<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, 2003

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
           For the transition period from ____________ to ____________

                         COMMISSION FILE NUMBER 1-14380

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

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

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

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

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

         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 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, 2003)

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

<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, 2003

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, 2003 and
              December 31, 2002......................................................................................    2

              Condensed Consolidated Statements of Income and Comprehensive Income -
              Three and Nine-Month Periods Ended September 30, 2003 and 2002.........................................    3

              Condensed Consolidated Statement of Shareholder's Equity - Nine-Month Period
              Ended September 30, 2003...............................................................................    4

              Condensed Consolidated Statements of Cash Flows - Nine-Month Periods Ended
              September 30, 2003 and 2002............................................................................    5

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

   Item 2.    Management's Discussion and Analysis of Financial Condition and
              Results of Operations..................................................................................   17

   Item 3.    Quantitative and Qualitative Disclosures About Market Risk.............................................   24

   Item 4.    Controls and Procedures................................................................................   28

PART II.       OTHER INFORMATION

   Item 1.    Legal Proceedings......................................................................................   29

   Item 6.    Exhibits and Reports on Form 8-K.......................................................................   29

SIGNATURES...........................................................................................................   30
</TABLE>

<PAGE>

                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

         This Report contains "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Specifically, all statements under
the 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", "our Company", "we", "us", "our", or similar references)
are forward looking statements. In addition, when used in this document, the
words "anticipate," "estimate," "project," "believe" and similar expressions are
used to identify forward looking statements.

         Those forward looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from the forward looking
statements. Those risks and uncertainties include changes in the availability
and cost of crude oil, feedstocks, blending components and refined products;
changes in prices or demand for our products as a result of competitive actions
or economic factors; changes in environmental and other regulatory requirements,
which may affect 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. In addition, we purchase a
significant portion of our crude oil requirements from Petroleos de Venezuela,
S.A. (as defined herein), our ultimate parent corporation, under long-term
supply agreements, and could be adversely affected by social, economic and
political conditions in Venezuela. (See Exhibit 99.4 to the Form 8-K filed by
CITGO on February 25, 2003 for additional information concerning risk factors).

         Readers are cautioned not to place undue reliance on these forward
looking statements, which speak only as of the date of this Report. We undertake
no obligation 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,
                                                                                         2003                DECEMBER 31,
                                                                                     (UNAUDITED)                 2002
                                                                                    -------------------------------------
<S>                                                                                 <C>                      <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                         $    131,089             $     33,025
  Accounts receivable, net                                                             1,034,931                  905,178
  Due from affiliates                                                                     66,232                   93,615
  Inventories                                                                            962,106                1,090,915
  Prepaid expenses and other                                                              63,837                   64,767
                                                                                    ------------             ------------
            Total current assets                                                       2,258,195                2,187,500

PROPERTY, PLANT AND EQUIPMENT - Net                                                    3,874,544                3,750,166

RESTRICTED CASH                                                                           24,648                   23,486

INVESTMENTS IN AFFILIATES                                                                635,490                  716,469

OTHER ASSETS                                                                             335,231                  309,291
                                                                                    ------------             ------------

                                                                                    $  7,128,108             $  6,986,912
                                                                                    ============             ============

LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                  $    670,634             $    830,769
  Payables to affiliates                                                                 489,294                  417,634
  Taxes other than income                                                                233,809                  229,072
  Other                                                                                  252,658                  283,428
  Income taxes payable                                                                   128,712                   24,770
  Current portion of long-term debt                                                       31,364                  190,664
  Current portion of capital lease obligation                                             12,803                   22,713
                                                                                    ------------             ------------
            Total current liabilities                                                  1,819,274                1,999,050

LONG-TERM DEBT                                                                         1,420,699                1,109,861

CAPITAL LEASE OBLIGATION                                                                  23,116                   24,251

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                              302,268                  247,762

OTHER NONCURRENT LIABILITIES                                                             287,727                  211,950

DEFERRED INCOME TAXES                                                                    863,202                  834,880

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                                                                      776,503                  925,114
  Accumulated other comprehensive loss                                                   (24,380)                 (25,655)
                                                                                    ------------             ------------
            Total shareholder's equity                                                 2,411,822                2,559,158
                                                                                    ------------             ------------

                                                                                    $  7,128,108             $  6,986,912
                                                                                    ============             ============
</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)

<TABLE>
<CAPTION>
                                                                                     THREE MONTHS             NINE MONTHS
                                                                                 ENDED SEPTEMBER 30,      ENDED SEPTEMBER 30,
                                                                                 -------------------      -------------------
                                                                                  2003          2002       2003         2002
                                                                                  ----          ----       ----         ----
<S>                                                                           <C>          <C>          <C>          <C>
REVENUES:
  Net sales                                                                   $6,430,568   $5,342,794   $18,595,453  $13,698,780
  Sales to affiliates                                                             71,763       67,777       303,627      176,654
                                                                              ----------   ----------   -----------  -----------
                                                                               6,502,331    5,410,571    18,899,080   13,875,434
  Equity in earnings of affiliates                                                35,398       28,132        79,973       77,405
  Insurance recoveries                                                             1,863       46,326       146,165      256,867
  Other income (expense) - net                                                     1,208      (11,492)       16,899      (26,002)
                                                                              ----------   ----------   -----------  -----------
        Total revenues                                                         6,540,800    5,473,537    19,142,117   14,183,704
                                                                              ----------   ----------   -----------  -----------

COST OF SALES AND EXPENSES:
  Cost of sales and operating expenses
     (including purchases of $2,450,149, $2,103,726,
     $6,680,122 and $4,989,436 from affiliates)                                6,267,004    5,298,606    18,284,027   13,694,391
  Selling, general and administrative expenses                                    80,788       67,192       218,115      218,518
  Interest expense, excluding capital lease                                       31,264       17,188        87,124       50,358
  Capital lease interest charge                                                    1,011        1,615         3,806        5,402
                                                                              ----------   ----------   -----------  -----------
        Total cost of sales and expenses                                       6,380,067    5,384,601    18,593,072   13,968,669
                                                                              ----------   ----------   -----------  -----------

INCOME BEFORE INCOME TAXES                                                       160,733       88,936       549,045      215,035

INCOME TAXES                                                                      57,864       32,016       197,656       77,412
                                                                              ----------   ----------   -----------  -----------

NET INCOME                                                                       102,869       56,920       351,389      137,623
                                                                              ----------   ----------   -----------  -----------

OTHER COMPREHENSIVE (LOSS) INCOME:
   Cash flow hedges:

      Reclassification adjustment for derivative losses included in net
         income, net of related income taxes of $39, $43, $127, and $130              70           77           225          232

      Foreign currency translation (loss) gain, net of related income taxes
         of $(83), $(86), $591 and $(86)                                            (147)        (154)        1,050         (154)
                                                                              ----------   ----------   -----------  -----------

OTHER COMPREHENSIVE (LOSS) INCOME                                                    (77)         (77)        1,275           78
                                                                              ----------   ----------   -----------  -----------

COMPREHENSIVE INCOME                                                          $  102,792   $   56,843   $   352,664  $   137,701
                                                                              ==========   ==========   ===========  ===========
</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
                                                                                      OTHER
                                     COMMON STOCK       ADDITIONAL    RETAINED    COMPREHENSIVE
                                SHARES        AMOUNT     CAPITAL      EARNINGS    (LOSS) INCOME    TOTAL
                                ------        ------     -------      --------    -------------    -----
<S>                           <C>          <C>          <C>          <C>           <C>           <C>
BALANCE, DECEMBER 31, 2002             1   $        1   $1,659,698   $  925,114    $  (25,655)   $2,559,158

Net income                             -            -            -      351,389             -       351,389

Other comprehensive income             -            -            -            -         1,275         1,275

Dividends paid                         -            -            -     (500,000)            -      (500,000)

