<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
-------------------
<S>                                 <C>
2005                                $   74
2006                                    47
2007                                    35
2008                                    18
2009                                    14
   Thereafter                           90
                                    ------
Total minimum lease payments        $  278
                                    ======
</TABLE>

Net rental expenses for the years ended December 31, 2004, 2003 and 2002 were
approximately $90 million, $63 million and $34 million, respectively.

9. FINANCIAL INSTRUMENTS

The fair value of all financial instruments included in current assets and
current liabilities, including cash and cash equivalents, accounts receivable,
and accounts payable, approximated their carrying value due to their short
maturity. The fair value of long-term loans payable approximated their carrying
value because of their variable interest rates.

                                      F-45

<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

10. PENSION AND OTHER POSTRETIREMENT BENEFITS

LCR has defined benefit pension plans, which cover full-time regular employees.
Retirement benefits are based on years of service and the employee's highest
three consecutive years of compensation during the last ten years of service.
LCR funds the plans through periodic contributions to pension trust funds as
required by applicable law. LCR also has one unfunded supplemental nonqualified
retirement plan, which provides pension benefits for certain employees in excess
of the U.S. tax-qualified plans' limit. In addition, LCR sponsors unfunded
postretirement benefit plans other than pensions, which provide medical and life
insurance benefits. The postretirement medical plan is contributory, while the
life insurance plan is noncontributory. The measurement date for LCR's pension
and other postretirement benefit plans is December 31, 2004.

The following table provides a reconciliation of benefit obligations, plan
assets and the funded status of the plans:

<TABLE>
<CAPTION>
                                                                           OTHER POSTRETIREMENT
                                                  PENSION BENEFITS               BENEFITS
                                                ---------------------      --------------------
           MILLIONS OF DOLLARS                    2004         2003          2004         2003
------------------------------------------      -------      --------      -------      -------
<S>                                             <C>          <C>           <C>          <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation, January 1                   $   125      $    124      $    39      $    35
Service cost                                          6             6            1            1
Interest cost                                         8             7            3            2
Plan amendments                                      --            --           10           --
Actuarial (gain) loss                                15            (3)          (2)           3
Benefits paid                                        (7)           (9)          (3)          (2)
                                                -------      --------      -------      -------
Benefit obligation, December 31                     147           125           48           39
                                                -------      --------      -------      -------

CHANGE IN PLAN ASSETS:
Fair value of plan assets, January 1                 51            49
Actual return on plan assets                          7            10
Partnership contributions                            27             1
Benefits paid                                        (7)           (9)
                                                -------      --------
Fair value of plan assets, December 31               78            51
                                                -------      --------

Funded status                                       (69)          (74)         (48)         (39)
Unrecognized actuarial and investment loss           52            46           12           16
Unrecognized prior service cost (benefit)             2             2           (4)         (16)
                                                -------      --------      -------      -------
Net amount recognized                           $   (15)     $    (26)     $   (40)     $   (39)
                                                =======      ========      =======      =======

AMOUNTS RECOGNIZED IN THE
   BALANCE SHEET CONSIST OF:
Accrued benefit liability                       $   (40)     $    (47)     $   (40)     $   (39)
Intangible asset                                      2             2           --           --
Accumulated other comprehensive loss                 23            19           --           --
                                                -------      --------      -------      -------
Net amount recognized                           $   (15)     $    (26)     $   (40)     $   (39)
                                                =======      ========      =======      =======
</TABLE>

                                      F-46

<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

10. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

<TABLE>
<CAPTION>
                                                PENSION BENEFITS
                                                ----------------
           MILLIONS OF DOLLARS                   2004       2003
------------------------------------------      -----      -----
<S>                                             <C>        <C>
ADDITIONAL INFORMATION:
Accumulated benefit obligation for defined
    benefit plans, December 31                  $ 116      $  98
Increase (decrease) in minimum liability
    included in other comprehensive loss            4        (10)
</TABLE>

