<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 MARCH 31, 2002

                                       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 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 April 30, 2002)
<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 MARCH 31, 2002

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 - March 31, 2002 and
              December 31, 2001 (as restated) .......................................................  2

              Condensed Consolidated Statements of Income and Comprehensive Income -
              Three-Month Periods Ended March 31, 2002 and 2001 (as restated)........................  3

              Condensed Consolidated Statement of Shareholder's Equity - Three-Month Period
              Ended March 31, 2002 (as restated).....................................................  4

              Condensed Consolidated Statements of Cash Flows - Three-Month Periods Ended
              March 31, 2002 and 2001 (as restated)..................................................  5

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

   Item 2.    Management's Discussion and Analysis of Financial Condition and
              Results of Operations.................................................................  14

   Item 3.    Quantitative and Qualitative Disclosures About Market Risk............................  19

PART II.      OTHER INFORMATION

   Item 1.    Legal Proceedings.....................................................................  24

   Item 6.    Exhibits and Reports on Form 8-K......................................................  24

  SIGNATURES........................................................................................  25
</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 (as
defined herein) are forward looking statements. In addition, when used in this
document, the words "anticipate," "estimate," "prospect" and similar expressions
are used to identify forward looking statements. Those statements are subject to
risks and uncertainties, such as increased inflation, continued access to
capital markets and commercial bank financing on favorable terms, increases in
environmental and other regulatory burdens, outcomes of currently contested
matters, changes in prices or demand for CITGO products as a result of
competitive actions or economic factors and changes in the cost of crude oil,
feedstocks, blending components or refined products. Those statements are also
subject to the risks of increased costs in related technologies and those
technologies producing anticipated results. Should one or more of these risks or
uncertainties, among others, materialize, actual results may vary materially
from those estimated, anticipated or projected. Readers are cautioned not to
place undue reliance on these forward looking statements, which speak only as of
the date of this Report. CITGO undertakes no obligation to publicly release any
revision to these forward looking statements to reflect events or circumstances
after the date of 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>
                                                                                                       DECEMBER 31,
                                                                                     MARCH 31,            2001
                                                                                       2002           (AS RESTATED
                                                                                    (UNAUDITED)        -See Note 1)
                                                                                   ------------       ------------
<S>                                                                                <C>                <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                            $ 21,773          $ 104,362
  Accounts receivable, net                                                              920,750            913,068
  Due from affiliates                                                                    59,717             64,923
  Inventories                                                                         1,030,281          1,109,346
  Prepaid expenses and other                                                             67,692             95,334
                                                                                   ------------       ------------
            Total current assets                                                      2,100,213          2,287,033

PROPERTY, PLANT AND EQUIPMENT - Net                                                   3,357,541          3,292,469

INVESTMENTS IN AFFILIATES                                                               710,046            700,701

OTHER ASSETS                                                                            256,773            228,906
                                                                                   ------------       ------------
                                                                                   $  6,424,573        $ 6,509,109
                                                                                   ============       ============
LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
  Short-term bank loans                                                             $    90,000       $          -
  Accounts payable                                                                      592,817            616,854
  Payables to affiliates                                                                344,179            265,517
  Taxes other than income                                                               208,778            219,699
  Other                                                                                 228,811            300,484
  Current portion of long-term debt                                                      86,364            107,864
  Current portion of capital lease obligation                                            20,358             20,358
                                                                                   ------------       ------------
            Total current liabilities                                                 1,571,307          1,530,776

LONG-TERM DEBT                                                                        1,233,700          1,303,692

CAPITAL LEASE OBLIGATION                                                                 46,964             46,964

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                             225,940            218,706

OTHER NONCURRENT LIABILITIES                                                            210,938            217,121

DEFERRED INCOME TAXES                                                                   749,891            767,338

MINORITY INTEREST                                                                             -             23,176

COMMITMENTS AND CONTINGENCIES (Note 6)

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                                                                     729,521            745,102
  Accumulated other comprehensive loss                                                   (3,387)            (3,465)
                                                                                   ------------       ------------
            Total shareholder's equity                                                2,385,833          2,401,336
                                                                                   ------------       ------------
                                                                                   $  6,424,573       $  6,509,109
                                                                                   ============       ============
</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
                                                                           ENDED MARCH 31,
                                                                           ---------------
                                                                         2002           2001
                                                                     -----------    -----------
                                                                                   (AS RESTATED
                                                                                    -See Note 1)
                                                                                    -----------
<S>                                                                  <C>            <C>
REVENUES:

  Net sales                                                          $ 3,622,355    $ 4,895,632
  Sales to affiliates                                                     49,067         65,919
                                                                     -----------    -----------
                                                                       3,671,422      4,961,551
  Equity in earnings of affiliates                                        18,934         23,631
  Insurance recoveries                                                    94,706             --
  Other income (expense) - net                                            (6,501)        (2,006)
                                                                     -----------    -----------
                                                                       3,778,561      4,983,176

COST OF SALES AND EXPENSES:
  Cost of sales and operating expenses (including purchases
     of $1,238,848 and $1,585,970 from affiliates)                     3,708,903      4,747,468
  Selling, general and administrative expenses                            76,387         60,063
  Interest expense, excluding capital lease                               15,723         18,321
  Capital lease interest charge                                            1,893          2,407
  Minority interest                                                           --             34
                                                                     -----------    -----------
                                                                       3,802,906      4,828,293
                                                                     -----------    -----------
(LOSS) INCOME BEFORE INCOME TAXES AND CUMULATIVE
    EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                             (24,345)       154,883

