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

                                  United States

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

                                       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)

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

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

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

                                       N/A
          (Former name or former address if changed since last report)

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
                                       -----    -----

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

Indicate by check mark whether the registrant is a shell company (as described
in Rule 12b-2 of the Act): Yes       No   X
                               -----    -----

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 October 31, 2005)

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

<PAGE>

CITGO PETROLEUM CORPORATION

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

TABLE OF CONTENTS

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

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements (Unaudited)

           Condensed Consolidated Balance Sheets - September 30, 2005 and
           December 31, 2004.............................................     2

           Condensed Consolidated Statements of Income and Comprehensive
           Income - Three-Month and Nine-Month Periods Ended
           September 30, 2005 and 2004...................................     3

           Condensed Consolidated Statement of Shareholder's Equity -
           Nine-Month Period Ended September 30, 2005....................     4

           Condensed Consolidated Statements of Cash Flows - Nine-Month
           Periods Ended September 30, 2005 and 2004.....................     5

           Notes to the Condensed Consolidated Financial Statements......     6

Item 2. Management's Discussion and Analysis of Financial Condition and

        Results of Operations............................................    19

Item 3. Quantitative and Qualitative Disclosures About Market Risk.......    28

Item 4. Controls and Procedures..........................................    33

PART II.    OTHER INFORMATION

Item 1. Legal Proceedings................................................    34

Item 6. Exhibits.........................................................    34

SIGNATURES...............................................................    35
</TABLE>

<PAGE>

                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

          Except for the historical information contained in this Report,
certain of the matters discussed in this Report may be deemed to be "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Specifically, all
statements under the caption "Item 2 - 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 Petroleum Corporation ("CITGO") are forward looking
statements. Words such as "anticipate," "estimate," "expect," "project,"
"believe" and similar expressions generally identify a forward-looking
statement.

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

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

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

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

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

     -    costs and uncertainties associated with technological change and
          implementation;

     -    inflation; and

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

          CITGO purchases approximately 40% of its crude oil requirements from
Petroleos de Venezuela, S.A., the national oil company of the Bolivarian
Republic of Venezuela and CITGO's ultimate parent corporation, under long-term
supply agreements. See Note 9 of the Notes to the Condensed Consolidated
Financial Statements for additional information regarding these crude supply
agreements.

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


                                        1

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                  SEPTEMBER 30,
                                                       2005       DECEMBER 31,
                                                   (UNAUDITED)        2004
                                                  -------------   ------------
<S>                                               <C>             <C>
ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                       $  238,952      $   23,033
   Accounts receivable, net                         2,144,737       1,292,751
   Due from affiliates                                239,205         106,514
   Inventories                                        895,831       1,165,660
   Prepaid expenses and other                         183,290          77,696
                                                   ----------      ----------
      Total current assets                          3,702,015       2,665,654

PROPERTY, PLANT AND EQUIPMENT - Net                 4,070,088       4,038,505

RESTRICTED CASH                                         2,044           2,315

INVESTMENTS IN AFFILIATES                             536,762         580,647

OTHER ASSETS                                          324,059         356,551
                                                   ----------      ----------
                                                   $8,634,968      $7,643,672
                                                   ==========      ==========

LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
   Accounts payable                                $1,253,570      $  888,030
   Payables to affiliates                           1,120,391         674,997
   Taxes other than income                            240,225         290,456
   Other                                              379,065         251,451
   Current portion of long-term debt                  161,350          11,364
   Current portion of capital lease obligation          4,569           4,404
                                                   ----------      ----------
      Total current liabilities                     3,159,170       2,120,702

LONG-TERM DEBT                                        970,753       1,120,527

CAPITAL LEASE OBLIGATION                               40,968          43,755

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS           389,704         359,707

OTHER NONCURRENT LIABILITIES                          323,469         337,250

DEFERRED INCOME TAXES                                 925,404         939,299

COMMITMENTS AND CONTINGENCIES (Note 8)

SHAREHOLDER'S EQUITY:
   Common stock - $1.00 par value, 1,000 shares
      authorized, issued and outstanding                    1               1
   Additional capital                               1,659,698       1,659,698
   Retained earnings                                1,190,393       1,088,096
   Accumulated other comprehensive loss               (24,592)        (25,363)
                                                   ----------      ----------
      Total shareholder's equity                    2,825,500       2,722,432
                                                   ----------      ----------
                                                   $8,634,968      $7,643,672
                                                   ==========      ==========
</TABLE>

See notes to condensed consolidated financial statements.


                                        2

<PAGE>

CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR SUPPLEMENTAL INFORMATION)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS                NINE MONTHS
                                                                 ENDED SEPTEMBER 30,        ENDED SEPTEMBER 30,
                                                              ------------------------   -------------------------
                                                                  2005         2004          2005          2004
                                                              -----------   ----------   -----------   -----------
<S>                                                           <C>           <C>          <C>           <C>
REVENUES:
   Net sales (1)                                              $12,194,928   $8,749,338   $30,642,808   $23,292,869
   Sales to affiliates                                             65,331      129,952       291,679       306,832
                                                              -----------   ----------   -----------   -----------
                                                               12,260,259    8,879,290    30,934,487    23,599,701
   Equity in earnings of affiliates                                49,767       71,036       124,076       166,229
   Other income (expense) - net                                     6,609        1,560        28,639         2,135
                                                              -----------   ----------   -----------   -----------
                                                               12,316,635    8,951,886    31,087,202    23,768,065

COST OF SALES AND EXPENSES:
   Cost of sales and operating expenses (1)
      (including purchases of $5,107,635, $3,554,449,
      $12,608,247 and $9,201,366 from affiliates)              12,073,901    8,532,015    30,154,083    22,792,607
   Selling, general and administrative expenses                    82,389       78,165       238,766       218,813
   Interest expense, excluding capital lease                       21,411       28,493        55,964        98,736
   Capital lease interest charge                                      985          955         3,090         2,481
                                                              -----------   ----------   -----------   -----------
                                                               12,178,686    8,639,628    30,451,903    23,112,637
                                                              -----------   ----------   -----------   -----------
INCOME BEFORE INCOME TAXES                                        137,949      312,258       635,299       655,428

INCOME TAXES                                                       44,416      107,248       216,002       225,118
                                                              -----------   ----------   -----------   -----------
NET INCOME                                                         93,533      205,010       419,297       430,310
                                                              -----------   ----------   -----------   -----------

OTHER COMPREHENSIVE INCOME:
   Cash flow hedges:
      Reclassification adjustment for derivative losses
         included in net income, net of related income
         taxes of $-, $38, $28 and $123                                --           79            52           236
   Foreign currency translation gain (loss), net of related
      income taxes (benefit) of  $200, $(5), $409 and $375            388          (11)          794           718
   Minimum pension liability adjustment, net of deferred
      taxes (benefit) of $-, $-, $(42) and $241                        --           --           (75)          428
                                                              -----------   ----------   -----------   -----------
OTHER COMPREHENSIVE INCOME                                            388           68           771         1,382
                                                              -----------   ----------   -----------   -----------

COMPREHENSIVE INCOME                                          $    93,921   $  205,078   $   420,068   $   431,692
                                                              ===========   ==========   ===========   ===========

SUPPLEMENTAL INFORMATION (millions of dollars)
(1) Includes amounts related to buy/sell arrangements:
         Net sales                                            $   1,240.2   $  1,146.6   $   3,271.8   $   3,169.3
                                                              ===========   ==========   ===========   ===========
         Cost of sales and operating expenses                 $   1,306.7   $  1,158.0   $   3,379.8   $   3,200.9
                                                              ===========   ==========   ===========   ===========
</TABLE>

See notes to condensed consolidated financial statements.


                                        3

<PAGE>

CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (UNAUDITED)
(DOLLARS AND SHARES IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                     ACCUMULATED
                                          COMMON STOCK                                  OTHER
                                        ---------------   ADDITIONAL    RETAINED    COMPREHENSIVE
                                        SHARES   AMOUNT     CAPITAL     EARNINGS    INCOME (LOSS)      TOTAL
                                        ------   ------   ----------   ----------   -------------   ----------
<S>                                     <C>      <C>      <C>          <C>          <C>             <C>
BALANCE, DECEMBER 31, 2004                  1      $ 1    $1,659,698   $1,088,096     $(25,363)     $2,722,432

Net income                                 --       --            --      419,297           --         419,297

Other comprehensive income                 --       --            --           --          771             771

Dividends paid to parent, PDV America      --       --            --     (317,000)          --        (317,000)

                                          ---      ---    ----------   ----------     --------      ----------
BALANCE, SEPTEMBER 30, 2005                 1      $ 1    $1,659,698   $1,190,393     $(24,592)     $2,825,500
                                          ===      ===    ==========   ==========     ========      ==========
</TABLE>

See notes to condensed consolidated financial statements.


                                        4

<PAGE>

CITGO PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                      NINE MONTHS
                                                                                  ENDED SEPTEMBER 30,
                                                                                 ---------------------
                                                                                    2005        2004
                                                                                 ---------   ---------
<S>                                                                              <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                    $ 419,297   $ 430,310
   Depreciation and amortization                                                   293,709     270,220
   Other adjustments to reconcile net income to net cash
      provided by operating activities                                             101,500      88,872
   Changes in operating assets and liabilities                                      63,497     (92,425)
                                                                                 ---------   ---------
      Net cash provided by operating activities                                    878,003     696,977
                                                                                 ---------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                           (263,092)   (226,549)
   Proceeds from sales of property, plant and equipment                                 82         539
   Decrease in restricted cash                                                         271       4,576
   Investments in LYONDELL-CITGO Refining LP                                       (51,745)    (19,511)
   Investments in and advances to other affiliates                                      --      (1,554)
                                                                                 ---------   ---------
      Net cash used in investing activities                                       (314,484)   (242,499)
                                                                                 ---------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment of senior secured term loan                                                  --    (200,000)
   Payments on master shelf agreement senior notes                                      --     (20,000)
   Proceeds from tax-exempt bonds                                                       --      61,800
   Payments on taxable bonds                                                            --     (25,000)
   Payments on loans from affiliates                                               (26,100)         --
   Payments of capital lease obligations                                            (2,622)     (2,604)
   Financing fees and debt issuance costs                                           (1,878)       (728)
   Dividends paid to parent, PDV America                                          (317,000)         --
                                                                                 ---------   ---------
      Net cash used in financing activities                                       (347,600)   (186,532)
                                                                                 ---------   ---------

INCREASE IN CASH AND CASH EQUIVALENTS                                              215,919     267,946

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      23,033     202,008
                                                                                 ---------   ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                         $ 238,952   $ 469,954
                                                                                 =========   =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the period for:
      Interest, net of amounts capitalized                                       $  53,899   $ 111,643
                                                                                 =========   =========
      Income taxes (net of refunds of $1,947 in 2005 and $231 in 2004)(Note 9)   $ 355,206   $ 137,554
                                                                                 =========   =========
</TABLE>

See notes to condensed consolidated financial statements.