Pension plans with projected benefit obligations and accumulated benefit
obligations in excess of the fair value of assets are summarized as follows at
December 31:

<TABLE>
<CAPTION>
                                                PENSION BENEFITS
                                                ----------------
      MILLIONS OF DOLLARS                        2004       2003
-------------------------------                 -----      -----
<S>                                             <C>        <C>
Projected benefit obligations                   $ 147      $ 125
Accumulated benefit obligations                   116         98
Fair value of assets                               78         51
</TABLE>

Net periodic pension and other postretirement benefit costs included the
following components:

<TABLE>
<CAPTION>
                                                                     OTHER POSTRETIREMENT
                                            PENSION BENEFITS               BENEFITS
                                        ------------------------   ------------------------
         MILLIONS OF DOLLARS             2004     2003     2002     2004     2003     2002
-------------------------------------   ------   ------   ------   ------   ------   ------
<S>                                     <C>      <C>      <C>      <C>      <C>      <C>
COMPONENTS OF NET PERIODIC
  BENEFIT COST:
    Service cost                        $    6   $    7   $    6   $    1   $    1   $    1
    Interest cost                            8        7        8        3        2        2

    Actual (gain) loss on plan assets       (7)     (10)       5       --       --       --
    Less unrecognized gain (loss)            3        6       (9)      --       --       --
                                        ------   ------   ------   ------   ------   ------
    Recognized gain on plan assets          (4)      (4)      (4)      --       --       --

    Prior service costs amortization        --       --       --       (2)      (3)      (3)
    Actuarial loss amortization              4        4        3        1        1        1
    Net effect of settlements                2       --       --       --       --       --
                                        ------   ------   ------   ------   ------   ------
    Net periodic benefit cost           $   16   $   14   $   13   $    3   $    1   $    1
                                        ======   ======   ======   ======   ======   ======
</TABLE>

                                      F-47

<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

10. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

The weighted-average assumptions used in determining net benefit liabilities
were as follows at December 31:

<TABLE>
<CAPTION>
                                      PENSION         OTHER POSTRETIREMENT
                                      BENEFITS              BENEFITS
                                  ---------------     --------------------
                                  2004       2003       2004        2003
                                  ----       ----       ----        ----
<S>                               <C>        <C>        <C>         <C>
Discount rate                     5.75%      6.25%      5.75%       6.25%
Rate of compensation increase     4.50%      4.50%        --          --
</TABLE>

The weighted-average assumptions used in determining net periodic benefit cost
were as follows:

<TABLE>
<CAPTION>
                                                               OTHER POSTRETIREMENT
                                      PENSION BENEFITS               BENEFITS
                                   ----------------------     ----------------------
                                   2004     2003     2002     2004     2003     2002
                                   ----     ----     ----     ----     ----     ----
<S>                                <C>      <C>      <C>      <C>      <C>      <C>
Discount rate                      6.25%    6.50%    6.50%    6.25%    6.50%    6.50%
Expected return on plan assets     8.00%    8.00%    9.50%      --       --       --
Rate of compensation increase      4.50%    4.50%    4.50%      --       --       --
</TABLE>

Management's goal is to manage pension investments over the long term to achieve
optimal returns with an acceptable level of risk and volatility. Targeted asset
allocations of 55% U.S. equity securities, 15% non-U.S. equity securities and
30% fixed income securities were adopted in 2003 for the plans based on
recommendations by LCR's independent pension investment advisor. Investment
policies prohibit investments in securities issued by an affiliate, such as
Lyondell, or investment in speculative, derivative instruments. The investments
are marketable securities that provide sufficient liquidity to meet expected
benefit obligation payments.