INCOME TAXES                                                              (8,764)        56,303
                                                                     -----------    -----------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF
     CHANGE IN ACCOUNTING PRINCIPLE                                      (15,581)        98,580

CUMULATIVE EFFECT, ACCOUNTING FOR DERIVATIVES,
    NET OF RELATED INCOME TAXES OF $0 AND $7,977                              --         13,600
                                                                     -----------    -----------
NET (LOSS) INCOME                                                        (15,581)       112,180
                                                                     -----------    -----------
OTHER COMPREHENSIVE INCOME (LOSS):
  Cash flow hedges:
    Cumulative effect, accounting for derivatives, net
      of related income taxes of $0 and $(850)                                --         (1,450)

  Less: reclassification adjustment for derivative losses included
    in net income, net of related income taxes of $44 and $139                78            237
                                                                     -----------    -----------
OTHER COMPREHENSIVE INCOME (LOSS)                                             78         (1,213)
                                                                     -----------    -----------
COMPREHENSIVE (LOSS) INCOME                                          $   (15,503)   $   110,967
                                                                     ===========    ===========
</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     INCOME (LOSS)       TOTAL
                                       ------   ------     -------      --------     -------------       -----
<S>                                    <C>      <C>       <C>          <C>           <C>             <C>
BALANCE, DECEMBER 31, 2001
  (As Restated - See Note 1)               1      $1      $1,659,698   $ 745,102        $(3,465)      $ 2,401,336

Net loss                                   -       -              --     (15,581)            --           (15,581)

Other comprehensive income                 -       -              --          --             78                78
                                       ------   ------     -------      --------        -------       -----------

BALANCE, MARCH 31, 2002                    1      $1      $1,659,698   $ 729,521        $(3,387)      $ 2,385,833
                                       ======   ======    ==========   =========        =======       ===========
</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>
                                                                 THREE MONTHS
                                                                ENDED MARCH 31,
                                                              ------------------
                                                              2002          2001
                                                            ---------    ---------
                                                                       (AS RESTATED
                                                                       -See Note 1)
                                                                         ---------
<S>                                                         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES                        $  57,512    $ 175,758
                                                            ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                       (120,510)     (37,436)
  Proceeds from sales of property, plant and equipment            276          629
  Investments in LYONDELL-CITGO Refining LP                   (15,400)      (1,300)
  Investments in and advances to other affiliates              (2,967)         (96)
                                                            ---------    ---------
            Net cash used in investing activities            (138,601)     (38,203)
                                                            ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from (repayments of) short-term bank loans      90,000      (37,500)
  Net repayments of revolving bank loans                      (66,500)          --
  Proceeds from issuance of tax-exempt bonds                   25,000       25,000
  Payments on taxable bonds                                   (25,000)     (25,000)
  Payments of capital lease obligations                            --       (8,402)
  Payments of master shelf agreement notes                    (25,000)          --
  Repayments of other debt                                         --       (1,778)
                                                            ---------    ---------
            Net cash used in financing activities              (1,500)     (47,680)
                                                            ---------    ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS              (82,589)      89,875

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                104,362       19,038
                                                            ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                    $  21,773    $ 108,913
                                                            =========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash (received) paid during the period for:
        Interest, net of amounts capitalized                $   9,391    $  17,671
                                                            =========    =========
        Income taxes (net of refund of $50,000 in 2002)     $ (45,561)   $ 111,808
                                                            =========    =========
</TABLE>


See notes to condensed consolidated financial statements.


                                       5
<PAGE>
CITGO PETROLEUM CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE-MONTH PERIODS ENDED MARCH 31, 2002 AND 2001 (AS RESTATED)

1.    BASIS OF PRESENTATION

      The financial information for CITGO Petroleum Corporation ("CITGO" or "the
      Company") subsequent to December 31, 2001 and with respect to the interim
      three-month periods ended March 31, 2002 and 2001 (as restated) is
      unaudited. In the opinion of management, 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 three-month periods ended March 31, 2002 and
      2001 (as restated) 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, 2001 on Form 10-K, dated March 28,
      2002, for additional information.

      On January 1, 2002, PDV America, the parent company of CITGO, made a
      contribution to the capital of CITGO of all of the common stock of PDV
      America's wholly owned subsidiary, VPHI Midwest, Inc. ("VPHI"). No
      additional shares of the capital stock of CITGO were issued in connection
      with the contribution. Effective January 1, 2002, the accounts of VPHI are
      included in the consolidated financial statements of CITGO at the
      historical carrying value of PDV America's investment in VPHI. CITGO
      recorded the effects of this transaction in a manner similar to
      "pooling-of-interests" accounting. The 2001 financial statements have been
      restated to reflect the Company's financial condition at December 31, 2001
      and the results of operations for the quarter ended March 31, 2001 as if
      the transaction had occurred on January 1, 2001. The following unaudited
      proforma information presents the separate results of operations for CITGO
      and VPHI for the three months ended March 31, 2001:
<TABLE>
<CAPTION>
                                     (000'S OMITTED)
                                     ---------------
<S>                                     <C>
         Net Income CITGO               $ 79,350
         Net Income VPHI                  32,830
                                        --------
         Net Income Consolidated        $112,180
                                        ========
</TABLE>



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

      The condensed consolidated financial statements include the accounts of
      CITGO and its wholly owned subsidiaries and Cit-Con Oil Corporation, which
      was 65% owned by CITGO through December 31, 2001 (collectively, "the
      Company"). On January 1, 2002, CITGO acquired the outstanding 35 percent
      interest in Cit-Con from Conoco, Inc. The principal asset of Cit-Con is a
      lubricants refinery in Lake Charles, Louisiana. This transaction did not
      have a material effect on the consolidated financial position or results
      of operations of the Company.

