##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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Form 20-F



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ANNUAL REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For
the fiscal year ended December 31, 2005

Commission File Number: 0-99

PETRÓLEOS MEXICANOS

(Exact name of registrant as specified in its
charter)



|                                                |  |                                                
|----------------------------------------------- |  | -----------------------------------------------
|Mexican Petroleum                               |  | United Mexican States                          
|(Translation of registrants name into English) |  | (Jurisdiction of incorporation or organization)



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Avenida Marina Nacional No. 329

Colonia Huasteca

México, D.F. 11311

México

(Address of principal executive offices)



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Securities registered or to be
registered pursuant to Section 12(b) of the Act.

None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Title of Each Class

8.85%
Global Guaranteed Notes due 2007

9.50% Global Guaranteed Bonds due 2027

91/4% Global Guaranteed Bonds due 2018

93/8% Notes due December 2, 2008, Puttable at Par on December 2, 2001

8.50% Notes due 2008

9.125% Notes due 2010

8.00% Notes due 2011

7.875% Notes due 2009

8.625% Bonds due 2022

7.375% Notes due 2014

6.125% Notes due 2008

9.00%
Guaranteed Notes due 2007

8.85% Guaranteed Notes due 2007

93/8% Guaranteed Notes due 2008

91/4%
Guaranteed Bonds due 2018

8.625% Guaranteed Bonds due 2023

9.50% Guaranteed Bonds due 2027

5.75% Notes due 2015

6.625% Bonds due 2035

Indicate the
number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report:   None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. ̈Yes    x  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934. ̈Yes    x  No

NoteChecking the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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.x  Yes ̈No

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark which financial statement item the registrant has elected to follow: ̈Item 17    x  Item 18

If this an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ̈Yes    x  No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ̈Yes ̈No



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##### Table of Contents

TABLE OF CONTENTS



|          |  |                                                                              |  |    
|--------- |  | ---------------------------------------------------------------------------- |  | ---
|          |  |                                                                             
|Item 1.   |  | Identity of Directors, Senior Management and Advisers                        |  | 4  
|          |  |                                                                             
|Item 2.   |  | Offer Statistics and Expected Timetable                                      |  | 4  
|          |  |                                                                             
|Item 3.   |  | Key Information                                                              |  | 5  
|          |  |                                                                             
|Item 4.   |  | Information on the Company                                                   |  | 13 
|          |  |                                                                             
|Item 5.   |  | Operating and Financial Review and Prospects                                 |  | 90 
|          |  |                                                                             
|Item 6.   |  | Directors, Senior Management and Employees                                   |  | 127
|          |  |                                                                             
|Item 7.   |  | Major Shareholders and Related Party Transactions                            |  | 149
|          |  |                                                                             
|Item 8.   |  | Financial Information                                                        |  | 150
|          |  |                                                                             
|Item 9.   |  | The Offer and Listing                                                        |  | 157
|          |  |                                                                             
|Item 10.  |  | Additional Information                                                       |  | 157
|          |  |                                                                             
|Item 11.  |  | Quantitative and Qualitative Disclosures about Market Risk                   |  | 165
|          |  |                                                                             
|Item 12.  |  | Description of Securities Other than Equity Securities                       |  | 170
|          |  |                                                                             
|Item 13.  |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 171
|          |  |                                                                             
|Item 14.  |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 171
|          |  |                                                                             
|Item 15.  |  | Controls and Procedures                                                      |  | 171
|          |  |                                                                             
|Item 16A. |  | Audit Committee Financial Expert                                             |  | 172
|          |  |                                                                             
|Item 16B. |  | Code of Ethics                                                               |  | 172
|          |  |                                                                             
|Item 16C. |  | Principal Accountant Fees and Services                                       |  | 172
|          |  |                                                                             
|Item 16D. |  | Exemptions from the Listing Standards for Audit Committees                   |  | 173
|          |  |                                                                             
|Item 16E. |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       |  | 173
|          |  |                                                                             
|Item 17.  |  | Financial Statements                                                         |  | 174
|          |  |                                                                             
|Item 18.  |  | Financial Statements                                                         |  | 174
|          |  |                                                                             
|Item 19.  |  | Exhibits                                                                     |  | 174