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

BALANCE, SEPTEMBER 30, 2003            1   $        1   $1,659,698   $  776,503    $  (24,380)   $2,411,822
                              ==========   ==========   ==========   ==========    ==========    ==========
</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,
                                                                 --------------------------
                                                                    2003            2002
                                                                    ----            ----
<S>                                                              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                     $  351,389      $  137,623
  Depreciation and amortization                                     245,397         220,983
  Other adjustments to reconcile net income to
    net cash provided by operating activities                       180,203          55,083
  Changes in operating assets and liabilities                        69,373          68,713
                                                                 ----------      ----------
           Net cash provided by operating activities                846,362         482,402
                                                                 ----------      ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                             (315,105)       (478,053)
  Proceeds from sales of property, plant and equipment                3,845             718
  Increase in restricted cash                                        (1,162)        (33,507)
  Investments in LYONDELL-CITGO Refining LP                         (17,083)        (28,700)
  Investments in and advances to other affiliates                    (2,537)        (19,237)
                                                                 ----------      ----------
            Net cash used in investing activities                  (332,042)       (558,779)
                                                                 ----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from short-term bank loans                                 -         119,000
  Net repayments of revolving bank loans                           (279,300)       (154,000)
  (Payments on) proceeds from loans from affiliates                 (39,000)         37,000
  Proceeds from senior notes due 2011                               546,590               -
  Proceeds from senior secured term loan                            200,000               -
  (Payments on) proceeds from tax-exempt bonds                     (126,050)         62,501
  Payments on taxable bonds                                         (90,000)        (25,000)
  Payments of capital lease obligations                             (11,860)         (9,901)
  Payments on master shelf agreement senior notes                   (50,000)        (25,000)
  Repurchase of senior notes due 2006                               (47,500)              -
  Repayments of other debt                                                -          (8,312)
  Dividend paid                                                    (500,000)              -
  Debt issuance costs                                               (19,136)              -
                                                                 ----------      ----------
            Net cash used in financing activities                  (416,256)         (3,712)
                                                                 ----------      ----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     98,064         (80,089)

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

CASH AND CASH EQUIVALENTS, END OF PERIOD                         $  131,089      $   24,273
                                                                 ==========      ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid (received) during the period for:
        Interest, net of amounts capitalized                     $   66,578      $   48,077
                                                                 ==========      ==========
        Income taxes (net of refunds of $45,000 and $51,381)     $   45,305      $  (45,293)
                                                                 ==========      ==========
</TABLE>

See notes to condensed consolidated financial statements.

                                        5

<PAGE>

CITGO PETROLEUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002

1.   BASIS OF PRESENTATION

     The financial information for CITGO Petroleum Corporation ("CITGO" or "the
     Company") subsequent to December 31, 2002 and with respect to the interim
     three-month and nine-month periods ended September 30, 2003 and 2002 is
     unaudited. In management's opinion, such interim information contains all
     adjustments, consisting only of normal recurring adjustments, necessary for
     a fair presentation of the results of such periods. The results of
     operations for the nine-month periods ended September 30, 2003 and 2002 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, 2002 on Form 10-K/A, dated September 8, 2003, for additional
     information.

2.   NEW ACCOUNTING PRONOUNCEMENTS

     In January 2003, the 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. 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 46 applies immediately to variable interest entities
     created after January 31, 2003, and to variable interest entities in which
     an enterprise obtains an interest after that date. It applies at December
     31, 2004 to variable interest entities in which a nonpublic enterprise, as
     defined, holds a variable interest that it acquired before February 1,
     2003. FIN 46 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. CITGO, which meets the definition of a nonpublic enterprise in
     FIN 46, expects that the application of FIN 46 at December 31, 2004 to
     variable interest entities in which it acquired an interest before February
     1, 2003 will not have a material impact on its financial position or
     results of operations.

     CITGO holds a 49.5% partnership interest in Nelson Industrial Steam Company
     ("NISCO"), a variable interest entity. NISCO operates a qualified
     cogeneration facility in Louisiana. NISCO had total assets of approximately
     $179 million at December 31, 2002 and revenue of approximately $72 million
     for the year ended December 31, 2002. CITGO, along with certain other
     partners, indirectly purchases electricity produced by NISCO. In addition
     to its partnership interest, CITGO provides a limited guarantee on behalf
     of NISCO. See Note 8 for CITGO's estimate of its maximum exposure to loss
     as a result of its involvement with NISCO.

     On January 1, 2003 the Company adopted Statement of Financial Accounting
     Standards No. 143, "Accounting for Asset Retirement Obligations" (SFAS No.
     143) which addresses financial accounting and reporting for obligations
     associated with the retirement of tangible long-lived assets and the
     associated asset retirement costs. It applies to legal obligations
     associated with the retirement of long-lived assets that result from the
     acquisition, construction, development and/or the normal operation of a
     long-lived asset, except for certain obligations of lessees. The Company
     has identified certain asset retirement obligations that are within the
     scope of the standard, including obligations imposed by certain state laws
     pertaining to closure and/or removal of storage tanks, contractual removal
     obligations included in certain easement and right-of-way agreements
     associated with the Company's pipeline operations, and contractual removal
     obligations relating to a refinery processing unit located within a
     third-party entity's facility. The Company cannot

                                        6

<PAGE>

     currently determine a reasonable estimate of the fair value of its asset
     retirement obligations due to the fact that the related assets have
     indeterminate useful lives which preclude development of assumptions about
     the potential timing of settlement dates. Such obligations will be
     recognized in the period in which sufficient information exists to estimate
     a range of potential settlement dates and estimated amounts of costs to be
     incurred. Accordingly, the adoption of SFAS No. 143 did not impact the
     Company's financial position or results of operations.

     In April 2003, the FASB issued Statement of Financial Accounting Standards
     No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
     Activities" ("SFAS No. 149"). The changes in SFAS No. 149 improve financial
     reporting by requiring that contracts with comparable characteristics be
     accounted for similarly. Those changes will result in more consistent
     reporting of contracts as either derivatives or hybrid instruments. SFAS
     No. 149 is effective for contracts entered into or modified after June 30,
     2003, except for certain issues from SFAS No. 133 which have been effective
     for fiscal quarters that began prior to June 15, 2003 and for hedging
     relationships designated after June 30, 2003. In addition, all provisions
     of SFAS No. 149 should be applied prospectively. The changes in principle
     effective with the adoption of SFAS No. 149 did not have a material effect
     on the Company's statements of financial position and results of operation.

3.   ACCOUNTS RECEIVABLE

     On February 28, 2003, the Company established a new accounts receivable
     sales facility. This facility allows for the non-recourse sale of an
     interest in trade accounts receivable meeting specified requirements to
     independent third parties. A maximum of $200 million in accounts receivable
     may be sold at any one time. At September 30, 2003, no accounts receivable
     sold through this facility remained outstanding.

4.   INVENTORIES

     Inventories, primarily at LIFO, consist of the following:

<TABLE>
<CAPTION>
                           SEPTEMBER 30,
                              2003        DECEMBER 31,
                           (UNAUDITED)       2002
                           ------------   ------------
                                (000S OMITTED)
<S>                        <C>            <C>
Refined products           $  582,799     $  781,495
Crude oil                     291,491        221,422
Materials and supplies         87,816         87,998
                           ----------     ----------

                           $  962,106     $1,090,915
                           ==========     ==========
</TABLE>

5.   RESTRICTED CASH

     Restricted cash of approximately $25 million at September 30, 2003 is
     related to tax-exempt industrial revenue bonds and a product sales and
     option agreement.

     CITGO issued $30 million of tax-exempt environmental facilities revenue
     bonds in June 2002 and $39 million in May 2003. The proceeds from these
     bonds will be used for spending on qualified projects at the Lemont and
     Corpus Christi refineries. Restricted cash of approximately $14 million at
     September 30, 2003 represents highly liquid investments held in trust
     accounts in accordance with these bond agreements. Funds

                                        7

<PAGE>

     may be released solely to finance the qualified capital expenditures as
     defined in the related bond agreements.

     Restricted cash of approximately $11 million at September 30, 2003 relates
     to a product sales and option agreement and represents highly liquid
     investments held in accordance with a contract related to that product
     sales and option agreement.