                                        5

<PAGE>

CITGO PETROLEUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NINE-MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

1.   BASIS OF PRESENTATION

     CITGO Petroleum Corporation ("CITGO" or the "Company") and its subsidiaries
     are engaged in the refining, marketing and transportation of petroleum
     products including gasoline, diesel fuel, jet fuel, petrochemicals,
     lubricants, asphalt and refined waxes, mainly within the continental United
     States east of the Rocky Mountains. The Company does not own any crude oil
     reserves or crude oil exploration or production facilities. It operates as
     a single segment. It is an indirect wholly owned subsidiary of 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.

     The financial information for CITGO subsequent to December 31, 2004 and
     with respect to the interim three-month and nine-month periods ended
     September 30, 2005 and 2004 is unaudited. In management's opinion, such
     interim information contains all adjustments, consisting of normal
     recurring adjustments, necessary for a fair presentation of the results of
     such periods, such interim information also reflects the write-off of costs
     associated with the deferral of two capital projects. The results of
     operations for the three-month and nine-month periods ended September 30,
     2005 and 2004 are not necessarily indicative of the results to be expected
     for the full year. Reference is made to CITGO's Annual Report for the
     fiscal year ended December 31, 2004 on Form 10-K.

2.   NEW ACCOUNTING PRONOUNCEMENTS

     In January 2003, the Financial Accounting Standards Board ("FASB") issued
     Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN
     46"), which clarifies the application of Accounting Research Bulletin No.
     51, "Consolidated Financial Statements." FIN 46 defines variable interest
     entities and how an enterprise should assess its interests in a variable
     interest entity to decide whether to consolidate that entity. In December
     2003, the FASB issued a revision of FIN 46 (FIN 46R), primarily to clarify
     the required accounting for investments in variable interest entities. This
     standard replaces FIN 46. For CITGO, which meets the definition of a
     nonpublic enterprise for purposes of applying FIN 46R, application is
     required immediately for variable interest entities created after December
     31, 2003 and for variable interest entities in which an interest is
     acquired after that date, and to all entities that are subject to FIN 46R
     by January 1, 2005. The interpretation requires certain minimum disclosures
     with respect to variable interest entities in which an enterprise holds
     significant variable interest but which it does not consolidate. FIN 46R
     may be applied prospectively with a cumulative-effect adjustment as of the
     date on which it is first applied or by restating previously issued
     financial statements for one or more years with a cumulative-effect
     adjustment as of the beginning of the first year restated. The Company's
     adoption of FIN 46R, effective January 1, 2005, had no impact on the
     financial position or results of operations for the nine-month period ended
     September 30, 2005.

     In March 2005, the FASB issued Interpretation No. 47, "Accounting for
     Conditional Asset Retirement Obligations" ("FIN 47"), which clarifies the
     application of FASB Statement No. 143, "Accounting for Asset Retirement
     Obligations" ("SFAS No. 143"). FIN 47 clarifies (i) that an entity is
     required to recognize a liability for the fair value of a conditional asset
     retirement obligation when incurred if the liability's fair value can be
     reasonably estimated; and (ii) when an entity would have sufficient
     information to reasonably estimate the fair value of an asset retirement
     obligation. FIN 47 is effective no later than the end of fiscal years
     ending after December 15, 2005. Retrospective application for interim
     financial information is permitted but is not required. The Company is
     currently evaluating the impact, if any, on its financial position or
     results of operations that may result from the application of FIN 47.


                                        6

<PAGE>

     In December 2004, the FASB issued FASB Staff Position No. FAS 109-1,
     "Application of FASB Statement No. 109, "Accounting for Income Taxes," to
     the Tax Deduction on Qualified Production Activities Provided by the
     American Jobs Creation Act of 2004" ("FSP FAS 109-1"). The American Jobs
     Creation Act introduces a special phased in 9% tax deduction on qualified
     production activities. FSP FAS 109-1 clarifies that this tax deduction
     should be accounted for as a special tax deduction in accordance with FASB
     Statement No. 109. The Company does not expect the adoption of this new tax
     provision to have a material impact on its consolidated financial position,
     results of operations or cash flows for the year ended December 31, 2005.

     In September 2005, the FASB ratified the consensus reached by the Emerging
     Issues Task Force ("EITF") in Issue No. 04-13, "Accounting for Purchases
     and Sales of Inventory with the Same Counterparty" ("EITF 04-13"). In this
     issue, the EITF reached consensus on i) the circumstances under which two
     or more transactions involving inventory with the same counterparty should
     be viewed as a single nonmonetary transaction within the scope of APB
     Opinion No. 29, Accounting for Nonmonetary Transactions; and ii) whether
     there are circumstances under which nonmonetary exchanges of inventory
     within the same line of business should be recognized at fair value. EITF
     04-13 is effective for new arrangements entered into in reporting periods
     beginning after March 15, 2006. The Company is currently evaluating the
     impact, if any, on its financial position and results of operations that
     may result from the application of EITF 04-13.

3.   ACCOUNTS RECEIVABLE

     The Company has a limited purpose consolidated subsidiary, CITGO Funding
     Company L.L.C. ("CITGO Funding"), which established a non-recourse
     agreement to sell an undivided interest in specified trade accounts
     receivables ("pool") to independent third parties. Under the terms of the
     agreement, new receivables are added to the pool as collections
     (administered by CITGO) reduce previously sold receivables. CITGO pays
     specified fees related to its sale of receivables under the program. The
     outstanding invested amount of the interest sold to third-parties at any
     one time under the trade accounts receivable sales agreement is limited to
     a maximum of $350 million.

     As of September 30, 2005, $844 million of CITGO's accounts receivable
     comprised the designated pool of trade receivables owned by CITGO Funding.
     As of September 30, 2005, no outstanding investment in the receivables in
     the designated pool had been sold to the third party and the entire amount
     of the receivables was retained by CITGO Funding.

4.   INVENTORIES

     Inventories, primarily at LIFO, consist of the following:

<TABLE>
<CAPTION>
                         SEPTEMBER 30,
                              2005       DECEMBER 31,
                          (UNAUDITED)        2004
                         -------------   ------------
                                (000S OMITTED)
<S>                      <C>             <C>
Refined products            $594,312      $  787,795
Crude oil                    205,279         284,301
Materials and supplies        96,240          93,564
                            --------      ----------
                            $895,831      $1,165,660
                            ========      ==========
</TABLE>


                                        7

<PAGE>

5.   RESTRICTED CASH

     CITGO issued $39 million of tax-exempt environmental facilities revenue
     bonds in May 2003. The proceeds from these bonds are being used on
     qualified projects at the Corpus Christi refinery. Restricted cash of
     approximately $2 million at September 30, 2005 represents highly liquid
     investments held in trust accounts in accordance with the related trust
     indenture. Funds may be released solely to finance the qualified capital
     expenditures as defined in the related loan agreement.

6.   LONG-TERM DEBT AND FINANCING ARRANGEMENTS

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                           SEPTEMBER 30,
                                                                2005       DECEMBER 31,
                                                            (UNAUDITED)        2004
                                                           -------------   ------------
                                                                  (000S OMITTED)
<S>                                                        <C>             <C>
Senior Notes, $250 million face amount, due 2011 with
   interest rate of 6%                                       $  248,486     $  248,299

Senior Notes, $150 million face amount, due 2006 with
   interest rate of 7-7/8%                                      149,986        149,969

Senior Notes, $6.6 million face amount, due 2011 with
   interest rate of 11-3/8%                                       6,617          6,613

Private Placement Senior Notes, due 2005 to 2006 with an
   interest rate of 9.30%                                        22,727         22,727

Master Shelf Agreement Senior Notes, due 2006 to
   2009 with interest rates from 7.17% to 8.94%                 165,000        165,000

Tax-Exempt Bonds, due 2007 to 2032 with variable
   and fixed interest rates                                     459,287        459,283

Taxable Bonds, due 2026 with variable interest rate              80,000         80,000
                                                             ----------     ----------
                                                              1,132,103      1,131,891
Current portion of long-term debt                              (161,350)       (11,364)
                                                             ----------     ----------
                                                             $  970,753     $1,120,527
                                                             ==========     ==========
</TABLE>

     CITGO has a $260 million, three-year, unsecured revolving credit facility
     maturing in December 2005. There was no outstanding balance under this
     credit facility at September 30, 2005. The Company is actively reviewing
     and intends to replace the revolving credit facility by the maturity date.

     In October 2004, CITGO issued $250 million of 6% unsecured senior notes due
     October 15, 2011. In connection with this transaction, CITGO repurchased
     approximately $543 million principal amount of its 11-3/8% senior notes due
     2011 as part of a tender offer for such notes. After the tender offer for
     the 11-3/8% notes in October 2004, approximately $6.6 million remain
     outstanding at September 30, 2005.


                                        8

<PAGE>

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

     Approximately $392 million of the outstanding taxable and tax-exempt bonds
     are supported by letters of credit issued by various banks.