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##### Table of Contents

Petróleos Mexicanos and its four subsidiary entities, Pemex-Exploración y
Producción (Pemex-Exploration and Production), Pemex-Refinación (Pemex-Refining), Pemex-Gas y Petroquímica Básica (Pemex-Gas and Basic Petrochemicals) and Pemex-Petroquímica
(Pemex-Petrochemicals), comprise the state oil and gas company of the United Mexican States, which we refer to as Mexico. Each of Petróleos Mexicanos and the subsidiary entities is a decentralized public entity of the Federal Government of
Mexico, which we refer to as the Mexican Government, and is a legal entity empowered to own property and carry on business in its own name. In addition, a number of subsidiary companies that are defined in Note 1 and listed in Note 2c. to our
consolidated financial statements included in Item 18, including the Pemex Project Funding Master Trust and the Fideicomiso F/163 (which are described below under Item 5Operating and Financial Review and ProspectsLiquidity and
Capital ResourcesCommitments for Capital Expenditures and Sources of Funding), are incorporated into the consolidated financial statements; these subsidiary companies are also identified with the corresponding ownership percentages in
Consolidated Structure of PEMEX on page 3. Petróleos Mexicanos, the subsidiary entities and the consolidated subsidiary companies are collectively referred to as PEMEX or we.

References herein to U.S. $, $, U.S. dollars or dollars are to United States dollars. References
herein to pesos or Ps. are to the lawful currency of Mexico. References herein to euros or  are to the lawful currency of the European Economic and Monetary Union. References herein to
pounds or £ are to the lawful currency of the United Kingdom. The term billion as used herein means one thousand million.

We maintain our consolidated financial statements and records in constant pesos. Unless otherwise indicated, we have translated all peso amounts to U.S. dollars in this Form 20-F, including all convenience
translations of our consolidated financial statements included herein, at an exchange rate of Ps. 10.7777 = U.S. $1.00, which is the exchange rate thatSecretaría de Hacienda y Crédito Público (Ministry of
Finance and Public Credit) instructed us to use on December 31, 2005. You should not construe these translations from pesos into dollars as actually representing such U.S. dollar amounts or meaning that you could convert such amounts into U.S.
dollars at the rates indicated. The peso has depreciated substantially in relation to the U.S. dollar since the end of 1994, when the Mexican Government allowed the peso to float freely against the U.S. dollar and the Mexican Government established
a broad economic reform program in response to these and other events. Due to the volatility of the peso/dollar exchange rate, the exchange rate on any date subsequent to the date hereof could be materially different from the rate indicated above.
See Item 3Key InformationExchange Rates for information regarding the rates of exchange between pesos and U.S. dollars.

The Private Securities Litigation Reform Act of 1995 provides for a safe harbor for forward-looking statements. This Form 20-F contains words, such as believe, expect and anticipate and similar
expressions that identify forward-looking statements, which reflect our views about future events and financial performance. Actual results could differ materially from those projected in such forward-looking statements as a result of various
factors that may be beyond our control, including, but not limited to, effects on us from competition, changes in the limitations on our access to sources of financing on competitive terms, significant economic or political developments in Mexico,
particularly developments affecting the energy sector, and changes in our regulatory environment. Accordingly, you should not place undue reliance on these forward-looking statements. In any event, these statements speak only as of their dates, and
we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

PRESENTATION OF INFORMATION CONCERNING RESERVES

The estimates of Mexicos proved reserves of crude oil and natural
gas for the three years ended included in this annual report have been calculated according to the technical definitions required by the U.S. Securities and Exchange Commission, or the SEC. Although DeGolyer and MacNaughton, Netherland, Sewell
International, S. de R.L. de C.V. and Ryder Scott Company L.P. reviewed our estimates of the hydrocarbon reserves of Mexico as of December 31, 2004, all reserve estimates involve some degree of uncertainty. See Item 3. Key
InformationRisk FactorsRisk Factors Related to the Relationship between PEMEX and the Mexican GovernmentThe Mexican nation, not PEMEX, owns the hydrocarbon reserves in Mexico, and Information on Mexicos
hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions for a description of the risks relating to our reserves and our reserve estimates.



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LOGO



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##### Table of Contents

PART I



|Item 1. | Identity of Directors, Senior Management and Advisers
|------- | -----------------------------------------------------

Not applicable.



|Item 2. | Offer Statistics and Expected Timetable
|------- | ---------------------------------------

Not
applicable.



