<PAGE>
================================================================================

                                  United States

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       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)

         ONE WARREN PLACE, 6100 SOUTH YALE AVENUE, TULSA, OKLAHOMA 74136
               (Address of principal executive office) (Zip Code)

                                 (918) 495-4000
              (Registrant's telephone number, including area code)

                                      N.A.
   (Former name, former address and former fiscal year, if changed since last
                                    report)

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

    Title of Each Class            Name of each Exchange on which registered
    -------------------            -----------------------------------------
7 7/8% SENIOR NOTES, DUE 2006             NEW YORK STOCK EXCHANGE, INC.

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

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) and (iii)
certain information otherwise required by Item 11 of Form 10-K relating to
executive compensation as permitted by General Instruction (I)(2)(c).

             Disclosure of delinquent filers pursuant to Item 405 of
                         Regulation S-K: NOT APPLICABLE
    Aggregate market value of the voting stock held by non-affiliates of the
                           registrant: NOT APPLICABLE

     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, 2002)


================================================================================
<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, 2001

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......................................................................................15
Item 4.       Submission of Matters to a Vote of Security Holders....................................................16

PART II.

Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters..................................17
Item 6.       Selected Financial Data................................................................................17
Item 7.       Management's Discussion and Analysis of Financial Condition and
              Results of Operations..................................................................................18
Item 7A.      Quantitative and Qualitative Disclosures about Market Risk.............................................25
Item 8.       Financial Statements and Supplementary Data............................................................28
Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial
              Disclosure.............................................................................................28

PART III.

Item 10.      Directors and Executive Officers of the Registrant.....................................................28
Item 11.      Executive Compensation.................................................................................28
Item 12.      Security Ownership of Certain Beneficial Owners and Management.........................................28
Item 13.      Certain Relationships and Related Transactions.........................................................29

PART IV.

Item 14.      Exhibits, Financial Statements and Reports on Form 8-K.................................................31
</TABLE>



<PAGE>
                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

         This Report contains "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Specifically, all statements under
the captions "Items 1 and 2 - Business and Properties" and "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations" 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 below) are forward
looking statements. In addition, when used in this document, the words
"anticipate", "estimate", "prospect" and similar expressions are used to
identify forward-looking statements. Those statements are subject to risks and
uncertainties, such as increased inflation, continued access to capital markets
and commercial bank financing on favorable terms, increases in environmental and
other regulatory burdens, outcomes of currently contested matters, changes in
prices or demand for CITGO products as a result of competitive actions or
economic factors and changes in the cost of crude oil, feedstocks, blending
components or refined products. Those statements are also subject to the risks
of increased costs in related technologies and those technologies producing
anticipated results. Should one or more of these risks or uncertainties, among
others, materialize, actual results may vary materially from those estimated,
anticipated or projected. Readers are cautioned not to place undue reliance on
these forward looking statements, which speak only as of the date of this
Report. CITGO undertakes no obligation to publicly release any revision to these
forward looking statements to reflect events or circumstances after the date of
the Report.




                                       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.

         CITGO's transportation fuel customers include primarily 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. CITGO has commenced operations to sell
lubricants, gasoline, and distillates in various Latin American markets.
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.

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
698 thousand barrels per day ("MBPD"). The following table shows the capacity of
each U.S. refinery in which CITGO holds an interest and CITGO's share of such
capacity as of December 31, 2001.

                            CITGO REFINING CAPACITY
<TABLE>
<CAPTION>
                                                                                       TOTAL         NET
                                                                                       RATED        CITGO
                                                                                       CRUDE      OWNERSHIP
                                                                            CITGO    REFINING    IN REFINING
                                                           OWNER          INTEREST   CAPACITY     CAPACITY
                                                          -------         --------   --------     --------
                                                                             (%)      (MBPD)       (MBPD)
<S>                                                   <C>                    <C>        <C>          <C>
LOCATION
      Lake Charles, LA                                     CITGO             100        320          320
      Corpus Christi, TX                                   CITGO             100        157          157
      Paulsboro, NJ                                        CITGO             100         84           84
      Savannah, GA                                         CITGO             100         28           28
      Houston, TX                                     LYONDELL-CITGO          41        265          109
                                                                                        ---          ---
            Total Rated Refining Capacity as of
               December 31, 2001                                                        854          698
                                                                                        ===          ===
</TABLE>

     On January 1, 2002, PDV America, the parent company of CITGO, made a
contribution to the capital of CITGO of all of the common stock of PDV
America's wholly owned subsidiary, VPHI Midwest, Inc. ("VPHI"). No additional
shares of the capital stock of CITGO were issued in connection with the
contribution.

     The principal asset of VPHI is a 167 MBPD petroleum refinery owned by its
wholly owned subsidiary, PDV Midwest Refining, L.L.C. ("PDVMR"), located in
Lemont, Illinois. CITGO has operated this refinery and purchased substantially
all of its primary output, consisting of transportation fuels and
petrochemicals, since 1997. (See Consolidated Financial Statements of CITGO -
Notes 2 and 4 in Item 14a).



                                       3

<PAGE>

The following table shows CITGO's aggregate interest in refining capacity,
refinery input, and product yield for the three years in the period ended
December 31, 2001.

                       CITGO REFINERY PRODUCTION (1) (2)
<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                   -------------------------------------------------
                                                      2001                2000               1999
                                                   ----------          ----------         ----------
                                                         (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                                <C>     <C>         <C>    <C>         <C>     <C>
RATED REFINING CAPACITY AT YEAR END                698                 691                691
Refinery Input
     Crude oil                                     639      84%        638     82%        607      82%
     Other feedstocks                              122      16%        139     18%        129      18%
                                                 -----    ----        ----   ----        ----    ----
         Total                                     761     100%        777    100%        736     100%
                                                 =====    ====        ====   ====        ====    ====
Product Yield
     Light fuels
         Gasoline                                  307      40%        330     42%        317      43%
         Jet fuel                                   76      10%         78     10%         70       9%
         Diesel/#2 fuel                            148      19%        142     18%        136      18%
     Asphalt                                        44       6%         47      6%         42       6%
     Petrochemicals and industrial products        198      25%        189     24%        179      24%
                                                 -----    ----        ----   ----        ----    ----
         Total                                     773     100%        786    100%        744     100%
                                                 =====    ====        ====   ====        ====    ====

UTILIZATION OF RATED REFINING CAPACITY                      92%                92%                 88%
</TABLE>

-----------------
(1)  Includes all of CITGO refinery production, except as otherwise noted.

(2)  Includes 41.25% of the Houston refinery production.

         CITGO produces its light fuels and petrochemicals primarily through its
Lake Charles and Corpus Christi refineries. Asphalt refining operations are
carried out through CITGO's Paulsboro and Savannah refineries. CITGO purchases
refined products from its joint venture refinery in Houston.

         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 Lake Charles
refinery has a Solomon Process Complexity Rating of 17.7 (as compared to an
average of 13.9 for U.S. refineries in the most recently available Solomon
Associates, Inc. survey). The Solomon Process Complexity Rating is an industry
measure of a refinery's ability to produce higher value products. A higher
Solomon Process Complexity Rating indicates a greater capability to produce such
products.




                                       4
<PAGE>

           The following table shows the rated refining capacity, refinery input
and product yield at the Lake Charles refinery for the three years in the period
ended December 31, 2001.

                        LAKE CHARLES REFINERY PRODUCTION
<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                  -------------------------------------------------
                                                     2001               2000                1999
                                                  ----------         ----------          ----------
                                                        (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                                <C>    <C>        <C>     <C>         <C>     <C>

RATED REFINING CAPACITY AT YEAR END                320               320                 320
Refinery Input
     Crude oil                                     317     90%       319      87%        298      89%
     Other feedstocks                               37     10%        48      13%         36      11%
                                                  ----   ----       ----    ----        ----    ----
          Total                                    354    100%       367     100%        334     100%
                                                  ====   ====       ====    ====        ====    ====
Product Yield
     Light fuels
          Gasoline                                 175     48%       187      50%        171      50%
          Jet fuel                                  67     19%        70      19%         63      18%
          Diesel/#2 fuel                            62     17%        58      15%         53      16%
     Petrochemicals and industrial products         57     16%        59      16%         54      16%
                                                  ----   ----       ----    ----        ----    ----
          Total                                    361    100%       374     100%        341     100%
                                                  ====   ====       ====    ====        ====    ====

UTILIZATION OF RATED REFINING CAPACITY                     99%               100%                 93%
</TABLE>

         Approximately 40%, 42% and 33% of the total crude runs at the Lake
Charles refinery, in the years 2001, 2000 and 1999, respectively, consisted of
crude oil with an average API gravity of 24 degrees or less. (See "Items 1. and
2. Business and Properties--Crude Oil and Refined Product Purchases").

         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
and benzene. Industrial products include sulphur, residual fuels and petroleum
coke.

         Located adjacent to the Lake Charles refinery is a lubricants refinery
operated by CITGO and owned by Cit-Con Oil Corporation ("Cit-Con"), which is
owned 65% by CITGO and 35% by Conoco, Inc. ("Conoco"). The Cit-Con refinery
produces high quality oils and waxes, and is one of the few in the industry
designed as a stand-alone lubricants refinery. Feedstocks are supplied 65% from
CITGO's Lake Charles refinery and 35% from Conoco's Lake Charles refinery.
Finished refined products are shared on the same pro rata basis by CITGO and
Conoco.

          On January 1, 2002, CITGO acquired Conoco's 35 percent interest in
Cit-Con. CITGO plans to continue to operate this facility solely for its own
account.




                                       5
<PAGE>
         Corpus Christi, Texas Refinery. The Corpus Christi refinery processes
heavy crude oil into a flexible slate of refined products, and has a Solomon
Process Complexity Rating of 16.3 (as compared to an average 13.9 for U.S.
refineries in the most recently available Solomon Associates, Inc. survey). 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 in the period
ended December 31, 2001.

                       CORPUS CHRISTI REFINERY PRODUCTION
<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                    -----------------------------------------------
                                                       2001              2000               1999
                                                    ----------        ----------         ----------
                                                         (MBPD, EXCEPT AS OTHERWISE INDICATED)
<S>                                                <C>     <C>        <C>     <C>        <C>     <C>
RATED REFINING CAPACITY AT YEAR END                157                150                150
Refinery Input
     Crude oil                                     154      71%       149      70%       148      70%
     Other feedstocks                               63      29%        65      30%        62      30%
                                                   ---     ---        ---     ---        ---     ---
          Total                                    217     100%       214     100%       210     100%
                                                   ===     ===        ===     ===        ===     ===

Product Yield
     Light fuels
          Gasoline                                  90      42%        95      46%        96      46%
          Diesel/#2 fuel                            57      26%        58      27%        55      27%
     Petrochemicals and industrial products         69      32%        58      27%        56      27%
                                                   ---     ---        ---     ---        ---     ---
          Total                                    216     100%       211     100%       207     100%
                                                   ===     ===        ===     ===        ===     ===
UTILIZATION OF RATED REFINING CAPACITY                      98%                99%                99%
</TABLE>

         Corpus Christi crude runs during 2001, 2000 and 1999 consisted of 81%,
79% and 81%, respectively, heavy sour Venezuelan crude. The average API gravity
of the composite crude slate run at the Corpus Christi refinery is approximately
24 degrees. (See "Items 1. and 2. Business and Properties--Crude Oil and Refined
Product Purchases"). Crude oil supplies are delivered directly to the Corpus
Christi refinery through the Port of Corpus Christi.

         CITGO operates the West Plant under a sublease agreement (the
"Sublease") from Union Pacific Corporation ("Union Pacific"). The basic term of
the Sublease ends on January 1, 2004, but CITGO may renew the Sublease for
successive renewal terms through January 31, 2011. CITGO has the right to
purchase the West Plant from Union Pacific at the end of the basic term, the end
of any renewal term, or on January 31, 2011 at a nominal price. (See
Consolidated Financial Statements of CITGO - Note 14 in Item 14a).

         The Corpus Christi refinery's main petrochemical products include
cumene, cyclohexane, and aromatics (including benzene, toluene and xylene).




                                       6

<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,
2001, CITGO's investment in LYONDELL-CITGO was $508 million. In addition, at
December 31, 2001, CITGO held notes receivable from LYONDELL-CITGO of $35
million. (See Consolidated Financial Statements of CITGO -- Note 3 in Item 14a).
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.

         In April 1998, PDVSA, pursuant to its contractual rights, declared
force majeure and reduced deliveries of crude oil to LYONDELL-CITGO; this
required LYONDELL-CITGO to obtain alternative sources of crude oil supply in
replacement, which resulted in lower operating margins. On October 1, 2000, the
force majeure condition was terminated and PDVSA deliveries of crude oil
returned to contract levels. On February 9, 2001, PDVSA notified LYONDELL-CITGO
that effective February 1, 2001, it had again declared force majeure under the
contract described above. As of December 31, 2001, PDVSA deliveries of crude oil
to LYONDELL-CITGO have not been reduced due to PDVSA's declaration of force
majeure. On January 22, 2002, PDVSA notified LYONDELL-CITGO that pursuant to the
February 9, 2001 declaration of force majeure, effective March 1, 2002, PDVSA
expects to deliver approximately 20 percent less than the contract volume and
that force majeure will be in effect until at least June 2002. If PDVSA reduces
its delivery of crude oil under these crude oil supply agreements,
LYONDELL-CITGO will be required to obtain alternative sources of crude oil which
may result in reduced operating margins. The effect of this declaration on
LYONDELL-CITGO's crude oil supply and the duration of this situation are not
known at this time. (See Consolidated Financial Statements of CITGO -- Notes 3
and 4 in Item 14a).

         Lemont, Illinois Refinery. As described above, on January 1, 2002, PDV
America, the parent company of CITGO, made a contribution to the capital of
CITGO of all of the common stock of PDV America's wholly owned subsidiary, VPHI.
The principal asset of VPHI is a petroleum refinery owned by its wholly owned
subsidiary, PDVMR, located in Lemont, Illinois. The Lemont refinery processes
heavy crude oil into a flexible slate of refined products, and has a Solomon
Process Complexity Rating of 11.7 (as compared to an average 13.9 for U.S.
refineries in the most recently available Solomon Associates, Inc. survey).

         On August 14, 2001, a fire occurred at the crude oil distillation unit
of the Lemont refinery. The crude unit was destroyed and the refinery's other
processing units were temporarily taken out of production. A new crude unit is
expected to be operational in April 2002. Operations have resumed by
using purchased feedstocks for processing units downstream from the crude unit.
PDVMR has insurance coverage for this type of an event and has submitted a
notice of loss to its insurance carriers related to the fire, including a claim
under its business interruption coverage. (See Consolidated Financial Statements
of CITGO - Note 18 in Item 14a).

CRUDE OIL AND REFINED PRODUCT PURCHASES

         CITGO owns no crude oil reserves or production facilities, and must
therefore rely on purchases of crude oil and feedstocks for its refinery
operations. In addition, because CITGO's refinery operations do not produce
sufficient refined products to meet the demands of its marketers, CITGO
purchases refined products, primarily gasoline, from other refiners, including a
number of affiliated companies. (See "Item 13. Certain Relationships and Related
Transactions").




                                       7
<PAGE>

         Crude Oil Purchases. The following chart shows CITGO's purchases of
crude oil for the three years in the period ended December 31, 2001:

                            CITGO CRUDE OIL PURCHASES
<TABLE>
<CAPTION>
                    LAKE CHARLES, LA         CORPUS CHRISTI, TX           PAULSBORO, NJ             SAVANNAH, GA
                 ----------------------     ---------------------     ---------------------    ----------------------
                   2001   2000    1999       2001   2000    1999       2001   2000    1999      2001    2000    1999
                 ------- ------  ------     ------ ------  ------     ------ ------  ------    ------  ------  ------
                         (MBPD)                    (MBPD)                    (MBPD)                    (MBPD)
<S>                 <C>    <C>     <C>        <C>    <C>     <C>        <C>    <C>     <C>       <C>     <C>     <C>
SUPPLIERS
PDVSA               136    104     104        138    143     118        42     47      42        22      22      19
Other sources       185    214     196         10      8      29         -      -       -         -       -       -
                   ----   ----    ----       ----   ----    ----       ---    ---     ---       ---     ---     ---
     Total          321    318     300        148    151     147        42     47      42        22      22      19
                   ====   ====    ====       ====   ====    ====       ===    ===     ===       ===     ===     ===
</TABLE>

         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 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, 2001.

                   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)      2001   2000    1999       DATE
                            ----  --------------     ------ ------  ------   ----------
                                 (MBPD)                     (MBPD)             (YEAR)
<S>                         <C>   <C>                <C>    <C>     <C>      <C>
LOCATION
Lake Charles, LA (2)        120       50              117    110     101       2006
Corpus Christi, TX (2)      130        -              126    118     108       2012
Paulsboro, NJ (2)            30        -               26     28      22       2010
Savannah, GA (2)             12        -               12     12      11       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,
usually 20 to 25 years. The supply agreements differ somewhat for each entity
and each CITGO refinery but generally incorporate formula prices based on the
market value of a slate of refined products deemed to be produced for each
particular grade of crude oil or feedstock, less (i) certain deemed refining
costs; (ii) certain actual costs, including transportation charges, import
duties and taxes; and (iii) a deemed margin, which varies according to the grade
of crude oil or feedstock delivered. Under each supply agreement, deemed margins
and deemed costs are adjusted



                                       8
<PAGE>

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
entitle the supplier to reduce the quantity of crude oil and feedstocks
delivered under the crude supply agreements under specified circumstances. For
the year 2000, PDVSA deliveries of crude oil to CITGO were less than contractual
base volumes due to PDVSA's declaration of force majeure pursuant to all of the
long-term crude oil supply contracts related to CITGO's refineries. As a result,
the Company was required to obtain alternative sources of crude oil, which
resulted in lower operating margins. On October 1, 2000, the force majeure
condition was terminated and deliveries of crude oil returned to contract
levels.