Prior to 2003, LCR's expected long-term rate of return on plan assets of 9.5%
had been based on the average level of earnings that its independent pension
investment advisor had advised could be expected to be earned over time, using
the expected returns for the above-noted asset allocations that had been
recommended by the advisor, and had been adopted for the plans. Over the
three-year period ended December 31, 2003, LCR's actual return on plan assets
was a loss averaging 1.8% per year. In 2003, LCR reviewed its asset allocation
and expected long-term rate of return assumptions and obtained an updated asset
allocation study from the independent pension investment advisor, including
updated expectations for long-term market earnings rates for various classes of
investments. Based on this review, LCR reduced its expected long-term rate of
return on plan assets to 8% and did not significantly change its plan asset
allocations.

                                      F-48

<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

10. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

LCR's pension plan weighted-average asset allocations by asset category were as
follows at December 31:

<TABLE>
<CAPTION>
                              2004 POLICY    2004    2003
                              -----------    ----    ----
<S>                           <C>            <C>     <C>
ASSET CATEGORY:
U.S. equity securities            55%          57%     53%
Non-U.S. equity securities        15%          15%     18%
Fixed income securities           30%          28%     29%
                                 ---          ---     ---
     Total                       100%         100%    100%
                                 ===          ===     ===
</TABLE>

LCR expects to contribute approximately $5 million to its pension plans in 2005.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
"Act") was enacted in December 2003. In January 2004, the FASB issued FASB Staff
Position ("FSP") FAS 106-1, Accounting and Disclosure Requirements Related to
the Medicare Prescription Drug, Improvement and Modernization Act of 2003. As
permitted by FSP FAS 106-1, LCR elected to defer recognition of the effects of
the Act in accounting for its plans until the FASB developed and issued
authoritative guidance on accounting for subsidies provided by the Act. In May
2004, the FASB issued FSP FAS 106-2 of the same title, which gave final guidance
on accounting for subsidies under the Act and required LCR to implement its
provisions no later than the third quarter 2004, if the effects were
significant. The effect of the Act was not significant to the Partnership's
financial statements and was recognized in the December 31, 2004 accumulated
postretirement benefit obligation and the 2004 net periodic postretirement
benefit cost.

As of December 31, 2004, future expected benefit payments, which reflect
expected future service, as appropriate, were as follows:

<TABLE>
<CAPTION>
                       PENSION      OTHER
MILLIONS OF DOLLARS    BENEFITS    BENEFITS
-------------------    --------    --------
<S>                    <C>         <C>
  2005                   $    5       $   3
  2006                        7           3
  2007                        8           3
  2008                       10           4
  2009                       13           4
  2010 through 2014          82          19
                         ------       -----
      Total              $  125       $  36
                         ======       =====
</TABLE>

                                      F-49

<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

10. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

The assumed annual rate of increase in the per capita cost of covered health
care benefits as of December 31, 2004 was 10% for 2005, 7% for 2006 through 2008
and 5% thereafter. The health care cost trend rate assumption does not have a
significant effect on the amounts reported due to limits on LCR's maximum
contribution level to the medical plan. To illustrate, increasing or decreasing
the assumed health care cost trend rates by one percentage point in each year
would not change the accumulated postretirement benefit liability as of December
31, 2004 by less than $1 million and would not have a material effect on the
aggregate service and interest cost components of the net periodic
postretirement benefit cost for the year then ended.

LCR also maintains voluntary defined contribution savings plans for eligible
employees. Contributions to the plans by LCR were $5 million in each of the
three years ended December 31, 2004.

11. COMMITMENTS AND CONTINGENCIES

Commitments -- LCR has various purchase commitments for materials, supplies and
services incident to the ordinary conduct of business, generally for quantities
required for LCR's business and at prevailing market prices. LCR is party to
various unconditional purchase obligation contracts as a purchaser for products
and services, principally take-or-pay contracts for hydrogen, electricity and
steam. At December 31, 2004, future minimum payments under these contracts with
noncancelable contract terms in excess of one year and fixed minimum payments
were as follows:

<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
-------------------
<S>                                       <C>
2005                                      $   31
2006                                          29
2007                                          27
2008                                          25
2009                                          24
Thereafter through 2021                      177
                                          ------
   Total minimum contract payments        $  313
                                          ======
</TABLE>

Total LCR purchases under these agreements were $134 million, $107 million and
$68 million during 2004, 2003 and 2002, respectively. A substantial portion of
the future minimum payments and purchases were related to a hydrogen take-or-pay
agreement with Equistar (see Note 3).