      Certain reclassifications have been made to the March 31, 2001 financial
      statements to conform to the classifications used at March 31, 2002.


                                       6
<PAGE>
2.    CHANGE IN ACCOUNTING PRINCIPLE

      On January 1, 2001 the Company adopted Statement of Financial Accounting
      Standards No. 133, "Accounting for Derivative Instruments and Hedging
      Activities" ("SFAS No. 133"). The statement, as amended, establishes
      accounting and reporting standards for derivative instruments and for
      hedging activities. It requires that an entity recognize all derivatives,
      at fair value, as either assets or liabilities in the statement of
      financial position with an offset either to shareholder's equity and
      comprehensive income or income depending upon the classification of the
      derivative. Under the transition provisions of SFAS No. 133, on January 1,
      2001 the Company recorded an after-tax, cumulative-effect-type transition
      benefit of $13.6 million (as restated) to net income related to
      derivatives that existed on that date and an after-tax,
      cumulative-effect-type transition charge of $1.5 million to accumulated
      other comprehensive income.

3.    INVENTORIES

      Inventories, primarily at LIFO, consist of the following:

<TABLE>
<CAPTION>
                                    MARCH 31,   DECEMBER 31,
                                     2002          2001
                                  (UNAUDITED)  (AS RESTATED)
                                  -----------  -------------
                                        (000'S OMITTED)
<S>                               <C>          <C>
         Refined products         $  766,150   $  836,683
         Crude oil                   184,572      193,319
         Materials and supplies       79,559       79,344
                                  ----------   ----------
                                  $1,030,281   $1,109,346
                                  ==========   ==========
</TABLE>


                                       7
<PAGE>
4.    LONG-TERM DEBT AND FINANCING ARRANGEMENTS

<TABLE>
<CAPTION>
                                                                           MARCH 31,    DECEMBER 31,
                                                                             2002           2001
                                                                          (UNAUDITED)   (AS RESTATED)
                                                                          -----------    -----------
                                                                                (000'S OMITTED)
<S>                                                                     <C>            <C>
         Revolving bank loans                                           $   325,000    $   391,500

         Senior Notes, $200 million face amount, due 2006 with
            interest rate of 7.875%                                         199,875        199,867

         Private Placement Senior Notes, due 2002 to 2006 with
            interest rate of 9.30%                                           56,819         56,819

         Master Shelf Agreement Senior Notes, due 2002 to
            2009 with interest rates from 7.17% to 8.94%                    235,000        260,000

         Tax Exempt Bonds, due 2004 to 2032 with variable
            and fixed interest rates                                        382,370        357,370

         Taxable Bonds, due 2026 to 2028 with variable interest rates       121,000        146,000
                                                                        -----------    -----------
                                                                          1,320,064      1,411,556
         Current portion of long-term debt                                  (86,364)      (107,864)
                                                                        -----------    -----------
                                                                        $ 1,233,700    $ 1,303,692
                                                                        ===========    ===========
</TABLE>


5.    INVESTMENT IN LYONDELL-CITGO REFINING LP

      LYONDELL-CITGO Refining LP ("LYONDELL-CITGO") owns and operates a 265 MBPD
      refinery in Houston, Texas and is owned by subsidiaries of CITGO (41.25%)
      and Lyondell Chemical Company (58.75%) ("the Owners"). This refinery
      processes heavy crude oil supplied by Petroleos de Venezuela, S.A.
      ("PDVSA" which may also be used to refer to one or more of its
      subsidiaries) 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.

      On February 9, 2001, PDVSA notified LYONDELL-CITGO that effective February
      1, 2001, it had declared force majeure under the contract described above.
      As of December 31, 2001, PDVSA deliveries of crude oil to LYONDELL-CITGO
      had not been reduced due to PDVSA's declaration of force majeure. On
      January 22, 2002, PDVSA notified LYONDELL-CITGO that pursuant to the
      February 9, 2001 declaration of force majeure, effective March 1, 2002,
      PDVSA expects to deliver approximately 20 percent less than the contract
      volume and that force majeure will be in effect until at least June 2002.
      PDVSA delivered approximately 89 percent of the contractual crude oil
      volume during the first quarter of 2002. When PDVSA reduces its delivery
      of crude oil under the crude oil supply contract, LYONDELL-CITGO is
      required to use alternative sources of crude oil which may result in
      reduced operating margins. The future effect of this declaration on
      LYONDELL-CITGO's crude oil supply and the duration of this situation are
      not known at this time.


                                       8
<PAGE>
      CITGO has notes receivable from LYONDELL-CITGO which total $35 million
      at March 31, 2002 and December 31, 2001. The notes bear interest at
      market rates and are due July 1, 2003. These notes are included in
      other assets in the accompanying consolidated balance sheets.