         On February 9, 2001, PDVSA notified CITGO that, effective February 1,
2001, it had declared force majeure under the four contracts described above.
During 2001, PDVSA deliveries of crude oil to CITGO were slightly less than
contractual base volumes due to this declaration of force majeure. Therefore,
the Company was required to obtain alternative sources of crude oil, which
resulted in lower operating margins. On January 22, 2002, PDVSA notified CITGO
that pursuant to the February 9, 2001 declaration of force majeure, effective
March 1, 2002, PDVSA expects to deliver approximately 20 percent less than the
contract volume and PDVSA indicated that force majeure will be in effect until
at least June 2002. If PDVSA reduces its delivery of crude oil under these crude
oil supply agreements, CITGO will be required to obtain alternative sources of
crude oil which may result in reduced operating margins. The effect of this
declaration on CITGO's crude oil supply and the duration of this situation are
not known at this time.

         These contracts also contain provisions which entitle the supplier to
reduce the quantity of crude oil and feedstocks delivered under the crude supply
agreements and oblige the supplier to pay CITGO the deemed margin under that
contract for each barrel of reduced crude oil and feedstocks. During the second
half of 1999 and throughout 2000 and 2001, PDVSA did not deliver naphtha
pursuant to certain contracts and has made or will make contractually specified
payments in lieu thereof.

         CITGO purchases sweet crude oil under long-standing relationships with
numerous producers.

         Refined Product Purchases. CITGO is required to purchase refined
products to supplement the production of the Lake Charles and Corpus Christi
refineries in order to meet demand of CITGO's marketing network. The following
table shows CITGO's purchases of refined products for the three years in the
period ended December 31, 2001.

                        CITGO REFINED PRODUCT PURCHASES
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                               ---------------------------------
                                                2001          2000         1999
                                               ------        ------       ------
                                                             (MBPD)
<S>                                             <C>           <C>          <C>
LIGHT FUELS
     Gasoline                                     708           705          691
     Jet fuel                                      74            82           77
     Diesel/ #2 fuel                              291           306          279
                                                -----         -----        -----
        Total                                   1,073         1,093        1,047
                                                =====         =====        =====
</TABLE>


         As of December 31, 2001, 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



                                       9
<PAGE>

year 2017. LYONDELL-CITGO was a major supplier in 2001 providing CITGO with 101
MBPD of gasoline, 69 MBPD of diesel/#2 fuel, and 20 MBPD of jet fuel. See
"--Refining--LYONDELL-CITGO".

         As of May 1, 1997, CITGO began purchasing substantially all of the
refined products produced at the Lemont refinery. During the period ended
December 31, 2001, the Lemont refinery provided CITGO with 68 MBPD of gasoline
and 27 MBPD of diesel/#2 fuel.

         In October 1998 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 106 MBPD of refined products from the refinery
during 2001, 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 in the period ended December 31, 2001.

                CITGO REFINED PRODUCT SALES REVENUES AND VOLUMES
<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,             YEAR ENDED DECEMBER 31,
                                             -------------------------------     ------------------------------
                                               2001        2000       1999         2001        2000       1999
                                             --------    --------   --------     --------    --------   -------
                                                     ($ IN MILLIONS)                      (MM GALLONS)
<S>                                          <C>          <C>        <C>          <C>         <C>        <C>
LIGHT FUELS
    Gasoline                                 $ 11,316     $12,447    $ 7,691      13,585      13,648     13,115
    Jet fuel                                    1,660       2,065      1,129       2,190       2,367      2,198
    Diesel / #2 fuel                            3,984       4,750      2,501       5,429       5,565      5,057
ASPHALT                                           502         546        338         946         812        753
PETROCHEMICALS AND INDUSTRIAL PRODUCTS          1,510       1,740      1,024       2,308       2,153      2,063
LUBRICANTS AND WAXES                              536         552        482         240         279        285
                                             --------     -------    -------      ------      ------     ------
      Total                                  $ 19,508     $22,100    $13,165      24,698      24,824     23,471
                                             ========     =======    =======      ======      ======     ======
</TABLE>

         Light Fuels. Gasoline sales accounted for 58% of CITGO's refined
product sales in 2001, 56% in 2000, and 58% in 1999. CITGO markets CITGO branded
gasoline through 13,397 independently owned and operated CITGO branded retail
outlets (including 11,204 branded retail outlets owned and operated by
approximately 783 independent marketers and 2,193 7-Eleven(TM) convenience
stores) located throughout the United States, primarily east of the Rocky
Mountains. CITGO purchases gasoline to supply its marketing network, as the
gasoline production from the Lake Charles and Corpus Christi refineries was only
equivalent to approximately 44%, 48% and 45% of the volume of CITGO branded
gasoline sold in 2001, 2000 and 1999, 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 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 the year 2006.
Under this contract, CITGO arranges all transportation and delivery of motor
fuels and handles all product ordering. CITGO also acts as processing agent for
the purpose of facilitating and implementing orders and purchases from
third-party suppliers. CITGO receives a processing fee for such services.

         CITGO markets jet fuel directly to airline customers at 24 airports,
including such major hub cities as Atlanta, Chicago, Dallas/Fort Worth, New York
and Miami.

         CITGO's delivery of light fuels to its customers is accomplished in
part through 48 refined product terminals located throughout CITGO's primary
market territory. Of these terminals, 37 are wholly-owned by CITGO and 11 are
jointly owned. Twelve of CITGO's product terminals have waterborne docking
facilities, which greatly enhance the flexibility of CITGO's logistical system.
In addition, CITGO operates and delivers refined products from seven terminals
owned by PDVMR in the Midwest. Refined product terminals owned or operated by
CITGO provide a total storage capacity of approximately 22 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 a joint venture phenol
production plant in which CITGO is a limited partner. The phenol plant produces
phenol and acetone for sale primarily to the principal partner in the phenol
plant for the production of plastics. Sulphur is sold to the U.S. and
international fertilizer 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 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 in the Northeast 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 Latin
America, Inc. ("CILA"), is introducing the PDVSA and CITGO brands into various
Latin American markets which will include wholesale and retail sales of
lubricants, gasoline and distillates. Initial operations are underway in Puerto
Rico and Ecuador.

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 five 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.

EMPLOYEES

         CITGO and its subsidiaries have a total of approximately 4,300
employees, approximately 1,600 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.

ENVIRONMENT AND SAFETY

         Environment

          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 sulphur diesel fuel which has necessitated
additional capital and operating expenditures, and altered significantly the
U.S. refining industry and the return realized on refinery investments. Also,
regulatory interpretations by the U.S. Environmental Protection Agency regarding
"modifications" to refinery



                                       12
<PAGE>

equipment under the "New Source Review" ("NSR") provisions of the Clean Air Act
have created uncertainty about the extent to which additional capital and
operating expenditures will be required.

         In addition, CITGO is subject to various other federal, state and local
environmental laws and regulations which 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. See "Factors Affecting Forward Looking Statements".

         CITGO's accounting policy establishes environmental reserves as
probable site restoration and remediation obligations become reasonably capable
of estimation. 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 its consolidated results of operations, financial condition
and cash flows.

         In 1992, the Company reached an agreement with the Louisiana Department
of Environmental Quality to cease usage of certain surface impoundments at the
Company's Lake Charles refinery by 1994. A mutually acceptable closure plan was
filed with the state in 1993. The Company and its former owner are participating
in the closure and sharing the related costs based on estimated contributions of
waste and ownership periods. The remediation commenced in December 1993. In
1997, the Company presented a proposal to a state agency revising the 1993
closure plan. In 1998 and 2000, the Company submitted further revisions as
requested by the Louisiana Department. A ruling on the proposal, as amended, is
expected in 2002 with final closure to begin later in 2002.

         The Texas Natural Resources Conservation Commission conducted
environmental compliance reviews at the Corpus Christi refinery in 1998 and
1999. The Texas Commission issued Notices of Violation ("NOV") related to each
of the reviews and has proposed fines of approximately $970,000 based on the
1998 review and $700,000 based on the 1999 review. The first NOV was issued in
January 1999 and the second NOV was issued in December 1999. Most of the alleged
violations refer to recordkeeping and reporting issues, failure to meet required
emission levels, and failure to properly monitor emissions. The Company is
currently engaged in settlement discussions, but is prepared to contest the
alleged violations and proposed fines if a reasonable settlement cannot be
reached.

         In June 1999, CITGO and numerous other industrial companies received
notice from the U.S. EPA that the U.S. EPA believes these companies have
contributed to contamination in the Calcasieu Estuary, in the proximity of Lake
Charles, Calcasieu Parish, Louisiana and are Potentially Responsible Parties
("PRPs") under the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"). The U.S. EPA made a demand for payment of its past
investigation costs from CITGO and other PRPs and is conducting a Remedial
Investigation/Feasibility Study ("RI/FS") under its CERCLA authority. CITGO and
other PRPs may be potentially responsible for the costs of the RI/FS, subsequent
remedial actions and natural resource damages. CITGO disagrees with the U.S.
EPA's allegations and intends to contest this matter.

      In October 1999, the Louisiana Department of Environmental Quality issued
the Company a NOV and Potential Penalty alleging violation of the National
Emission Standards for Hazardous Air Pollutants ("NESHAPS") regulations covering
benzene emissions from wastewater treatment operations at CITGO's Lake Charles,
Louisiana refinery and requested additional information. The Company is in
settlement discussions and anticipates resolving this matter in the near future.




                                       13
<PAGE>

      In January and July 2001, CITGO received NOVs from the U.S. EPA alleging
violations of the Clean Air Act. The NOVs are an outgrowth of an industry-wide
and multi-industry U.S. EPA enforcement initiative alleging that many refineries
and electric utilities modified air emission sources without obtaining permits
under the New Source Review provisions of the Clean Air Act. The NOVs to CITGO
followed inspections and formal Information Requests regarding the Company's
Lake Charles, Louisiana and Corpus Christi, Texas refineries and the Lemont,
Illinois refinery operated by CITGO. At the U.S. EPA's request, the Company is
engaged in settlement discussions, but is prepared to contest the NOVs if
settlement discussions fail. If the Company settles or is found to have violated
the provisions cited in the NOVs, it would be subject to possible penalties and
significant capital expenditures for installation or upgrading of pollution
control equipment or technologies.

      In June 1999, a NOV was issued by the U.S. EPA alleging violations of the
NESHAPS regulations covering benzene emissions from wastewater treatment
operations at the Lemont, Illinois refinery operated by CITGO. CITGO is in
settlement discussions with the U.S. EPA. The Company believes this matter will
be consolidated with the matters described in the previous paragraph.

      In 1992, an agreement was reached between the Company and a former owner
concerning a number of environmental issues which provides, in part, that the
former owner will continue to share the costs of certain specific environmental
remediation and certain tort liability actions based on ownership periods and
specific terms of the agreement.

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

      Increasingly stringent environmental regulatory provisions and obligations
periodically require additional capital expenditures. During 2001, CITGO spent
approximately $26 million for environmental and regulatory capital improvements
in its operations. Management currently estimates that CITGO will spend
approximately $1.2 billion for environmental and regulatory capital projects
over the five-year period 2002-2006, which includes capital expenditures
relating to the Lemont refinery of approximately $480 million. 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 occupational health and safety laws and regulations. CITGO
maintains comprehensive safety, training and maintenance programs.




                                       14
<PAGE>

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 May 1997, a fire occurred at CITGO's Corpus Christi refinery. No
serious personal injuries were reported. There are seventeen related lawsuits
pending in Corpus Christi, Texas state court against CITGO on behalf of
approximately 9,000 individuals alleging property damages, personal injury and
punitive damages. A trial of the claims of approximately 20 plaintiffs is
scheduled for April 2002. Approximately 1,300 claims have been resolved for
immaterial amounts.

      A class action lawsuit is pending in Corpus Christi, Texas state court
against CITGO which claims damages for reduced value of residential properties
as a result of alleged air, soil and groundwater contamination. CITGO has
purchased 275 adjacent properties included in the lawsuit and settled those
related property damage claims. Over CITGO's objections, the trial court has
recently ruled that an agreement by CITGO that purported to provide for
settlement of the remaining property damage claims for $5 million payable by it
is enforceable. CITGO will appeal this decision.

      A lawsuit alleging wrongful death and personal injury filed in 1996
against CITGO and other industrial facilities in Corpus Christi, Texas state
court was brought by persons who claim that exposure to refinery hydrocarbon
emissions caused various forms of illness. The lawsuit is scheduled for trial in
September 2002.

      Litigation is pending in federal court in Lake Charles, Louisiana against
CITGO by a number of current and former refinery employees and applicants
asserting claims of racial discrimination in connection with CITGO's employment
practices. A trial involving two plaintiffs resulted in verdicts for the
Company. The Court granted the Company summary judgment with respect to another
group of claims; these rulings have been affirmed by the Fifth Circuit Court of
Appeals. Trials of the remaining cases will be set in the future.

      CITGO is among defendants to class action and individual lawsuits in North
Carolina, New York and Illinois alleging contamination of water supplies by
methyl tertiary butyl ether ("MTBE"), a component of gasoline. These actions
allege that MTBE poses public health risks and seek testing, damages and
remediation of the alleged contamination. These matters are in early stages of
discovery. One of the Illinois cases has been transferred to New York and
consolidated with the case pending in New York. CITGO has denied all of the
allegations and is pursuing its defenses.

      In 1999, a group of U.S. independent oil producers filed petitions under
the U.S. antidumping and countervailing duty laws against imports of crude oil
from Venezuela, Iraq, Mexico and Saudi Arabia. These laws provide for the
imposition of additional duties on imports of merchandise if (1) the U.S.
Department of Commerce ("DOC"), after investigation, determines that the
merchandise has been sold to the United States at dumped prices or has benefited
from countervailing subsidies, and (2) the U.S. International Trade Commission
determines that the imported merchandise has caused or threatened material
injury to the U.S. industry producing like product. The amount of the additional
duties imposed is generally equal to the amount of the dumping margin and
subsidies found on the imports on which the duties are assessed. No duties are
owed on imports made prior to the formal initiation of an investigation by the
DOC. In 1999, prior to initiation of a formal investigation, the DOC dismissed
the petitions. In 2000, the U.S. Court of International Trade ("CIT") reversed
this decision and remanded the case to the DOC for reconsideration. In August
2001, the DOC again dismissed the petitions. This matter is now pending before
the CIT for a decision to affirm or remand for further consideration.




                                       15
<PAGE>

         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

         Not Applicable.




                                       16
<PAGE>
                                     PART II

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

         The Company's common stock is not publicly traded. All of the Company's
common stock is held by PDV America. In 2001, CITGO declared and paid dividends
of $373 million.

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, 2001. The following table should be read
in conjunction with the consolidated financial statements of CITGO as of
December 31, 2001 and 2000, and for each of the three years in the period ended
December 31, 2001, included in "Item 8. Financial Statements and Supplementary
Data".
<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                 ------------------------------------------------------------------
                                                    2001          2000          1999          1998          1997
                                                 ----------    ----------    ----------    ----------    ----------
                                                                       (DOLLARS IN MILLIONS)
<S>                                               <C>           <C>           <C>           <C>           <C>
INCOME STATEMENT DATA
    Sales                                         $ 19,621      $ 22,151      $ 13,317      $ 10,912      $ 13,591
    Equity in earnings of affiliates                   109            59            21            77            64
    Net revenues                                    19,735        22,194        13,322        10,981        13,645
    Net income                                         317           232           146           194           207
    Other comprehensive income (loss)                   (1)            1            (3)            -             -
    Comprehensive income                               316           233           143           194           207
Ratio of Earnings to Fixed Charges (1)                6.59  x       5.04  x       3.47  x       3.92  x       3.21  x
BALANCE SHEET DATA
    Total assets                                  $  5,810      $  5,998      $  5,907      $  5,254      $  5,412
    Long-term debt (excluding current portion)(2)    1,331         1,067         1,478         1,361         1,275
    Total debt (3)                                   1,427         1,179         1,557         1,460         1,386
    Shareholder's equity                             1,918         1,975         1,964         1,846         2,081
</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.

(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.




                                       17
<PAGE>

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

OVERVIEW

         The following discussion of the financial condition and results of
operations of 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.

         In general, prices for refined products are significantly influenced by
the price of crude oil, feedstocks and blending components. Although an increase
or decrease in the price for crude oil, feedstocks and blending components
generally results in a corresponding increase or decrease in prices for refined
products, generally there is 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. 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 the Company's earnings and cash flows.