Crude Supply Agreement--Under the CSA, which will expire on December 31, 2017,
PDVSA Oil is required to sell, and LCR is required to purchase 230,000 barrels
per day of extra heavy Venezuelan crude oil, which constitutes approximately 86%
of the Refinery's refining capacity of 268,000 barrels per day of crude oil (see
Note 3). Since April 1998, PDVSA Oil has, from time to time, declared itself in
a force majeure situation and subsequently reduced deliveries of crude oil. Such
reductions in deliveries were purportedly based on announced OPEC production
cuts. At such times, PDVSA Oil informed LCR that the Venezuelan government,
through the Ministry of Energy and Mines, had instructed that production of
certain grades of crude oil be reduced. In certain circumstances, PDVSA Oil made
payments under a different provision of the CSA in partial compensation for such
reductions.

                                      F-50

<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

LCR has consistently contested the validity of the reductions in deliveries by
PDVSA Oil and PDVSA under the CSA. The parties have different interpretations of
the provisions of the contracts concerning the delivery of crude oil. The
contracts do not contain dispute resolution procedures and the parties have been
unable to resolve their commercial dispute. As a result, in February 2002, LCR
filed a lawsuit against PDVSA and PDVSA Oil in connection with the force majeure
declarations, which LCR is continuing to litigate.

From time to time, Lyondell and PDVSA have had discussions covering both a
restructuring of the CSA and a broader restructuring of the LCR partnership. LCR
is unable to predict whether changes in either arrangement will occur. Depending
on then-current market conditions, any breach or termination of the CSA, or
reduction in supply thereunder, would require LCR to purchase all or a portion
of its crude oil in the merchant market, which could subject LCR to significant
volatility and price fluctuations and could aversely affect the Partnership.
There can be no assurance that alternative crude oil supplies with similar
margins would be available for purchase by LCR. During the year ended December
31, 2004, LCR received crude oil under the CSA at or above the contract volumes.

Subject to the consent of the other partner and rights of first offer and
refusal, the Partners each have a right to transfer their interests in LCR to
unaffiliated third parties in certain circumstances. If neither CITGO, PDVSA Oil
or their affiliates were a partner in LCR, PDVSA Oil would have an option to
terminate the CSA.

Environmental Remediation--With respect to liabilities associated with the
Refinery, Lyondell generally has retained liability for events that occurred
prior to July 1, 1993 and certain ongoing environmental projects at the Refinery
under the Contribution Agreement, retained liability section. LCR generally is
responsible for liabilities associated with events occurring after June 30, 1993
and ongoing environmental compliance inherent to the operation of the Refinery.

LCR's policy is to be in compliance with all applicable environmental laws. LCR
is subject to extensive national, state and local environmental laws and
regulations concerning emissions to the air, discharges onto land or waters and
the generation, handling, storage, transportation, treatment and disposal of
waste materials. Many of these laws and regulations provide for substantial
fines and potential criminal sanctions for violations. Some of these laws and
regulations are subject to varying and conflicting interpretations. In addition,
the Partnership cannot accurately predict future developments, such as
increasingly strict environmental laws, inspection and enforcement policies, as
well as higher compliance costs therefrom, which might affect the handling,
manufacture, use, emission or disposal of products, other materials or hazardous
and non-hazardous waste. Some risk of environmental costs and liabilities is
inherent in particular operations and products of the Partnership, as it is with
other companies engaged in similar businesses, and there is no assurance that
material costs and liabilities will not be incurred. In general, however, with
respect to the capital expenditures and risks described above, the Partnership
does not expect that it will be affected differently than the rest of the
refining industry where LCR is located.