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

<TABLE>
<CAPTION>
                                             March 31,  December 31,
                                              2002          2001
                                              ----          ----
                                          (Unaudited)
                                                (000s omitted)

<S>                                       <C>           <C>
         Carrying value of investment     $  521,063    $  507,940
         Notes receivable                     35,278        35,278
         Participation interest                   41%           41%

         Summary of financial position:
            Current assets                $  256,000    $  227,000
            Non current assets             1,430,000     1,434,000
            Current liabilities              813,000       377,000
            Non current liabilities          344,000       776,000
            Member's equity                  529,000       508,000
</TABLE>

<TABLE>
<CAPTION>
                                    Three Months Ended March 31,
                                    ----------------------------
                                           2002        2001
                                           ----        ----
                                       (Unaudited)
<S>                                      <C>        <C>
         Equity in net income            $ 14,438   $ 14,898
         Cash distribution received        16,715     15,372

         Summary of operating results:
            Revenue                      $706,718   $910,117
            Gross profit                   60,312     71,999
            Net income                     41,297     41,824
</TABLE>


                                       9

<PAGE>
6.       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.

         A class action lawsuit brought by four former marketers of the UNO-VEN
         Company ("UNO-VEN") in U.S. District Court in Wisconsin against UNO-VEN
         alleging improper termination of the UNO-VEN Marketer Sales Agreement
         under the Petroleum Marketing Practices Act in connection with PDVMR's
         1997 acquisition of Unocal's interest in UNO-VEN has resulted in the
         Federal judge granting the Company's motion for summary judgment. PDVMR
         and it's parent, VPHI, jointly and severally, have agreed to indemnify
         UNO-VEN and certain other related entities against certain liabilities
         and claims, including this matter.

         A lawsuit is pending against PDVMR and CITGO in Illinois state court
         which claims damages as a result of PDVMR invoicing a partnership in
         which it is a partner, and an affiliate of the other partner of the
         partnership, alleging excessive charges for electricity utilized by
         these entities' facilities located adjacent to the Lemont, Illinois
         refinery. The Company has denied all allegations and is pursuing its
         defenses.

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

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

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

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

         CITGO is among defendants to class action and individual lawsuits in
         New York and Illinois alleging contamination of water supplies by
         methyl tertiary butyl ether ("MTBE"), a component of


                                       10
<PAGE>
         gasoline. These actions allege that MTBE poses public health risks and
         seek testing, damages and remediation of the alleged contamination.
         These matters are in early stages of discovery. One of the Illinois
         cases has been transferred to New York and consolidated with the case
         pending in New York. CITGO has denied all of the allegations and is
         pursuing its defenses. A North Carolina case has been settled for an
         immaterial amount.

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

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

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

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

         The Texas Natural Resources Conservation Commission conducted
         environmental compliance reviews at the Corpus Christi refinery in 1998
         and 1999. The Texas Commission issued Notices of Violation ("NOV")
         related to each of the reviews and has proposed fines of approximately
         $970,000


                                       11
<PAGE>
         based on the 1998 review and $700,000 based on the 1999 review. The
         first NOV was issued in January 1999 and the second NOV was issued in
         December 1999. Most of the alleged violations refer to recordkeeping
         and reporting issues, failure to meet required emission levels, and
         failure to properly monitor emissions. The Company is currently engaged
         in settlement discussions, but is prepared to contest the alleged
         violations and proposed fines if a reasonable settlement cannot be
         reached.

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

         In October 1999, the LDEQ issued the Company a NOV and Potential
         Penalty alleging violation of the National Emission Standards for
         Hazardous Air Pollutants ("NESHAPS") regulations covering benzene
         emissions from wastewater treatment operations at CITGO's Lake Charles,
         Louisiana refinery and requested additional information. The Company
         finalized a Settlement Agreement April 11, 2002 with the LDEQ that had
         the Company pay a penalty of $300,000 and agree to implement beneficial
         environmental projects at the Lake Charles refinery estimated at $1.3
         million as well as miscellaneous requirements regarding compliance with
         NESHAPS.

         In January and July 2001, CITGO received NOVs from the U.S. EPA
         alleging violations of the Federal Clean Air Act. The NOVs are an
         outgrowth of an industry-wide and multi-industry U.S. EPA enforcement
         initiative alleging that many refineries and electric utilities
         modified air emission sources without obtaining permits under the New
         Source Review provisions of the Clean Air Act. The NOV's to CITGO
         followed inspections and formal Information Requests regarding the
         Company's Lake Charles, Louisiana and Corpus Christi, Texas refineries
         and the Lemont, Illinois refinery which at the time was operated by
         CITGO but not owned by CITGO. At the U.S. EPA's request, the Company is
         engaged in settlement discussions, but is prepared to contest the NOVs
         if settlement discussions fail. If the Company settles or is found to
         have violated the provisions cited in the NOVs, it would be subject to
         possible penalties and significant capital expenditures for
         installation or upgrading of pollution control equipment or
         technologies.

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

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

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

         DERIVATIVE COMMODITY AND FINANCIAL INSTRUMENTS - As of March 31, 2002
         the Company's petroleum commodity derivatives included exchange traded
         futures contracts, forward purchase and


                                       12
<PAGE>
         sale contracts, exchange traded and over-the-counter options, and
         over-the-counter swaps. At March 31, 2002, the balance sheet captions
         prepaid expenses and other current assets and other current liabilities
         include $23 million and $24 million, respectively, related to the fair
         values of open commodity derivatives.