         CITGO purchases a significant amount of its crude oil requirements from
PDVSA under long-term supply agreements (expiring in the years 2006 through
2013). This supply represented approximately 53% of the crude oil processed in
refineries operated by CITGO in the year ended December 31, 2001. These crude
supply agreements contain force majeure provisions which entitle the supplier to
reduce the quantity of crude oil and feedstocks delivered under the crude supply
agreements under specified circumstances. For the year 2001, PDVSA deliveries of
crude oil to CITGO were slightly less than contractual base volumes due to
PDVSA's declaration of force majeure pursuant to all of the long-term crude oil
supply contracts related to CITGO's refineries. Therefore, the Company was
required to obtain alternative sources of crude oil, which resulted in lower
operating margins. On January 22, 2002, PDVSA notified CITGO that pursuant to
the February 9, 2001 declaration of force majeure, effective March 1, 2002,
PDVSA expects to deliver approximately 20 percent less than the contract volume
and PDVSA indicated that force majeure will be in effect until at least June
2002. If PDVSA reduces its delivery of crude oil under these crude oil supply
agreements, CITGO will be required to obtain alternative sources of crude oil
which may result in reduced operating margins. The effect of this declaration on
CITGO's crude oil supply and the duration of this



                                       18
<PAGE>
situation are not known at this time. (See Items 1. and 2. Business and
Properties -- Crude Oil and Refined Product Purchases).

         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, 2001.

         The cost and available coverage level of property and business
interruption insurance to the Company is driven, in part, by company specific
and industry factors. It is also affected by national and international events.
The present environment for CITGO is one characterized by increased cost of
coverage, higher deductibles, and some restrictions in coverage terms. This has
the potential effect of lower profitability in the near term.

CRITICAL ACCOUNTING POLICIES

         The preparation of financial statements in conformity with Accounting
Principles Generally Accepted 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. Subsequent adjustments to estimates, to the extent
required, may be made as more refined information becomes available.

         Commodity and Interest Rate Derivatives. The Company enters into
petroleum futures contracts, options and other over-the-counter commodity
derivatives, primarily to reduce its inventory purchase and product sale
exposure to market risk. In the normal course of business, the Company also
enters into certain petroleum commodity forward purchase and sale contracts,
which qualify as derivatives. The Company also enters into various interest
rate swap agreements to manage its risk related to interest rate changes on its
debt. Effective January 1, 2001, 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. 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. CITGO will continue to review its accounting treatment of derivatives
and may elect hedge accounting under certain circumstances in the future.

         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 in health care costs will be reversed in future
periods. 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.

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

                        CITGO SALES REVENUES AND VOLUMES
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,                 YEAR ENDED DECEMBER 31,
                                           ----------------------------------       --------------------------------
                                            2001          2000         1999          2001         2000         1999
                                           --------     --------     --------       ------       ------       ------
                                                    ($ IN MILLIONS)                         (MM GALLONS)
<S>                                        <C>          <C>         <C>           <C>          <C>          <C>
Gasoline                                   $ 11,316     $ 12,447     $  7,691       13,585       13,648       13,115
Jet fuel                                      1,660        2,065        1,129        2,190        2,367        2,198
Diesel / #2 fuel                              3,984        4,750        2,501        5,429        5,565        5,057
Asphalt                                         502          546          338          946          812          753
Petrochemicals and industrial products        1,510        1,740        1,024        2,308        2,153        2,063
Lubricants and waxes                            536          552          482          240          279          285
                                           --------     --------     --------       ------       ------       ------
          Total refined product sales      $ 19,508     $ 22,100     $ 13,165       24,698       24,824       23,471
Other sales                                     113           51          152            -            -            -
                                           --------     --------     --------       ------       ------       ------
          Total sales                      $ 19,621     $ 22,151     $ 13,317       24,698       24,824       23,471
                                           ========     ========     ========       ======       ======       ======
</TABLE>

                                       19
<PAGE>


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

                   CITGO COST OF SALES AND OPERATING EXPENSES
<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                                      2001          2000          1999
                                                                     -------       -------       -------
                                                                               ($ IN MILLIONS)
<S>                                                                  <C>           <C>           <C>
     Crude oil                                                       $ 4,112       $ 5,256       $ 2,855
     Refined products                                                 11,749        13,360         7,828
     Intermediate feedstocks                                           1,197         1,397           883
     Refining and manufacturing costs                                    929           884           816
     Other operating costs and expenses and inventory changes            926           624           415
                                                                     -------       -------       -------
            Total cost of sales and operating expenses               $18,913       $21,521       $12,797
                                                                     =======       =======       =======
</TABLE>

RESULTS OF OPERATIONS -- 2001 COMPARED TO 2000

         Sales revenues and volumes. Sales decreased $2.5 billion, representing
an 11% decrease from 2000 to 2001. This was due to a decrease in average sales
price of 11% and a decrease in sales volume of 1%. (See CITGO Sales Revenues and
Volumes table above.)

         Equity in earnings of affiliates. Equity in earnings of affiliates
increased by approximately $50 million, or 85% from $59 million in 2000 to $109
million in 2001. The increase was primarily due to the change in the earnings of
LYONDELL-CITGO, CITGO's share of which increased $33 million, from $41 million
in 2000 to $74 million in 2001. LYONDELL-CITGO's increased earnings in 2001 are
primarily due to higher refining margins offset by the impact of lower crude
processing rates due to an unplanned production unit outage and a major
turnaround, and higher natural gas costs in the first quarter of 2001. The
earnings for 2000 were impacted by a major planned turnaround which occurred
during the second quarter of 2000.

         Cost of sales and operating expenses. Cost of sales and operating
expenses decreased by $2.6 billion, or 12%, from 2000 to 2001. (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 62% of cost of sales for the years 2001 and 2000.
These refined product purchases included purchases from LYONDELL-CITGO, PDVMR,
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".)

         As a result of purchases of crude oil supplies from alternate sources
due to the supplier's invocation of the force majeure provisions in its crude
oil supply contracts, CITGO estimates that its cost of crude oil purchased in
2001 increased by $6 million from what would have otherwise been the case.




                                       20
<PAGE>
         Gross margin. The gross margin for 2001 was $709 million, or 3.6% of
net sales, compared to $630 million, or 2.8% of net sales, for 2000. The gross
margin increased from 2.5 cents per gallon in 2000 to 2.9 cents per gallon in
2001 as a result of general market conditions.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased $59 million, or 29% in 2001, primarily as a
result of an increase in incentive compensation, promotion expenses, and the
start-up expenses related to an international operation in 2001.

         Interest Expense. Interest expense decreased $14 million, or 17% in
2001, primarily due to lower interest rates and lower average debt outstanding
during 2001.

         Income taxes. CITGO's provision for income taxes in 2001 was $172
million, representing an effective tax rate of 36%. In 2000, CITGO's provision
for income taxes was $139 million, representing an effective tax rate of 37%.

RESULTS OF OPERATIONS -- 2000 COMPARED TO 1999

         Sales revenues and volumes. Sales increased $8.8 billion, representing
a 66% increase from 1999 to 2000. This was due to an increase in average sales
price of 57% and an increase in sales volume of 6%. (See CITGO Sales Revenues
and Volumes table above.)

         Equity in earnings of affiliates. Equity in earnings of affiliates
increased by approximately $38 million, or 181% from $21 million in 1999 to $59
million in 2000. The increase was primarily due to the change in the earnings of
LYONDELL-CITGO, CITGO's share of which increased $40 million, from $1 million in
1999 to $41 million in 2000. The increase in LYONDELL-CITGO earnings was due
primarily to increased deliveries and an improved mix of crude oil, higher spot
margins, reflecting a stronger gasoline market in 2000, and higher margins for
reformulated gasoline due to industry supply shortages. These improvements were
partly offset by higher fuels and utility costs and interest expense.

         Cost of sales and operating expenses. Cost of sales and operating
expenses increased by $8.7 billion, or 68%, from 1999 to 2000. (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 62% and 61% of cost of sales for the years 2000
and 1999, respectively. These refined product purchases included purchases from
LYONDELL-CITGO, PDVMR 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".

         As a result of purchases of crude oil supplies from alternate sources
due to the supplier's invocation of the force majeure provisions in its crude
oil supply contracts, CITGO estimates that its cost of crude oil purchased in
2000 increased by $5 million from what would have otherwise been the case.

         Gross margin. The gross margin for 2000 was $630 million, or 2.8% of
net sales, compared to $520 million, or 3.9% of net sales, for 1999. The gross
margin increased from 2.2 cents per gallon in 1999 to 2.5 cents per gallon in
2000.




                                       21
<PAGE>

         Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $12 million, or 6% in 2000, primarily as a
result of a reduction in bad debt expense due to the sale of the Company's
consumer credit card business in March 2000.

         Income taxes. CITGO's provision for income taxes in 2000 was $139
million, representing an effective tax rate of 37%. In 1999, CITGO's provision
for income taxes was $62 million, representing an effective tax rate of 30%. The
effective tax rate for the 1999 tax-year was unusually low due to a favorable
resolution in the second quarter of 1999 of a significant tax issue in the last
Internal Revenue Service audit. During the years under that audit, deferred
taxes were recorded for certain environmental expenses deducted in the tax
returns pending final determination by the Internal Revenue Service. The
deductions were allowed on audit and, accordingly, the deferred tax liability of
approximately $11 million was reversed with a corresponding benefit to tax
expense.

LIQUIDITY AND CAPITAL RESOURCES

         For the year ended December 31, 2001, CITGO's net cash provided by
operating activities totaled approximately $438 million, primarily reflecting
$317 million of net income, $248 million of depreciation and amortization and
the net effect of other items of $(127) million. The more significant changes in
other items included the decrease in accounts receivable, including receivables
from affiliates, of approximately $355 million and the decrease in accounts
payable and other current liabilities, including payables to affiliates, of
approximately $494 million. The average price per gallon of refined products
sold declined by approximately $0.30 between December 2000 and December 2001.
This decline is the primary reason for the decrease in accounts receivable. The
average price per barrel of crude oil purchased declined by approximately $9.20
between December 2000 and December 2001. In the same time period, the average
price per gallon of refined products purchased declined by approximately 29
cents. The price declines are the primary reason for the decrease in accounts
payable.

         Net cash used in investing activities in 2001 totaled $227 million
consisting primarily of capital expenditures of $186 million and investments in
LYONDELL-CITGO of $32 million.

         During the same period, consolidated net cash used by financing
activities totaled approximately $125 million resulting primarily from net
borrowings of $359 million on revolving bank loans, dividend payments in the
amount of $373 million, net repayments of other debt totaling $84 million, and
capital lease payments of $27 million.

         CITGO currently estimates that its capital expenditures for the years
2002 through 2006 will total approximately $2.5 billion, which includes capital
expenditures relating to the Lemont refinery of approximately $550 million.
These include:

      CITGO ESTIMATED CAPITAL EXPENDITURES - 2002 THROUGH 2006 (1)

<TABLE>
<S>                                                        <C>
     Strategic                                             $   777 million
     Maintenance                                               525 million
     Regulatory / Environmental                              1,154 million
                                                           ---------------
          Total                                            $ 2,456 million
                                                           ===============
</TABLE>
--------------
(1)  These estimates may change as future regulatory events unfold.  See
     "Factors Affecting Forward Looking Statements".

         As of December 31, 2001, the Company and its subsidiaries had an
aggregate of $1.4 billion of indebtedness outstanding that matures on various
dates through the year 2029. As of December 31, 2001, the Company's contractual
commitments to make principal payments on this indebtedness were $76 million,
$381 million and $47 million for 2002, 2003 and 2004, respectively. The
Company's bank credit facilities consist of a $400 million, five year, revolving
bank loan, a $150 million, 364-day, revolving bank loan, and a $25 million,
364-day, revolving bank loan, all of which are unsecured and have various
borrowing



                                       22
<PAGE>

maturities. At December 31, 2001, $360 million was outstanding under these
credit agreements. The Company's other principal indebtedness consists of (i)
$200 million in senior notes issued in 1996, (ii) $260 million in senior notes
issued pursuant to a master shelf agreement with an insurance company, (iii) $57
million in private placement senior notes issued in 1991, (iv) $338 million in
obligations related to tax exempt bonds issued by various governmental units,
and (v) $146 million in obligations related to taxable bonds issued by various
governmental units. (See Consolidated Financial Statements of CITGO -- Note 9
and 10 in Item 14a.)

         The following table summarizes future payments for CITGO's contractual
obligations at December 31, 2001.

<Table>
<Caption>
                                           Contractual Obligations
                                             At December 31, 2001

<S>                                     <C>       <C>       <C>       <C>       <C>
                                                  Less than  Year      Year     After 5
                                         Total      1 Year    2-3       4-5      Years
                                        -------   --------- -------   -------   -------
                                                        ($ in millions)

Long-Term Debt                          $ 1,360   $    76   $   428   $   263   $   593
Capital Lease Obligations                    67        20        25         6        16
Operating Leases                            170        47        65        40        18
                                        -------   -------   -------   -------   -------
Total Contractual Cash Obligations      $ 1,597   $   143   $   518   $   309   $   627
                                        =======   =======   =======   =======   =======


(See Consolidated Financial Statements of CITGO--Notes 10 and 14 in Item 14a).
</Table>


         The following table summarizes CITGO's contingent commitments at
December 31, 2001.
<Table>
<Caption>
                                          Other Commercial Commitments
                                             At December 31, 2001


<S>                                     <C>        <C>         <C>       <C>       <C>
                                                               Expiration
                                                   ---------------------------------------
                                         Total
                                         Amounts   Less than     Year      Year     Over 5
                                        Committed    1 Year       2-3       4-5      Years
                                        ---------  ---------   -------   -------   -------
                                                        ($ in millions)

Letters of Credit(1)                    $    18    $    18     $    -    $    -    $     -
Guarantees                                  134         63         66         4          1
Surety Bonds                                 73         56         14         3          -
                                        -------    -------     -------   -------   -------
Total Commercial Commitments            $   225    $   137     $    80   $    7    $     1
                                        =======    =======     =======   =======   =======

(1) The Company has outstanding letters of credit totaling approximately
    $515 million, which includes $497 million related to the Company's
    tax-exempt and taxable revenue bonds included in Long-Term Debt in
    the table of contractual obligations above.

(See Consolidated Financial Statements of CITGO--Notes 10 and 14 in Item 14a).
</Table>

         As of December 31, 2001, capital resources available to CITGO included
cash provided by operations, available borrowing capacity of $135 million under
CITGO's revolving credit facility and $190 million in unused availability under
uncommitted short-term borrowing facilities with various banks. Additionally,
the remaining $400 million from CITGO's shelf registration with the Securities
and Exchange Commission for $600 million of debt securities may be offered and
sold from time to time. CITGO believes that it has sufficient capital resources
to carry out planned capital spending programs, including regulatory and
environmental projects in the near term, and to meet currently anticipated
future obligations as they arise. CITGO periodically evaluates other sources of
capital in the marketplace and anticipates long-term capital requirements will
be satisfied with current capital resources and future financing arrangements,
including the issuance of debt securities. The Company's ability to obtain such
financing will depend on numerous factors, including market conditions and the
perceived creditworthiness of the Company at that time. See "Factors Affecting
Forward Looking Statements".

         CITGO's debt instruments impose restrictions on CITGO's ability to
incur additional debt, place liens on property, sell or acquire fixed assets,
and make restricted payments, including dividends.

         As of December 31, 2001, CITGO's senior unsecured debt rating, as
assessed by the three major credit rating agencies, were as follows:

                         Fitch               BBB
                         Moody's             Baa2
                         Standard & Poor's   BB

CITGO's debt instruments do not contain any provisions which trigger
acceleration of payment or decreases in available borrowing capacity as a
result of changes in credit ratings.

         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 14a).




                                       23
<PAGE>

IMPENDING ACCOUNTING CHANGES

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS No. 141") which addresses financial accounting and reporting for business
combinations and requires that all business combinations initiated after June
30, 2001 be accounted for under the purchase method. Use of the pooling of
interest method is no longer permitted. The adoption of SFAS No. 141 did not
impact the Company's financial position or results of operations.

         In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") which
is fully effective in fiscal years beginning after December 15, 2001, although
certain provisions of SFAS No. 142 are applicable to goodwill and other
intangible assets acquired in transactions completed after June 30, 2001. SFAS
No. 142 addresses financial accounting and reporting for acquired goodwill and
other intangible assets and requires that goodwill and intangibles with an
indefinite life no longer be amortized but instead be periodically reviewed for
impairment. The adoption of SFAS No. 142 will not materially impact the
Company's financial position or results of operations.

         In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No.
143") which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. It applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and (or) the normal operation of a long-lived asset, except for
certain obligations of lessees. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company
has not determined the impact on its financial statements that may result from
the adoption of SFAS No. 143.

          In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS No. 144") which addresses financial accounting and reporting for
the impairment or disposal of long-lived assets by requiring that one accounting
model be used for long-lived assets to be disposed of by sale, whether
previously held and used or newly acquired, and by broadening the presentation
of discontinued operations to include more disposal transactions. SFAS No. 144
is effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. The provisions
of this statement generally are to be applied prospectively; therefore, the
adoption of SFAS No. 144 will not impact the Company's financial position or
results of operations.

         The American Institute of Certified Public Accountants has issued a
"Statement of Position" exposure draft on cost capitalization that is expected
to require companies to expense the non-capital portion of major maintenance
costs as incurred. The statement is expected to require that any existing
unamortized deferred non-capital major maintenance costs be expensed
immediately. The exposure draft indicates that this change will be required to
be adopted for years beginning after June 15, 2002, and that the effect of
expensing existing unamortized deferred non-capital major maintenance costs will
be reported as a cumulative effect of an accounting change in the consolidated
statement of income. At December 31, 2001, the Company had included turnaround
costs of $98 million in other assets. Company management has not determined the
amount, if any, of these costs that could be capitalized under the provisions of
the exposure draft.