LCR estimates that it has a liability of approximately $6 million at December
31, 2004 related to future assessment and remediation costs. Lyondell has a
contractual obligation to reimburse LCR for approximately $5 million.
Accordingly, LCR has reflected a current liability for the remaining portion of
this liability that will not be reimbursed by Lyondell. In the opinion of
management, there is currently no material estimable range of loss in excess of
the amount recorded. However, it is possible that new information associated
with this liability, new technology or future developments such as involvement
in investigations by regulatory agencies, could require LCR to reassess its
potential exposure related to environmental matters.

                                      F-51

<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Clean Air Act - Under the Clean Air Act, the eight-county Houston/Galveston
region has been designated a severe non-attainment area for ozone by the U.S.
Environmental Protection Agency ("EPA") under a "one-hour" ozone standard.
Emission reduction controls for nitrogen oxides ("NOx") must be installed at the
Refinery located in the Houston/Galveston region during the next several years.
Revised rules adopted by the regulatory agencies changed the required NOx
reduction levels from 90% to 80%.

The benefit from the 80% NOx reduction level could be affected by increased
costs for stricter proposed controls over highly reactive, volatile organic
compounds ("HRVOC"). The regulatory agency for the state of Texas, the Texas
Commission on Environmental Quality ("TCEQ"), finalized the HRVOC rules in
December 2004. LCR is still assessing the impact of the proposed HRVOC
revisions. In addition, in April 2004, the EPA designated the eight-county
Houston/Galveston region a moderate non-attainment area under an "eight-hour"
ozone standard. As a result, the TCEQ must submit a plan to the EPA in 2007 to
demonstrate compliance with the eight-hour ozone standard in 2010. The timing
and amount of estimated expenditures are subject to regulatory and other
uncertainties, as well as obtaining the necessary permits and approvals. There
can be no assurance as to the ultimate cost of implementing any plan developed
to comply with the final ozone standards.

The Clean Air Act also specified certain emissions standards for vehicles, and
in 1998, the EPA concluded that additional controls on gasoline and diesel fuel
were necessary. New standards for gasoline were finalized in 1999 and will
require refiners to produce a low sulfur gasoline by 2004, with final compliance
by 2006. A new "on-road" diesel standard was adopted in January 2001 and will
require refiners of on-road diesel fuel to produce 80% as ultra low sulfur
diesel ("ULSD") by June 2006 and 100% by the end of 2009, with less stringent
standards for "off-road" diesel fuel. To date, the "off-road" diesel fuel
standards have not been finalized. These gasoline and diesel fuel standards will
result in increased capital investment for LCR. In addition, these standards
could result in higher operating costs for LCR.

For the years ended December 31, 2004, 2003 and 2002 LCR spent $31 million, $16
million and $31 million, respectively, for environmental related capital
expenditures. These expenditures exclude a $25 million charge in 2003 for the
impairment of value of project costs incurred as a result of a change to
alternative approaches to complying with the gasoline and diesel fuel standards
projects that led to a reduction in estimated expenditures for project
compliance. LCR currently estimates that environmentally related capital
expenditures will be approximately $96 million for 2005 and $129 million for
2006, including preliminary estimated expenditures for engineering studies
related to emission control standards for HRVOC's, as described above.

LCR is involved in various lawsuits and proceedings. Subject to the uncertainty
inherent in all litigation, management believes the resolution of these
proceedings will not have a material adverse effect on the financial position,
liquidity or results of operations of LCR.

In the opinion of management, any liability arising from the matters discussed
in this note is not expected to have a material adverse effect on the financial
position or liquidity of LCR. However, the adverse resolution in any reporting
period of one or more of these matters discussed in this note could have a
material impact on LCR's results of operations for that period which may be
mitigated by contribution or indemnification obligations of others, or by any
insurance coverage that may be available.

                                      F-52

<PAGE>

                           LYONDELL-CITGO REFINING LP

                   NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

12. SUPPLEMENTAL CASH FLOW INFORMATION

At December 31, 2004, 2003 and 2002, construction in progress included
approximately $22 million, $5 million and $6 million, respectively, of non-cash
additions which related to accounts payable accruals and accrued liabilities.