     Our various debt instruments require maintenance of a specified minimum net
     worth and impose restrictions on our ability to: incur additional debt
     unless we meet specified interest coverage and debt to capitalization
     ratios; place liens on our property, subject to specified exceptions; sell
     assets, subject to specified exceptions; make restricted payments,
     including dividends, repurchases of capital stock and specified
     investments; and merge, consolidate or transfer assets. Various of our debt
     agreements, including the agreements governing the Private Placement Senior
     Notes and the Master Shelf Agreement Senior Notes and the reimbursement
     agreements relating to various letters of credit that provide liquidity
     support for our tax-exempt bonds, contain provisions requiring that we
     equally and ratably secure those instruments if we issue secured debt other
     than as permitted by those instruments. CITGO is in compliance with its
     covenants under its debt financing arrangements at September 30, 2005.

     See Note 14 for information regarding cash tender offers relating to the
     7-7/8% senior notes due 2006 and the 6% senior notes due 2011; CITGO's
     election to redeem all of its outstanding 11-3/8% senior notes due 2011,
     its outstanding 9.30% private placement senior notes due 2006, and its
     outstanding master shelf agreement senior notes due 2006 through 2009; and
     a senior secured credit facility that CITGO is seeking.

7.   INVESTMENT IN LYONDELL-CITGO REFINING LP

     LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265
     thousand barrels per day 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.

     As of September 30, 2005, CITGO has a note receivable from LYONDELL-CITGO
     of $35 million. The note bears interest at market rates, which was
     approximately 3.9 percent at September 30, 2005. Principal and interest are
     due January 1, 2008. Accordingly, the note and related accrued interest are
     included in the balance sheet caption other assets, noncurrent, in the
     accompanying consolidated balance sheets.


                                        9

<PAGE>

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

<TABLE>
<CAPTION>
                                                         (000s omitted)
                                                  September 30,   December 31,
                                                       2005           2004
                                                  -------------   ------------
                                                   (Unaudited)
<S>                                               <C>             <C>
Carrying value of investment                        $  365,298     $  409,782
Note receivable                                         35,278         35,278
Participation interest                                      41%            41%

Summary of LYONDELL-CITGO's financial position:
   Current assets                                   $  487,000     $  359,000
   Non current assets                                1,367,000      1,288,000
   Current liabilities                                 883,000        588,000
   Noncurrent liabilities                              811,000        819,000
   Partners' capital                                   159,000        240,000
</TABLE>

<TABLE>
<CAPTION>
                                                    Nine Months Ended
                                                      September 30,
                                                 -----------------------
                                                    2005         2004
                                                 ----------   ----------
                                                       (Unaudited)
<S>                                              <C>           <C>
Equity in net income                             $   87,201   $  133,910
Cash distribution received                          183,311      215,944

Summary of LYONDELL-CITGO's operating results:

   Revenue                                       $5,301,238   $4,038,659
   Gross profit                                     289,029      409,970
   Net income                                       228,822      341,292
</TABLE>

LYONDELL-CITGO has a three-year, $550 million credit facility secured by
substantially all of its assets. The credit facility is comprised of a $450
million senior secured term loan and a $100 million senior secured revolver,
both with an interest rate based on the London Interbank Offered Rate ("LIBOR").
There was no outstanding balance under the working capital revolving credit
facility at September 30, 2005. In October 2005, the capacity of
LYONDELL-CITGO's senior secured revolver was increased from $100 million to
$150 million.


                                       10
<PAGE>

8.   COMMITMENTS AND CONTINGENCIES

     LITIGATION AND INJURY CLAIMS - Various lawsuits and claims arising in the
     ordinary course of business are pending against CITGO. CITGO records
     accruals for potential losses when, in management's opinion, such losses
     are probable and reasonably estimable. If known lawsuits and claims were to
     be determined in a manner adverse to CITGO, and in amounts greater than
     CITGO's accruals, then such determinations could have a material adverse
     effect on CITGO's results of operations in a given reporting period. The
     most significant lawsuits and claims are discussed below.

     In September 2002, a Texas court ordered CITGO to pay property owners and
     their attorneys approximately $6 million based on an alleged settlement of
     class action property damage claims as a result of alleged air, soil and
     groundwater contamination from emissions released from CITGO's Corpus
     Christi, Texas refinery. In October 2005, the Texas Court of Appeals
     sustained CITGO's appeal of the trial court's order and remanded the case
     to the trial court. CITGO shall continue to vigorously defend this case and
     does not believe that the resolution of this matter will have a material
     adverse effect on its financial condition or results of operations.

     CITGO, along with most of the other major oil companies, is a defendant in
     a number of federal and state lawsuits alleging contamination of private
     and public water supplies by methyl tertiary butyl ether ("MTBE"), a
     gasoline additive. In general, the plaintiffs claim that MTBE renders the
     water not potable. In addition to compensatory and punitive damages,
     plaintiffs seek injunctive relief to abate the contamination. CITGO intends
     to defend all of the MTBE lawsuits vigorously. These approximately 72
     cases, the majority of which were filed by municipal authorities, were
     removed to federal court and at the defendants' request consolidated in
     Multi District Litigation ("MDL") 1358. On March 16, 2004, the judge in MDL
     1358 denied the plaintiffs' motion to remand the cases to state court. Two
     plaintiffs have appealed the denial of the remand to state court to the
     U.S. Court of Appeals for the Second Circuit. The Appeals Court denied the
     defendants' motion for summary affirmance of the denial of the remand order
     and the appeal will proceed. In an April 20, 2005 ruling, the judge refused
     to dismiss most of the plaintiffs' causes of action. In doing so, the judge
     held that the plaintiffs might be able to prove liability under a
     commingled product market share liability theory because the plaintiffs
     could not identify the particular defendants which had manufactured the
     gasoline that caused the alleged contamination to drinking water supplies.
     Defendants have filed a motion for summary judgment on plaintiffs' claims
     on the grounds that they are pre-empted by federal law. Resolution of that
     motion is not expected this year. CITGO management does not believe that
     the resolution of these matters will have a material adverse effect on its
     financial condition, but may have a significant effect on its financial
     results for a given period.

     Claims have been made against CITGO in approximately 650 asbestos lawsuits
     pending in state and federal courts. These cases, most of which involve
     multiple defendants, are brought by former employees or contractor
     employees seeking damages for asbestos related illnesses allegedly caused,
     at least in part, from exposure at refineries owned or operated by CITGO in
     Lake Charles, Louisiana, Corpus Christi, Texas and Lemont, Illinois. In
     many of these cases, the plaintiffs' alleged exposure occurred over a
     period of years extending back to a time before CITGO owned or operated the
     premises at issue. CITGO does not believe that the resolution of these
     cases will have a material adverse effect on its financial condition or
     results of operations.

     In 2001, Miami-Dade County sued seventeen defendants for the costs of
     remediation of pollution rising from jet fuel operations during the past
     decades at the Miami International Airport ("the Airport"). Although not a
     defendant in this case, CITGO along with approximately 250 other former jet
     fuel operators at the Airport has received a payment demand from Miami-Dade
     County for the remediation costs for alleged pollution occurring while
     CITGO had jet fuel operations at the Airport. Although CITGO is contesting
     the amount of damages that Miami-Dade County claims are attributed to
     CITGO's jet fuel operations at the Airport and will vigorously defend
     itself should no settlement be reached, CITGO has voluntarily executed a
     case


                                       11

<PAGE>

     management order in an attempt to settle the claim. CITGO does not believe
     that the resolution of this matter will have a material adverse effect on
     its financial condition or results of operations.

     CITGO's Corpus Christi, Texas refinery and current and former employees are
     being investigated by state and federal agencies for alleged criminal
     violations of federal environmental statutes and regulations, including the
     CAA and the Migratory Bird Act. CITGO is cooperating with the
     investigation. CITGO believes that it has defenses to any such charges. At
     this time, CITGO management cannot predict the outcome of any such charges,
     but does not believe that the resolution of this matter will have a
     material adverse effect on its financial condition or results of
     operations.

     On November 26, 2004, the Athos I, a merchant tanker, struck a submerged
     anchor in the public channel of the Delaware River near Paulsboro, New
     Jersey and released crude oil owned by CITGO Asphalt Refining Company
     ("CARCO"), a subsidiary of CITGO. In a maritime limitation of liability
     action in federal court in Philadelphia, Pennsylvania, the owner of the
     Athos I has counterclaimed against CARCO for over $125 million in oil spill
     recovery and clean costs. CITGO does not believe that CARCO has any
     liability and will vigorously defend itself.

     On April 19, 2005, CITGO received a claim from Dixie Pipeline Company
     ("Dixie") that CITGO may have injected contaminated propane into Dixie's
     pipeline system. Dixie and CITGO are cooperating to investigate the facts.
     CITGO does not have sufficient information to determine liability, if any,
     or to estimate the loss or range of loss, if any, related to this claim.

     At September 30, 2005, CITGO's balance sheet included an accrual for
     lawsuits and claims of $36 million compared with $24 million at December
     31, 2004. CITGO estimates that an additional loss of $103 million is
     reasonably possible in connection with such lawsuits and claims.

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

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

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

     CITGO's accounting policy establishes environmental reserves as probable
     site restoration and remediation obligations become reasonably capable of
     estimation. Environmental liabilities are not discounted to their present
     value and are recorded without consideration of potential recoveries from
     third parties. Subsequent adjustments to estimates, to the extent required,
     will be made as more refined information becomes available. CITGO believes
     the amounts provided in its consolidated financial statements, as
     prescribed by generally accepted accounting principles, are adequate in
     light of probable and estimable liabilities and obligations.


                                       12

<PAGE>

     However, there can be no assurance that the actual amounts required to
     discharge alleged liabilities and obligations and to comply with applicable
     laws and regulations will not exceed amounts provided for or will not have
     a material adverse affect on CITGO's consolidated results of operations,
     financial condition and cash flows.

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

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

     In January and July 2001, CITGO received notices of violation ("NOVs") from
     the U.S. EPA alleging violations of the CAA. The NOVs are an outgrowth of
     an industry-wide and multi-industry U.S. EPA enforcement initiative
     alleging that many refineries, electric utilities and other industrial
     sources modified air emission sources. Without admitting any violation
     CITGO executed a Consent Decree with the United States and the states of
     Louisiana, Illinois, New Jersey, and Georgia. The Consent Decree requires
     the implementation of control equipment at CITGO's refineries and a
     Supplemental Environment Project at CITGO's Corpus Christi, Texas refinery.
     Approximately $300 million in capital costs will be incurred over a period
     of time, primarily between 2005 and 2010.