                                       24
<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, 2001, 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. 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, 2001, none of the Company's
commodity derivatives were accounted for as hedges.


                        NON TRADING COMMODITY DERIVATIVES
                       OPEN POSITIONS AT DECEMBER 31, 2001
<TABLE>
<CAPTION>
                                                                   MATURITY     NUMBER OF     CONTRACT      MARKET
     COMMODITY                      DERIVATIVE                       DATE       CONTRACTS       VALUE      VALUE(4)
     ---------                      ----------                     --------     ---------     --------     --------
                                                                                                 ($ in millions)
                                                                                              ---------------------
<S>                      <C>                                         <C>           <C>          <C>         <C>
No Lead Gasoline (1)     Futures Purchased                           2002            994        $ 25.4      $ 25.0
                         Futures Sold                                2002            332        $  8.3      $  8.1
                         Forward Purchase Contracts                  2002          4,095        $ 95.8      $ 94.0
                         Forward Sale Contracts                      2002          3,148        $ 71.2      $ 73.2

Distillates (1)          Futures Purchased                           2002          1,483        $ 43.4      $ 34.6
                         Futures Purchased                           2003             94        $  2.4      $  2.3
                         Futures Sold                                2002            943        $ 25.3      $ 21.8
                         OTC Options Purchased                       2002             30        $  -        $  -
                         OTC Options Sold                            2002             30        $ (0.1)     $ (0.1)
                         Forward Purchase Contracts                  2002          1,123        $ 25.2      $ 24.9
                         Forward Sale Contracts                      2002          2,536        $ 56.3      $ 56.4

Crude Oil (1)            Futures Purchased                           2002            517        $ 12.6      $ 10.4
                         Futures Sold                                2002            649        $ 12.7      $ 12.9
                         OTC Swaps (Pay Float/Receive Fixed)(3)      2002              2        $  -        $  0.3
                         OTC Swaps (Pay Fixed/Receive Float)(3)      2002              1        $  -        $  -
                         Forward Purchase Contracts                  2002          6,651        $127.5      $132.4
                         Forward Sale Contracts                      2002          6,261        $123.5      $124.5

Natural Gas (2)          Futures Sold                                2002             55        $  1.6      $  1.4
                         OTC Options Sold                            2002             20        $  -        $ (0.1)
</TABLE>
--------------
(1)  Thousands of barrels
(2)  Ten-thousands of mmbtu
(3)  Floating price based on market index designated in contract; fixed price
     agreed upon at date of contract.
(4)  Based on actively quoted prices.



                                       25
<PAGE>
                        NON TRADING COMMODITY DERIVATIVES
                       OPEN POSITIONS AT DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                   MATURITY     NUMBER OF     CONTRACT      MARKET
     COMMODITY                      DERIVATIVE                       DATE       CONTRACTS       VALUE      VALUE(3)
     ---------                      ----------                     --------     ---------     --------     --------
                                                                                                 ($ in millions)
                                                                                              ---------------------
<S>                      <C>                                         <C>           <C>          <C>         <C>
No Lead Gasoline (1)     Futures Purchased                           2001             25        $  0.8      $  0.8

Heating Oil (1)          Futures Purchased                           2001          1,533        $ 53.9      $ 55.6
                         Futures Purchased                           2002             16        $  0.5      $  0.5
                         Futures Sold                                2001            579        $ 21.2      $ 21.7
                         OTC Swaps (Pay Fixed/Receive Float)(2)      2001              9        $  -        $  0.1
                         OTC Swaps (Pay Float/Receive Fixed)(2)      2001            500        $  -        $ (0.5)

Crude Oil (1)            Futures Purchased                           2001            579        $ 15.9      $ 15.5
                         Futures Sold                                2001            800        $ 23.4      $ 21.4
--------------
(1)  1,000 barrels per contract

(2)  Floating price based on market index designated in contract; fixed price agreed upon at date of contract

(3)  Based on actively quoted prices.
</TABLE>

         Debt Related Instruments. CITGO has fixed and floating U.S. currency
denominated debt. CITGO uses interest rate swaps to manage its debt portfolio
toward a benchmark of 40 to 60 percent fixed rate debt to total fixed and
floating rate debt. These instruments have the effect of changing the interest
rate with the objective of minimizing CITGO's long-term costs. At December 31,
2001 and 2000, 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, 2001 AND 2000
<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>

         The fair value of the interest rate swap agreements in place at
December 31, 2001, 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 an unrealized loss of $2.8 million.


                                       26
<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, 2001
<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>
    2002           $ 36              8.78%            $ 39            3.45%
    2003             61              8.79%             320            4.64%
    2004             31              8.02%              16            5.72%
    2005             11              9.30%               -              -
    2006            251              8.06%               -              -
 Thereafter         130              7.85%             465            8.50%
                   ----              ----             ----            ----
    Total          $520              8.17%            $840            6.74%
                   ====              ====             ====            ====
 Fair Value        $532                               $840
                   ====                               ====
</TABLE>


                                DEBT OBLIGATIONS
                              AT DECEMBER 31, 2000
<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>
    2001           $ 40              9.11%            $ 44            6.79%
    2002             36              8.78%               -              -
    2003             61              8.79%               -              -
    2004             31              8.02%              16            7.36%
    2005             11              9.30%               -              -
 Thereafter         380              7.99%             465            8.86%
                   ----              ----             ----            ----
    Total          $559              8.23%            $525            8.64%
                   ====              ====             ====            ====
 Fair Value        $552                               $525
                   ====                               ====
</TABLE>





                                       27

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

         None.


                                    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

         Not applicable.




                                       28
<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 $3.0 billion of crude oil, feedstocks
and refined products at market related prices from PDVSA in 2001. At December
31, 2001, $185 million was included in CITGO's current payable to affiliates as
a result of its transactions with PDVSA. (See "Items 1. and 2. Business and
Properties -- Crude Oil and Refined Product Purchases").

         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 2001, 70% 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"). CITGO contributed cash during the years 1993 through 1997 for a
participation interest and other commitments related to LYONDELL-CITGO's
refinery enhancement project, and Lyondell contributed the Houston refinery and
related assets for the remaining participation interest. The refinery
enhancement project to increase the refinery's heavy crude oil high conversion
capacity was substantially completed at the end of 1996, with an in-service date
of March 1, 1997. The heavy crude oil processed by the Houston refinery is
supplied by PDVSA under a long-term crude oil supply agreement through the year
2017. Under this agreement, LYONDELL-CITGO purchased approximately $1.5 billion
of crude oil and feedstocks at market related prices from PDVSA in 2001. 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 14a). Various disputes exist
between LYONDELL-CITGO and the partners 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, 2001, in accordance with agreements between the Owners
concerning such interest. CITGO held notes receivable from LYONDELL-CITGO of $35
million at December 31, 2001. The notes bear interest at market rates which were
approximately 2.2% at December 31, 2001, and are due July 1, 2003.

         On July 20, 2001, LYONDELL-CITGO completed a refinancing of its working
capital revolver and its $450 million term bank loan. The new 18-month term loan
and working capital revolver will mature in January 2003.

         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.

         On May 1, 1997, PDV America and Union Oil Company of California
("Unocal") closed a transaction relating to The UNO-VEN Company ("UNO-VEN"). The
transaction transferred certain assets and liabilities to PDVMR, a subsidiary of
PDV America, in liquidation of PDV America's 50% ownership interest in UNO-VEN.
The assets include a refinery in Lemont, Illinois, as well as product
distribution terminals located in the Midwest. CITGO operates these facilities
and purchases the products produced at the refinery (See Consolidated Financial
Statements of CITGO -- Note 2 and Note 4 in Item 14a). A portion of the crude
oil processed by PDVMR is supplied by PDVSA under a long-term crude supply
contract. On January 1, 2002, PDV America, the parent company of CITGO, made a
contribution to the capital of CITGO of all of the common stock of PDV America's
wholly owned subsidiary, VPHI, the direct parent of PDVMR. (See Consolidated
Financial Statements of CITGO -Note 18 in Item 14a).




                                       29
<PAGE>

         In October 1998 an affiliate of PDVSA acquired a 50% equity interest in
HOVENSA and has the right under a product sales agreement to assign periodically
to CITGO, or other related parties, its 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 -- Note 2 and 4 in Item 14a). Pursuant to the above
arrangement, CITGO acquired approximately 106 MBPD of refined products from the
refinery during 2001, approximately one-half of which was gasoline.

         The refined product purchase agreements with LYONDELL-CITGO, PDVMR and
HOVENSA incorporate various formula prices based on published market prices and
other factors. Such purchases totaled $4.8 billion for 2001. At December 31,
2001, $87 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 $292 million to affiliates, including LYONDELL-CITGO and Mount Vernon Phenol
Plant Partnership, in 2001. The Company's sales of crude oil to affiliates were
$5 million in 2001. At December 31, 2001, $134 million was included in Due from
affiliates as a result of these and related transactions.

         CITGO has guaranteed approximately $122 million of debt of certain
affiliates, including $50 million related to HOVENSA, $25 million related to PDV
Texas, Inc., and $20 million related to PDVMR. (See Consolidated Financial
Statements of CITGO -- Note 13 in Item 14a).

         Under a separate guarantee of rent agreement, PDVSA has guaranteed
payment of rent, stipulated loss value and termination value due under the lease
of the Corpus Christi Refinery West Plant facilities. (See Consolidated
Financial Statements of CITGO -- Note 4 in Item 14a).

         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, 2001,
CITGO had net related party receivables related to federal income taxes of $62
million.



                                       30
<PAGE>

                                     PART IV

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

a.   CERTAIN DOCUMENTS FILED AS PART OF THIS REPORT

     (1) Financial Statements:

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                          <C>
Independent Auditors' Report                                                 F-1
Consolidated Balance Sheets at December 31, 2001 and 2000                    F-2
Consolidated Statements of Income and Comprehensive Income
   for the years ended December 31, 2001, 2000 and 1999                      F-3
Consolidated Statements of Shareholder's Equity for the years
   ended December 31, 2001, 2000 and 1999                                    F-4
Consolidated Statements of Cash Flows for the years ended
   December 31, 2001, 2000 and 1999                                          F-5
Notes to Consolidated Financial Statements                                   F-7
</TABLE>

     (2) Exhibits:

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

b.   REPORTS ON FORM 8-K

              A Form 8-K was filed with the Securities and Exchange Commission
     on January 16, 2002 in regard to the fact that on January 1, 2002, PDV
     America, Inc. ("PDVA"), the parent company of CITGO Petroleum Corporation,
     made a contribution to the capital of CITGO of all of the common stock of
     PDVA's wholly-owned subsidiary, VPHI. No additional shares of the capital
     stock of CITGO were issued in connection with the contribution. Effective
     January 1, 2002, the accounts of VPHI were included in the consolidated
     financial statements of CITGO at the historical carrying value of PDVA's
     investment in VPHI. CITGO will record the effects of this transaction in a
     manner similar to "pooling-of-interests" accounting.

              The principal asset of VPHI is a petroleum refinery owned by its
     wholly-owned subsidiary, PDVMR, located in Lemont, Illinois. CITGO has
     operated this refinery and purchased substantially all of its primary
     output, consisting of transportation fuels and petrochemicals, since May
     1997. CITGO plans to continue to operate the refinery as a source of supply
     for transportation fuels and petrochemicals.




                                       31
<PAGE>

c.  EXHIBITS

<TABLE>
<CAPTION>
  Exhibit
  Number
  -------
<S>              <C>
      *3.1       Certificate of Incorporation, Certificate of Amendment of Certificate of Incorporation.

  *****3.1(i)    By-laws of CITGO Petroleum Corporation as amended on March 13, 2001.

      *4.1       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.

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

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

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

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

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

    **10.5       Contract for the Purchase/Sale of Boscan Crude Oil dated as of June 2, 1993 between Tradecal,
                 S.A. and CITGO Asphalt Refining Company.

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

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

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

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

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

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

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

      10.13(i)   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.

     *10.15(i)   First Amendment to the Second Amended and Restated Senior Term Loan Agreement, by and between
                 CITGO Petroleum Corporation and Bank of America National Trust and Savings Association et al,
                 dated as of February 15, 1994.
</TABLE>





                                       32
<PAGE>
<TABLE>
<CAPTION>
  Exhibit
  Number
  -------
<S>              <C>
     *10.15(ii)  Second Amendment to Second Amended and Restated Senior Term Loan Agreement by and among
                 CITGO Petroleum Corporation and Bank of America Illinois et al, dated as of October 21, 1994.

     *10.15(iii) First Amendment to the Second Amended and Restated Senior Revolving Credit Facility
                 Agreement by and among CITGO Petroleum Corporation and Bank of America National Trust and
                 Savings Association et al, dated as of February 15, 1994.

     *10.15(iv)  Second Amendment to Second Amended and Restated Senior Revolving Credit Facility
                 Agreement by and among CITGO Petroleum Corporation and Bank of America Illinois
                 et al, dated as of October 21, 1994.

     *10.16      Master Shelf Agreement (1994) by and between Prudential Insurance Company of America
                 and CITGO Petroleum Corporation ($100,000,000), dated March 4, 1994.

     *10.17(i)   Letter Agreement by and between the Company and Prudential Insurance Company of
                 America, dated March 4, 1994.

     *10.17(ii)  Letter Amendment No. 1 to Master Shelf Agreement with Prudential Insurance Company of
                 America, dated November 14, 1994.

    **10.18      CITGO Senior Debt Securities (1991) Agreement.

   ***10.21      Selling Agency Agreement dated as of October 28, 1997 among CITGO Petroleum Corporation,
                 Salomon Brothers Inc. and Chase Securities Inc.

  ****10.22      $150,000,000 Credit Agreement dated May 13, 1998.

  ****10.23      $400,000,000 Credit Agreement dated May 13, 1998.

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

      12.1       Computation of Ratio of Earnings to Fixed Charges.

      23.1       Consent of Independent Auditors.

--------------
    *  Previously filed in connection with the Registrant's Report on Form 10, Registration No. 333-3226.

   **  Incorporated by reference to the Registration Statement on Form F-1 of PDV America, Inc. (No. 33-63742).

  ***  Incorporated by reference to the Registrant's Report on Form 8-K filed
       with the Commission on November 18, 1997.

 ****  Incorporated by reference to the Registrant's Report on Form 10-K filed with
       the Commission on March 17, 1999.

*****  Incorporated by reference to the Registrant's Report on Form 10-K filed
       with the Commission on March 21, 2001.
</TABLE>




                                       33
<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/  Larry Krieg
                                    --------------------------------------------
                                                     Larry Krieg
                                        Controller (Chief Accounting Officer)

Date: March 28, 2002


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.

<TABLE>
<CAPTION>
                  Signatures                                   Title                              Date
                  ----------                                   ------                             ----
<S>                                                  <C>                                    <C>
By           /s/  CARLOS JORDA                       Chairman of the Board and              March 28, 2002
  ------------------------------------------         Director
                  Carlos Jorda

By           /s/  LUIS DAVILA                        Director                               March 28, 2002
  ------------------------------------------
                  Luis Davila

By           /s/  ANDRES RIERA                       Director                               March 28, 2002
  ------------------------------------------
                  Andres Riera

By           /s/  OSWALDO CONTRERAS                  President, Chief Executive             March 28, 2002
  ------------------------------------------         Officer and Director
                  Oswaldo Contreras

By           /s/  EDDIE R. HUMPHREY                  Chief Financial Officer                March 28, 2002
  ------------------------------------------
                  Eddie R. Humphrey
</TABLE>




                                       34
<PAGE>





     CITGO PETROLEUM CORPORATION
     Consolidated Financial Statements as of
     December 31, 2001 and 2000, and for
     Each of the Three Years in the Period
     Ended December 31, 2001, and
     Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT

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 as of December 31, 2001 and 2000, and the related
consolidated statements of income and comprehensive income, shareholder's equity
and cash flows for each of the three years in the period ended December 31,
2001. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of CITGO Petroleum Corporation and
subsidiaries at December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in the
United States of America.