During 2004, 2003 and 2002, LCR paid interest of $18 million, $20 million and
$26 million, respectively.

In June 2003, the Partners agreed to contribute part of the outstanding accrued
interest payable to the respective Partners' capital accounts based on their
relative ownership interests of 58.75% for Lyondell Partners and 41.25% for
CITGO Partners. Accordingly, $10 million and $7 million of Lyondell Partners and
CITGO Partners accrued interest, respectively, was reclassified to the
respective Partners' capital accounts.

                                      F-53
<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number                                  Description
------                                  -----------
<S>         <C>
3.1         Restated Certificate of Incorporation, as amended (incorporated by
            reference to the Registrant's Registration Statement on Form 10,
            File No. 333-3226, Exhibit 3.1 filed with the Commission on April 4,
            1996).

3.2         By-laws of CITGO Petroleum Corporation as amended on March 13, 2001
            (incorporated by reference to Registrant's 2000 Form 10-K, File No.
            1-14380, Exhibit 3.1(i) filed with the Commission on March 21,
            2001).

4.1         Master Shelf Agreement (1994) by and between Prudential Insurance
            Company of America and CITGO Petroleum Corporation ($100,000,000),
            dated March 4, 1994 (incorporated by reference to the Registrant's
            Registration Statement on Form 10, File No. 333-3226, Exhibit 10.16
            filed with the Commission on April 4, 1996).

4.2         Letter Agreement by and between the Company and Prudential Insurance
            Company of America, dated March 4, 1994 (incorporated by reference
            to the Registrant's Registration Statement on Form 10, File No.
            333-3226, Exhibit 10.17(i) filed with the Commission on April 4,
            1996).

4.3         Letter Amendment No. 1 to Master Shelf Agreement with Prudential
            Insurance Company of America, dated November 14, 1994 (incorporated
            by reference to the Registrant's Registration Statement on Form 10,
            File No. 333-3226, Exhibit 10.17(ii) filed with the Commission on
            April 4, 1996).

4.4         CITGO Senior Debt Securities (1991) Agreement (incorporated by
            reference to PDV America, Inc.'s Registration Statement on Form F-1,
            File No. 33-63742, Exhibit 10.18 filed with the Commission on June
            2, 1993).

4.5         Indenture, dated as of May 1, 1996, between CITGO Petroleum
            Corporation and the First National Bank of Chicago, relating to the
            7-7/8% Senior Notes due 2006 of CITGO Petroleum Corporation,
            including the form of Senior Note (incorporated by reference to the
            Registrant's Registration Statement on Form 10, File No. 333-3226,
            Exhibit 4.1 filed with the Commission on April 4, 1996).

4.6         Indenture, dated as of February 27, 2003, between CITGO Petroleum
            Corporation, as Issuer, and The Bank of New York, as Trustee,
            relating to the $550,000,000 11-3/8% Senior Notes due 2011 of CITGO
            Petroleum Corporation (incorporated by reference to the Registrant's
            2002 Form 10-K, File No. 1-14380, Exhibit 4.2 filed with the
            Commission on March 24, 2003).

4.7         Supplemental Indenture dated as of October 20, 2004 between CITGO
            Petroleum Corporation, as Issuer, and The Bank of New York, as
            Trusted, relating to the $550,000,000 11-3/8% Senior Notes due 2011
            of CITGO Petroleum Corporation (incorporated by reference to the
            Registrant's Form 8-K dated October 22, 2004, File No. 1-14380,
            Exhibit 4.1 filed with the Commission on October 28, 2004).

4.8         Indenture, dated as of October 22, 2004, between CITGO Petroleum
            Corporation, as Issuer, and J.P. Morgan Trust Company, National
            Association, as Trustee, relating to the $250,000,000 6% Senior
            Notes due 2011 of CITGO Petroleum Corporation (incorporated by
            reference to the Registrant's Registration Statement on Form S-4,
            File No. 333-122100, Exhibit 4.1 filed with the Commission on
            January 18, 2005).