     In October 2004, the New Jersey Natural Lands Trust voted to reject the
     donation by CITGO of a conservation easement covering the 392 acre Petty's
     Island, which is located in the Delaware River in Pennsauken, New Jersey
     and owned by CITGO. Petty's Island contains a CITGO closed petroleum
     terminal and other industrial facilities, but it is also the habitat for
     the bald eagle and other wildlife. The City of Pennsauken, through a
     private developer, wants to condemn Petty's Island through eminent domain
     and to redevelop Petty's Island into residential and commercial uses. The
     granting of the conservation easement would have mitigated the amount of
     remediation that CITGO would have to perform on Petty's Island. The
     ultimate outcome cannot be determined at this time.

     At September 30, 2005, CITGO's balance sheet included an environmental
     accrual of $70 million compared with $65 million at December 31, 2004.
     Results of operations reflect an increase in the accrual during 2005 due
     primarily to a revision of the Company's estimated share of costs related
     to two sites indicating higher costs offset in part, by spending on
     environmental projects. CITGO estimates that an additional loss of $31
     million is reasonably possible in connection with environmental matters.

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


                                       13

<PAGE>

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

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

     DERIVATIVE COMMODITY AND FINANCIAL INSTRUMENTS - As of September 30, 2005,
     CITGO'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 September 30, 2005,
     the balance sheet captions prepaid expenses and other current assets and
     other current liabilities include $83 million and $71 million,
     respectively, related to the fair values of open commodity derivatives.

     GUARANTEES - As of September 30, 2005, the Company has guaranteed the debt
     of others in a variety of circumstances including letters of credit issued
     for an affiliate, bank debt of an equity investment, bank debt of customers
     and financing debt incurred by an equity investment as shown in the
     following table:

<TABLE>
<CAPTION>
                                                    Expiration
                                                       Date
                                                    ----------
                                   (000s omitted)
<S>                                <C>              <C>
Letters of credit                      $20,296         2006

Bank debt
   Equity investment                     5,500         none
   Customers                               737         2006

Financing debt
   Equipment acquisition - NISCO         7,966         2008
                                       -------
   Total                               $34,499
                                       =======
</TABLE>

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

     In the event of debtor default on the letters of credit, CITGO has been
     indemnified by PDV Holding, Inc., the direct parent of PDV America, which
     is CITGO's direct parent. In the event of debtor default on the equity
     investment bank debt, CITGO has no recourse. In the event of debtor default
     on customer bank debt, CITGO generally has recourse to personal guarantees
     from principals or liens on property. In the event of debtor default on
     financing debt incurred by an equity investee, CITGO has no recourse.

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

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


                                       14

<PAGE>

9.   RELATED PARTY TRANSACTIONS

     CITGO purchases approximately 40% of the crude oil processed in its
     refineries from subsidiaries of PDVSA under long-term supply agreements.
     These supply agreements extend through the year 2006 for the Lake Charles
     refinery, 2010 for the Paulsboro refinery, 2012 for the Corpus Christi
     refinery and 2013 for the Savannah refinery. CITGO and PDVSA are evaluating
     possible changes to certain provisions and conditions of these supply
     agreements, including the pricing mechanisms, volumes and term.

     These crude supply agreements contain force majeure provisions that excuse
     the performance by either party of its obligations under the agreement
     under specified circumstances.

     Three affiliates entered into agreements to advance excess cash to the
     Company from time to time under demand notes for amounts of up to a maximum
     of $10 million with PDV Texas, Inc. ("PDV Texas"), $30 million with PDV
     America and $10 million with PDV Holding. The notes bear interest at rates
     equivalent to 30-day LIBOR plus 0.875% payable quarterly. At September 30
     2005, there was no outstanding balance on these notes. At December 31,
     2004, the amounts outstanding on these notes were $7 million, $14 million
     and $5 million from PDV Texas, PDV America and PDV Holding, respectively.

     The Company and PDV Holding are parties to a tax allocation agreement that
     is designed to provide PDV Holding with sufficient cash to pay its
     consolidated income tax liabilities. PDV Holding appointed CITGO as its
     agent to handle the payment of such liabilities on its behalf. As such,
     CITGO calculates the taxes due, allocates the payments among the tax
     allocation agreement members according to the agreement and bills each
     member accordingly. Each member records its amounts due from or payable to
     CITGO in a related party account. At September 30, 2005 and December 31,
     2004, CITGO had net related party receivables related to federal income
     taxes of $150 million and $28 million, respectively, which is included in
     due from affiliates.


                                       15

<PAGE>

10.  EMPLOYEE BENEFIT PLANS

     COMPONENTS OF NET PERIODIC BENEFIT COST

For the three months ended September 30:

<TABLE>
<CAPTION>
                                      PENSION BENEFITS     OTHER BENEFITS
                                     -----------------   -----------------
                                       2005      2004      2005      2004
                                     -------   -------   -------   -------
                                                 (000S OMITTED)
<S>                                  <C>       <C>       <C>       <C>
Service cost                         $ 5,920   $ 5,743   $ 2,359   $ 2,285
Interest cost                          8,303     7,954     5,922     5,767
Expected return on plan assets        (8,124)   (7,285)      (19)      (18)
Amortization of Transition Asset          (5)      (12)       --        --
Amortization of prior service cost      (193)     (193)     (123)     (130)
Amortization of net loss               1,540       818      4,536    4,911
                                     -------   -------   -------   -------
Net periodic benefit cost            $ 7,441   $ 7,025   $12,675   $12,815
                                     =======   =======   =======   =======
</TABLE>

For the nine months ended September 30:

<TABLE>
<CAPTION>
                                                  PENSION BENEFITS      OTHER BENEFITS
                                                -------------------   -----------------
                                                  2005       2004       2005      2004
                                                --------   --------   -------   -------
                                                             (000S OMITTED)
<S>                                             <C>        <C>        <C>       <C>
Service cost                                    $ 17,760   $ 17,229   $ 7,078   $ 6,855
Interest cost                                     24,910     23,862    17,766    17,301
Expected return on plan assets                   (24,372)   (21,855)      (56)      (54)
Amortization of Transition Obligation (Asset)        (15)       (36)       --        --
Amortization of prior service cost                  (579)      (579)     (371)     (390)
Amortization of net loss                           4,621      2,454    13,608    14,734
                                                --------   --------   -------   -------
Net periodic benefit cost                       $ 22,325   $ 21,075   $38,025   $38,446
                                                ========   ========   =======   =======
</TABLE>

     EFFECT OF RECENT LEGISLATION ON OTHER BENEFITS COST

     In December 2003, the Medicare Prescription Drug, Improvement and
     Modernization Act of 2003 ("Medicare Reform") was signed into law. Medicare
     Reform introduces a prescription drug benefit under Medicare (Medicare Part
     D) as well as a non-taxable federal subsidy to sponsors of retiree health
     care benefit plans that provide a benefit that is at least actuarially
     equivalent to Medicare Part D. In May 2004, the FASB Staff issued FASB
     Staff Position No. FAS 106-2, "Accounting and Disclosure Requirements
     Related to the Medicare Prescription Drug, Improvement and Modernization
     Act of 2003". The Staff Position permits a sponsor to report the effects of
     Medicare Reform prospectively in the third quarter of 2004 or
     retrospectively to the measurement date following enactment of the
     legislation. CITGO has chosen to use the retrospective method to reflect
     Medicare Reform as of January 1, 2004. The effect of this legislation at
     that date was to reduce the benefit obligation by approximately $40
     million. The service cost and interest cost components of that reduction
     total approximately $3 million. Under CITGO's accounting policy for
     recognizing actuarial gains, net periodic benefit cost for the quarter and
     nine-month period ended September 30, 2004 and the year ended December 31,
     2004 was reduced $10 million, $30 million and $40 million, respectively,
     related to this actuarial gain.

     EMPLOYER CONTRIBUTIONS

     CITGO contributed approximately $35 million to its pension plan in the
     quarter ended September 30, 2005.


                                       16

<PAGE>

11.  CORPORATE HEADQUARTERS RELOCATION

     In April 2004, CITGO announced its decision to move its corporate
     headquarters from Tulsa, Oklahoma to Houston, Texas. The transfer of
     approximately 700 positions from a total of approximately 1,000 positions
     in Tulsa began in August 2004. At September 30, 2005, essentially all of
     the positions have been transferred. While the relocation was substantially
     completed in July 2005, CITGO expects related costs will continue to be
     incurred over the next three months. A summary of relocation costs follows:

<TABLE>
<CAPTION>
                                      Expected                      Cumulative
                                        Total     Amount Incurred     Amount
                                       Amount    3rd Quarter 2005    Incurred
                                      --------   ----------------   ----------
                                                   ($ in millions)
<S>                                   <C>        <C>                <C>
Relocation costs                         $32             $5             $28
Severance and related costs               21              1              16
Property and leasehold improvements       29             --              29
                                         ---            ---             ---
   Total                                 $82             $6             $73
                                         ===            ===             ===
</TABLE>

     During the third quarter 2005, the expected total cost of the relocation
     was reduced to $82 million from the estimate of $85 million at the end of
     the second quarter. The original estimate for the relocation project was
     $90 million. Relocation costs and severance and related costs are included
     in CITGO's condensed consolidated statement of income and comprehensive
     income as a component of the caption selling, general and administrative
     expense. Costs related to property and leasehold improvements are included
     in CITGO's condensed consolidated balance sheet as a component of the
     caption property, plant and equipment. An accrual of $9 million related to
     the relocation is included in CITGO's condensed consolidated balance sheet
     as a component of the caption current liabilities other.