DELOITTE & TOUCHE LLP

Tulsa, Oklahoma
February 14, 2002



                                      F-1
<PAGE>
CITGO PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                        -------------------------------
ASSETS                                                        2001               2000

CURRENT ASSETS:
<S>                                                      <C>                <C>
   Cash and cash equivalents                             $   104,143        $    17,777
   Accounts receivable, net                                  849,791          1,307,837
   Due from affiliates                                       133,992             37,622
   Inventories                                               968,515            987,810
   Prepaid expenses and other                                110,379              5,768
                                                         -----------        -----------
           Total current assets                            2,166,820          2,356,814

PROPERTY, PLANT AND EQUIPMENT - Net                        2,739,972          2,756,189

INVESTMENTS IN AFFILIATES                                    678,558            688,863

OTHER ASSETS                                                 224,588            196,312
                                                         -----------        -----------

                                                         $ 5,809,938        $ 5,998,178
                                                         ===========        ===========


LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
   Short-term bank loans                                 $        --        $    37,500
   Accounts payable                                          546,050            843,057
   Payables to affiliates                                    311,557            524,288
   Taxes other than income                                   219,699            210,986
   Other                                                     273,845            283,654
   Current portion of long-term debt                          75,864             47,078
   Current portion of capital lease obligation                20,358             26,649
                                                         -----------        -----------
           Total current liabilities                       1,447,373          1,973,212

LONG-TERM DEBT                                             1,283,842          1,000,175

CAPITAL LEASE OBLIGATION                                      46,964             67,322

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                  218,706            206,339

OTHER NONCURRENT LIABILITIES                                 201,748            190,050

DEFERRED INCOME TAXES                                        670,269            554,626

MINORITY INTEREST                                             23,176             31,518

COMMITMENTS AND CONTINGENCIES (NOTE 13)

SHAREHOLDER'S EQUITY:
   Common stock - $1.00 par value, 1,000 shares
    authorized, issued and outstanding                             1                  1
   Additional capital                                      1,305,009          1,305,009
   Retained earnings                                         616,315            672,291
   Accumulated other comprehensive loss                       (3,465)            (2,365)
                                                         -----------        -----------
           Total shareholder's equity                      1,917,860          1,974,936
                                                         -----------        -----------

                                                         $ 5,809,938        $ 5,998,178
                                                         ===========        ===========
</TABLE>


See notes to consolidated financial statements.


                                      F-2
<PAGE>
CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                 2001                2000                 1999

REVENUES:

<S>                                                                          <C>                 <C>                 <C>
   Net sales                                                                 $ 19,329,589        $ 21,929,231        $ 13,127,443
   Sales to affiliates                                                            291,657             222,177             189,778
                                                                             ------------        ------------        ------------
                                                                               19,621,246          22,151,408          13,317,221

   Equity in earnings of affiliates                                               109,244              58,771              21,348
   Other income (expense), net                                                      4,203             (15,963)            (16,511)
                                                                             ------------        ------------        ------------
                                                                               19,734,693          22,194,216          13,322,058
                                                                             ------------        ------------        ------------

COST OF SALES AND EXPENSES:
   Cost of sales and operating expenses (including purchases of
      $7,876,069, $10,622,919, and $5,947,449 from affiliates)                 18,912,591          21,520,984          12,796,596
   Selling, general and administrative expenses                                   267,403             208,009             220,489
   Interest expense, excluding capital lease                                       67,919              81,819              83,933
   Capital lease interest charge                                                    9,128              11,019              12,715
   Minority interest                                                                1,971               1,808                 151
                                                                             ------------        ------------        ------------
                                                                               19,259,012          21,823,639          13,113,884
                                                                             ------------        ------------        ------------

INCOME BEFORE INCOME TAXES AND CUMULATIVE
   EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                                       475,681             370,577             208,174

INCOME TAXES                                                                      171,657             138,593              61,690
                                                                             ------------        ------------        ------------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
   IN ACCOUNTING PRINCIPLE                                                        304,024             231,984             146,484

CUMULATIVE EFFECT, ACCOUNTING FOR DERIVATIVES,
   NET OF RELATED INCOME TAXES OF $7,625                                           13,000                  --                  --
                                                                             ------------        ------------        ------------

NET INCOME                                                                        317,024             231,984             146,484

OTHER COMPREHENSIVE INCOME (LOSS):
   Cash flow hedges:
      Cumulative effect, accounting for derivatives, net of related
         income taxes of $(850)                                                    (1,450)                 --                  --
      Less:  reclassification adjustment for derivative losses included in
         net income, net of related income taxes of $265                              469                  --                  --
                                                                             ------------        ------------        ------------

                                                                                     (981)                 --                  --

   Minimum pension liability adjustment, net of deferred taxes of $69
      in 2001, $(499) in 2000 and $2,012 in 1999                                     (119)                849              (3,214)
                                                                             ------------        ------------        ------------

           Total other comprehensive (loss) income                                 (1,100)                849              (3,214)
                                                                             ------------        ------------        ------------

COMPREHENSIVE INCOME                                                         $    315,924        $    232,833        $    143,270
                                                                             ============        ============        ============
</TABLE>


See notes to consolidated financial statements.


                                      F-3
<PAGE>
CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001
(DOLLARS AND SHARES IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                               ACCUMULATED OTHER
                                                                           COMPREHENSIVE INCOME (LOSS)
                                                                           --------------------------
                                                                             MINIMUM         CASH                          TOTAL
                                  COMMON STOCK    ADDITIONAL     RETAINED    PENSION         FLOW                      SHAREHOLDER'S
                                 --------------
                                 SHARES  AMOUNT     CAPITAL      EARNINGS   LIABILITY       HEDGES       TOTAL             EQUITY

<S>                              <C>     <C>      <C>          <C>           <C>          <C>           <C>            <C>
BALANCE, JANUARY 1, 1999             1   $  1     $ 1,312,616  $   533,823   $     --     $    --       $     --        $ 1,846,440

   Net income                       --     --               --     146,484          --         --             --            146,484

   Other comprehensive loss         --     --              --           --     (3,214)         --         (3,214)            (3,214)

   Noncash dividend paid            --     --              --      (10,788)        --          --             --            (10,788)

   Dividend paid                    --     --              --      (15,000)        --          --             --            (15,000)
                                    ----  ----       --------      --------   --------      ------       --------           --------
  BALANCE, DECEMBER 31, 1999         1      1       1,312,616      654,519     (3,214)         --         (3,214)         1,963,922

   Net income                       --     --              --      231,984         --          --             --            231,984

   Other comprehensive income       --     --              --           --        849          --            849                849

   Tax allocation agreement
      amendment                     --     --          (7,607)      10,788         --          --             --              3,181

   Dividend paid                    --     --              --     (225,000)        --          --                          (225,000)
                                   ---   ----     -----------  ------------  --------     -------      ---------        -----------
  BALANCE, DECEMBER 31, 2000         1      1       1,305,009      672,291     (2,365)         --         (2,365)         1,974,936

   Net income                       --     --              --      317,024         --          --             --            317,024

   Other comprehensive loss         --     --              --           --       (119)       (981)        (1,100)            (1,100)

   Dividends paid                   --     --              --     (373,000)        --          --             --           (373,000)
                                   ----  ----     -----------     ---------  ---------     ------       --------        -----------
  BALANCE, DECEMBER 31, 2001         1   $  1     $ 1,305,009  $   616,315   $ (2,484)     $ (981)      $ (3,465)       $ 1,917,860
                                   ====   ====     ===========  ===========   ========      ======       ========        ===========
</TABLE>


See notes to consolidated financial statements.




                                      F-4
<PAGE>
CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                           2001             2000             1999

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                     <C>              <C>              <C>
   Net income                                                           $ 317,024        $ 231,984        $ 146,484
   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Depreciation and amortization                                       247,726          249,306          233,747
      Provision for losses on accounts receivable                           6,239            1,651           15,110
      Loss on sale of investments                                              --                1            1,616
      Deferred income taxes                                                82,938           47,236           49,349
      Distributions in excess of equity in earnings of affiliates          42,942           67,904           80,660
      Other adjustments                                                    10,383           25,928           12,662
      Changes in operating assets and liabilities:
         Accounts receivable and due from affiliates                      355,438         (304,982)        (482,957)
         Inventories                                                       15,537          (34,657)        (233,528)
         Prepaid expenses and other current assets                        (89,014)           1,368           11,182
         Accounts payable and other current liabilities                  (494,275)         424,532          456,568
         Other assets                                                     (86,761)         (49,987)         (58,759)
         Other liabilities                                                 30,111           (1,544)         (14,931)
                                                                        ---------        ---------        ---------
           Total adjustments                                              121,264          426,756           70,719
                                                                        ---------        ---------        ---------
           Net cash provided by operating activities                      438,288          658,740          217,203
                                                                        ---------        ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                  (186,436)        (101,545)        (227,167)
   Proceeds from sales of property, plant and equipment                     2,476            4,413           10,524
   Decrease in restricted cash                                                 --            3,015            6,421
   Investments in LYONDELL-CITGO Refining LP                              (31,800)         (17,600)              --
   Loans to LYONDELL-CITGO Refining LP                                         --           (7,024)         (24,600)
   Proceeds from sale of investments                                           --               --            4,980
   Investments in and advances to other affiliates                        (11,435)         (14,500)          (4,212)
                                                                        ---------        ---------        ---------
           Net cash used in investing activities                         (227,195)        (133,241)        (234,054)
                                                                        ---------        ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net (repayments of) proceeds from short-term bank loans                (37,500)          21,500          (21,000)
   Net proceeds (repayments of) from revolving bank loans                 359,500         (345,000)         180,000
   Payments on private placement senior notes                             (39,935)         (39,935)         (39,935)
   Payments on taxable bonds                                              (28,000)              --          (25,000)
   Proceeds from issuance of tax-exempt bonds                              28,000               --           25,000
   Payments of capital lease obligations                                  (26,649)          (7,954)         (14,660)
   Repayments of other debt                                                (7,143)          (7,113)          (7,112)
   Dividends paid                                                        (373,000)        (225,000)         (15,000)
                                                                        ---------        ---------        ---------
           Net cash (used in) provided by financing activities           (124,727)        (603,502)          82,293
                                                                        ---------        ---------        ---------
</TABLE>


                                                                     (Continued)





                                      F-5
<PAGE>
CITGO PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                      2001            2000             1999
<S>                                                               <C>               <C>             <C>
INCREASE (DECREASE) IN CASH AND CASH

         EQUIVALENTS                                              $    86,366       $(78,003)       $ 65,442

      CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                   17,777         95,780          30,338
                                                                  -----------       --------        --------

      CASH AND CASH EQUIVALENTS, END OF PERIOD                    $   104,143       $ 17,777        $ 95,780
                                                                  ===========       ========        ========

      SUPPLEMENTAL DISCLOSURE OF CASH FLOW
         INFORMATION:
         Cash paid during the period for:
            Interest, net of amounts capitalized                  $    83,695       $ 89,746        $ 94,907
                                                                  ===========       ========        ========

            Income taxes, net of refunds of $30,488 in 1999       $   296,979       $ 60,501        $(16,428)
                                                                  ===========       ========        ========

      SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
         ACTIVITIES -

         Investment in LYONDELL-CITGO Refining LP (Note 3)        $        --       $     --        $(32,654)
                                                                  ===========       ========        ========

      SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
         ACTIVITIES:

         Noncash dividend                                         $        --       $     --        $(10,788)
                                                                  ===========       ========        ========
         Tax allocation agreement amendment                       $        --       $  3,181        $     --
                                                                  ===========       ========        ========
</TABLE>


See notes to consolidated financial statements.                      (Concluded)





                                      F-6
<PAGE>
CITGO PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001


1.    SIGNIFICANT ACCOUNTING POLICIES

      DESCRIPTION OF BUSINESS - CITGO Petroleum Corporation ("CITGO" or the
      "Company") 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 quality transportation fuels as
      well as lubricants, refined waxes, petrochemicals, asphalt and other
      industrial products. CITGO owns and operates two modern, highly complex
      crude oil refineries (Lake Charles, Louisiana, and Corpus Christi, Texas)
      and two asphalt refineries (Paulsboro, New Jersey, and Savannah, Georgia)
      with a combined aggregate rated crude oil refining capacity of 582
      thousand barrels per day ("MBPD"). CITGO also owns a minority interest in
      LYONDELL-CITGO Refining LP, a limited partnership (formerly a limited
      liability company) that owns and operates a refinery in Houston, Texas,
      with a rated crude oil refining capacity of 265 MBPD. CITGO also operates
      a 167 MBPD refinery in Lemont, Illinois, owned by PDV Midwest Refining
      L.L.C. ("PDVMR"), a wholly owned subsidiary of PDV America (see Note 18,
      "Subsequent Events"). CITGO's consolidated financial statements also
      include accounts relating to a 65 percent owned lubricant and wax plant,
      pipelines, and equity interests in pipeline companies and petroleum
      storage terminals.

      CITGO's transportation fuel customers include primarily 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. CITGO and
      PDVSA are engaged in a joint effort to sell lubricants, gasoline and
      distillates in various Latin American markets. Petrochemical feedstocks
      and industrial products are sold to various manufacturers and industrial
      companies throughout the United States. Petroleum coke is sold primarily
      in international markets.

      PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
      include the accounts of CITGO and its subsidiaries (collectively referred
      to as the "Company"). All subsidiaries are wholly owned except for Cit-Con
      Oil Corporation ("Cit-Con"), which is 65 percent owned (see Note 18,
      "Subsequent Events"). 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.


                                      F-7
<PAGE>
      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 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 from sales of products is recognized upon
      transfer of title, based upon the terms of delivery.

      SUPPLY AND MARKETING ACTIVITIES - The Company engages in the buying and
      selling of crude oil to supply its refineries. 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.

      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 $3.3 billion, $3.2
      billion, and $3.1 billion were collected from customers and paid to
      various governmental entities in 2001, 2000, and 1999, respectively.
      Excise taxes are not included in sales.

      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.

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

      The 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 $1.5 million, $4
      million, and $7 million, during 2001, 2000, and 1999, respectively.


                                      F-8
<PAGE>
      COMMODITY AND INTEREST RATE DERIVATIVES - The Company enters into
      petroleum futures contracts, options and other over-the-counter commodity
      derivatives, primarily to reduce its inventory purchase and product sale
      exposure to market risk. In the normal course of business, the Company
      also enters into certain petroleum commodity forward purchase and sale
      contracts, which qualify as derivatives. The Company also enters into
      various interest rate swap agreements to manage its risk related to
      interest rate change on its debt.

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards No. 133, "Accounting for
      Derivative Instruments and Hedging Activities" ("SFAS No. 133"). In June
      2000, Statement of Financial Accounting Standards No. 138, "Accounting for
      Certain Derivative Instruments and Certain Hedging Activities, an
      amendment of SFAS No. 133," was issued. The statement, as amended,
      establishes accounting and reporting standards for derivative instruments
      and for hedging activities. It requires that an entity recognize all
      derivatives, at fair value, as either assets or liabilities in the
      statement of financial position with an offset either to shareholder's
      equity and comprehensive income or income depending upon the
      classification of the derivative. The Company adopted SFAS No. 133 on
      January 1, 2001. Certain of the derivative instruments identified at
      January 1, 2001 under the provisions of SFAS No. 133 had been previously
      designated in hedging relationships that addressed the variable cash flow
      exposure of forecasted transactions; under the transition provisions of
      SFAS No. 133, on January 1, 2001 the Company recorded an after-tax,
      cumulative-effect-type transition charge of $1.5 million to accumulated
      other comprehensive income related to these derivatives. Certain of the
      derivative instruments identified at January 1, 2001, under the provisions
      of SFAS No. 133 had been previously designated in hedging relationships
      that addressed the fair value of certain forward purchase and sale
      commitments; under the transition provisions of SFAS No. 133, on January
      1, 2001 the Company recorded fair value adjustments to the subject
      derivatives and related commitments resulting in the recording of a net
      after-tax, cumulative-effect-type transition charge of $0.2 million to net
      income. The remaining derivatives identified at January 1, 2001 under the
      provisions of SFAS No. 133, consisting of certain forward purchases and
      sales, had not previously been considered derivatives under accounting
      principles generally accepted in the United States of America; under the
      transition provisions of SFAS No. 133, on January 1, 2001 the Company
      recorded an after-tax, cumulative-effect-type benefit of $13.2 million to
      net income related to these derivatives. The Company did not elect
      prospective hedge accounting for derivatives existing at the date of
      adoption of SFAS No. 133.

      Effective January 1, 2001, 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. 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.

      Prior to January 1, 2001, gains or losses on contracts which qualified as
      hedges were recognized when the related inventory was sold or the hedged
      transaction was consummated. Changes in the market value of commodity
      derivatives which were not hedges were recorded as gains or losses in the
      period in which they occurred. Additionally, prior to January 1, 2001,
      premiums paid for purchased interest rate swap agreements were amortized
      to interest expense over the terms of the agreements. Unamortized premiums
      were included in other assets. The interest rate differentials received or
      paid by the Company related to these agreements were recognized as
      adjustments to interest expense over the term of the agreements.


                                      F-9
<PAGE>
      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 $58 million, $57 million, and $47 million for 2001, 2000,
      and 1999, respectively. Ordinary maintenance is expensed as incurred.

      The American Institute of Certified Public Accountants has issued a
      "Statement of Position" exposure draft on cost capitalization that is
      expected to require companies to expense the non-capital portion of major
      maintenance costs as incurred. The statement is expected to require that
      any existing unamortized deferred non-capital major maintenance costs be
      expensed immediately. The exposure draft indicates that this change will
      be required to be adopted for fiscal years beginning after June 15, 2002,
      and that the effect of expensing existing unamortized deferred non-capital
      major maintenance costs will be reported as a cumulative effect of an
      accounting change in the consolidated statement of income. At December 31,
      2001, the Company had included turnaround costs of $98 million in other
      assets. Company management has not determined the amount, if any, of these
      costs that could be capitalized under the provisions of the exposure
      draft.

      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. 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 July 2001, the FASB issued Statement of
      Financial Accounting Standards No. 141, "Business Combinations" ("SFAS No.
      141") which addresses financial accounting and reporting for business
      combinations and requires that all business combinations initiated after
      June 30, 2001 be accounted for under the purchase method. Use of the
      pooling of interests method is no longer permitted. The adoption of SFAS
      No. 141 did not impact the Company's financial position or results of
      operations.