10.1        Crude Supply Agreement between CITGO Petroleum Corporation and
            Petroleos de Venezuela, S.A., dated as of September 30, 1986
            (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.1 filed with
            the Commission on June 2, 1993).
</TABLE>

<PAGE>

<TABLE>
<S>         <C>
10.2        Supplemental Crude Supply Agreement dated as of September 30, 1986
            between CITGO Petroleum Corporation and Petroleos de Venezuela, S.A
            (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.2 filed with
            the Commission on June 2, 1993).

10.3        Crude Oil and Feedstock Supply Agreement dated as of March 31, 1987
            between Champlin Refining Company and Petroleos de Venezuela, S.A
            (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.3 filed with
            the Commission on June 2, 1993).

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. (incorporated by reference to PDV America, Inc.'s
            Registration Statement on Form F-1, File No. 33-63742, Exhibit 10.4
            filed with the Commission on June 2, 1993).

10.5        Contract for the Purchase/Sale of Boscan Crude Oil dated as of June
            2, 1993 between Tradecal, S.A. and CITGO Asphalt Refining Company
            (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.1 filed with
            the Commission on June 2, 1993).

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 (incorporated by reference to PDV America,
            Inc.'s Registration Statement on Form F-1, File No. 33-63742,
            Exhibit 10.6 filed with the Commission on June 2, 1993).

10.7        Sublease Agreement dated as of March 31, 1987 between Champlin
            Petroleum Company, Sublessor, and Champlin Refining Company,
            Sublessee (incorporated by reference to PDV America, Inc.'s
            Registration Statement on Form F-1, File No. 33-63742, Exhibit 10.7
            filed with the Commission on June 2, 1993).

10.8        Amended and Restated Limited Liability Company Regulations of
            LYONDELL-CITGO Refining Company, Ltd., dated July 1, 1993
            (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.9 filed with
            the Commission on June 2, 1993).

10.9        Contribution Agreement among Lyondell Petrochemical Company and
            LYONDELL-CITGO Refining Company, Ltd. and Petroleos de Venezuela,
            S.A (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.10 filed with
            the Commission on June 2, 1993).

10.10       Crude Oil Supply Agreement between LYONDELL-CITGO Refining Company,
            Ltd. and Lagoven, S.A. dated as of May 5, 1993 (incorporated by
            reference to PDV America, Inc.'s Registration Statement on Form F-1,
            File No. 33-63742, Exhibit 10.11 filed with the Commission on June
            2, 1993).

10.11       Supplemental Supply Agreement dated as of May 5, 1993 between
            LYONDELL-CITGO Refining Company, Ltd. and Petroleos de Venezuela,
            S.A (incorporated by reference to PDV America, Inc.'s Registration
            Statement on Form F-1, File No. 33-63742, Exhibit 10.12 filed with
            the Commission on June 2, 1993).

10.12       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 (incorporated by reference to PDV America,
            Inc.'s Registration Statement on Form F-1, File No. 33-63742,
            Exhibit 10.13 filed with the Commission on June 2, 1993).

10.13       Second Amendment to the Tax Allocation Agreement among PDV America,
            Inc., VPHI Midwest, Inc., CITGO Petroleum Corporation and PDV USA,
            Inc., dated as of January 1, 1997 (incorporated
</TABLE>

<PAGE>

<TABLE>
<S>         <C>
            by reference to Registrant's 2001 Form 10-K, File No. 1-14380,
            Exhibit 10.13(i) filed with the Commission on March 28, 2002).

10.14       Limited Partnership Agreement of LYONDELL-CITGO Refining LP, dated
            December 31, 1998 (incorporated by reference to the Registrant's
            1998 Form 10-K, File No. 1-14380, Exhibit 10.24 filed with the
            Commission on March 17, 1999).