12.  OTHER INFORMATION

     As previously reported, CITGO received an informal inquiry from the
     Securities and Exchange Commission ("SEC") seeking information from CITGO
     regarding a now concluded inquiry conducted by a special commission of the
     Venezuelan National Assembly (the "VNA"), allegations made by a CITGO
     employee in a letter sent to both CITGO's auditors as well as the SEC, and
     CITGO's October 2004 tender offer for its 11-3/8% senior notes. CITGO is
     continuing to cooperate with the SEC and has provided it with the requested
     information. Two independent law firms, retained to investigate various
     payments that were part of the inquiries, concluded there was not any
     evidence that such payments were improper. The aggregate amount of these
     payments is not material.


                                       17

<PAGE>

13.  CAPITAL PROJECT DEFERRALS

     The Company periodically reviews investment decisions based on market
     conditions, availability of supply, and optimization of investments and
     synergies with other CITGO sites. As the result of such a review, the
     Company has decided to defer a capital project at its Corpus Christi
     refinery related to production of ultra low sulfur diesel fuel.
     Accordingly, results for the nine months ended September 30, 2005 include,
     in cost of sales, a charge against income of approximately $18 million to
     write off the costs incurred to date on the project. Approximately $13
     million in work in process assets were removed from net, property, plant
     and equipment, and approximately $5 million was included in other current
     liabilities for additional expenses and cancellation charges.

     In addition, the Company decided to cancel an energy conservation project
     at its Lemont refinery when costs escalated over original expectations.
     Accordingly, results for the nine months ended September 30, 2005 include
     in cost of sales, a charge of approximately $18 million to write off the
     costs incurred to date on the project. Approximately $10 million in work in
     process assets were removed from net, property, plant and equipment, and
     approximately $8 million was included in other current liabilities for
     additional expenses and cancellation charges.

14.  SUBSEQUENT EVENT

     On October 13, 2005, the Company announced cash tender offers for all of
     its outstanding 7-7/8% senior notes due 2006 and 6% senior notes due 2011.

     On October 14, 2005, the Company sent notices of its election to redeem
     prior to their stated maturity dates the following debt securities:

          -    all of its outstanding 11-3/8% senior notes due 2011;

          -    all of its outstanding 9.30% private placement senior notes due
               2006; and

          -    all of its outstanding master shelf agreement senior notes due
               2006 through 2009 with interest rates ranging from 7.17% to
               8.94%.

     The Company is also working with two co-lead banks who have committed on a
     $1.85 billion senior secured credit facility, which would consist of a
     five-year revolving credit facility in the amount of $1.15 billion and a
     seven-year term loan of $700 million. The credit facility, which is subject
     to the completion of documentation and a number of other conditions, would
     be secured by CITGO's interests in its Lake Charles, Louisiana and Corpus
     Christi, Texas refineries, its trade accounts receivable and its
     inventories and is subject to covenants typical for secured financing. The
     Company expects to close this transaction in the fourth quarter of 2005.

     The ratings on the new senior secured credit facility, as currently
     assessed by the three major debt rating agencies, are as follows:

<TABLE>
<CAPTION>
                                  Secured
                                  -------
<S>                               <C>
Standard & Poor's Ratings Group     BBB-
Moody's Investors Service           Ba1
Fitch Investors Services, Inc.      BB+
</TABLE>


                                       18

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

OVERVIEW

          This discussion of our financial condition and results of operations
should be read in conjunction with our unaudited condensed consolidated
financial statements included elsewhere in this report.

          We generated net income of $90 million on total revenue of $12.3
billion in the quarter ended September 30, 2005 compared to net income of $205
million on total revenue of $9.0 billion for the same period last year. We
generated net income of $416 million on total revenue of $31.1 billion in the
nine-month period ended September 30, 2005 compared to net income of $430
million on total revenue of $23.8 billion for the same period last year. (See
"Gross margin").

          The decrease in net income for the quarter ended September 30, 2005
compared to the same period last year is due primarily to a decline of the gross
margin on asphalt, petrochemicals and other industrial products. The gross
margin on light products such as gasoline, jet fuel and diesel fuel were higher
than those in the same period last year. However, earnings on gasoline sales
were reduced due to a nine percent drop in sales volume when compared to the
same period last year. Inventory levels at September 30, 2005 were lower than at
December 31, 2004. CITGO intends to rebuild its inventory to year-end 2004
levels by year-end 2005. The temporary inventory decrement as of September 30,
2005 was valued at expected replacement cost which is included in the results of
operations for the period ending September 30, 2005. Also contributing to the
decline in net income was a reduction in LYONDELL-CITGO earnings during the
quarter ended September 30, 2005 as compared to the same period last year.

          Despite higher price levels in the nine months ended September 30,
2005 compared to the same period last year, the gross margin on sales remained
approximately the same. Reductions in LYONDELL-CITGO earnings and increases in
selling, general and administrative expenses were offset by reductions in
interest expense and increases in other income (expense), net.

          In preparation for the possible impact from Hurricane Rita, CITGO
began shutting down its 425 thousand barrels per day Lake Charles refinery on
September 21, 2005. On September 24, 2005 Hurricane Rita hit Lake Charles,
Louisiana. Although the hurricane inflicted only minor damage to the equipment,
the refinery did not have electricity other than from emergency generators until
October 3, 2005. As soon as Hurricane Rita passed, CITGO began recalling its
employees and contractors to inspect each system, clean up debris, make any
necessary repairs and restart the units. Although accomplished in phases, the
refinery was fully operational by October 26, 2005.

          LYONDELL-CITGO's 265 thousand barrels per day Houston refinery was
also shut down in preparation for Hurricane Rita. LYONDELL-CITGO experienced
difficulty in restarting its refinery and had a fire in its catalytic cracker
while restarting. It is estimated to be fully operational by December 1, 2005.

          CITGO purchases all of the transportation petroleum products produced
at the LYONDELL-CITGO refinery. Inventories were drawn down because of the
storm. Most of CITGO's crude and feedstock suppliers and petroleum product and
by-product customers cooperated with CITGO in canceling or deferring shipments.
However, for those few customers who were unwilling to voluntarily cancel or
defer shipments, CITGO was compelled to declare force majeure.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

          We make a number of significant estimates, assumptions and judgments
in the preparation of our financial statements. We direct your attention to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Critical Accounting Policies" in our Form 10-K annual report for
our


                                       19

<PAGE>

fiscal year ended December 31, 2004, for a discussion of the estimates and
judgments necessary in our accounting for environmental expenditures, litigation
and injury claims, health care costs and pensions.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                  THREE MONTHS                        NINE MONTHS
                                                      ENDED                              ENDED
                                                  SEPTEMBER 30,       INCREASE       SEPTEMBER 30,       INCREASE
                                                ----------------     (DECREASE)    -----------------    (DECREASE)
                                                  2005     2004      FROM 2004       2005      2004      FROM 2004
                                                -------   ------   -------------   -------   -------   ------------
<S>                                             <C>       <C>      <C>      <C>    <C>       <C>       <C>      <C>
(DOLLARS IN MILLIONS)

Net sales                                       $12,194   $8,749   $3,445          $30,642   $23,293   $7,349
Sales to affiliates                                  66      130      (64)             292       307      (15)
                                                -------   ------   ------          -------   -------   ------
                                                 12,260    8,879    3,381    38%    30,934    23,600    7,334   31%
                                                -------   ------   ------          -------   -------   ------

Equity in earnings of affiliates                     50       71      (21)             124       166      (42)
Other income (expense), net                           7        2        5               29         2       27
                                                -------   ------   ------          -------   -------   ------
                                                 12,317    8,952    3,365    38%    31,087    23,768    7,319   31%
                                                -------   ------   ------          -------   -------   ------

Cost of sales and operating expenses             12,074    8,532    3,542           30,154    22,793    7,361
Selling, general and administrative expenses         83       78        5              239       219       20
Interest expense, excluding capital lease            21       29       (8)              56        99      (43)
Capital lease interest charge                         1        1       --                3         2        1
                                                -------   ------   ------          -------   -------   ------
                                                 12,179    8,640    3,539    41%    30,452    23,113    7,339   32%
                                                -------   ------   ------          -------   -------   ------

Income before income taxes                          138      312     (174)             635       655      (20)
Income taxes                                         44      107      (63)             216       225       (9)
                                                -------   ------   ------          -------   -------   ------
Net income                                      $    94   $  205   $ (111)  -54%   $   419   $   430   $  (11)  -3%
                                                =======   ======   ======          =======   =======   ======

Gulf Coast 3/2/1 crack spread ($ per bbl) (1)   $ 16.45   $ 6.16   $10.29   167%   $ 10.74   $  7.12   $ 3.62   51%

Average price per gallon of gasoline (2)        $  1.92   $ 1.28   $ 0.64    50%   $  1.62   $  1.22   $ 0.40   33%
Average cost per barrel of crude oil (3)        $ 57.72   $37.46   $20.26    54%   $ 48.18   $ 34.45   $13.73   40%
</TABLE>

----------
(1)  The Gulf Coast 3/2/1 crack spread is used as a benchmark for gauging
     changes in refining industry margins based upon a hypothetical yield from a
     barrel of crude oil. It is calculated as the value of two-thirds barrel of
     gasoline plus one-third barrel of distillate minus one barrel of crude
     (West Texas Intermediate or "WTI"). Heavy crude refiners also evaluate the
     light/heavy crude spread (WTI minus Maya). The sum of these benchmarks is
     the heavy crack spread. During the third quarter of 2005, the heavy crack
     spread was $32.11 per barrel versus $17.91 per barrel during the third
     quarter of 2004. During the first nine months of 2005, the heavy crack
     spread was $26.00 per barrel versus $17.08 per barrel for the same period
     in 2004. The values used to calculate the Gulf Coast 3/2/1 crack spread and
     the heavy crack spread are obtained from Platts (an energy industry
     information reporting service) using an average of daily prices for the
     three-month and nine-month periods ended September 30, 2005 and 2004
     (excluding weekends and holidays).