         CITGO has also entered into various interest rate swaps to manage its
         risk related to interest rate changes on its debt. The fair value of
         the interest rate swap agreements in place at March 31, 2002, based on
         the estimated amount that CITGO would receive or pay to terminate the
         agreements as of that date and taking into account current interest
         rates, was a loss of $3 million, the offset of which is recorded in the
         balance sheet caption other current liabilities. In connection with the
         determination of fair market value, the Company considers the
         creditworthiness of the counterparties, but no adjustment was
         determined to be necessary as a result.

7.       RELATED PARTY TRANSACTIONS

         CITGO's largest supplier of crude oil is PDVSA. CITGO has entered into
         long-term crude oil supply agreements with PDVSA with respect to the
         crude oil requirements for each of CITGO's refineries. These crude oil
         supply agreements contain force majeure provisions which entitle PDVSA
         to reduce the quantity of crude oil and feedstocks delivered under the
         crude oil supply agreements under specified circumstances. On February
         9, 2001, PDVSA notified CITGO that it had declared force majeure,
         effective February 1, 2001, under each of the long-term crude oil
         supply agreements it has with CITGO. Under a force majeure declaration,
         PDVSA may reduce the amount of crude oil that it would otherwise be
         required to supply under these agreements. During 2001, PDVSA
         deliveries of crude oil to CITGO were slightly less than contractual
         base volumes due to this declaration of force majeure. Therefore, the
         Company was required to obtain alternative sources of crude oil, which
         resulted in lower operating margins. On January 22, 2002, PDVSA
         notified CITGO that pursuant to the February 9, 2001 declaration of
         force majeure, effective March 1, 2002, PDVSA expected to deliver
         approximately 20 percent less than the contract volume and PDVSA
         indicated that force majeure will be in effect until at least June
         2002. PDVSA delivered approximately 91 percent of the contractual crude
         oil volume during the first quarter of 2002. In March 2002, PDVSA
         delivered approximately 82 percent of the contractual crude oil volume.
         When PDVSA reduces its delivery of crude oil under these crude oil
         supply agreements, CITGO may obtain alternative sources of crude oil or
         increase its purchases of refined products which may result in reduced
         operating margins. The future effect of this declaration on CITGO's
         crude oil supply and the duration of this situation are not known at
         this time.

8.       INSURANCE RECOVERIES

         The insurance recoveries of $95 million included in the first quarter
         of 2002 relate 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. A new
         crude unit is expected to be operational in May 2002. The Company has
         insurance coverage for this type of event including business
         interruption insurance. The Company received cash proceeds of
         $101 million during the quarter, a portion of which were applied to
         receivables recorded during 2001. The Company expects to recover
         additional amounts related to this event.


                                       13
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

         The following discussion of the financial condition and results of
operations of CITGO should be read in conjunction with the unaudited condensed
consolidated financial statements of CITGO included elsewhere herein. Reference
is made to CITGO's Annual Report for the fiscal year ended December 31, 2001 on
Form 10-K, dated March 28, 2002, for additional information and a description of
critical accounting policies and factors which may cause substantial
fluctuations in the earnings and cash flows of CITGO.

         On January 1, 2002, PDV America, the parent company of CITGO, made a
contribution to the capital of CITGO of all of the common stock of PDV America's
wholly owned subsidiary, VPHI. Effective January 1, 2002, the accounts of VPHI
are included in the consolidated financial statements of CITGO at the historical
carrying value of PDV America's investment in VPHI. (See Note 1 to the condensed
consolidated financial statements). In the following discussion and analysis of
financial condition and results of operations, 2001 data has been restated to
reflect the Company's financial condition and results of operations for the
quarter ended March 31, 2001 as if the transaction had occurred on January 1,
2001.

         In the quarter ended March 31, 2002, CITGO generated a net loss of
$15.6 million on total revenue of $3.8 billion compared to net income of $112.2
million on total revenue of $5.0 billion for the same period last year. (See
"Gross margin").


                                       14
<PAGE>
RESULTS OF OPERATIONS

         The following table summarizes the sources of CITGO's sales revenues
and sales volumes for the three-month periods ended March 31, 2002 and 2001:


                        CITGO SALES REVENUES AND VOLUMES
<TABLE>
<CAPTION>
                                                        THREE                       THREE
                                                    MONTHS ENDED                 MONTHS ENDED
                                                       MARCH 31,                   MARCH 31,
                                                ----------------------------------------------------
                                                  2002          2001          2002         2001
                                                  ----          ----          ----         ----
                                                            (AS RESTATED)              (AS RESTATED)
                                                            -------------              -------------
                                                   ($ in millions)           (gallons in millions)
<S>                                             <C>            <C>            <C>          <C>
Gasoline                                        $ 2,110        $ 2,660        3,340        3,014
Jet fuel                                            310            482          532          573
Diesel/#2 fuel                                      758          1,188        1,319        1,457
Asphalt                                              41             50           77           90
Petrochemicals and industrial products              298            426          499          536
Lubricants and waxes                                130            142           59           70
                                                -------------------------------------------------
        Total refined product sales               3,647          4,948        5,826        5,740
Other sales and adjustments                          24             14
                                                -------------------------------------------------
        Total sales                             $ 3,671        $ 4,962        5,826        5,740
                                                =================================================
</TABLE>

         The following table summarizes CITGO's cost of sales and operating
expenses for the three-month periods ended March 31, 2002 and 2001:


                   CITGO COST OF SALES AND OPERATING EXPENSES
<TABLE>
<CAPTION>
                                                                                THREE MONTHS
                                                                               ENDED MARCH 31,
                                                                  -----------------------------------
                                                                           2002                2001
                                                                  -----------------------------------
                                                                                          (As Restated)
                                                                                           -----------
                                                                             ($ in millions)
<S>                                                                <C>                    <C>
Crude oil                                                                    $ 892           $ 1,326
Refined products                                                             1,982             2,462
Intermediate feedstocks                                                        266               309
Refining and manufacturing costs                                               283               301
Other operating costs, expenses and inventory changes                          286               349
                                                                  -----------------------------------
       Total cost of sales and operating expenses                          $ 3,709           $ 4,747
                                                                  ===================================
</TABLE>


                                       15
<PAGE>
         Sales revenues and volumes. Sales decreased $1.3 billion, or
approximately 26%, in the three-month period ended March 31, 2002 as compared to
the same period in 2001. This was due to a decrease in average sales price of
27% partially offset by an increase in sales volume of 2%. (See CITGO Sales
Revenues and Volumes table above.)

         Equity in earnings of affiliates. Equity in earnings of affiliates
decreased by $5 million for the three-month period ended March 31, 2002 as
compared to the same period in 2001. The decrease was primarily due to the
decrease in the earnings of Nelson Industrial Steam Company. CITGO's share of
these earnings decreased $9 million, from $7 million in the first quarter of
2001 to $(2) million in the first quarter of 2002. This decrease was partially
offset by an increase in the earnings of pipeline affiliates. CITGO's share of
these earnings increased $4 million, from $4 million in the first quarter of
2001 to $8 million in the first quarter of 2002.

         Insurance recoveries. The insurance recoveries of $95 million included
in the first quarter of 2002 relate 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. A
new crude unit is expected to be operational in May 2002. The Company has
insurance coverage for this type of event including business interruption
insurance. The Company expects to recover additional amounts related to this
event.

         Cost of sales and operating expenses. Cost of sales and operating
expenses decreased by $1 billion or 22%, in the quarter ended March 31, 2002 as
compared to the same period in 2001. PDVSA's reduction of deliveries of crude
oil related to its declaration of force majeure on its crude oil supply
agreements did not have a significant effect on the crude oil component of cost
of sales and operating expenses in the first quarter 2002 or 2001. (See CITGO
Cost of Sales and Operating Expenses table above.)

         CITGO purchases refined products to supplement the production from its
refineries to meet marketing demands and resolve logistical issues. Refined
product purchases represented 53% of total cost of sales and operating expenses
for the first quarter 2002 and 52% for the first quarter of 2001. CITGO
estimates margins on purchased products, on average, are lower than margins on
produced products due to the fact that CITGO can only receive the marketing
portion of the total margin received on the produced refined products. However,
purchased products are not segregated from CITGO produced products and margins
may vary due to market conditions and other factors beyond the Company's
control. As such, it is not practical to measure the effects on profitability of
changes in volumes of purchased products. In the near term, other than normal
refinery turnaround maintenance, CITGO does not anticipate operational actions
or market conditions which might cause a material change in anticipated
purchased product requirements; however, there could be events beyond the
control of CITGO which impact the volume of refined products purchased. (See
also "Factors Affecting Forward Looking Statements".)

         Gross margin. The gross margin for the three-month period ended March
31, 2002 was negative, approximately (0.7) cents per gallon, compared to a
positive gross margin of approximately 3.7 cents per gallon for the same period
in 2001. The revenue per gallon component in the three-month period ended March
31, 2002 was approximately 23 cents less than the revenue per gallon in the
three-month period ended March 31, 2001. The cost per gallon component in the
three-month period ended March 31, 2002 was approximately 19 cents less than the
cost per gallon in the three-month period ended March 31, 2001. As a result, the
gross margin decreased approximately 4.4 cents on a per gallon basis in the
quarter ended March 31, 2002 compared to the same period in 2001. 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 CITGO's consolidated operating results therefore depends in
part on how quickly refined product prices adjust to reflect these changes.
However, in the first quarter 2002, there was a substantial decrease in refined
product sales


                                       16
<PAGE>
prices without an equivalent decrease in costs resulting in a significant
negative impact on CITGO's gross margin and earnings.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased 27% from $60 million in the first quarter of
2001 to $76 million in the first quarter of 2002, primarily related to
sponsorship fees, professional and consulting fees, and the start-up expenses
related to international operations.

         Interest Expense. Interest expense decreased by $3 million in the
three-month period ended March 31, 2002 as compared to the same period in 2001.
This was primarily due to the decrease in key interest rates during the first
quarter.

LIQUIDITY AND CAPITAL RESOURCES

         For the three-month period ended March 31, 2002, the Company's
consolidated net cash provided by operating activities totaled approximately $58
million including $101 million from insurance proceeds. Operating cash flows
were derived from a net loss of $16 million, depreciation and amortization of
$72 million and changes in working capital and other adjustments of $2 million.
The more significant changes in working capital included the decrease in
inventories of approximately $79 million, the decrease in prepaid expenses of
$54 million, the increase in income taxes payable of $32 million, and the
decrease in accounts payable and other current liabilities, including payables
to affiliates, of approximately $99 million. Additionally, other long term
assets increased $67 million.

         Net cash used in investing activities totaled $139 million for the
three-month period ended March 31, 2002 consisting primarily of capital
expenditures of $121 million (compared to $37 million for the same period in
2001). The capital expenditures during the first quarter of 2002 relate
primarily to crude unit reconstruction at the Lemont refinery. On August 14,
2001, a fire occurred at the crude distillation unit of the Lemont refinery. The
crude unit was destroyed and the refinery's other processing units were
temporarily taken out of production. A new crude unit is expected to be
operational in May 2002.