6.   LONG-TERM DEBT AND FINANCING ARRANGEMENTS

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30,
                                                                      2003         DECEMBER 31,
                                                                   (UNAUDITED)         2002
                                                                  -------------    ------------
                                                                          (000S OMITTED)
<S>                                                               <C>              <C>
Revolving bank loans                                               $        -       $  279,300

Senior Secured Term Loan, due 2006 with variable interest rate        200,000                -

Senior Notes, $200 million face amount, due 2006 with
   interest rate of 7-7/8%                                            149,941          199,898

Senior Notes, $550 million face amount, due 2011 with
    interest rate of 11-3/8%                                          546,841                -

Private Placement Senior Notes, due 2003 to 2006 with
   interest rate of 9.30%                                              45,455           45,455

Master Shelf Agreement Senior Notes, due 2003 to
   2009 with interest rates from 7.17% to 8.94%                       185,000          235,000

Tax Exempt Bonds, due 2004 to 2033 with variable
   and fixed interest rates                                           299,826          425,872

Taxable Bonds, due 2026 to 2028 with variable interest rates           25,000          115,000
                                                                   ---------        ----------
                                                                    1,452,063        1,300,525
Current portion of long-term debt                                     (31,364)        (190,664)
                                                                   ---------        ----------

                                                                   $1,420,699       $1,109,861
                                                                   ==========       ==========
</TABLE>

     CITGO's revolving bank loan agreements with various banks consist of (i) a
     $260 million, three-year, revolving bank facility, maturing in December
     2005; and (ii) a $260 million, 364-day, revolving bank facility, maturing
     in December 2003. CITGO does not intend to replace the $260 million,
     364-day, revolving bank facility when it matures.

     On May 15, 2003, CITGO issued $39 million of tax-exempt revenue bonds due
     2008. The proceeds of those bonds will be used for spending on qualified
     projects at the Corpus Christi refinery.

     On February 27, 2003, CITGO closed on a three-year $200 million, senior
     secured term loan with a variable interest rate. The loan is secured by a
     pledge of CITGO's 15.8 percent equity interest in Colonial Pipeline and 6.8
     percent equity interest in Explorer Pipeline.

                                        8

<PAGE>

     On February 27, 2003 CITGO issued $550 million aggregate principal amount
     of 11-3/8% unsecured senior notes due February 1, 2011. In connection with
     this debt issuance, CITGO redeemed $50 million principal amount of its
     7-7/8% senior notes due 2006.

     The taxable and tax-exempt bonds are supported by letters of credit. CITGO
     repurchased $90 million of taxable bonds and $165 million of tax-exempt
     bonds due to the non-renewal of these letters of credit in the nine-month
     period ending September 30, 2003. We will seek to reissue these bonds, with
     replacement letters of credit in support or, alternatively, we will seek to
     replace these bonds with new bonds that will not require letter of credit
     support.

     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. CITGO is in
     compliance with its covenants under its debt financing arrangements at
     September 30, 2003.

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 Petroleos de
     Venezuela, S.A. ("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.

     From February 2001 through March 2003 PDVSA, pursuant to its contractual
     rights, declared force majeure and reduced deliveries of crude oil to
     LYONDELL-CITGO. This action required LYONDELL-CITGO to obtain replacement
     crude oil supplies, which resulted in lower operating margins. Most
     recently, LYONDELL-CITGO received notice of force majeure from PDVSA in
     December 2002. Crude oil was purchased in the spot market to replace the
     volume not delivered under the contract during December 2002. By February
     2003, crude oil deliveries had returned to contract volumes and the force
     majeure was lifted March 6, 2003.

     CITGO has a note receivable from LYONDELL-CITGO of approximately $35
     million at September 30, 2003 and December 31, 2002. The note bears
     interest at 1.95% at September 30, 2003. Principal and interest are due in
     December 2004. Accordingly, this note and the related accrued interest is
     included in the balance sheet caption other assets 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,
                                                                    2003           2002
                                                               --------------   ------------
                                                                 (Unaudited)
<S>                                                            <C>              <C>
Carrying value of investment                                     $  441,010      $  518,279
Notes receivable                                                     35,278          35,278
Participation interest                                                   41%             41%

Summary of LYONDELL-CITGO's financial position:
   Current assets                                                $  246,000      $  357,000
   Non current assets                                             1,328,000       1,400,000
   Current liabilities:
        Distributions payable to partners                             8,000         181,000
        Current portion of long-term debt                           450,000               -
        Other                                                       313,000         333,000
   Noncurrent liabilities (including long-term debt of $0 at
       September 30, 2003 and $450,000 at December 31, 2002)        380,000         840,000
   Partners' capital                                                423,000         403,000
</TABLE>

<TABLE>
<CAPTION>
                                                               Nine Months Ended September 30,
                                                               -------------------------------
                                                                   2003              2002
                                                               ------------      -------------
                                                                         (Unaudited)
<S>                                                             <C>               <C>
Equity in net income                                             $   56,552      $   56,127
Cash distribution received                                          150,904          80,137

Summary of LYONDELL-CITGO's operating results:
   Revenue                                                       $3,117,794      $2,435,792
   Gross profit                                                     224,145         216,499
   Net income                                                       155,360         153,969
</TABLE>

     On December 11, 2002, LYONDELL-CITGO completed a refinancing of its working
     capital revolver and its term bank loan. The new term loan and working
     capital revolver mature in June 2004 and are shown above in current
     liabilities.

                                       10

<PAGE>

8.   COMMITMENTS AND CONTINGENCIES

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

     In September 2002, a Texas court ordered the Company 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 the Company's Corpus
     Christi, Texas refinery. CITGO has appealed the ruling to the Texas Court
     of Appeals.

     CITGO is a defendant in a number of state lawsuits alleging contamination
     of private and public water supplies by methyl tertiary butyl ether
     ("MTBE"), a component of gasoline. In general, the plaintiffs claim that
     MTBE renders the water not potable. In addition to compensatory and
     punitive damages, plaintiffs seek testing and monitoring, remediation
     and/or restoration of groundwater and drinking water sources, and other
     equitable relief.

     Pending Litigation

     - New York: Four actions are currently pending against the Company, and
     others, in New York state courts. Two have been filed by individual
     property owners, one has been filed by a public water supplier, and one is
     a purported class action on behalf of private well owners in two New York
     communities. The Company has moved to dismiss each of the cases.

     - Illinois: The Company is defending two actions pending in Illinois state
     court (Madison County). One is a purported class action on behalf of
     Illinois private well owners. The other case was filed by the Village of
     East Alton alleging contamination of its public water supplies. Both cases
     are scheduled for trial in the fall of 2004.

     New developments

     The Company has learned that approximately 50 new MTBE lawsuits have been
     filed in state courts in Illinois, New York, New Hampshire, Connecticut,
     Massachusetts, Florida, Iowa, Indiana and California since September 30,
     2003. To date, CITGO has been served in approximately ten of these cases,
     in Connecticut, New Hampshire, Illinois, Indiana and New York. The
     Connecticut, Indiana and New York lawsuits were filed on behalf of public
     water suppliers and allege MTBE contamination of public drinking water
     sources. The Illinois lawsuit is a putative nationwide class action on
     behalf of all public water suppliers and alleges MTBE contamination of
     public drinking water sources. The New Hampshire case was filed by the New
     Hampshire State Attorney General to protect the state's water resources.
     The lawsuit seeks restoration and remediation, monitoring and testing of
     all public and private water supplies in the state, as well as compensatory
     and punitive damages, and fines.

     In August 1999, the U.S. Department of Commerce rejected a petition filed
     by a group of independent oil producers to apply antidumping measures and
     countervailing duties against imports of crude oil from Venezuela, Iraq,
     Mexico and Saudi Arabia. The petitioners appealed this decision before the
     U.S. Court of International Trade based in New York. On September 19, 2000,
     the Court of International Trade remanded the case to the Department of
     Commerce with instructions to reconsider its August 1999 decision. The
     Department of Commerce was required to make a revised decision as to
     whether or not to initiate an investigation within 60 days. The Department
     of Commerce appealed to the U.S. Court of Appeals for the Federal Circuit,
     which dismissed the appeal as premature on July 31, 2001. The Department of
     Commerce issued its revised decision, which again rejected the petition, in
     August 2001. The revised decision was affirmed by the Court of
     International Trade on December 17, 2002. In February 2003, the independent
     oil producers appealed the decision of the Court of International Trade.