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

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


                                       20

<PAGE>

          Sales revenues and volumes. Sales increased $3.4 billion, or
approximately 38%, in the three-month period ended September 30, 2005 as
compared to the same period in 2004. This increase was primarily due to an
increase in average sales price of 46%. Sales increased $7.3 billion, or
approximately 31%, in the nine-month period ended September 30, 2005 as compared
to the same period in 2004. This increase was primarily due to an increase in
average sales price of 36%. The following table summarizes the sources of our
sales revenues and sales volumes for the three-month and nine-month periods
ended September 30, 2005 and 2004:

                        CITGO SALES REVENUES AND VOLUMES

<TABLE>
<CAPTION>
                                           THREE MONTHS        NINE MONTHS       THREE MONTHS     NINE MONTHS
                                               ENDED              ENDED             ENDED            ENDED
                                           SEPTEMBER 30,      SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,
                                         ----------------   -----------------   -------------   ------   ------
                                           2005     2004      2005      2004     2005    2004    2005     2004
                                         -------   ------   -------   -------   -----   -----   ------   ------
                                                    ($ in millions)                  (Gallons in millions)
<S>                                      <C>       <C>      <C>       <C>       <C>     <C>     <C>      <C>
Gasoline                                 $ 6,619   $4,866   $16,160   $13,303   3,442   3,791    9,972   10,889
Jet fuel                                   1,122      692     2,912     1,882     607     564    1,806    1,736
Diesel/#2 fuel                             2,732    1,773     7,214     4,594   1,479   1,488    4,521    4,396
Asphalt                                      399      334       811       723     442     422      964      983
Petrochemicals and industrial products     1,145    1,012     3,172     2,503     732     789    2,260    2,214
Lubricants and waxes                         210      188       592       517      67      77      206      214
                                         -------   ------   -------   -------   -----   -----   ------   ------
   Total refined product sales            12,227    8,865    30,861    23,522   6,769   7,131   19,729   20,432
Other sales                                   33       14        73        78
                                         -------   ------   -------   -------   -----   -----   ------   ------
   Total sales                           $12,260   $8,879   $30,934   $23,600   6,769   7,131   19,729   20,432
                                         =======   ======   =======   =======   =====   =====   ======   ======
</TABLE>

          Equity in earnings of affiliates. The table below shows the changes
during the three-month and nine-month periods ended September 30, 2005 compared
to the same periods in 2004 in the equity in earnings of affiliates. The
decrease in LYONDELL-CITGO's earnings in the third quarter and the first nine
months of 2005 as compared to the same periods in 2004 was due primarily to
lower crude processing rates which were a result of unplanned plant maintenance
and an outage of an external processor of refinery produced gas during the
second quarter of 2005, and refinery shut down due to the hurricane threat
during the third quarter of 2005.

<TABLE>
<CAPTION>
                        THREE MONTHS                 NINE MONTHS
                           ENDED                        ENDED
                       SEPTEMBER 30,    INCREASE    SEPTEMBER 30,    INCREASE
                       -------------   (DECREASE)   -------------   (DECREASE)
                        2005   2004     FROM 2004    2005   2004     FROM 2004
                        ----   ----    ----------    ----   ----    ----------
                                           ($ in millions)
<S>                    <C>     <C>     <C>          <C>     <C>     <C>
LYONDELL-CITGO           $35    $58       $(23)      $ 87   $134       $(47)
Pipeline investments      11     10          1         31     29          2
Other                      4      3          1          6      3          3
                         ---    ---       ----       ----   ----       ----
   Total                 $50    $71       $(21)      $124   $166       $(42)
                         ===    ===       ====       ====   ====       ====
</TABLE>


                                       21

<PAGE>

          Cost of sales and operating expenses. The following table summarizes
our cost of sales and operating expenses for the three-month and nine-month
periods ended September 30, 2005 and 2004:

                   CITGO COST OF SALES AND OPERATING EXPENSES

<TABLE>
<CAPTION>
                                                   THREE MONTHS       NINE MONTHS
                                                      ENDED              ENDED
                                                  SEPTEMBER 30,      SEPTEMBER 30,
                                                ----------------   -----------------
                                                  2005     2004      2005      2004
                                                -------   ------   -------   -------
                                                           ($ in millions)
<S>                                             <C>       <C>      <C>       <C>
Crude oil                                       $ 4,035   $2,502   $ 9,961   $ 6,417
Refined products                                  6,794    4,749    16,606    12,830
Intermediate feedstocks                             636      739     1,990     1,991
Refining and manufacturing costs                    353      378     1,165     1,123
Other operating costs and expenses                  256      164       432       432
                                                -------   ------   -------   -------
   Total cost of sales and operating expenses   $12,074   $8,532   $30,154   $22,793
                                                =======   ======   =======   =======
</TABLE>

          We purchase refined products to supplement the production from our
refineries in order to meet marketing demands and to optimize distribution.
Refined product purchases represented 56% of total cost of sales and operating
expenses for the third quarters of both 2005 and 2004 and 55% and 56% for the
first nine months of 2005 and 2004, respectively. Margins on purchased products,
on average, are lower than margins on refinery produced products because
refinery produced products benefit from the whole supply chain upgrade and
purchased refined products do not. However, purchased products are not
segregated from our produced products and margins may vary due to market
conditions and other factors beyond our control. In the near term, other than
normal refinery turnaround maintenance, we do not anticipate operational actions
or market conditions which might cause a material change in anticipated
purchased product requirements; however, there could be events beyond our
control which impact the volume of refined products purchased. (See also
"Factors Affecting Forward Looking Statements".)

          The Company periodically reviews investment decisions based on market
conditions, availability of supply, and optimization of investments and
synergies with other CITGO sites. As the result of such a review, the Company
has decided to defer a capital project at its Corpus Christi refinery related to
production of ultra low sulfur diesel fuel. Accordingly, results for the nine
months ended September 30, 2005 include a charge against income of approximately
$22 million to write off the costs incurred to date on the project. In addition,
the deferral of the project will reduce previously estimated capital
expenditures by approximately $194 million over the five-year period from 2005
through 2009.

          In addition, the Company decided to cancel an energy conservation
project at its Lemont refinery when costs escalated over original expectations.
Accordingly, results for the nine months ended September 30, 2005 include in
cost of sales, a charge of approximately $18 million to write off the costs
incurred to date on the project.

          Gross margin. Gross margin decreased approximately 2.1 cents per
gallon in the quarter ended September 30, 2005 compared to the same period in
2004 and remained flat in the nine months ended September 30, 2005 compared to
the same period in 2004. Gross margin for the quarter ended September 30, 2005
was approximately 2.8 cents per gallon compared to gross margin of approximately
4.9 cents per gallon for the same period in 2004. The decline in gross margin
for the quarter ended September 30, 2005 compared to the same period in 2004 is
attributable primarily to a decline in profitability of asphalt, petrochemicals
and industrial products. The selling price of these products did not respond to
increases in the cost of crude oil and feedstocks as readily as the price of
gasoline, jet fuel or diesel fuel. In addition, the combined sales volume of
gasoline, jet fuel and diesel fuel declined approximately 5% for the quarter
ended September 30, 2005 compared to the same period in 2004 primarily due to
the disruption in operations related to hurricanes on the Gulf Coast. Gross
margin for the nine months ended September 30, 2005 and 2004 was approximately
4.0 cents per gallon.

          Revenue per gallon for the third quarter 2005 increased approximately
46% compared to the third quarter 2004 and increased approximately 36% for the
first nine months of


                                       22

<PAGE>

2005 compared to the first nine months of 2004. Cost of sales and operating
expenses per gallon for the quarter ended September 30, 2005 increased
approximately 50% compared to the same period in 2004 and for the nine months
ended September 30, 2005 increased approximately 37% compared to the same period
in 2004.

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

          Selling, general and administrative expenses. Selling, general and
administrative expenses increased $5 million, or 6% from $78 million in the
third quarter of 2004 to $83 million in the third quarter of 2005. Selling,
general and administrative expenses increased $20 million, or 9% from $219
million in the first nine months of 2004 to $239 million in the first nine
months of 2005. The increase is primarily related to professional and consulting
fees, contract services and the decision to relocate corporate headquarters.

          Interest expense. Interest expense, including capital lease interest
charge, decreased $8 million in the three-month period ended September 30, 2005
as compared to the same period in 2004 and decreased $42 million in the
nine-month period ended September 30, 2005 as compared to the same period in
2004. The decrease in interest expense for the quarter and nine-month period
reflects the retirement of the senior secured term loan during the second
quarter of 2004 and the redemption in October 2004 of approximately $543 million
of our 11-3/8% notes due 2011.

LIQUIDITY AND CAPITAL RESOURCES

          The following summarizes cash flows during the nine-month periods
ended September 30, 2005 and 2004:

<TABLE>
<CAPTION>
                                          Nine Months
                                            Ended
                                         September 30,
                                        ---------------
                                          2005    2004
                                         -----   -----
                                        ($ in millions)
<S>                                     <C>      <C>
Net cash provided by/(used in):
   Operating activities                  $ 878   $ 697
   Investing activities                  $(314)  $(242)
   Financing activities                  $(348)  $(187)
</TABLE>

Cash Provided by Operating Activities

          Consolidated net cash provided by operating activities totaled
approximately $878 million for the nine-month period ended September 30, 2005.
Operating cash flows were derived primarily from net income of $419 million,
depreciation and amortization of $294 million, distributions in excess of equity
in earnings of affiliates of $88 million, decrease in deferred taxes of $20
million, asset retirements of $27 million and changes in operating assets and
liabilities of $63 million. The more significant changes in operating assets and
liabilities include an increase in current liabilities and a decrease in
inventories, offset in part, by an increase in notes and accounts receivable.


                                       23

<PAGE>

Cash Used in Investing Activities

          Net cash used in investing activities in the nine-month period ended
September 30, 2005 totaled $314 million consisting primarily of capital
expenditures of $263 million. These capital expenditures consisted of:

<TABLE>
<CAPTION>
                                   Nine Months Ended
                                  September 30, 2005
                                  ------------------
                                    ($ in millions)
<S>                               <C>
Regulatory requirements                  $130
Maintenance capital projects               53
Strategic capital expenditures             80
                                         ----
   Total capital expenditures            $263
                                         ====
</TABLE>

          See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" in our Form 10-K for
the year ended December 31, 2004 for additional information concerning projected
capital expenditures.

Cash Used in Financing Activities

          Net cash used in financing activities totaled $348 million for the
nine-month period ended September 30, 2005, consisting primarily of the payment
of $317 million in dividends to PDV America, our parent company, and the payment
of loans from affiliates.