         Net cash used in financing activities totaled $2 million for the
three-month period ended March 31, 2002 consisting primarily of $67 million of
payments on revolving bank loans, $25 million of payments on master shelf
agreement notes and $25 million of payments on taxable bonds, offset by $90
million net proceeds from short-term bank loans and $25 million net proceeds on
tax-exempt bonds.

         As of March 31, 2002, capital resources available to the Company
included cash generated by operations, available borrowing capacity under
CITGO's committed bank facilities of $171 million and $100 million of
uncommitted short-term borrowing facilities with various banks. Additionally,
the remaining $400 million from CITGO's shelf registration with the Securities
and Exchange Commission for $600 million of debt securities may be offered and
sold from time to time. CITGO management believes that the Company has
sufficient capital resources to carry out planned capital spending programs,
including regulatory and environmental projects in the near term, and to meet
currently anticipated future obligations as they arise. CITGO periodically
evaluates other sources of capital in the marketplace and anticipates that
long-term capital requirements will be satisfied with current capital resources
and future financing arrangements, including the issuance of debt securities.
The Company's ability to obtain such financing will depend on numerous factors,
including market conditions and the perceived creditworthiness of the Company at
that time. (See also "Factors Affecting Forward Looking Statements".)

         In April 2000, CITGO amended an agreement to sell trade accounts
receivable on an ongoing basis and without recourse. The amendment increased the
amount of such receivables that can be sold to $225


                                       17
<PAGE>
million. The amended agreement expires in June 2002 and is renewable for
successive annual terms by mutual agreement. CITGO intends to renew the
agreement.

         The Company is in compliance with its obligations under its debt
financing arrangements at March 31, 2002.

NEW ACCOUNTING STANDARDS

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

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

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


                                       18
<PAGE>
PROPOSED ACCOUNTING CHANGE

         The American Institute of Certified Public Accountants has issued a
"Statement of Position" exposure draft on cost capitalization that is expected
to require companies to expense the non-capital portion of major maintenance
costs as incurred. The statement is expected to require that any existing
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 this change will be required to
be adopted for fiscal years beginning after June 15, 2002, and that the effect
of expensing existing deferred major maintenance costs will be reported as a
cumulative effect of an accounting change in the consolidated statement of
income. At March 31, 2002, the Company had included turnaround costs of $126
million in other assets. Company management has not determined the amount, if
any, of these costs that could be capitalized under the provisions of the
exposure draft.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Introduction. CITGO has exposure to price fluctuations of crude oil and
refined products as well as fluctuations in interest rates. To manage these
exposures, management has defined certain benchmarks consistent with its
preferred risk profile for the environment in which the Company operates and
finances its assets. CITGO does not attempt to manage the price risk related to
all of its inventories of crude oil and refined products. As a result, at March
31, 2002, CITGO was exposed to the risk of broad market price declines with
respect to a substantial portion of its crude oil and refined product
inventories. The following disclosures do not attempt to quantify the price risk
associated with such commodity inventories.

         Commodity Instruments. CITGO balances its crude oil and petroleum
product supply/demand and manages a portion of its price risk by entering into
petroleum commodity derivatives.


                                       19
<PAGE>
                        NON TRADING COMMODITY DERIVATIVES
                        Open Positions at March 31, 2002

<TABLE>
<CAPTION>
                                                                        MATURITY   CONTRACTED      CONTRACT     MARKET
      COMMODITY                          DERIVATIVE                       DATE       VOLUME          VALUE       VALUE
      ---------                          ----------                       ----       ------          -----       -----
                                                                                                     ($ in millions)
                                                                                                   --------------------
<S>                     <C>                                             <C>        <C>             <C>          <C>
No Lead Gasoline (1)    Futures Purchased                                 2002         441           $ 15.1      $ 15.4
                        Futures Sold                                      2002         577           $ 18.6      $ 20.0
                        Forward Purchase Contracts                        2002        2,826          $ 86.5      $ 93.1
                        Forward Sale Contracts                            2002        1,350          $ 41.9      $ 45.3

Distillates (1)         Futures Purchased                                 2002         926           $ 25.1      $ 26.7
                        Futures Purchased                                 2003         152           $  3.9      $  4.4
                        Futures Sold                                      2002         882           $ 22.5      $ 25.1
                        Forward Purchase Contracts                        2002        1,500          $ 39.6      $ 41.1
                        Forward Sale Contracts                            2002        2,050          $ 52.7      $ 57.1

Crude Oil (1)           Futures Purchased                                 2002         965           $ 22.1      $ 25.3
                        Futures Sold                                      2002         856           $ 21.4      $ 22.5
                        Futures Sold                                      2003         90            $  2.2      $  2.2
                        Listed Options Purchased                          2002        1,550             $ -      $  0.9
                        Listed Options Sold                               2002        1,550             $ -      $ (0.4)
                        OTC Swaps (Pay Floating/Receive Fixed)(3)         2002        1,260             $ -      $ (1.0)
                        OTC Swaps (Pay Fixed/Receive Floating)(3)         2002        1,830             $ -      $  1.7
                        Forward Purchase Contracts                        2002        5,021          $120.7      $132.4
                        Forward Sale Contracts                            2002        5,042          $119.0      $133.0

Natural Gas (2)         Futures Sold                                      2002         40            $  1.3      $  1.3
</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.