                                       11

<PAGE>

     CITGO has been named as a defendant in approximately 125 asbestos lawsuits
     pending in state and federal courts, primarily in Louisiana, Texas and
     Illinois. 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. In some of these cases, CITGO is indemnified by or has the right to
     seek indemnification for losses and expenses that CITGO may incur from
     prior owners of the refineries or employers of the claimants. In other
     cases, CITGO's involvement arises not from having been sued directly but
     because prior owners of the CITGO refineries have asserted indemnification
     rights against CITGO. The Company does not believe that the resolution of
     these cases will have a material adverse effect on its financial condition
     or results of operations.

     At September 30, 2003, CITGO's balance sheet included an accrual for
     lawsuits and claims of $25 million compared with $23 million at December
     31, 2002. The increase in the accrual is due primarily to a revision in the
     estimated cost to CITGO in resolving various lawsuits and claims. In
     addition, CITGO estimates that an additional loss of $3 million is
     reasonably possible in connection with such lawsuits and claims.

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

     The U.S. refining industry is required to comply with increasingly
     stringent product specifications under the 1990 Clean Air Act Amendments
     for reformulated gasoline and low sulphur gasoline and diesel fuel that
     have necessitated additional capital and operating expenditures, and
     altered significantly the U.S. refining industry and the return realized on
     refinery investments. Also, regulatory interpretations by the U.S. EPA
     regarding the term "modifications" to refinery equipment under the NSR
     provisions of the CAA have created uncertainty about the extent to which
     additional capital and operating expenditures will be required and
     administrative penalties imposed.

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

     CITGO's accounting policy establishes environmental reserves as probable
     site restoration and remediation obligations become reasonably capable of
     estimation. CITGO believes the amounts provided in its consolidated
     financial statements, as prescribed by generally accepted accounting
     principles, are adequate in light of probable and estimable liabilities and
     obligations. However, there can be no assurance that the actual amounts
     required to discharge alleged liabilities and obligations and to comply
     with applicable laws and regulations will not exceed amounts provided for
     or will not have a material adverse affect on its consolidated results of
     operations, financial condition and cash flows.

                                       12

<PAGE>

     In 1992, the Company reached an agreement with the Louisiana Department of
     Environmental Quality ("LDEQ") to cease usage of certain surface
     impoundments at its Lake Charles refinery by 1994. A mutually acceptable
     closure plan was filed with the LDEQ in 1993. The Company 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. The remediation commenced in December 1993. In 1997, CITGO
     presented a proposal to the LDEQ revising the 1993 closure plan. In 1998
     and 2000, CITGO submitted further revisions as requested by the LDEQ. The
     LDEQ issued an administrative order in June 2002 that addressed the
     requirements and schedule for proceeding to develop and implement the
     corrective action or closure plan for these surface impoundments and
     related waste units. Compliance with the terms of the administrative order
     has begun. CITGO has incurred remediation costs to date related to these
     surface impoundments of approximately $45 million. Based on currently
     available information and proposed remedial approach, CITGO currently
     anticipates closure and post-closure costs related to these surface
     impoundments and related solid waste management units to range from $36
     million to $41 million.

     The Texas Commission on Environmental Quality ("TCEQ") and CITGO have
     reached agreement in principle on the general terms of a settlement
     agreement that is intended to resolve all outstanding enforcement issues
     between the Company and the TCEQ related to the Corpus Christi Refinery.
     This settlement includes all issues which have been the subject of prior,
     pending or threatened enforcement proceedings by the TCEQ. Although the
     complete terms of the settlement have not yet been finalized in an Agreed
     Order between the TCEQ and CITGO, CITGO estimates that the capital
     expenditures and penalties that will be required under the settlement will
     range up to an aggregate of $21 million, to be incurred over a period of
     years.

     In June 1999, CITGO and numerous other industrial companies received notice
     from the U.S. EPA that the U.S. EPA believed that CITGO and these other
     companies have contributed to contamination in the Calcasieu Estuary, in
     the proximity of Lake Charles, Calcasieu Parish, Louisiana and are
     potentially responsible parties ("PRPs") under the 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. The
     U.S. EPA released the draft of the remedial investigation phase of the
     report in May 2003. CITGO and other PRPs may be potentially responsible for
     the costs of the RI/FS, subsequent remedial actions and natural resource
     damages. Although CITGO is still reviewing the recent remedial
     investigation phase of the report and its implications, CITGO submitted
     initial comments on the report in July 2003. Also the EPA and the LDEQ
     issued a memorandum of understanding in June 2003 assigning the primary
     areas of responsibility between the agencies related to the Calcasieu
     Estuary. While the Company disagrees with many of the U.S. EPA's earlier
     allegations and conclusions, the Company is in discussions with the LDEQ on
     issues relative to its operations adjacent to the Bayou D'Inde tributary
     section of the Calcasieu Estuary and separately on issues relative to its
     refinery operations on other sections of the Estuary. If necessary, the
     Company still intends to contest this matter.

     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 and electric utilities modified air emission
     sources without obtaining permits or installing new control equipment under
     the NSR provisions of the CAA. The NOVs followed inspections and formal
     information requests regarding the Company's Lake Charles, Louisiana,
     Corpus Christi, Texas and Lemont, Illinois refineries. Since mid-2002,
     CITGO has been engaged in global settlement negotiations with the United
     States. The settlement negotiations have focused on different levels of air
     pollutant emission reductions and the merits of various types of control
     equipment to achieve those reductions. No settlement agreement, or
     agreement in principal, has been reached. Based primarily on the costs of
     control equipment reported by the United States and other petroleum
     companies and the types and number of emission control devices that have
     been agreed to in previous petroleum companies' NSR settlements with the
     United States, CITGO estimates that the capital costs of a settlement with
     the United States could be approximately $200 million. Any such capital
     costs would be incurred

                                       13

<PAGE>

     over a period of years, anticipated to be from 2003 to 2008. Also, this
     cost estimate range, while based on current information and judgment, is
     dependent on a number of subjective factors, including the types of control
     devices installed, the emission limitations set for the units, the year the
     technology may be installed, and possible future operational changes. The
     Company also may be subject to possible penalties. If settlement
     discussions fail, CITGO is prepared to contest the NOVs. If CITGO is found
     to have violated the provisions cited in the NOVs, it estimates the capital
     expenditures and penalties that might result could range up to $290
     million, to be incurred over a period of years.

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

     In June 2002, a Consolidated Compliance Order and Notice of Potential
     Penalty was issued by the LDEQ alleging various violations of the Louisiana
     air quality regulations at CITGO's Lake Charles, Louisiana refinery during
     2001. The majority of the alleged violations related to the leak detection
     and repair program. Current settlement discussions with the LDEQ are
     reasonably expected to include a penalty in excess of $100,000.

     At September 30, 2003, CITGO's balance sheet included an environmental
     accrual of $63 million compared with $68 million at December 31, 2002. The
     decline in the accrual is due primarily to a revision of the Company's
     estimated share of costs related to a site which is still under
     investigation by the U.S. EPA. In addition, CITGO estimates that an
     additional loss of $15 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 of CITGO and its
     subsidiaries' facilities and operations. Those audits have the potential to
     reveal matters that those authorities believe represent non-compliance in
     one or more respects with regulatory requirements and for which those
     authorities may seek corrective actions and/or penalties in an
     administrative or judicial proceeding. Based upon current information,
     CITGO is not aware that any such audits or their findings have resulted in
     the filing of such a proceeding or is the subject of a threatened filing
     with respect to such a proceeding, nor does CITGO believe that any such
     audit or their findings 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
     the Company's various sites including, but not limited to, its operating
     refinery complexes, former refinery sites, service stations and crude oil
     and petroleum product storage terminals. Based on currently available
     information, CITGO cannot determine the amount of any such future
     expenditures.

     DERIVATIVE COMMODITY AND FINANCIAL INSTRUMENTS - As of September 30, 2003
     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, 2003,
     the balance sheet captions prepaid expenses and other current assets and
     other current liabilities include $21 million and $13 million,
     respectively, related to the fair values of open commodity derivatives.

     CITGO has also entered into various interest rate swaps to manage the
     Company's risk related to interest rate changes on its debt. The fair value
     of the interest rate swap agreements in place at September 30, 2003, based
     on the estimated amount that the Company would receive or pay to terminate
     the agreements as of that date and taking into account current interest
     rates, was a loss of $3 million, the offset of which is recorded in the
     balance sheet caption other current liabilities. In connection with the
     determination of fair

                                       14

<PAGE>

     market value, the Company considered the creditworthiness of the
     counterparties, but no adjustment was determined to be necessary as a
     result.