10.15       $260,000,000 Three-Year Credit Agreement dated as of December 11,
            2002 among CITGO Petroleum Corporation, Bank of America, N.A., as
            Administrative Agent, JP Morgan Chase Bank, as Syndication Agent,
            Societe Generale, as Documentation Agent and the other lenders party
            thereto (incorporated by reference to the Registrant's 2002 Form
            10-K, File No. 1-14380, Exhibit 10.22 filed with the Commission on
            March 24, 2003).

10.16       First Amendment to Three-Year Credit Agreement entered into January
            29, 2003, but effective as of December 11, 2002, among CITGO
            Petroleum Corporation, Bank of America, N.A., as Administrative
            Agent and the other lenders party thereto (incorporated by reference
            to the Registrant's 2002 Form 10-K, File No. 1-14380, Exhibit 10.23
            filed with the Commission on March 24, 2003).

10.17       Purchase and Sale Agreement dated as of February 28, 2003 between
            CITGO Petroleum Corporation and CITGO Funding Company, L.L.C.
            (incorporated by reference to the Registrant's 2003 Form 10-K, File
            No. 1-14380, Exhibit 10.23 filed with the Commission on March 30,
            2004).

10.18       Amendment No. 1 dated as of November 26, 2003 to Purchase and Sale
            Agreement dated as of February 28, 2003 (incorporated by reference
            to the Registrant's 2003 Form 10-K, File No. 1-14380, Exhibit 10.24
            filed with the Commission on March 30, 2004).

10.19       Receivables Purchase Agreement dated as of February 28, 2003 among
            CITGO Funding Company, L.L.C., CITGO Petroleum Corporation, Asset
            One Securitization, LLC and Societe Generale (incorporated by
            reference to the Registrant's 2003 Form 10-K, File No. 1-14380,
            Exhibit 10.25 filed with the Commission on March 30, 2004).

10.20       Amendment No. 1 dated as of November 26, 2003 to Receivables
            Purchase Agreement dated as of February 28, 2003 (incorporated by
            reference to the Registrant's 2003 Form 10-K, File No. 1-14380,
            Exhibit 10.26 filed with the Commission on March 30, 2004).

10.21       Amendment No. 2 dated as of November 24, 2004 to Receivables
            Purchase Agreement dated as of February 28, 2003.

12.1*       Computation of Ratio of Earnings to Fixed Charges.

23.1*       Consent of Independent Registered Public Accounting Firm of CITGO
            Petroleum Corporation.

23.2*       Consent of Independent Registered Public Accounting Firm of CITGO
            Petroleum Corporation.

23.3*       Consent of Independent Registered Public Accounting Firm of CITGO
            Petroleum Corporation.

23.4*       Consent of Independent Registered Public Accounting Firm of CITGO
            Petroleum Corporation.

23.5*       Consent of Independent Registered Public Accounting Firm of
            LYONDELL-CITGO Refining LP.

23.6*       Consent of Independent Registered Public Accounting Firm of
            LYONDELL-CITGO Refining LP.

31.1*       Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the
            Securities Exchange Act of 1934 as to the Annual Report on Form 10-K
            for the fiscal year ended December 31, 2004 filed by Felix
            Rodriguez, President and Chief Executive Officer.
</TABLE>

<PAGE>

<TABLE>
<S>         <C>
31.2*       Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the
            Securities Exchange Act of 1934 as to the Annual Report on Form 10-K
            for the fiscal year ended December 31, 2004 filed by Larry E. Krieg,
            Chief Financial Officer.

32.1*       Certification Pursuant to Section 1350 of Chapter 63 of Title 18
            United States Code as to the Annual Report on Form 10-K for the
            fiscal year ended December 31, 2004 filed by Felix Rodriguez,
            President and Chief Executive Officer.

32.2*       Certification Pursuant to Section 1350 of Chapter 63 of Title 18
            United States Code as to the Annual Report on Form 10-K for the
            fiscal year ended December 31, 2004 filed by Larry E. Krieg, Chief
            Financial Officer.
</TABLE>

--------
* Filed Herewith