      In July 2001, the FASB issued Statement of Financial Accounting Standards
      No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") which is
      fully effective in fiscal years beginning after December 15, 2001,
      although certain provisions of SFAS No. 142 are applicable to goodwill and
      other intangible assets acquired in transactions completed after June 30,
      2001. SFAS No. 142 addresses financial accounting and reporting for
      acquired goodwill and other intangible assets and requires that goodwill
      and intangibles with an indefinite life no longer be amortized but instead
      be periodically reviewed for impairment. The adoption of SFAS No. 142 will
      not materially impact the Company's financial position or results of
      operations.


                                      F-10
<PAGE>
      In June 2001, the FASB issued Statement of Financial Accounting Standards
      No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143")
      which addresses financial accounting and reporting for obligations
      associated with the retirement of tangible long-lived assets and the
      associated asset retirement costs. It applies to legal obligations
      associated with the retirement of long-lived assets that result from the
      acquisition, construction, development and/or the normal operation of a
      long-lived asset, except for certain obligations of lessees. This
      statement is effective for financial statements issued for fiscal years
      beginning after June 15, 2002. The Company has not determined the impact
      on its financial statements that may result from the adoption of SFAS No.
      143.

      In August 2001, the FASB issued Statement of Financial Accounting
      Standards No. 144, "Accounting for the Impairment or Disposal of
      Long-Lived Assets" ("SFAS No. 144") which addresses financial accounting
      and reporting for the impairment or disposal of long-lived assets by
      requiring that one accounting model be used for long-lived assets to be
      disposed of by sale, whether previously held and used or newly acquired,
      and by broadening the presentation of discontinued operations to include
      more disposal transactions. SFAS No. 144 is effective for financial
      statements issued for fiscal years beginning after December 15, 2001, and
      interim periods within those fiscal years. The provisions of this
      statement generally are to be applied prospectively; therefore, the
      adoption of SFAS No. 144 will not impact the Company's financial position
      or results of operations.

2.    REFINERY AGREEMENTS

      Effective May 1, 1997, CITGO became the operator of a refinery owned by
      PDVMR, a subsidiary of PDV America. CITGO also purchases the products
      produced at the refinery (Note 4).

      An affiliate of PDVSA acquired a 50 percent equity interest in a refinery
      in Chalmette, Louisiana ("Chalmette") in October 1997, and assigned to
      CITGO its option to purchase up to 50 percent of the refined products
      produced at the refinery through December 31, 2000 (Note 4). CITGO
      exercised this option during 2000 and 1999, and acquired approximately 67
      MBPD and 66 MBPD of refined products from the refinery during those years,
      respectively, approximately one-half of which was gasoline. The affiliate
      did not assign this option to CITGO for 2001.

      In October 1998, an affiliate of PDVSA acquired 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 106 MBPD, 125 MBPD,
      and 118 MBPD of refined products from HOVENSA during 2001, 2000, and 1999,
      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).


                                      F-11
<PAGE>
      In April 1998, PDVSA, pursuant to its contractual rights, declared force
      majeure and reduced deliveries of crude oil to LYONDELL-CITGO; this
      required LYONDELL-CITGO to obtain alternative sources of crude oil supply
      in replacement, which resulted in lower operating margins. On October 1,
      2000, the force majeure condition was terminated and PDVSA deliveries of
      crude oil returned to contract levels. On February 9, 2001, PDVSA notified
      LYONDELL-CITGO that effective February 1, 2001, it had again declared
      force majeure under the contract described above. As of December 31, 2001,
      PDVSA deliveries of crude oil to LYONDELL-CITGO have not been reduced due
      to PDVSA's declaration of force majeure. On January 22, 2002, PDVSA
      notified LYONDELL-CITGO that pursuant to the February 9, 2001 declaration
      of force majeure, effective March 1, 2002, PDVSA expects to deliver
      approximately 20 percent less than the contract volume and that force
      majeure will be in effect until at least June 2002. If PDVSA reduces its
      delivery of crude oil under these crude oil supply agreements,
      LYONDELL-CITGO will be required to use alternative sources of crude oil
      which may result in reduced operating margins. The effect of this
      declaration on LYONDELL-CITGO's crude oil supply and the duration of this
      situation are not known at this time.

      As of December 31, 2001, CITGO has outstanding loans to LYONDELL-CITGO of
      $35 million. On December 31, 1999, CITGO converted $32.7 million of
      outstanding loans to investments in LYONDELL-CITGO. The notes bear
      interest at market rates, which were approximately 2.2 percent, 6.9
      percent, and 6.7 percent at December 31, 2001, 2000 and 1999, and are due
      July 1, 2003. These notes are included in other assets in the accompanying
      consolidated balance sheets.

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


<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                              ---------------------------------------------
                                                                  2001             2000            1999
                                                                              (000's omitted)

<S>                                                           <C>              <C>              <C>
     Carrying value of investment                             $  507,940       $  518,333       $  560,227
     Notes receivable                                             35,278           35,278           28,255
     Participation interest                                           41 %             41 %             41 %
     Equity in net income                                     $   73,983       $   41,478       $      924
     Cash distributions received                                 116,177          100,972           70,724

     Summary of financial position:
        Current assets                                        $  227,000       $  310,000       $  219,000
        Noncurrent assets                                      1,434,000        1,386,000        1,406,000
        Current liabilities (including debt of $50,000,
           $470,000 and $450,000 at December 31,
           2001, 2000, and 1999, respectively)                   377,000          867,000          697,000
        Noncurrent liabilities (including debt of
           $450,000 at December 31, 2001 and $0 at
           December 31, 2000 and 1999)                           776,000          321,000          316,000
        Member's equity                                          508,000          508,000          612,000

     Summary of operating results:
        Revenue                                               $3,284,000       $4,075,000       $2,571,000
        Gross profit                                             317,000          250,000          133,000
        Net income                                               203,000          128,000           24,000
</TABLE>




                                      F-12
<PAGE>
      On July 20, 2001, LYONDELL-CITGO completed a refinancing of its working
      capital revolver and its $450 million term bank loan. The new 18-month
      term loan and working capital revolver will mature in January 2003.

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. 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 $3.0 billion, $3.2 billion, and $1.7 billion of crude oil,
      feedstocks and other products from wholly owned subsidiaries of PDVSA in
      2001, 2000, and 1999, respectively, under these and other purchase
      agreements.

      During 2000 and 1999, PDVSA deliveries of crude oil to CITGO were less
      than contractual base volumes due to the PDVSA declaration of force
      majeure pursuant to all four long-term crude oil supply contracts
      described above. As a result, the Company was required to obtain
      alternative sources of crude oil, which resulted in lower operating
      margins. On October 1, 2000 the force majeure condition was terminated and
      PDVSA deliveries of crude oil returned to contract levels.

      On February 9, 2001 PDVSA notified CITGO that, effective February 1, 2001,
      it had declared force majeure under the four contracts described above.
      During 2001, PDVSA deliveries of crude oil to CITGO were slightly less
      than contractual base volumes due to this declaration of force majeure.
      Therefore, the Company was required to use alternative sources of crude
      oil, which resulted in lower operating margins. On January 22, 2002, PDVSA
      notified CITGO that pursuant to the February 9, 2001 declaration of force
      majeure, effective March 1, 2002, PDVSA expects to deliver approximately
      20 percent less than the contract volume and PDVSA indicated that force
      majeure will be in effect until at least June 2002. If PDVSA reduces its
      delivery of crude oil under these crude oil supply agreements, CITGO will
      be required to use alternative sources of crude oil which may result in
      reduced operating margins. The effect of this declaration on CITGO's crude
      oil supply and the duration of this situation are not known at this time.

      During the second half of 1999 and throughout 2000 and 2001, PDVSA did not
      deliver naphtha pursuant to certain contracts and has made or will make
      contractually specified payments in lieu thereof.

      The crude oil supply contracts incorporate formula prices based on the
      market value of a number of refined products deemed to be produced from
      each particular crude oil, less (i) certain deemed refining costs
      adjustable for inflation; (ii) certain actual costs, including
      transportation charges, import duties and taxes; and (iii) a deemed
      margin, which varies according to the grade of crude oil. At December 31,
      2001 and 2000, $185 million and $251 million, respectively, were included
      in payables to affiliates as a result of these transactions.

      The Company also purchases refined products from various other affiliates
      including LYONDELL-CITGO, PDVMR, HOVENSA and Chalmette, under long-term
      contracts. These agreements incorporate various formula prices based on
      published market prices and other factors. Such purchases totaled $4.8
      billion, $7.4 billion, and $4.3 billion for 2001, 2000, and 1999,
      respectively. At December 31, 2001 and 2000, $87 million and $267 million,
      respectively, were included in payables to affiliates as a result of these
      transactions.



                                      F-13
<PAGE>
      The Company had refined product, feedstock, and other product sales to
      affiliates, primarily at market-related prices, of $292 million, $222
      million, and $190 million in 2001, 2000, and 1999, respectively. The
      Company's sales of crude oil to affiliates were $5 million, $4 million,
      and $37 million in 2001, 2000, and 1999, respectively. At December 31,
      2001 and 2000, $134 million and $38 million, respectively, was included in
      due from affiliates as a result of these and related transactions.

      Pursuant to the PDVMR operating agreement (Note 2), on May 1, 1997, CITGO
      became the operator of the PDVMR refinery and employed a substantial
      number of employees previously employed by the UNO-VEN Company,
      ("UNO-VEN") and as a result, CITGO assumed a liability for postretirement
      benefits other than pensions (Note 11) of approximately $27 million
      related to those employees. A corresponding amount due from PDVMR is
      included in other assets at December 31, 2001 and 2000, pending final
      determination of the method of settlement by PDV America. CITGO charges
      PDVMR a management fee which covers various support services ($8 million,
      $7 million, and $7 million in 2001, 2000 and 1999, respectively) which is
      included in other income. PDVMR reimburses CITGO for all payroll expenses,
      including pension and benefit costs, related to CITGO employees engaged in
      the operation of the refinery. Such employee costs and the related
      reimbursements ($55 million, $53 million, and $55 million in 2001, 2000
      and 1999, respectively) are not included in CITGO's cost of sales or
      revenues.

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

      The 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, 2001, CITGO had net related party receivables
      related to federal income taxes of $62 million. At December 31, 2000,
      CITGO had a net related party payable related to federal income taxes of
      $12.5 million.

      Prior to the formation of PDV Holding as the common parent in the 1997 tax
      year, the Company and PDV America were parties to a tax allocation
      agreement. In 1998, $8 million due from CITGO to PDV America under this
      agreement for the 1997 tax year was classified as a noncash contribution
      of capital. In 1999, $11 million due from PDV America to CITGO under this
      agreement for the 1998 tax year was classified as a noncash dividend.
      Amendment No. 2 to the Tax Allocation Agreement was executed during 2000;
      this amendment eliminated the provisions of the agreement that provided
      for these noncash contribution and dividend classifications effective with
      the 1997 tax year. Consequently, the classifications made in the prior two
      years were reversed in 2000. In the event that CITGO should cease to be
      part of the consolidated federal income tax group, any amounts included in
      shareholder's equity under this agreement are required to be settled
      between the parties in cash (net $2 million payable to PDV America at
      December 31, 2001 and 2000).

      At December 31, 2001, CITGO had income tax prepayments of $76 million
      included in prepaid expenses. At December 31, 2000, CITGO has federal
      income taxes payable of $50 million included in other current liabilities.


                                      F-14
<PAGE>
5.    ACCOUNTS RECEIVABLE


<TABLE>
<CAPTION>
                                                    2001                 2000
                                                        (000'S OMITTED)

<S>                                              <C>                <C>
      Trade                                      $   684,529        $ 1,161,964
      Credit card                                    121,334            126,822
      Other                                           55,507             32,996
                                                 -----------        -----------
                                                     861,370          1,321,782
      Allowance for uncollectible accounts           (11,579)           (13,945)
                                                 -----------        -----------

                                                 $   849,791        $ 1,307,837
                                                 ===========        ===========
</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 two limited purpose consolidated subsidiaries, CITGO
      Funding Corporation and CITGO Funding Corporation II, which established
      non-recourse agreements to sell trade accounts and credit card receivables
      to independent third parties. Under the terms of the agreements, new
      receivables are added to the pool as collections (administered by CITGO)
      reduce previously sold receivables. The amounts sold at any one time is
      limited to a maximum of $225 million (increased from $125 million through
      an amendment in April 2000). The agreement to sell trade accounts
      receivable was extended in April 2001 for one year, and is renewable for
      successive one-year terms by mutual agreement. In October 2001, the
      agreement to sell up to $150 million of credit card receivables expired
      and CITGO chose not to renew it. Fees and expenses of $7.6 million, $16
      million, and $15.2 million related to the agreements were recorded as
      other expense during the years ended December 31, 2001, 2000 and 1999,
      respectively. In 2000, the Company realized a gain of $5 million resulting
      from the reversal of the allowance for uncollectible accounts related to
      certain receivables sold.

6.    INVENTORIES


<TABLE>
<CAPTION>
                                     2001           2000
                                       (000'S OMITTED)

<S>                                <C>            <C>
      Refined product              $750,293       $748,855
      Crude oil                     151,395        175,455
      Materials and supplies         66,827         63,500
                                   --------       --------

                                   $968,515       $987,810
                                   ========       ========
</TABLE>





      At December 31, 2001 and 2000, estimated net market values exceeded
      historical cost by approximately $158 million and $628 million,
      respectively.


                                      F-15
<PAGE>
7.    PROPERTY, PLANT AND EQUIPMENT


<TABLE>
<CAPTION>
                                                          2001                2000
                                                              (000'S OMITTED)

<S>                                                   <C>                <C>
      Land                                            $   112,655        $   112,406
      Buildings and leaseholds                            464,973            459,046
      Machinery and equipment                           3,396,625          3,314,907
      Vehicles                                             22,003             21,947
      Construction in process                             130,332             45,899
                                                      -----------        -----------
                                                        4,126,588          3,954,205
      Accumulated depreciation and amortization        (1,386,616)        (1,198,016)
                                                      -----------        -----------

                                                      $ 2,739,972        $ 2,756,189
                                                      ===========        ===========
</TABLE>


      Depreciation expense for 2001, 2000, and 1999 was $190 million, $192
      million, and $187 million, respectively.

      Other income (expense) includes gains and losses on disposals and
      retirements of property, plant and equipment. Such net losses were
      approximately $13 million, $11 million, and $13 million in 2001, 2000, and
      1999, respectively.

8.    INVESTMENTS IN AFFILIATES

      In addition to LYONDELL-CITGO, the Company's investments in affiliates
      consist 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 $134 million and $138 million at December 31,
      2001 and 2000, respectively.

      At December 31, 2001 and 2000, NISCO had a partnership deficit. CITGO's
      share of this deficit, as a general partner, was $39.5 million and $50.1
      million at December 31, 2001 and 2000, 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,
                                                                   2001           2000          1999
                                                                             (000'S OMITTED)
<S>                                                              <C>            <C>            <C>
      Company's investments in affiliates
         (excluding NISCO)                                       $678,558       $688,863       $734,822
      Company's equity in net income of affiliates                109,244         58,771         21,348
      Dividends and distributions received from affiliates        152,185        126,350        102,339
</TABLE>



                                            F-16
<PAGE>
      Selected financial information provided by the affiliates is summarized
      as follows:


<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                --------------------------------------------
                                                                   2001             2000            1999
                                                                              (000'S OMITTED)

      Summary of financial position:
<S>                                                             <C>              <C>              <C>
         Current assets                                         $  549,670       $  618,769       $  469,101
         Noncurrent assets                                       3,231,177        2,943,622        2,853,786
         Current liabilities (including debt of $685,089,
            $729,806 and $625,006 at December 31,
            2001, 2000, and 1999, respectively)                  1,234,253        1,328,662        1,034,181
         Noncurrent liabilities (including debt of
            $1,460,196, $1,274,069 and $1,046,317
            at December 31, 2001, 2000, and 1999,
            respectively)                                        2,082,573        1,874,465        1,681,558

      Summary of operating results:
         Revenues                                               $4,547,632       $5,146,546       $3,559,451
         Gross profit                                              778,766          696,320          567,749
         Net income                                                397,494          324,282          237,906
</TABLE>


9.    SHORT-TERM BANK LOANS

      As of December 31, 2001, the Company has established $190 million of
      uncommitted, unsecured, short-term borrowing facilities with various
      banks. Interest rates on these facilities are determined daily based upon
      the federal funds' interest rates, and maturity options vary up to 30
      days. The weighted average interest rates actually incurred in 2001, 2000,
      and 1999 were 2.3 percent, 6.4 percent, and 5.5 percent, respectively. The
      Company had $0 and $38 million of borrowings outstanding under these
      facilities at December 31, 2001 and 2000, respectively.