                                       20
<PAGE>
                  NON TRADING COMMODITY DERIVATIVES
           Open Positions at March 31, 2001 (As Restated)

<TABLE>
<CAPTION>
                                                                        MATURITY   CONTRACTED       CONTRACT       MARKET
      COMMODITY                           DERIVATIVE                      DATE       VOLUME           VALUE         VALUE
      ---------                           ----------                      ----       ------           -----         -----
                                                                                                        ($ in millions)
                                                                                                   ----------------------
<S>                      <C>                                            <C>        <C>             <C>            <C>
No Lead Gasoline (1)     Futures Purchased                                2001        2007           $  75.6      $  76.7
                         Forward Purchase Contracts                       2001        3752           $ 132.3      $ 132.7
                         Forward Sale Contracts                           2001        2975           $ 104.8      $ 106.3

Distillates (1)          Futures Purchased                                2001        1171           $  34.6      $  34.8
                         Futures Purchased                                2002         299           $   9.0      $   9.0
                         OTC Swap Options Purchased                       2001         10            $     -      $     -
                         OTC Swap Options Sold                            2001         10            $     -      $     -
                         OTC Swap Options Purchased                       2002         30            $     -      $     -
                         OTC Swap Options Sold                            2002         30            $     -      $  (0.1)
                         Forward Purchase Contracts                       2001        1174           $  34.8      $  34.3
                         Forward Sale Contracts                           2001        1419           $  42.9      $  42.8

Crude Oil (1)            Futures Purchased                                2001         200           $   5.3        $ 5.3
                         Forward Purchase Contracts                       2001        7254           $ 201.7      $ 190.0
                         Forward Sales Contracts                          2001        8295           $ 230.8      $ 217.3

Natural Gas (2)          Futures Purchased                                2001         40            $   2.1      $   2.0
                         OTC Swap Options Purchased                       2001         100           $     -      $   0.3
                         OTC Swap Options Sold                            2001         120           $     -      $  (0.4)
</TABLE>

-------------------------
(1)      Thousands of barrels
(2)      Ten-thousands of mmbtu


                                       21
<PAGE>
         Debt Related Instruments. CITGO has fixed and floating U.S. currency
denominated debt. CITGO uses interest rate swaps to manage its debt portfolio
toward a benchmark of 40 to 60 percent fixed rate debt to total fixed and
floating rate debt. These instruments have the effect of changing the interest
rate with the objective of minimizing CITGO's long-term costs. At March 31, 2002
and 2001, CITGO's primary exposures were to LIBOR and floating rates on tax
exempt bonds.

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


                      NON TRADING INTEREST RATE DERIVATIVES
                    Open Positions at March 31, 2002 and 2001
<TABLE>
<CAPTION>
                                                                                 Notional
                                  Expiration                  Fixed Rate         Principal
 Variable Rate Index                 Date                       Paid               Amount
 -------------------                 ----                       ----               ------
                                                                              ($ in millions)
<S>                             <C>                           <C>             <C>
J.J. Kenny                      February 2005                   5.30%              $ 12
J.J. Kenny                      February 2005                   5.27%                15
J.J. Kenny                      February 2005                   5.49%                15
                                                                                   ----
                                                                                   $ 42
                                                                                   ====
</TABLE>

         The fair value of the interest rate swap agreements in place at March
31, 2002, based on the estimated amount that CITGO would receive or pay to
terminate the agreements as of that date and taking into account current
interest rates, was a loss of $3 million.


                                       22
<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 March 31, 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%              $115             3.45%
          2003                     61           8.79%               300             5.15%
          2004                     31           8.02%                16             6.52%
          2005                     12           9.30%                 -                -
          2006                    252           8.06%                 -                -
       Thereafter                 128           7.85%               484             9.85%
                                 ----           -----              ----            -----
         Total                 $ 495            8.15%              $915             7.45%
                               ======           =====             =====            =====

       Fair Value              $ 487                              $915
                               ======                             ====
</TABLE>


                                DEBT OBLIGATIONS
                                At March 31, 2001
                                  (As Restated)
<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>
          2001                   $ 40           9.11%              $ 5              5.52%
          2002                     36           8.78%                -                 -
          2003                     61           8.79%                -                 -
          2004                     31           8.02%               16              6.71%
          2005                     11           9.30%                -                 -
       Thereafter                 381           7.99%              485              8.49%
                                 ----           -----             ----             -----
         Total                  $ 560           8.23%            $ 506              8.40%
                                =====           =====            =====             =====

       Fair Value               $ 576                            $ 506
                                =====                            =====
</TABLE>


                                       23
<PAGE>
                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         The required information is incorporated by reference to Part II of
this Report from Note 6 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

                           None.

         (b)      Reports on Forms 8-K and 8-K/A:

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

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

                  A Form 8-K/A was filed with the Securities and Exchange
         Commission on March 8, 2002 amending the Form 8-K noted above. The
         8-K/A included the financial statements as of and for the year ended
         December 31, 2001 of VPHI and the pro forma financial information for
         CITGO's consolidated financial position as of December 31, 2001 and
         results of operations for the three years in the period ended December
         31, 2001 as if the transaction had occurred on January 1, 1999.


                                       24
<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of the Securities 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:   May 10, 2002                           /s/   Larry E. Krieg
                                            ----------------------------------
                                                     Larry E. Krieg
                                          Controller (Chief Accounting Officer)



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