          As of September 30, 2005, capital resources available to us included
cash on hand totaling $239 million generated by operations and other sources,
and available borrowing capacity under our committed bank facilities of $256
million.

          On October 22, 2004, we issued $250 million aggregate principal amount
of our 6% unsecured senior notes due October 15, 2011. On that date, we used the
net proceeds from that note issue, together with cash on hand, to repurchase
approximately $543 million aggregate principal amount of our 11-3/8% senior
notes due 2011 that had been tendered to us in accordance with a tender offer we
made for those notes. We also received the necessary consents of the holders of
those notes to amend the indenture governing those notes to remove substantially
all of the restrictive covenants and specified events of default.

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

     -    incur additional debt unless we meet specified interest coverage and
          debt to capitalization ratios;

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

     -    sell assets, subject to specified exceptions;

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

     -    merge, consolidate or transfer assets.

          We are in compliance with the covenants under our debt financing
arrangements at September 30, 2005.


                                       24

<PAGE>

          Upon the occurrence of a change of control of our Company, as defined
in the indenture governing our 6% senior notes due 2011, coupled with a rating
decline on these notes, the holders of those notes have the right to require us
to repurchase them at a price equal to 101% of the principal amount plus accrued
interest. In addition, our bank credit agreements and the reimbursement
agreements governing various of the letters of credit issued to provide
liquidity support for our tax-exempt bonds provide that, unless lenders holding
two-thirds of the commitments thereunder otherwise agree, a change in control of
our Company, as defined in those agreements, will constitute a default under
those credit agreements.

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

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

          Three of our affiliates entered into agreements to advance excess cash
to us from time to time under demand notes. These notes provide for maximum
amounts of $10 million from PDV Texas, $30 million from PDV America and $10
million from PDV Holding. At September 30, 2005 there was no outstanding balance
on these notes. At December 31, 2004, the amounts outstanding on these notes
were $7 million, $14 million and $5 million from PDV Texas, PDV America and PDV
Holding, respectively.

          As of September 30, 2005, we had an effective shelf registration with
the SEC under which we could have publicly offered up to $400 million principal
amount of debt securities. Due to our current credit ratings, the shelf
registration statement is not presently available.

          On March 17, 2005, we established an accounts receivable sales
facility. This facility allows the non-recourse sale of specified accounts
receivable to independent third parties. A maximum of $350 million in accounts
receivable may be sold at any one time. As of September 30, 2005, no receivables
had been sold under this facility.

          Our debt instruments do not contain any covenants that trigger
increased costs or burdens as a result of an adverse change in our securities
ratings. However, certain of our guarantee agreements, which support
approximately $20 million letters of credit of PDV Texas, an affiliate, require
us to cash collateralize the applicable letters of credit upon a reduction of
our credit rating below a stated level.

          We believe that we have adequate liquidity from existing sources to
support our operations for the foreseeable future.

          On October 13, 2005, we announced cash tender offers for all of our
outstanding 7-7/8% senior notes due 2006 and 6% senior notes due 2011.


                                       25

<PAGE>

          On October 14, 2005, we sent notices of our election to redeem prior
to their stated maturity dates the following debt securities:

     -    all of our outstanding 11-3/8% senior notes due 2011;

     -    all of our outstanding 9.30% private placement senior notes due 2006;
          and

     -    all of our outstanding master shelf agreement senior notes due 2006
          through 2009 with interest rates ranging from 7.17% to 8.94%.

          We are also working with two co-lead banks who have committed on a
$1.85 billion senior secured credit facility, which would consist of a five-year
revolving credit facility in the amount of $1.15 billion and a seven-year term
loan of $700 million. The credit facility, which is subject to the completion of
documentation and a number of other conditions, would be secured by our
interests in our Lake Charles, Louisiana and Corpus Christi, Texas refineries,
our trade accounts receivable and our inventories and is subject to covenants
typical for secured financing. We expect to close this transaction in the fourth
quarter of 2005.

          The ratings on the new senior secured credit facility, as currently
assessed by the three major debt rating agencies, are as follows:

<TABLE>
<CAPTION>
                                  Secured
                                  -------
<S>                               <C>
Standard & Poor's Ratings Group     BBB-
Moody's Investors Service           Ba1
Fitch Investors Services, Inc.      BB+
</TABLE>


                                       26

<PAGE>

NEW ACCOUNTING STANDARDS

          In January 2003, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 46, "Consolidation of Variable Interest Entities"
("FIN 46"), which clarifies the application of Accounting Research Bulletin No.
51, "Consolidated Financial Statements." FIN 46 defines variable interest
entities and how an enterprise should assess its interests in a variable
interest entity to decide whether to consolidate that entity. In December 2003,
the FASB issued a revision of FIN 46 (FIN 46R), primarily to clarify the
required accounting for investments in variable interest entities. This standard
replaces FIN 46. For CITGO, which meets the definition of a nonpublic enterprise
for purposes of applying FIN 46R, application is required immediately for
variable interest entities created after December 31, 2003 and for variable
interest entities in which an interest is acquired after that date, and to all
entities that are subject to FIN 46R by January 1, 2005. The interpretation
requires certain minimum disclosures with respect to variable interest entities
in which an enterprise holds significant variable interest but which it does not
consolidate. FIN 46R may be applied prospectively with a cumulative-effect
adjustment as of the date on which it is first applied or by restating
previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year restated. The
Company's adoption of FIN 46R, effective January 1, 2005, had no impact on the
financial position or results of operations for the nine-month period ended
September 30, 2005.

          In March 2005, the FASB issued Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations" ("FIN 47"), which clarifies the
application of FASB Statement No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). FIN 47 clarifies (i) that an entity is required
to recognize a liability for the fair value of a conditional asset retirement
obligation when incurred if the liability's fair value can be reasonably
estimated; and (ii) when an entity would have sufficient information to
reasonably estimate the fair value of an asset retirement obligation. FIN 47 is
effective no later than the end of fiscal years ending after December 15, 2005.
Retrospective application for interim financial information is permitted but is
not required. The Company is currently evaluating the impact, if any, on its
financial position or results of operations that may result from the application
of FIN 47.

          In December 2004, the FASB issued FASB Staff Position No. FAS 109-1,
"Application of FASB Statement No. 109, "Accounting for Income Taxes," to the
Tax Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004" ("FSP FAS 109-1"). The American Jobs Creation Act
introduces a special 9% tax deduction on qualified production activities. FSP
FAS 109-1 clarifies that this tax deduction should be accounted for as a special
tax deduction in accordance with FASB Statement No. 109. The Company does not
expect the adoption of this new tax provision to have a material impact on its
consolidated financial position, results of operations or cash flows.

          In September 2005, the FASB ratified the consensus reached by the
Emerging Issues Task Force ("EITF") in Issue No. 04-13, "Accounting for
Purchases and Sales of Inventory with the Same Counterparty" ("EITF 04-13"). In
this issue, the EITF reached consensus on i) the circumstances under which two
or more transactions involving inventory with the same counterparty should be
viewed as a single nonmonetary transaction within the scope of APB Opinion No.
29, Accounting for Nonmonetary Transactions; and ii) whether there are
circumstances under which nonmonetary exchanges of inventory within the same
line of business should be recognized at fair value. EITF 04-13 is effective for
new arrangements entered into in reporting periods beginning after March 15,
2006. The Company is currently evaluating the impact, if any, on its financial
position and results of operations that may result from the application of
EITF 04-13.


                                       27

<PAGE>

ITEM 3. 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. 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 September 30, 2005, CITGO was exposed
to the risk of broad market price declines with respect to a substantial portion
of its crude oil and refined product inventories. As of September 30, 2005,
CITGO's total crude and refined products inventory was 47 million barrels.
Aggregate commodity derivative positions entered into for price risk management
purposes at that date totaled 2.9 million barrels. The following disclosures do
not attempt to quantify the price risk associated with such commodity
inventories.

          Commodity Instruments. CITGO balances its crude oil and petroleum
product supply/demand and from time to time enters into petroleum commodity
derivative contracts. 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 September 30, 2005, none of the Company's commodity derivatives were
accounted for as hedges. Changes in the fair value of these contracts are
recorded in cost of sales and operating expense.


                                       28

<PAGE>

                              COMMODITY DERIVATIVES
                      OPEN POSITIONS AT SEPTEMBER 30, 2005

<TABLE>
<CAPTION>
                                                                   MATURITY     NUMBER OF    CONTRACT    MARKET
COMMODITY                              DERIVATIVE                    DATE       CONTRACTS      VALUE    VALUE(3)
---------                              ----------                  --------   ------------   --------   --------
                                                                              Long/(Short)    Asset/(Liability)
                                                                              ------------   -------------------
                                                                                               ($ in millions)
<S>                    <C>                                         <C>        <C>            <C>        <C>
No Lead Gasoline (1)   Futures Purchased                             2005           203      $  16.7    $  17.7
                       Futures Sold                                  2005          (161)     $ (12.8)   $ (14.0)
                       Listed Put Options Sold                       2005           (10)     $    --    $    --
                       Listed Call Options Purchased                 2005            50      $    --    $   0.3
                       Listed Call Options Sold                      2005           (50)     $    --    $  (0.2)
                       OTC Swaps (Pay Fixed / Receive Float) (4)     2005           100      $    --    $   2.7
                       Forward Purchase Contracts                    2005         2,038      $  85.1    $  93.5
                       Forward Sale Contracts                        2005        (1,070)     $ (76.1)   $ (87.4)

Distillates (1)        Futures Purchased                             2005         1,223      $  86.5    $ 110.6
                       Futures Purchased                             2006         1,458      $ 102.0    $ 128.3
                       Futures Sold                                  2005          (284)     $ (23.6)   $ (25.5)
                       Futures Sold                                  2006          (110)     $  (8.0)   $  (9.8)
                       Listed Call Options Purchased                 2005             6      $    --    $    --
                       Listed Call Options Sold                      2005            (6)     $    --    $    --
                       OTC Swaps (Pay Fixed / Receive Float) (4)     2005           445      $    --    $  17.8
                       OTC Swaps (Pay Fixed / Receive Float) (4)     2006           316      $    --    $   2.2
                       OTC Swaps (Pay Float / Receive Fixed) (4)     2005          (368)     $    --    $ (14.8)
                       Forward Purchase Contracts                    2005           696      $  40.5    $  47.6
                       Forward Sale Contracts                        2005        (1,889)     $(150.1)   $(181.1)
                       Forward Sale Contracts                        2006        (1,130)     $ (82.2)   $ (99.7)