                                      F-17
<PAGE>
10.   LONG-TERM DEBT AND FINANCING ARRANGEMENTS


<TABLE>
<CAPTION>
                                                                              2001              2000
                                                                               (000'S OMITTED)

<S>                                                                     <C>                <C>
     Revolving bank loans                                               $   359,500        $        --

     Senior Notes $200 million face amount, due 2006 with
        interest rate of 7.875%                                             199,867            199,837

     Private Placement Senior Notes, due 2006 with an

        interest rate of 9.30%                                               56,819             96,753

     Master Shelf Agreement Senior Notes, due 2002 to

        2009 with interest rates from 7.17% to 8.94%                        260,000            260,000

     Tax-Exempt Bonds, due 2004 to 2031 with variable
        and fixed interest rates                                            337,520            309,520

     Taxable Bonds, due 2026 to 2028 with variable interest rates           146,000            174,000

     Cit-Con bank credit agreement                                               --              7,143
                                                                        -----------        -----------
                                                                          1,359,706          1,047,253
     Current portion of long-term debt                                      (75,864)           (47,078)
                                                                        -----------        -----------

                                                                        $ 1,283,842        $ 1,000,175
                                                                        ===========        ===========
</TABLE>


      REVOLVING BANK LOANS - The Company's credit agreements with various banks
      consist of (i) a $400 million, five-year, revolving bank loan maturing in
      May 2003; (ii) a $150 million, 364-day, revolving bank loan; and (iii) a
      $25 million 364-day revolving bank loan established May 28, 2001, all of
      which are unsecured and have various borrowing maturities and interest
      rate options. Interest rates on the revolving bank loans ranged from 2.5
      percent - 2.9 percent at December 31, 2001; $360 million was outstanding
      under these credit agreements at December 31, 2001.

      On May 11, 2001 CITGO renewed its $150 million 364-day revolving bank
      loan facility for another term.

      SHELF REGISTRATION - 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 that may be offered
      and sold from time to time. In May 1996, the registration became effective
      and CITGO sold a tranche of debt securities with an aggregate offering
      price of $200 million. On October 28, 1997, the Company entered into a
      Selling Agency Agreement with Salomon Brothers Inc. and Chase Securities
      Inc. providing for the sale of up to an additional $235 million in
      aggregate principal amount of notes in tranches from time to time by the
      Company under the shelf registration. No amounts were sold under this
      agreement as of December 31, 2001.

      PRIVATE PLACEMENT - At December 31, 2001, the Company has outstanding
      approximately $57 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.


                                      F-18
<PAGE>
      MASTER SHELF AGREEMENT - At December 31, 2001, the Company has outstanding
      $260 million of privately-placed senior notes under an unsecured Master
      Shelf Agreement with an insurance company. The notes have various fixed
      interest rates and maturities.

      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 was in compliance with the debt covenants at December
      31, 2001.

      TAX-EXEMPT BONDS - At December 31, 2001, through state entities, the
      Company has outstanding $74.8 million of industrial development bonds for
      certain Lake Charles port facilities and pollution control equipment and
      $262.7 million of environmental revenue bonds to finance a portion of the
      Company's environmental facilities at its Lake Charles and Corpus Christi
      refineries and at the LYONDELL-CITGO refinery. Additional credit support
      for these bonds is provided through letters of credit. The bonds bear
      interest at various floating rates, which ranged from 2.5 percent to 6.0
      percent at December 31, 2001 and ranged from 4.7 percent to 6.0 percent at
      December 31, 2000.

      TAXABLE BONDS - At December 31, 2001, through state entities, the Company
      has outstanding $146 million of taxable environmental revenue bonds to
      finance a portion of the Company's environmental facilities at its Lake
      Charles refinery and at the LYONDELL-CITGO refinery. Such bonds are
      secured by letters of credit and have floating interest rates (3.1 percent
      at December 31, 2001 and 6.6 percent at December 31, 2000). 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. As of December 31, 2001, $49 million of originally issued taxable
      bonds had been converted to tax-exempt bonds.

      CIT-CON BANK CREDIT AGREEMENT - The Cit-Con bank credit agreement
      consisted of a term loan collateralized by throughput agreements of the
      owner companies. The loan contained various interest rate options
      (weighted average effective rate of 7.6 percent at December 31, 2000), and
      required quarterly principal payments through December 2001.

      DEBT MATURITIES - Future maturities of long-term debt as of December 31,
      2001, are: 2002 - $75.9 million, 2003 - $381.4 million, 2004 - $47.2
      million, 2005 - $11.4 million, 2006 - $251.2 million and $592.6 million
      thereafter.

      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         2001          2000
       Variable Rate Index         Date              Paid             (000's 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>






                                      F-19
<PAGE>
      Interest expense includes $0.6 million and $1.5 million in 2000 and 1999,
      respectively, related to the net settlements on these agreements.
      Effective January 1, 2001, changes in the fair value of these agreements
      is recorded in other income (expense). The fair value of these agreements
      at December 31, 2001, 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 $2.8 million, the offset of
      which is recorded in the balance sheet caption other current liabilities.

11.   EMPLOYEE BENEFIT PLANS

      EMPLOYEE SAVINGS - The Company 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 the Company makes contributions, including
      matching of employee contributions, based on plan provisions. The Company
      expensed $20 million, $17 million, and $18 million, related to its
      contributions to these plans for the years 2001, 2000, and 1999,
      respectively.

      PENSION BENEFITS - The Company sponsors three qualified noncontributory
      defined benefit pension plans, two covering eligible hourly employees and
      one covering eligible salaried employees. The Company also sponsors three
      nonqualified defined benefit plans for certain eligible employees. The
      qualified plans' assets include corporate securities, shares in a fixed
      income mutual fund, two collective funds and a short-term investment fund.
      The nonqualified plans are not funded.

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

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



                                      F-20
<PAGE>
      The following sets forth the changes in benefit obligations and plan
      assets for the pension and postretirement plans for the years ended
      December 31, 2001 and 2000, and the funded status of such plans reconciled
      with amounts reported in the Company's consolidated balance sheets:


<TABLE>
<CAPTION>
                                                          PENSION BENEFITS                  OTHER BENEFITS
                                                     ----------------------------       --------------------------
                                                         2001            2000             2001               2000
                                                            (000'S OMITTED)                  (000'S OMITTED)
<S>                                                   <C>              <C>              <C>              <C>
       CHANGE IN BENEFIT OBLIGATION:
       Benefit obligation at beginning of year        $ 288,188        $ 258,703        $ 206,276        $ 189,032
       Service cost                                      15,680           15,533            5,754            5,769
       Interest cost                                     21,798           19,680           15,708           14,392
       Plan vesting changes                                  --            5,556               --               --
       Actuarial loss                                    23,130              737           40,556            4,463
       Benefits paid                                    (11,879)         (12,021)          (7,598)          (7,380)
                                                      ---------        ---------        ---------        ---------
       Benefit obligation at end of year                336,917          288,188          260,696          206,276
                                                      ---------        ---------        ---------        ---------

       Change in plan assets:
       Fair value of plan assets at
          beginning of year                             272,889          275,382            1,053              991
       Actual return on plan assets                     (10,185)           6,844               62               62
       Employer contribution                             13,128            2,684            7,598            7,380
       Benefits paid                                    (11,879)         (12,021)          (7,598)          (7,380)
                                                      ---------        ---------        ---------        ---------
       Fair value of plan assets at end of year         263,953          272,889            1,115            1,053
                                                      ---------        ---------        ---------        ---------

       Funded status                                    (72,965)         (15,299)        (259,581)        (205,223)
       Unrecognized net actuarial (gain) loss            (1,991)         (62,492)          30,840           (9,717)
       Unrecognized prior service cost                    2,293            2,644               --               --
       Net gain at date of adoption                        (475)            (744)              --               --
                                                      ---------        ---------        ---------        ---------

       Net amount recognized                          $ (73,138)       $ (75,891)       $(228,741)       $(214,940)
                                                      =========        =========        =========        =========

       Amounts recognized in the Company's
       consolidated balance sheets consist of:

          Accrued benefit liability                   $ (80,238)       $ (83,353)       $(228,741)       $(214,940)
          Intangible asset                                3,035            3,584               --               --
          Accumulated other comprehensive
             income                                       4,065            3,878               --               --
                                                      ---------        ---------        ---------        ---------

       Net amount recognized                          $ (73,138)       $ (75,891)       $(228,741)       $(214,940)
                                                      =========        =========        =========        =========
</TABLE>




<TABLE>
<CAPTION>
                                               PENSION BENEFITS          OTHER BENEFITS
                                             --------------------      --------------------
                                              2001         2000         2001         2000
      WEIGHTED-AVERAGE ASSUMPTIONS
         AS OF DECEMBER 31:

<S>                                           <C>          <C>          <C>          <C>
         Discount rate                        7.25 %       7.75 %       7.25 %       7.75 %
         Expected return on plan assets        9.0 %        9.0 %        6.0 %        6.0 %
         Rate of compensation increase         5.0 %        5.0 %         --           --
</TABLE>




                                      F-21
<PAGE>
      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 2002. These rates are assumed to decrease 1
      percent per year to an ultimate level of 5 percent by 2007 for pre-65 and
      2008 for post-65 participants, and to remain at that level thereafter.

<TABLE>
<CAPTION>
                                                             PENSION BENEFITS                          OTHER BENEFITS
                                                  ------------------------------------     ----------------------------------------
                                                     2001        2000         1999           2001           2000             1999
                                                          (000's omitted)                              (000's omitted)
      Components of net periodic benefit cost:

<S>                                               <C>          <C>          <C>            <C>             <C>             <C>
         Service cost                             $ 15,680     $ 15,533     $ 19,554        $ 5,754        $  5,769        $  6,922
         Interest cost                              21,798       19,680       17,899         15,708          14,392          13,040
         Expected return on plan assets            (24,165)     (24,397)     (22,531)           (63)            (59)            (57)
         Amortization of prior service cost            351          143           40             --              --              --
         Amortization of net gain at date
            of adoption                               (268)        (268)        (268)            --              --              --
         Recognized net actuarial gain              (3,021)      (4,824)      (1,649)            --         (17,254)             --

      Net periodic benefit cost                   $ 10,375     $  5,867     $ 13,045       $ 21,399        $  2,848        $ 19,905
                                                  ========     ========     ========       ========        ========        ========

      One-time adjustment                         $     --     $  2,875     $     --       $     --        $     --        $     --
                                                  ========     ========     ========       ========        ========        ========
</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.

      The projected benefit obligation, accumulated benefit obligation, and fair
      value of plan assets for the pension plan with accumulated benefit
      obligations in excess of plan assets were $33.4 million, $29.3 million and
      $0, respectively, as of December 31, 2001 and $31.7 million, $28 million
      and $0, respectively, as of December 31, 2000.

      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
                                                                   --------------------------------
                                                                            (000's omitted)
<S>                                                                <C>              <C>
      Increase (decrease) in total of service and interest cost
        components                                                    $  3,580       $ (2,850)
      Increase (decrease) in postretirement benefit obligation          39,683        (32,151)
</TABLE>




      EMPLOYEE SEPARATION PROGRAMS - During 1997, the Company's senior
      management implemented a Transformation Program that resulted in certain
      personnel reductions (the "Separation Programs"). The Company expensed
      approximately $0.3 million, $1 million, and $7 million for the years ended
      December 31, 2001, 2000 and 1999, respectively, relating to the Separation
      Programs.


                                      F-22
<PAGE>
12.   INCOME TAXES

      The provisions for income taxes are comprised of the following:

<TABLE>
<CAPTION>
                         2001           2000            1999
                                    (000'S OMITTED)

      Current:
<S>                    <C>            <C>            <C>
         Federal       $ 83,220       $ 86,743       $ 11,781
         State            4,948          4,614            560
                       --------       --------       --------
                         88,168         91,357         12,341
      Deferred           83,489         47,236         49,349
                       --------       --------       --------

                       $171,657       $138,593       $ 61,690
                       ========       ========       ========
</TABLE>


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


<TABLE>
<CAPTION>
                                                2001        2000          1999

<S>                                            <C>          <C>          <C>
     Federal statutory tax rate                35.0 %       35.0 %       35.0 %
     State taxes, net of federal benefit        1.1 %        2.0 %        2.4 %
     Dividend exclusions                       (1.5)%       (1.7)%       (3.8)%
     Tax settlement                              -- %         -- %       (5.4)%
     Other                                      1.5 %        2.1 %        1.4 %
                                               ------       ------       ------

     Effective tax rate                        36.1 %       37.4 %       29.6 %
                                               ======       ======       ======
</TABLE>


      The effective tax rate for 1999 was unusually low due primarily to the
      favorable resolution in this year with the Internal Revenue Service of
      significant tax issues related to environmental expenditures.



                                      F-23
<PAGE>
      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, 2001 and 2000 are as follows:


<TABLE>
<CAPTION>
                                                                          2001          2000
                                                                             (000'S OMITTED)

      Deferred tax liabilities:
<S>                                                                     <C>            <C>
         Property, plant and equipment                                  $591,568       $588,708
         Inventories                                                      77,602         99,475
         Investments in affiliates                                       166,470        149,161
         Other                                                            53,808         44,106
                                                                        --------       --------
                                                                         889,448        881,450
                                                                        --------       --------

      Deferred tax assets:
         Postretirement benefit obligations                               88,049         76,396
         Employee benefit accruals                                        57,243         43,532
         Alternative minimum tax credit carryforwards                     33,358        109,403
         Net operating loss carryforwards                                  1,602            729
         Marketing and promotional accruals                                4,989         12,594
         Other                                                            49,560         66,993
                                                                        --------       --------
                                                                         234,801        309,647
                                                                        --------       --------

      Net deferred tax liability (of which $15,622
         is included in current assets at
         December 31, 2001 and $17,177
         is included in current liabilities at December 31, 2000)       $654,647       $571,803
                                                                        ========       ========
</TABLE>


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

13.      COMMITMENTS AND CONTINGENCIES

      LITIGATION AND INJURY CLAIMS - Various lawsuits and claims 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 May 1997, a fire occurred at CITGO's Corpus Christi refinery. No
      serious personal injuries were reported. There are seventeen related
      lawsuits pending in Corpus Christi, Texas state court against CITGO on
      behalf of approximately 9,000 individuals alleging property damages,
      personal injury and punitive damages. A trial of the claims of
      approximately 20 plaintiffs is scheduled for April 2002. Approximately
      1,300 claims have been resolved for immaterial amounts.


                                      F-24
<PAGE>
      A class action lawsuit is pending in Corpus Christi, Texas state court
      against CITGO which claims damages for reduced value of residential
      properties as a result of alleged air, soil and groundwater contamination.
      CITGO has purchased 275 adjacent properties included in the lawsuit and
      settled those related property damage claims. Over CITGO's objections, the
      trial court has recently ruled that an agreement by CITGO that purported
      to provide for settlement of the remaining property damage claims for $5
      million payable by it, is enforceable. CITGO will appeal this decision.

      A lawsuit alleging wrongful death and personal injury filed in 1996
      against CITGO and other industrial facilities in Corpus Christi, Texas
      state court was brought by persons who claim that exposure to refinery
      hydrocarbon emissions have caused various forms of illness. The lawsuit is
      scheduled for trial in September 2002.

      Litigation is pending in federal court in Lake Charles, Louisiana against
      CITGO by a number of current and former refinery employees and applicants
      asserting claims of racial discrimination in connection with CITGO's
      employment practices. A trial involving two plaintiffs resulted in
      verdicts for the Company. The Court granted the Company summary judgment
      with respect to another group of claims; these rulings have been affirmed
      by the Fifth Circuit Court of Appeals. Trials of the remaining cases will
      be set in the future.

      CITGO is among defendants to class action and individual lawsuits in North
      Carolina, New York and Illinois alleging contamination of water supplies
      by methyl tertiary butyl ether ("MTBE"), a component of gasoline. These
      actions allege that MTBE poses public health risks and seek testing,
      damages and remediation of the alleged contamination. These matters are in
      early stages of discovery. One of the Illinois cases has been transferred
      to New York and consolidated with the case pending in New York. CITGO has
      denied all of the allegations and is pursuing its defenses.

      In 1999, a group of U.S. independent oil producers filed petitions under
      the U.S. antidumping and countervailing duty laws against imports of crude
      oil from Venezuela, Iraq, Mexico and Saudi Arabia. These laws provide for
      the imposition of additional duties on imports of merchandise if (1) the
      U.S. Department of Commerce ("DOC"), after investigation, determines that
      the merchandise has been sold to the United States at dumped prices or has
      benefited from countervailing subsidies, and (2) the U.S. International
      Trade Commission determines that the imported merchandise has caused or
      threatened material injury to the U.S. industry producing like product.
      The amount of the additional duties imposed is generally equal to the
      amount of the dumping margin and subsidies found on the imports on which
      the duties are assessed. No duties are owed on imports made prior to the
      formal initiation of an investigation by the DOC. In 1999, prior to
      initiation of a formal investigation, the DOC dismissed the petitions. In
      2000, the U.S. Court of International Trade ("CIT") reversed this decision
      and remanded the case to the DOC for reconsideration. In August 2001, the
      DOC again dismissed the petitions. This matter is now pending before the
      CIT for a decision to affirm or remand for further consideration.

      ENVIRONMENTAL COMPLIANCE AND REMEDIATION - CITGO is subject to various
      federal, state and local environmental laws and regulations which may
      require CITGO to take action to correct or improve the effects on the
      environment of prior disposal or release of petroleum substances by CITGO
      or other parties. Maintaining compliance with environmental laws and
      regulations in the future could require significant capital expenditures
      and additional operating costs.


                                      F-25
<PAGE>
      CITGO's accounting policy establishes environmental reserves as probable
      site restoration and remediation obligations become reasonably capable of
      estimation. 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 effect on its
      consolidated results of operations, financial condition and cash flows.