     GUARANTEES - As of September 30, 2003, 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 affiliate, bank debt of an equity
     investment, bank debt of customers, customer debt related to the
     acquisition of marketing equipment and financing debt incurred by an equity
     investment as shown in the following table:

<TABLE>
<CAPTION>
                                                                    EXPIRATION
                                                                       DATE
                                               (000s omitted)       ------------
<S>                                            <C>                  <C>
Letters of credit                                 $ 32,981          2003 - 2004

Bank debt
       Affiliate                                    10,000          2003 - 2004
       Equity investment                             5,500             2004
       Customers                                     2,393          2005 - 2009

Financing debt
       Customer equipment acquisition                1,306          2003 - 2007
       Equity investment - NISCO                    11,894             2008
                                                  --------

       Total                                      $ 64,074
                                                  ========
</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. ("PDV Holding"), the direct parent of PDV
     America. In the event of debtor default on the affiliate's and 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, except in one case, in which the
     guaranteed amount is $170 thousand, CITGO has no recourse. In the event of
     debtor default on financing debt incurred by customers, CITGO would receive
     an interest in the equipment being financed after making the guaranteed
     debt payment. In the event of debtor default on financing debt incurred by
     an equity investee, CITGO has no recourse.

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

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

                                       15

<PAGE>

9.   RELATED PARTY TRANSACTIONS

     CITGO purchases approximately one-half of the crude oil processed in its
     refineries from subsidiaries of PDVSA under long-term supply agreements.
     These supply agreements extend through the year 2006 for the Lake Charles
     refinery, 2010 for the Paulsboro refinery, 2012 for the Corpus Christi
     refinery and 2013 for the Savannah refinery.

     These crude supply agreements contain force majeure provisions that excuse
     the performance by either party of its obligations under the agreement
     under specified circumstances. PDVSA invoked the force majeure provisions
     and reduced the volume of crude oil supplied under the contracts in April
     1998, from February 1999 through October 2000 and from February 2001
     through March 2003. As a result of these declarations of force majeure, the
     Company was required to obtain crude oil from alternative sources, which
     resulted in increased volatility in its operating margins. The Company was
     notified that effective March 6, 2003, PDVSA ended its most recent
     declaration of force majeure under the crude oil supply agreements.

     In August 2002, 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 .875% payable quarterly. Amounts
     outstanding on these notes at December 31, 2002 were $5 million, $30
     million and $4 million from PDV Texas, PDV America and PDV Holding,
     respectively. At September 30, 2003, there was no outstanding balance on
     these notes.

10.  INSURANCE RECOVERIES

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

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

     The Company recognizes property damage insurance recoveries in excess of
     the amount of recorded losses and related expenses, and business
     interruption insurance recoveries when such amounts are realized. During
     the three-month periods ended September 30, 2003 and 2002, the Company
     recorded $2 million and $46 million, respectively, of insurance recoveries
     primarily related to these fires. During the nine-month periods ended
     September 30, 2003 and 2002, the Company recorded $146 million and $257
     million, respectively, of insurance recoveries primarily related to these
     fires. The Company received cash proceeds of $20 million and $49 million
     during the three-month periods ended September 30, 2003 and 2002. The
     Company received cash proceeds of $146 million and $292 million during the
     nine-month periods ended September 30, 2003 and 2002. In July 2003, the
     Company received the final payment related to the Lemont fire.

                                       16

<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 also direct your attention to
our Form 10-K annual report for our fiscal year ended December 31, 2002, for
additional information and a description of critical accounting policies and
factors that may cause substantial fluctuations in our earnings and cash flows.

     We generated net income of $102.9 million on total revenue of $6.5 billion
in the quarter ended September 30, 2003 compared to a net income of $56.9
million on total revenue of $5.5 billion for the same period last year. We
generated net income of $351.4 million on revenue of $19.1 billion in the nine
months ended September 30, 2003 compared to net income of $137.6 million on
total revenue of $14.2 billion for the same period last year. (See "Gross
margin").

RESULTS OF OPERATIONS

     The following table summarizes the sources of our sales revenues and sales
volumes for the three-month and nine-month periods ended September 30, 2003 and
2002:

                        CITGO SALES REVENUES AND VOLUMES

<TABLE>
<CAPTION>

                                            THREE MONTHS        NINE MONTHS         THREE MONTHS        NINE MONTHS
                                         ENDED SEPTEMBER 30  ENDED SEPTEMBER 30  ENDED SEPTEMBER 30  ENDED SEPTEMBER 30
                                         ------------------  ------------------  ------------------  ------------------
                                           2003      2002      2003      2002      2003      2002      2003      2002
                                           ----      ----      ----      ----      ----      ----      ----      ----
                                                    ($ in millions)                      (gallons in millions)

<S>                                      <C>       <C>       <C>       <C>         <C>       <C>      <C>       <C>
Gasoline                                 $ 3,831   $ 3,363   $10,727   $ 8,432     3,918     4,056    11,272    11,014
Jet fuel                                     513       359     1,451       991       640       479     1,734     1,483
Diesel/#2 fuel                             1,173       899     4,043     2,439     1,479     1,232     4,762     3,724
Asphalt                                      238       245       514       468       331       353       689       707
Petrochemicals and industrial products       570       379     1,653     1,053       662       555     1,915     1,593
Lubricants and waxes                         157       143       448       422        67        67       194       195
                                         -----------------   -----------------   -----------------   -----------------
        Total refined product sales        6,482     5,388    18,836    13,805     7,097     6,742    20,566    18,716
Other sales and adjustments                   20        23        63        70
                                         -----------------   -----------------   -----------------   -----------------
        Total sales                      $ 6,502   $ 5,411   $18,899   $13,875     7,097     6,742    20,566    18,716
                                         =================   =================   =================   =================
</TABLE>

                                       17

<PAGE>

     The following table summarizes our cost of sales and operating expenses for
the three-month and nine-month periods ended September 30, 2003 and 2002:

                   CITGO COST OF SALES AND OPERATING EXPENSES

<TABLE>
<CAPTION>
                                                               THREE MONTHS                 NINE MONTHS
                                                             ENDED SEPTEMBER 30,         ENDED SEPTEMBER 30,
                                                            ---------------------       ---------------------
                                                              2003         2002           2003         2002
                                                            -------       -------       -------       -------
                                                                              ($ in millions)
<S>                                                         <C>           <C>           <C>           <C>
Crude oil                                                   $ 1,724       $ 1,641       $ 5,110       $ 3,827
Refined products                                              3,577         2,876        10,409         7,556
Intermediate feedstocks                                         481           352         1,420         1,104
Refining and manufacturing costs                                323           314           963           900
Other operating costs, expenses and inventory changes           162           116           382           307
                                                            -------       -------       -------       -------
         Total cost of sales and operating expenses         $ 6,267       $ 5,299       $18,284       $13,694
                                                            =======       =======       =======       =======
</TABLE>

     Sales revenues and volumes. Sales increased $1.1 billion, or approximately
20%, in the three-month period ended September 30, 2003 as compared to the same
period in 2002. This increase was due to an increase in average sales price of
14% and an increase in sales volume of 5%. Sales increased $5.0 billion, or
approximately 36%, in the nine-month period ended September 30, 2003 compared to
the same period in 2002. This increase was due to an increase in average sales
price of 24% and an increase in refined product sales volume of 10%. (See CITGO
Sales Revenues and Volumes table above.)

     Equity in earnings of affiliates. Equity in earnings of affiliates
increased by $7 million for the three-month period ended September 30, 2003 and
increased $3 million for the nine-month period ended September 30, 2003 as
compared to the same period in 2002. The increase in the three-month period was
due primarily to an increase in the earnings of LYONDELL-CITGO, our share of
which increased $8 million. The increase in LYONDELL-CITGO'S earnings was
primarily due to improved refinery margins during the third quarter of 2003 as
compared to the same period in 2002.