Crude Oil (1)          Futures Purchased                             2005           595      $  39.2    $  39.4
                       Futures Purchased                             2006           190      $  12.2    $  12.7
                       Futures Sold                                  2005          (720)     $ (46.4)   $ (47.7)
                       Futures Sold                                  2006          (120)     $  (8.0)   $  (8.0)
                       Listed Call Options Purchased                 2006           150      $    --    $   0.2
                       Listed Call Options Sold                      2005          (150)     $    --    $  (0.2)
                       Listed Put Options Purchased                  2005           228      $    --    $   0.2
                       Listed Put Options Sold                       2005          (220)     $    --    $  (0.1)
                       OTC Swaps (Pay Fixed / Receive Float) (4)     2005           100      $    --    $   0.8
                       OTC Swaps (Pay Float / Receive Fixed) (4)     2005          (100)     $    --    $  (1.3)
                       Forward Purchase Contracts                    2005         4,370      $ 176.9    $ 179.7
                       Forward Sale Contracts                        2005        (2,903)     $(187.6)   $(187.9)

Natural Gas (2)        Futures Purchased                             2005            18      $   2.6    $   2.6
                       Futures Sold                                  2005           (20)     $  (2.9)   $  (2.9)
                       Listed Call Options Purchased                 2005            45      $    --    $   0.8
                       Listed Call Options Sold                      2005           (45)     $    --    $  (0.4)

Propane (1)            OTC Swaps (Pay Fixed / Receive Float) (4)     2005            10      $    --    $    --
</TABLE>

----------
(1)  Thousands of barrels

(2)  Ten-thousands of mmbtu

(3)  Based on actively quoted prices.

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


                                       29

<PAGE>

                                        COMMODITY DERIVATIVES
                                OPEN POSITIONS AT SEPTEMBER 30, 2004

<TABLE>
<CAPTION>
                                                       MATURITY     NUMBER OF    CONTRACT    MARKET
COMMODITY                        DERIVATIVE              DATE       CONTRACTS      VALUE    VALUE(3)
---------                        ----------            --------   ------------   --------   -------
                                                                  Long/(Short)    Asset/(Liability)
                                                                  ------------   ------------------
                                                                                   ($ in millions)
<S>                    <C>                             <C>        <C>            <C>        <C>
No Lead Gasoline (1)   Listed Put Options Purchased      2004           225      $    --    $    --
                       Listed Put Options Sold           2004          (450)     $    --    $    --
                       Listed Call Options Purchased     2004           200      $    --    $    --
                       Forward Purchase Contracts        2004         3,967      $ 216.3    $ 216.8
                       Forward Sales Contracts           2004        (2,365)     $(131.7)   $(132.2)

Distillates (1)        Futures Purchased                 2004           938      $  45.0    $ 54.6
                       Futures Purchased                 2005         1,159      $  52.7    $ 63.5
                       Futures Sold                      2004          (150)     $  (8.0)   $  (8.7)
                       Forward Purchase Contracts        2004         1,352      $  78.2    $  80.2
                       Forward Sale Contracts            2004        (2,521)     $(133.3)   $(143.5)
                       Forward Sale Contracts            2005        (1,153)     $ (54.9)   $(64.4)

Crude Oil (1)          Listed Put Options Purchased      2004           600      $    --    $   0.3
                       Listed Put Options Sold           2004          (400)     $    --    $    --
                       Forward Purchase Contracts        2004           336      $  13.4    $ 14.1
                       Forward Sale Contracts            2004          (270)     $ (12.5)   $ (13.4)

Natural Gas (2)        Futures Purchased                 2004            24      $   1.5    $   1.7
                       Listed Call Options Purchased     2004           100      $    --    $    --
                       Listed Put Options Sold           2004          (100)     $    --    $    --
</TABLE>

----------
(1)  Thousands of barrels

(2)  Ten-thousands of mmbtu

(3)  Based on actively quoted prices.


                                       30

<PAGE>

          Debt Related Instruments. We have fixed and floating U.S. currency
denominated debt. At September 30, 2005, our primary exposures were to LIBOR and
floating rates on tax exempt bonds. We manage the risk related to interest rates
by using both fixed and floating rates.

          For interest rate swaps, all of which expired in February 2005, 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.

                            INTEREST RATE DERIVATIVES
                      OPEN POSITIONS AT SEPTEMBER 30, 2004

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

          Changes in the fair value of these agreements were recorded in other
income (expense) in the third quarter of 2004 with the offset recorded in the
balance sheet caption other current liabilities at September 30, 2004. There
were no interest rate swap agreements in place at September 30, 2005.


                                       31

<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 SEPTEMBER 30, 2005

<TABLE>
<CAPTION>
                                                                              EXPECTED
                           FIXED        AVERAGE FIXED       VARIABLE      AVERAGE VARIABLE
EXPECTED MATURITIES      RATE DEBT      INTEREST RATE      RATE DEBT        INTEREST RATE
-------------------   ---------------   -------------   ---------------   ----------------
                      ($ in millions)                   ($ in millions)
<S>                   <C>               <C>             <C>               <C>
   2005                     $ 11            9.30%             $ --                --
   2006                      201            8.10%               --                --
   2007                       50            8.94%               12              5.88%
   2008                       25            7.17%               20              5.95%
   2009                       50            7.22%               --                --
Thereafter                   403            6.77%              360              6.58%
                            ----            ----              ----              ----
   Total                    $740            7.36%             $392              6.53%
                            ====            ====              ====              ====
Fair Value                  $743                              $392
                            ====                              ====
</TABLE>

                                DEBT OBLIGATIONS
                              AT SEPTEMBER 30, 2004

<TABLE>
<CAPTION>
                                                                              EXPECTED
                           FIXED        AVERAGE FIXED       VARIABLE      AVERAGE VARIABLE
EXPECTED MATURITIES      RATE DEBT      INTEREST RATE      RATE DEBT        INTEREST RATE
-------------------   ---------------   -------------   ---------------   ----------------
                      ($ in millions)                   ($ in millions)
<S>                   <C>               <C>             <C>               <C>
   2004                    $   11            9.30%            $ --                --
   2005                        11            9.30%              --                --
   2006                       201            8.10%              --                --
   2007                        50            8.94%              12              5.58%
   2008                        25            7.17%              20              5.86%
Thereafter                    745           10.40%             215              7.08%
                           ------           -----             ----              ----
   Total                   $1,043            9.79%            $247              6.91%
                           ======           =====             ====              ====
Fair Value                 $1,229                             $247
                           ======                             ====
</TABLE>


                                       32

<PAGE>

ITEM 4. CONTROLS AND PROCEDURES

          During the third quarter of 2005, the Company's management, including
the principal executive officer and principal financial officer, evaluated the
Company's disclosure controls and procedures related to the recording,
processing, summarization and reporting of information in the Company's periodic
reports that it files with the Securities and Exchange Commission ("SEC"). These
disclosure controls and procedures have been designed to ensure that (a)
material information relating to the Company, including its consolidated
subsidiaries, is made known to the Company's management, including these
officers, by other employees of the Company and its subsidiaries as appropriate
to allow timely decisions regarding required disclosure, and (b) this
information is recorded, processed, summarized, evaluated and reported, as
applicable, within the time periods specified in the SEC's rules and forms. Due
to the inherent limitations of control systems, not all misstatements may be
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. Also, the Company does not control or manage certain of
its unconsolidated entities and thus its access and ability to apply its
disclosure controls and procedures to entities that it does not control or
manage are more limited than is the case for the subsidiaries it controls and
manages.

          Accordingly, as of September 30, 2005, these officers (principal
executive officer and principal financial officer) concluded that the Company's
disclosure controls and procedures were effective to accomplish their
objectives.

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


                                       33

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

          The required information is incorporated by reference into Part II of
this Report from the information under the subheadings "Litigation and Injury
Claims" and "Environmental Compliance and Remediation" in Note 8 of the Notes to
the Condensed Consolidated Financial Statements included in Part I of this
Report.

ITEM 6. EXHIBITS

     (a)  Exhibits

          Certifications Pursuant to Rule 13a-14(a) and 15d-14(a) of the
          Securities Exchange Act of 1934 as to the Quarterly Report on Form
          10-Q for the quarterly period ended September 30, 2005 filed by the
          following officers:

          31.1 Filed by Felix Rodriguez, President and Chief Executive Officer.

          31.2 Filed by Larry E. Krieg, Vice President Finance and Chief
               Financial Officer.

          Certifications Pursuant to Section 1350 of Chapter 63 of Title 18
          United States Code as to the Quarterly Report on Form 10-Q for the
          quarterly period ended September 30, 2005 filed by the following
          officers:

          32.1 Filed by Felix Rodriguez, President and Chief Executive Officer.

          32.2 Filed by Larry E. Krieg, Vice President Finance and Chief
               Financial Officer.


                                       34

<PAGE>

                                   SIGNATURES

          Pursuant to the requirements 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


Date: November 8, 2005                  /s/ Paul Largess
                                        ----------------------------------------
                                        Paul Largess
                                        Controller, Chief Accounting Officer


                                       35

<PAGE>

                                Index to Exhibits

Certifications Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities
Exchange Act of 1934 as to the Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2005 filed by the following officers:

31.1 Filed by Felix Rodriguez, President and Chief Executive Officer.

31.2 Filed by Larry E. Krieg, Vice President Finance and Chief Financial
     Officer.

Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States
Code as to the Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2005 filed by the following officers:

32.1 Filed by Felix Rodriguez, President and Chief Executive Officer.

32.2 Filed by Larry E. Krieg, Vice President Finance and Chief Financial
     Officer.