      In 1992, the Company reached an agreement with the Louisiana Department of
      Environmental Quality to cease usage of certain surface impoundments at
      the Company's Lake Charles refinery by 1994. A mutually acceptable closure
      plan was filed with the state in 1993. The Company and its former owner
      are participating in the closure and sharing the related costs based on
      estimated contributions of waste and ownership periods. The remediation
      commenced in December 1993. In 1997, the Company presented a proposal to a
      state agency revising the 1993 closure plan. In 1998 and 2000, the Company
      submitted further revisions as requested by the Louisiana Department. A
      ruling on the proposal, as amended, is expected in 2002 with final closure
      to begin later in 2002.

      The Texas Natural Resources Conservation Commission conducted
      environmental compliance reviews at the Corpus Christi refinery in 1998
      and 1999. The Texas Commission issued Notices of Violation ("NOV") related
      to each of the reviews and proposed fines of approximately $970,000 based
      on the 1998 review and $700,000 based on the 1999 review. The first NOV
      was issued in January 1999 and the second NOV was issued in December 1999.
      Most of the alleged violations refer to recordkeeping and reporting
      issues, failure to meet required emission levels, and failure to properly
      monitor emissions. The Company is currently engaged in settlement
      discussions, but is prepared to contest the alleged violations and
      proposed fines if a reasonable settlement cannot be reached.

      In June 1999, CITGO and numerous other industrial companies received
      notice from the U.S. EPA that the U.S. EPA believes these companies have
      contributed to contamination in the Calcasieu Estuary, in the proximity of
      Lake Charles, Calcasieu Parish, Louisiana and are Potentially Responsible
      Parties ("PRPs") under the Comprehensive Environmental Response,
      Compensation, and Liability Act ("CERCLA"). The U.S. EPA made a demand for
      payment of its past investigation costs from CITGO and other PRPs and is
      conducting a Remedial Investigation/Feasibility Study ("RI/FS") under its
      CERCLA authority. CITGO and other PRPs may be potentially responsible for
      the costs of the RI/FS. CITGO disagrees with the U.S. EPA's allegations
      and intends to contest this matter.

      In October 1999, the Louisiana Department of Environmental Quality issued
      the Company a NOV and Potential Penalty alleging violation of the National
      Emission Standards for Hazardous Air Pollutants ("NESHAPS") regulations
      covering benzene emissions from wastewater treatment operations at CITGO's
      Lake Charles, Louisiana refinery and requested additional information. The
      Company is in settlement discussions and anticipates resolving this matter
      in the near future.

      In January and July 2001, CITGO received NOVs from the U.S. EPA alleging
      violations of the Clean Air Act. The NOVs are an outgrowth of an
      industry-wide and multi-industry U.S. EPA enforcement initiative alleging
      that many refineries and electric utilities modified air emission sources
      without obtaining permits under the New Source Review provisions of the
      Clean Air Act. The NOVs to CITGO followed inspections and formal
      Information Requests regarding the Company's Lake Charles, Louisiana and
      Corpus Christi, Texas refineries and the Lemont, Illinois refinery
      operated by CITGO. At U.S. EPA's request, the Company is engaged in
      settlement discussions, but is prepared to contest the NOVs if settlement
      discussions fail. If the Company settles or is found to have violated the
      provisions cited in the NOVs, it would be subject to possible penalties
      and significant capital expenditures for installation or upgrading of
      pollution control equipment or technologies.


                                      F-26
<PAGE>
      In June 1999, a NOV was issued by the U.S. EPA alleging violations of the
      NESHAPS regulations covering benzene emissions from wastewater treatment
      operations at the Lemont, Illinois refinery operated by CITGO. CITGO is in
      settlement discussions with the U.S. EPA. The Company believes this matter
      will be consolidated with the matters described in the previous paragraph.

      In 1992, an agreement was reached between the Company and a former owner
      concerning a number of environmental issues which provides, in part, that
      the former owner will continue to share the costs of certain specific
      environmental remediation and certain tort liability actions based on
      ownership periods and specific terms of the agreement.

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

      SUPPLY AGREEMENTS - CITGO purchases the crude oil processed at its
      refineries and also purchases refined products to supplement the
      production from its refineries to meet 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, 2001, the
      Company has no fixed and determinable, unconditional purchase obligations
      under these agreements.

      COMMODITY DERIVATIVE ACTIVITY - As of December 31, 2001 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,
      2001, the balance sheet captions other current assets and other current
      liabilities include $14.6 million and $22.7 million, respectively, related
      to the fair values of open commodity derivatives.

      OTHER CREDIT AND OFF-BALANCE SHEET RISK INFORMATION AS OF DECEMBER 31,
      2001 - The Company has guaranteed approximately $12 million of debt of
      certain CITGO marketers. Such debt is substantially collateralized by
      assets of these entities. The Company has also guaranteed approximately
      $122 million of debt of certain affiliates, including $50 million related
      to HOVENSA (Note 2). The Company has outstanding letters of credit
      totaling approximately $515 million, which includes $497 million related
      to the Company's tax-exempt and taxable revenue bonds (Note 10).

      The Company has also acquired surety bonds totaling $73 million primarily
      due to requirements of various government entities. The Company does not
      expect liabilities to be incurred related to such guarantees, 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 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.



                                      F-27
<PAGE>
      Management considers the credit risk to the Company related to its
      commodity and interest rate derivatives to be insignificant during the
      periods presented.

14.   LEASES

      The Company leases certain of its Corpus Christi refinery facilities under
      a capital lease. The basic term of the lease expires on January 1, 2004;
      however, the Company may renew the lease until January 31, 2011, the date
      of its option to purchase the facilities for a nominal amount. Capitalized
      costs included in property, plant and equipment related to the leased
      assets were approximately $209 million at December 31, 2001 and 2000.
      Accumulated amortization related to the leased assets was approximately
      $126 million and $118 million at December 31, 2001 and 2000, respectively.
      Amortization is included in depreciation expense.

      The Company also has various noncancelable operating leases, primarily for
      product storage facilities, office space, computer equipment and vehicles.
      Rent expense on all operating leases totaled $44 million in 2001, $35
      million in 2000, and $35 million in 1999. Future minimum lease payments
      for the capital lease and noncancelable operating leases are as follows:


<TABLE>
<CAPTION>
                                                      CAPITAL           OPERATING
                                                       LEASE             LEASES              TOTAL
      YEAR                                                           (000'S OMITTED)

<S>                                                  <C>             <C>                 <C>
      2002                                           $ 27,375           $ 47,030            $ 74,405
      2003                                             27,375             38,844              66,219
      2004                                              5,000             26,601              31,601
      2005                                              5,000             21,877              26,877
      2006                                              5,000             17,599              22,599
      Thereafter                                       21,000             18,073              39,073
                                                      -------          ---------           ---------
      Total minimum lease payments                     90,750          $ 170,024           $ 260,774
                                                                       ==========          =========
      Amount representing interest                     23,428
                                                      --------
      Present value of minimum lease payments          67,322
      Current portion                                 (20,358)
                                                      --------

                                                     $ 46,964
                                                      ========
</TABLE>


                                      F-28
<PAGE>
15.   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>
                                                           2001                                  2000
                                              ---------------------------------    -----------------------------
                                                CARRYING          FAIR                 CARRYING          FAIR
                                                 AMOUNT           VALUE                AMOUNT           VALUE
                                                     (000'S OMITTED)                      (000'S OMITTED)
      LIABILITIES:

<S>                                          <C>                <C>                <C>               <C>
         Short-term bank loans               $        --        $        --        $    37,500       $    37,500
         Long-term debt                        1,359,706          1,371,538          1,047,253         1,039,752

      DERIVATIVE AND OFF-BALANCE
         SHEET FINANCIAL INSTRUMENTS -
         UNREALIZED LOSSES:
         Interest rate swap agreements            (2,816)            (2,816)                --            (2,049)
         Guarantees of debt                           --             (1,470)                --            (1,069)
         Letters of credit                            --             (5,668)                --            (4,217)
         Surety bonds                                 --               (292)                --              (219)
</TABLE>

      SHORT-TERM BANK LOANS AND LONG-TERM DEBT - The fair value of short-term
      bank loans and long-term debt is based on interest rates that are
      currently available to the Company for issuance of debt with similar terms
      and remaining maturities, except for the year 2000 fair value of the
      Company's $200 million principal amount senior notes due 2006, which were
      based upon quoted market prices.

      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-29
<PAGE>
16.   QUARTERLY RESULTS OF OPERATIONS - UNAUDITED

      The following is a summary of the quarterly results of operations for the
      years ended December 31, 2001 and 2000:


<TABLE>
<CAPTION>
                                       1ST QTR.        2ND QTR.         3RD QTR.         4TH QTR.
                                                            (000'S OMITTED)
      2001

<S>                                  <C>              <C>              <C>              <C>
      Sales                          $4,960,424       $5,748,203       $5,179,450       $3,733,169
                                     ==========       ==========       ==========       ==========
      Cost of sales and
         operating expenses          $4,812,363       $5,462,848       $4,988,825       $3,648,555
                                     ==========       ==========       ==========       ==========

      Income before cumulative
         effect of change in
         accounting principle        $   66,350       $  149,571       $   87,925       $      178
                                     ==========       ==========       ==========       ==========

      Net income                     $   79,350       $  149,571       $   87,925       $      178
                                     ==========       ==========       ==========       ==========

      2000

      Sales                          $4,831,804       $5,690,696       $5,877,491       $5,751,417
                                     ==========       ==========       ==========       ==========
      Cost of sales and
         operating expenses          $4,714,261       $5,556,184       $5,675,036       $5,575,503
                                     ==========       ==========       ==========       ==========

      Net income                     $   38,177       $   33,179       $   99,719       $   60,909
                                     ==========       ==========       ==========       ==========
</TABLE>


17.   OTHER INFORMATION

      On September 21, 2001, a fire occurred at the hydrocracker unit of the
      Lake Charles refinery. The hydrocracker unit was damaged and operations at
      other processing units were temporarily affected. Operation of the other
      refinery units returned to normal on October 16, 2001. Operations at the
      hydrocracker resumed on November 22, 2001. The Company has insurance
      coverage for this type of an event and has submitted a notice of loss to
      its insurance carriers related to the fire, including a claim under its
      business interruption coverage.

      The Company records estimated property damage insurance recoveries, up to
      the amount of recorded losses and related expenses, when the collection of
      such amounts is probable. Property damage insurance recoveries in excess
      of the amount of recorded losses and related expenses, and business
      interruption insurance recoveries are not recognized until such amounts
      are realized. As a result of this fire, during the year ended December 31,
      2001, the Company recorded property losses and related expenses totaling
      $13.4 million in other income (expense), net. Additionally, during 2001
      the Company recorded $18.1 million of insurance proceeds received related
      to this event in other income (expense), net.


                                      F-30
<PAGE>
18.   SUBSEQUENT EVENTS

      On January 1, 2002, PDV America, the parent company of CITGO, made a
      contribution to the capital of CITGO of all of the common stock of PDV
      America's wholly owned subsidiary, VPHI Midwest, Inc. ("VPHI"). No
      additional shares of the capital stock of CITGO were issued in connection
      with the contribution. Effective January 1, 2002, the accounts of VPHI
      will be included in the consolidated financial statements of CITGO at the
      historical carrying value of PDV America's investment in VPHI. CITGO will
      record the effects of this transaction in a manner similar to
      pooling-of-interests accounting.

      The principal asset of VPHI is a petroleum refinery owned by its wholly
      owned subsidiary, PDVMR, located in Lemont, Illinois. CITGO has operated
      this refinery and purchased substantially all of its primary output,
      consisting of transportation fuels and petrochemicals, since 1997 (Notes 2
      and 4).

      On August 14, 2001, a fire occurred at the crude oil distillation unit of
      the PDVMR refinery. The crude unit was destroyed and the refinery's other
      processing units were temporarily taken out of production. A new crude
      unit is expected to be operational in March or April 2002. Operations have
      resumed by using purchased feedstocks for processing units downstream from
      the crude unit. PDVMR has insurance coverage for this type of an event and
      has submitted a notice of loss to its insurance carriers related to the
      fire, including a claim under its business interruption coverage.

      The following unaudited pro forma information presents a summary of the
      Company's consolidated financial position as of December 31, 2001 and
      results of operations for the three years in the period ended December 31,
      2001 as if the transaction had occurred on January 1, 1999. All
      significant intercompany transactions, balances and profits were
      eliminated; no other adjustments to previously reported results of
      operations of either entity were necessary in preparation of the pro forma
      information.

<TABLE>
<CAPTION>
      BALANCE SHEET INFORMATION (UNAUDITED):        DECEMBER 31, 2001
                                                     (000'S OMITTED)

<S>                                                 <C>
      Current assets                                    $2,287,033
      Property, plant and equipment - net                3,292,469
      Investment in affiliates                             700,701
      Other assets                                         228,906
                                                        ----------

                                                        $6,509,109
                                                        ==========
      Current liabilities                               $1,530,777
      Long-term debt and capital lease obligation        1,350,656
      Deferred income taxes                                767,338
      Other noncurrent liabilities                         459,002
      Shareholder's equity                               2,401,336
                                                        ----------

                                                        $6,509,109
                                                        ==========
</TABLE>


<TABLE>
<CAPTION>
      INCOME STATEMENT INFORMATION (UNAUDITED):    YEAR ENDED DECEMBER 31,
                                        ------------------------------------------
                                        2001               2000               1999
                                                     (000'S OMITTED)

<S>                                  <C>               <C>               <C>
      Total revenues                 $19,704,848       $22,189,945       $13,327,529
      Total costs and expenses        19,107,043        21,695,308        13,150,745
      Net income                         405,184           312,010           122,553
</TABLE>



                                      F-31
<PAGE>
      The unaudited pro forma results above have been prepared for comparative
      purposes only and do not purport to be indicative of the results of
      operations that actually would have resulted had the combination occurred
      on January 1, 1999, or of future results of operations of the combined
      entities.

      On January 1, 2002, CITGO acquired the outstanding 35 percent interest in
      Cit-Con from Conoco, Inc. The principal asset of Cit-Con is a lubricants
      refinery in Lake Charles, Louisiana. CITGO plans to continue to operate
      this facility as a source of lubricants. This transaction will not have a
      material effect on the consolidated financial position or results of
      operations of the Company.

                                     ******




                                      F-32

<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
  Exhibit
  Number
  -------
<S>              <C>
      *3.1       Certificate of Incorporation, Certificate of Amendment of Certificate of Incorporation.

  *****3.1(i)    By-laws of CITGO Petroleum Corporation as amended on March 13, 2001.

      *4.1       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.

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

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

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

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

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

    **10.5       Contract for the Purchase/Sale of Boscan Crude Oil dated as of June 2, 1993 between Tradecal,
                 S.A. and CITGO Asphalt Refining Company.

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

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

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

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

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

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

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

      10.13(i)   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.

     *10.15(i)   First Amendment to the Second Amended and Restated Senior Term Loan Agreement, by and between
                 CITGO Petroleum Corporation and Bank of America National Trust and Savings Association et al,
                 dated as of February 15, 1994.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
  Exhibit
  Number
  -------
<S>              <C>
     *10.15(ii)  Second Amendment to Second Amended and Restated Senior Term Loan Agreement by and among CITGO
                 Petroleum Corporation and Bank of America Illinois et al, dated as of October 21, 1994.

     *10.15(iii) First Amendment to the Second Amended and Restated Senior Revolving Credit Facility Agreement
                 by and among CITGO Petroleum Corporation and Bank of America National Trust and Savings
                 Association et al, dated as of February 15, 1994.

     *10.15(iv)  Second Amendment to Second Amended and Restated Senior Revolving Credit Facility Agreement by
                 and among CITGO Petroleum Corporation and Bank of America Illinois et al, dated as of
                 October 21, 1994.

     *10.16      Master Shelf Agreement (1994) by and between Prudential Insurance Company of America and CITGO
                 Petroleum Corporation ($100,000,000), dated March 4, 1994.

     *10.17(i)   Letter Agreement by and between the Company and Prudential Insurance Company of America, dated
                 March 4, 1994.

     *10.17(ii)  Letter Amendment No. 1 to Master Shelf Agreement with Prudential Insurance Company of America,
                 dated November 14, 1994.

    **10.18      CITGO Senior Debt Securities (1991) Agreement.

   ***10.21      Selling Agency Agreement dated as of October 28, 1997 among CITGO Petroleum Corporation,
                 Salomon Brothers Inc. and Chase Securities Inc.

  ****10.22      $150,000,000 Credit Agreement dated May 13, 1998.

  ****10.23      $400,000,000 Credit Agreement dated May 13, 1998.

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

      12.1       Computation of Ratio of Earnings to Fixed Charges.

      23.1       Consent of Independent Auditors.

--------------
    *  Previously filed in connection with the Registrant's Report on Form 10, Registration No. 333-3226.

   **  Incorporated by reference to the Registration Statement on Form F-1 of PDV America, Inc. (No. 33-63742).

  ***  Incorporated by reference to the Registrant's Report on Form 8-K filed
       with the Commission on November 18, 1997.

 ****  Incorporated by reference to the Registrant's Report on Form 10-K filed with
       the Commission on March 17, 1999.

*****  Incorporated by reference to the Registrant's Report on Form 10-K filed
       with the Commission on March 21, 2001.
</TABLE>