     Insurance recoveries. We recorded insurance recoveries of $2 million in the
three months ended September 30, 2003 and $146 million in the nine months ended
September 30, 2003. The recoveries for the nine-month period related primarily
to a fire which occurred on August 14, 2001 at the Lemont refinery. The crude
unit was destroyed and the refinery's other processing units were temporarily
taken out of production. These recoveries are, in part, reimbursements for
expenses incurred in 2002 and 2001 to mitigate the effect of the fire on our
earnings. We do not expect any additional insurance recoveries related to the
Lemont fire.

     Cost of sales and operating expenses. Cost of sales and operating expenses
increased by $968 million or 18%, in the quarter ended September 30, 2003 as
compared to the same period in 2002. Cost of sales and operating expenses
increased by $4.6 billion or 34%, in the nine months ended September 30, 2003 as
compared to the same period in 2002. (See CITGO Cost of Sales and Operating
Expenses table above.)

     We purchase refined products to supplement the production from our
refineries to meet marketing demands and resolve logistical issues. Refined
product purchases represented 57% and 54% of total cost of sales and operating
expenses for the third quarter of 2003 and 2002, respectively and 57% and 55%
for the nine-months of 2003 and 2002, respectively. We estimate margins on
purchased products, on average, are lower than margins on produced products due
to the fact that we can only receive the marketing portion of the total margin
received on the produced refined products. However, purchased products are not
segregated from our produced products and margins may vary due to market
conditions and other factors beyond our control. As such, it is not practical to

                                       18

<PAGE>

measure the effects on profitability of changes in volumes of purchased
products. In the near term, other than normal refinery turnaround maintenance,
we do not anticipate operational actions or market conditions which might cause
a material change in anticipated purchased product requirements; however, there
could be events beyond our control which impact the volume of refined products
purchased. (See also "Factors Affecting Forward Looking Statements".)

     Gross margin. The gross margin for the three-month period ended September
30, 2003 was approximately 3.3 cents per gallon, compared to approximately 1.7
cents per gallon for the same period in 2002. The gross margin for the
nine-month period ended September 30, 2003 was approximately 3.0 cents per
gallon, compared to less than one cent per gallon for the same period in 2002.
The revenue per gallon component in the three-month period ended September 30,
2003 increased approximately 14% and the cost per gallon component increased
approximately 12%. As a result, the gross margin increased approximately 1.7
cents on a per gallon basis in the quarter ended September 30, 2003 compared to
the same period in 2002. In the nine-month period ended September 30, 2003, the
revenue per gallon component increased approximately 24% and the cost per gallon
component increased approximately 22%. As a result, the gross margin increased
approximately 2.0 cents on a per gallon basis in the nine months ended September
30, 2003 compared to the same period in 2002. The gross margin is directly
affected by changes in selling prices relative to changes in costs. An increase
or decrease in the price for crude oil, feedstocks and blending products
generally results in a corresponding increase or decrease in prices for refined
products. Generally, the effect of changes in crude oil and feedstock prices on
our consolidated operating results therefore depends in part on how quickly
refined product prices adjust to reflect these changes. However, in the first
nine months of 2002, there was a substantial decrease in sales price without an
equivalent decrease in refined product costs resulting in a significant negative
impact on our gross margin and earnings.

     Selling, general and administrative expenses. Selling, general and
administrative expenses increased 20% from $67 million in the third quarter of
2002 to $81 million in the third quarter of 2003. Selling, general and
administrative expenses remained relatively flat at $219 million in the first
nine months of 2002 compared to $218 million in the same period in 2003. The
increase in selling, general and administrative expenses during the quarter
ended September 30, 2003 is primarily related to an increase in labor burden,
incentive compensation, and expenses related to an early retirement program.

     Interest expense. Interest expense increased by $13 million in the
three-month period ended September 30, 2003 and increased $35 million in the
nine-month period ended September 30, 2003 as compared to the same period in
2002. This was primarily due to the net increase in the outstanding debt balance
and higher overall interest rates resulting from the issuance of the $550
million senior notes and the closing of the $200 million secured term loan in
February 2003.

LIQUIDITY AND CAPITAL RESOURCES

     Consolidated net cash provided by operating activities totaled
approximately $846 million for the nine-month period ended September 30, 2003.
Operating cash flows were derived primarily from net income of $351 million,
depreciation and amortization of $245 million, distributions in excess of equity
in earnings of affiliates of $100 million, increase in deferred taxes of $54
million, and changes in operating assets and liabilities of $69 million. The
more significant changes in operating assets and liabilities include an increase
in notes and accounts receivable and a decrease in current liabilities offset,
in part, by a decrease in inventory.

                                       19

<PAGE>

     Net cash used in investing activities in the nine month period ended
September 30, 2003 totaled $332 million consisting primarily of capital
expenditures of $315 million. These capital expenditures consisted of:

<TABLE>
<CAPTION>
                                     Three         Nine
                                     Months       Months
                                   ---------     ---------
                                   Ended September 30, 2003
                                   ------------------------
                                        ($ in millions)
<S>                                <C>           <C>
Regulatory requirements            $      75     $     198
Maintenance capital projects              10            42
Strategic capital expenditures            21            75
                                   ---------     ---------

   Total capital expenditures      $     106     $     315
                                   =========     =========
</TABLE>

     Net cash used by financing activities totaled $416 million for the
nine-month period ended September 30, 2003, consisting primarily of the payment
of a $500 million dividend payment to PDV America, the repayments of $279
million on revolving bank loans; the repurchase of $126 million of tax-exempt
bonds; the repurchase of $90 million of taxable bonds; the repurchase of $50
million of our 7-7/8% senior notes due 2006 for a cash payment of $47.5 million;
the payment of $50 million on master shelf agreement notes; the repayment of
loans from affiliates of $39 million; $19 million in debt issuance costs
associated with the 11-3/8% senior notes due 2011, the senior secured loan, and
the repurchase of taxable and tax-exempt bonds; and capital lease payments of
$12 million. These payments were offset by proceeds from our senior secured term
loan of $200 million and the proceeds from our 11-3/8% senior notes due in 2011
of $547 million.

     As of September 30, 2003, capital resources available to us included cash
on hand totaling $131 million generated by operations and other sources, and
available borrowing capacity under our committed bank facilities of $517
million. Our management believes that we have sufficient capital resources to
carry out planned capital spending programs, including regulatory and
environmental projects in the near term and to meet currently anticipated future
obligations as they arise. We periodically evaluate other sources of capital in
the marketplace and anticipate that long-term capital requirements will be
satisfied with current capital resources and future financing arrangements,
including the issuance of debt securities. Our ability to obtain such financing
will depend on numerous factors, including market conditions and our perceived
creditworthiness at that time. (See also "Factors Affecting Forward Looking
Statements".)

     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 our covenants under our debt financing
arrangements at September 30, 2003.

                                       20

<PAGE>

     Upon the occurrence of a change of control of our Company, as defined in
the Indenture governing our 11-3/8% senior notes due 2011, 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 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.

     Internally generated cash flow, together with borrowings available under
our credit facilities, are expected to be sufficient to fund capital
expenditures during the remainder of 2003. In addition, we have taken steps to
reduce our capital expenditures in 2003 by approximately $250 million, resulting
in budgeted total 2003 expenditures of $460 million, and will reassess the
economics of the postponed projects at a later date. Of the $250 million
spending reduction, 60% was discretionary, 27% was maintenance of the business
and 13% was regulatory. The regulatory and maintenance of the business projects
will be completed under a delayed schedule. Discretionary spending will be
restarted in 2004 as funds become available. Finally, we are continuing to
review the timing and amount of scheduled expenditures under our planned capital
spending programs, including regulatory and environmental projects in the near
term.

     We have outstanding letters of credit that support taxable and tax-exempt
bonds that were issued previously for our benefit. Through September 30, 2003,
we repurchased $90 million of taxable bonds and $165 million of tax-exempt bonds
due to the non-renewal of these letters of credit. We will seek to reissue these
bonds, with replacement letters of credit in support or, alternatively, we will
seek to replace these bonds with new bonds that will not require letter of
credit support. As of November 1, 2003, we have an additional $182 million of
letters of credit outstanding that back or support other bond issues that we
have issued through governmental entities, which are subject to renewal during
the period ending September 30, 2004.

     In August 2002, 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. Amounts outstanding on these notes at December 31,
2002 were $5 million, $30 million and $4 million from PDV Texas, PDV America and
PDV Holding, respectively. At September 30, 2003, there was no outstanding
balance on these notes.

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

<TABLE>
<S>                                         <C>
Moody's Investor's Services                 Ba3
Standard & Poor's Ratings Group             BB
Fitch Investors Services, Inc.              BB-
</TABLE>

     On May 9, 2003, Standard & Poor's Ratings Group ("S&P") upgraded our senior
unsecured debt rating to BB-. S&P upgraded our senior unsecured debt rating to
BB on July 31, 2003 and Fitch Investors Services, Inc. ("Fitch") upgraded our
senior unsecured debt rating to BB- on August 8, 2003.

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

<TABLE>
<S>                                         <C>
Moody's Investor's Services                 Ba2
Standard & Poor's Ratings Group             BB+
Fitch Investors Services, Inc.              BB+
</TABLE>

     On May 9, 2003, S&P upgraded our secured debt rating to BB. S&P upgraded
our secured debt rating to BB+ on July 31, 2003 and Fitch upgraded our secured
debt rating to BB+ on August 8, 2003.

                                       21

<PAGE>

     On February 28, 2003, a new accounts receivable sales facility was
established. This facility allows for the non-recourse sale of certain accounts
receivable to independent third parties. A maximum of $200 million in accounts
receivable may be sold at any one time.

     On July 25, 2003 we made a $500 million dividend payment for the purpose of
enabling our parent, PDV America to make the principal payment on $500 million,
7-7/8% senior notes due August 1, 2003. Our $550 million, 11-3/8% senior notes
due 2011 have certain minimum liquidity requirements for payment of such a
dividend and we were in compliance with those requirements on July 25, 2003.

     Our debt instruments do not contain any covenants that trigger increased
costs or burdens as a result of a change in our securities ratings. However,
certain of our guarantee agreements, which support approximately $20 million of
PDV Texas, an affiliate, letters of credit, 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. We are continuing to review our
operations for opportunities to reduce operating and capital expenditures.

NEW ACCOUNTING STANDARDS

     On January 1, 2003 we adopted Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations" (SFAS No. 143) which
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset, except for certain
obligations of lessees. We have identified certain asset retirement obligations
that are within the scope of the standard, including obligations imposed by
certain state laws pertaining to closure and/or removal of storage tanks,
contractual removal obligations included in certain easement and right-of-way
agreements associated with our pipeline operations, and contractual removal
obligations relating to a refinery processing unit located within a third-party
entity's facility. We cannot currently determine a reasonable estimate of the
fair value of our asset retirement obligations due to the fact that the related
assets have indeterminate useful lives which preclude development of assumptions
about the potential timing of settlement dates. Such obligations will be
recognized in the period in which sufficient information exists to estimate a
range of potential settlement dates. Accordingly, the adoption of SFAS No. 143
did not impact our financial position or results of operations.

     In January 2003, the 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. 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 46 applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date. It
applies at December 31, 2004 to variable interest entities in which a nonpublic
enterprise, as defined, holds a variable interest that it acquired before
February 1, 2003. FIN 46 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. We
meet the definition of a nonpublic enterprise and expect that the application of
FIN 46 at December 31, 2004 to variable interest entities in which we acquired
an interest before February 1, 2003 will not have a material impact on our
financial position or results of operations.

     We hold a 49.5% partnership interest in NISCO, a variable interest entity.
NICSO operates a qualified cogeneration facility in Louisiana. NISCO had total
assets of approximately $179 million at December 31, 2002 and revenue of
approximately $72 million for the year ended December 31, 2002. We, along with
certain other

                                       22

<PAGE>

partners, indirectly purchase electricity produced by NISCO. In addition to our
partnership interest, we provide a limited guarantee on behalf of NISCO. See
Note 8 for our estimate of our maximum exposure to loss as a result of our
involvement with NISCO.

     In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" ("SFAS No. 149"). The changes in SFAS No. 149 improve financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. Those changes will result in more consistent reporting
of contracts as either derivatives or hybrid instruments. SFAS No. 149 is
effective for contracts entered into or modified after June 30, 2003, except for
certain issues from SFAS No. 133 which have been effective for fiscal quarters
that began prior to June 15, 2003 and for hedging relationships designated after
June 30, 2003. In addition, all provisions of SFAS No. 149 should be applied
prospectively. The changes in principle effective with the adoption of SFAS No.
149 did not have a material effect on our statements of financial position and
results of operation.

PROPOSED ACCOUNTING CHANGE

     The American Institute of Certified Public Accountants ("AICPA") has issued
a "Statement of Position" exposure draft on cost capitalization that is expected
to require companies to expense the non-capital portion of major maintenance
costs as incurred. The statement is expected to require that any existing
unamortized deferred non-capital major maintenance costs be expensed
immediately. This statement also has provisions which will change the method of
determining depreciable lives. The impact on future depreciation expense is not
determinable at this time. The exposure draft indicates that the effect of
expensing existing unamortized deferred non-capital major maintenance costs will
be reported as a cumulative effect of an accounting change in the consolidated
statement of income. The final accounting requirements are not known at this
time. Currently, adoption is not expected to be required before fiscal years
beginning after December 15, 2004. At September 30, 2003, we have included
turnaround costs of $172 million in other assets. Our management has not
determined the amount, if any, of these costs that could be capitalized under
the provisions of the exposure draft.

                                       23

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Introduction. We have exposure to price fluctuations of natural gas, crude
oil, feedstocks, and refined products as well as fluctuations in interest rates.
To manage these exposures, our management has authorized the use of commodity
derivatives in a Risk Management Program. We do not attempt to manage the price
risk related to all of our inventories and fixed forward commitments. As a
result at September 30, 2003, we were exposed to the risk of broad market price
movements with respect to a substantial portion of our current and anticipated
commodity needs. We have at least 30 million barrels of current inventory and
fixed forward price contracts at price risk on any given day. In addition, we
have price risk on purchasing 1.8 trillion Btu of natural gas every month. As of
September 30, 2003 aggregate commodity derivative positions entered into for
price risk management purposes totaled 3.2 million barrels and 1.0 trillion Btu.

     Commodity Instruments. We balance our crude oil and petroleum product
supply/demand and manage a portion of our price risk by entering into petroleum
commodity derivatives. Generally, our risk management strategies qualified as
hedges through December 31, 2000. Effective January 1, 2001, our 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, 2003, none of our commodity derivatives were accounted
for as hedges.

                        NON TRADING COMMODITY DERIVATIVES
                      OPEN POSITIONS AT SEPTEMBER 30, 2003

<TABLE>
<CAPTION>
                                                                MATURITY     NUMBER OF    CONTRACT     MARKET
    COMMODITY                         DERIVATIVE                  DATE       CONTRACTS     VALUE      VALUE (4)
    ---------                         ----------                  ----     ------------   --------    ---------
                                                                           LONG/(SHORT)     ASSET/(LIABILITY)
                                                                           ------------   --------------------
                                                                                             ($ in millions)
<S>                    <C>                                      <C>        <C>            <C>         <C>
No Lead Gasoline (1)   Futures Purchased                          2003          452       $   14.8    $   15.3
                       Futures Sold                               2003         (450)      $  (14.7)   $  (15.2)
                       Forward Purchase Contracts                 2003         6,745      $  223.8    $  223.1
                       Forward Sales Contracts                    2003        (5,203)     $ (174.3)   $ (171.1)

Distillates (1)        Futures Purchased                          2003         1,551      $   49.9    $   51.8
                       Futures Purchased                          2004         1,457      $   45.5    $   47.3
                       Futures Sold                               2003         (75)       $   (2.5)   $   (2.5)
                       OTC Call Options Purchased                 2003          12        $      -    $      -
                       OTC Put Options Purchased                  2003          12        $      -    $    0.1
                       OTC Call Options Sold                      2003         (12)       $      -    $   (0.1)
                       OTC Put Options Sold                       2003         (12)       $      -    $      -
                       OTC Swaps (Pay Fixed/Receive Float)(3)     2003           3        $      -    $      -
                       Forward Purchase Contracts                 2003          675       $   21.2    $   21.8
                       Forward Sale Contracts                     2003         (965)      $  (31.4)   $  (31.9)

Crude Oil (1)          OTC Swaps (Pay Fixed/Receive Float)(3)     2003          900       $      -    $    0.1
                       OTC Swaps (Pay Float/Receive Fixed)(3)     2003        (1,100)     $      -    $    0.2
                       Forward Purchase Contracts                 2003         1,550      $   40.2    $   43.0
                       Forward Sale Contracts                     2003        (1,032)     $  (28.3)   $  (29.9)

Natural Gas (2)        Listed Call Options Purchased              2003          100       $      -    $      -
                       Listed Call Options Sold                   2003         (100)      $      -    $      -
</TABLE>

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

(1)  1,000 barrels per contract

(2)  Ten-thousands of mmbtu per contract

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

(4)  Based on actively quoted prices.

                                       24

<PAGE>

                                  NON TRADING COMMODITY DERIVATIVES
                                OPEN POSITIONS AT SEPTEMBER 30, 2002

<TABLE>
<CAPTION>
                                                                   MATURITY     NUMBER OF    CONTRACT     MARKET
    COMMODITY                         DERIVATIVE                     DATE       CONTRACTS     VALUE      VALUE (4)
    ---------                         ----------                     ----       ----------   --------    ---------
                                                                              LONG/(SHORT)     ASSET/(LIABILITY)
                                                                              ------------   --------------------
                                                                                                ($ in millions)
<S>                    <C>                                         <C>        <C>            <C>         <C>
No Lead Gasoline (1)   Futures Purchased                             2002            50      $    1.7    $    1.7
                       Futures Sold                                  2002         2,902      $   99.4    $   98.1
                       Forward Purchase Contracts                    2002         5,901      $  194.7    $  204.6
                       Forward Sale Contracts                        2002         4,765      $  159.8    $  164.3

Distillates (1)        Futures Purchased                             2002         2,253      $   72.8    $   76.6
                       Futures Purchased                             2003           646      $   18.3    $   20.6
                       Futures Sold                                  2002           350      $   11.8    $   11.9
                       Futures Sold                                  2003           595      $   18.7    $   18.5
                       OTC Options Purchased                         2002            66      $      -    $    0.1
                       OTC Options Sold                              2002            66      $      -    $   (0.1)
                       Forward Purchase Contracts                    2002           812      $   26.7    $   27.3
                       Forward Sale Contracts                        2002         1,255      $   42.6    $   42.8

Crude Oil (1)          Futures Purchased                             2002         2,732      $   83.0    $   83.2
                       Futures Purchased                             2003           595      $   16.5    $   16.5
                       Futures Sold                                  2002           377      $   10.0    $   11.3
                       Futures Sold                                  2003           475      $   11.6    $   13.5
                       Listed Options Purchased                      2002           300      $      -    $      -
                       Listed Options Sold                           2002           300      $      -    $      -
                       OTC Swaps (Pay Floating/Receive Fixed)(3)     2002         1,280      $      -    $   (0.4)
                       Forward Purchase Contracts                    2002         6,794      $  178.1    $  187.0
                       Forward Sale Contracts                        2002         4,149      $  111.5    $  116.1

Natural Gas (2)        Futures Sold                                  2002            40      $    1.6    $    1.7

Propane (1)            OTC Swaps (Pay Floating/Receive Fixed)(3)     2002           300      $      -    $   (0.8)
                       OTC Swaps (Pay Floating/Receive Fixed)(3)     2003           300      $      -    $   (0.8)
                       OTC Swaps (Pay Fixed/Receive Floating)(3)     2002            75      $      -    $    0.3
                       OTC Swaps (Pay Fixed/Receive Floating)(3)     2003            75      $      -    $    0.3
</TABLE>

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

(2)   Ten-thousands of mmbtu

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

(4)   Based on actively quoted prices.

                                       25

<PAGE>

     Debt Related Instruments. We have fixed and floating U.S. currency
denominated debt. We use interest rate swaps to manage our debt portfolio toward
a benchmark of 40 to 70 percent fixed rate debt to total fixed and floating rate
debt. These instruments have the effect of changing the interest rate with the
objective of minimizing our long-term costs. At September 30, 2003 and 2002, our
primary exposures were to LIBOR and floating rates on tax exempt bonds.

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

                      NON TRADING INTEREST RATE DERIVATIVES
                  OPEN POSITIONS AT SEPTEMBER 30, 2003 AND 2002

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

     Changes in the fair value of these agreements are recorded in other income
(expense). The fair value of the interest rate swap agreements in place at
September 30, 2003, based on the estimated amount that we would receive or pay
to terminate the agreements as of that date and taking into account current
interest rates, was a loss of $3 million, the offset of which is recorded in the
balance sheet caption other current liabilities.

                                       26

<PAGE>

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

                                DEBT OBLIGATIONS
                              AT SEPTEMBER 30, 2003

<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>
       2003              $   11            9.30%            $  -                  -
       2004                  31            8.02%               -                  -
       2005                  11            9.30%               -                  -
       2006                 201            8.10%             200              7.41%
       2007                  50            8.94%               -                  -
    Thereafter              770           10.30%             178              9.39%
                         ------           ------            ----              -----
       Total             $1,074            9.74%            $378              8.34%
                         ======           ======            ====              =====

    Fair Value           $1,166                             $378
                         ======                             ====
</TABLE>

                                DEBT OBLIGATIONS
                             AT SEPTEMBER 30, 2002

<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>
       2002                $  11           9.30%           $ 119            3.07%
       2003                   61           8.79%             238            3.94%
       2004                   31           8.02%              16            4.81%
       2005                   11           9.30%               -                -
       2006                  252           8.06%               -                -
    Thereafter               183           7.90%             467            8.24%
                           -----           -----           -----            -----
       Total               $ 549           8.14%           $ 840            6.23%
                           =====           =====           =====            =====

    Fair Value             $ 580                           $ 840
                           =====                           =====
</TABLE>

                                       27

<PAGE>

ITEM 4. CONTROLS AND PROCEDURES

     During the third quarter of 2003, 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, 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. The Company's controls and procedures can only provide
reasonable, not absolute, assurance that the above objectives have been met.
Also, the Company does not control or manage certain of its unconsolidated
entities and thus, its access and ability to apply procedures to those entities
are more limited than is the case for its consolidated subsidiaries.

     As of September 30, 2003, these officers 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.

                                       28

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     The required information is incorporated by reference into Part II of this
Report from Note 7 of the Notes to the Condensed Consolidated Financial
Statements included in Part I of this Report.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (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, 2003 filed by the
          following officers:

          31.1   Filed by Luis Marin, President and Chief Executive Officer.
          31.2   Filed by Eddie R. Humphrey, 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, 2003 filed by the following
          officers:

          32.1   Filed by Luis Marin, President and Chief Executive Officer.
          32.2   Filed by Eddie R. Humphrey, Chief Financial Officer.

     (b)  Reports on Form 8-K:

     A report on Form 8-K was filed with the Securities and Exchange Commission
on August 18, 2003. The purpose of this report was to furnish information
included in our press release on earnings for the second quarter of 2003.

     A report on Form 8-K/A was filed with the Securities and Exchange
Commission on September 8, 2003 to amend the information in our report on Form
8-K filed May 2, 2003.

     A report on Form 8-K was filed with the Securities and Exchange Commission
on October 28, 2003 to furnish information included in our press release of the
same date clarifying certain published reports.

     A report on Form 8-K was filed with the Securities and Exchange Commission
on October 31, 2003 to furnish information included in our press release on
earnings for the third quarter of 2003.

                                       29

<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 10, 2003                 /s/      Larry E. Krieg
                                       ------------------------------------
                                                 Larry E. Krieg
                                       Controller (Chief Accounting Officer)

                                       30

<PAGE>

                                 EXHIBIT INDEX

     (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, 2003 filed by the
          following officers:

          31.1   Filed by Luis Marin, President and Chief Executive Officer.
          31.2   Filed by Eddie R. Humphrey, 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, 2003 filed by the following
          officers:

          32.1   Filed by Luis Marin, President and Chief Executive Officer.
          32.2   Filed by Eddie R. Humphrey, Chief Financial Officer.

                                       31