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|Item 3. | Key Information
|------- | ---------------

SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction with, and are qualified in their entirety by reference to,
our consolidated financial statements included in Item 18. The selected financial data set forth below as of the five years ended December 31, 2005 have been derived from our consolidated financial statements for the years ended
December 31, 2001 and 2002, which are not included herein, and the consolidated financial statements of PEMEX for the years ended December 31, 2003, 2004 and 2005. The consolidated financial statements included in this Form 20-F were
audited by PricewaterhouseCoopers, S.C.

Our consolidated financial statements are prepared in accordance with Mexican Generally Accepted
Accounting Principles (which we refer to as Mexican GAAP). Beginning January 1, 2003, we recognize the effects of inflation in accordance with NIF-06 BIS A Section C, which requires the adoption of Bulletin B-10, Recognition
of the Effects of Inflation on Financial Information, under Mexican GAAP (which we refer to as Bulletin B-10). As a result of the adoption of Bulletin B-10, we have restated our consolidated financial statements for the years ended
December 31, 2001, 2002, 2003 and 2004, in order to present our results for each of these years on the same basis as the results for the year ended December 31, 2005 with respect to the recognition of the effects of inflation.
Consequently, the amounts shown in our consolidated financial statements are expressed in thousands of constant Mexican pesos as of December 31, 2005. The December 31, 2005 restatement factors applied to the financial statements at
December 31, 2001, 2002, 2003 and 2004 were 19.5%, 13.0%, 8.7% and 3.3%, respectively, which correspond to inflation from January 1, 2002, 2003, 2004 and 2005 through December 31, 2005, respectively, based on the national consumer
price index, or NCPI. See Note 2b. to our consolidated financial statements included herein for a summary of the effects of adoption of Bulletin B-10 and Notes 2h., 2m., 2n., 2o. and 2x. to our consolidated financial statements included
herein for a discussion of the inflation accounting rules applied as a result of the adoption of Bulletin B-10.

Mexican GAAP differs in
certain significant respects from United States Generally Accepted Accounting Principles (which we refer to as U.S. GAAP). The principal differences between our net income and equity under U.S. and Mexican GAAP are described in Note 20 to our
consolidated financial statements and Item 5Operating and Financial Review and ProspectsU.S. GAAP Reconciliation.



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##### Table of Contents

Selected Financial Data of PEMEX



|                                         |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|---------------------------------------- |  | ---------------------------------------------------------- | ------- | - | --------------------------- | --- | ------- | ---- |  | --- | ------- | - |  | ---- | ------- | - | ------- | --- | --------- | - |  | - | ------- | -
|                                         |  | Year Ended December 31,(1)(2)                              |        
|                                         |  | 2001                                                       |         |   | 2002                        |     |         | 2003 |  |     | 2004    |   |  | 2005 |         |   | 2005(4) |    
|                                         |  | (in millions of constant pesos as of December 31, 2005)(3) |         |   | (in millionsof U.S.dollars) |    
|Income Statement Data                    |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|Amounts in accordance with Mexican GAAP: |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|Net sales(5)                             |  | Ps.                                                        | 543,713 |   |                             | Ps. | 559,623 |      |  | Ps. | 679,819 |   |  | Ps.  | 799,368 |   |         | Ps. | 928,643   |   |  | $ | 86,163  |  
|Total revenues(5)                        |  |                                                            | 545,560 |   |                             |     | 559,526 |      |  |     | 683,038 |   |  |      | 810,895 |   |         |     | 940,480   |   |  |   | 87,262  |  
|Total revenues net of the IEPS tax       |  |                                                            | 429,331 |   |                             |     | 426,441 |      |  |     | 580,780 |   |  |      | 754,367 |   |         |     | 920,265   |   |  |   | 85,386  |  
|Operating income                         |  |                                                            | 291,070 |   |                             |     | 321,437 |      |  |     | 399,532 |   |  |      | 470,371 |   |         |     | 498,754   |   |  |   | 46,276  |  
|Comprehensive financing cost             |  |                                                            | 2,664   |   |                             |     | 6,782   |      |  |     | 33,416  |   |  |      | 7,283   |   |         |     | 4,479     |   |  |   | 416     |  
|Income (loss) for the period             |  |                                                            | (33,040 | ) |                             |     | (26,712 | )    |  |     | (44,179 | ) |  |      | (26,345 | ) |         |     | (76,282   | ) |  |   | (7,078  | )
|Balance Sheet Data (end of period)       |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|Amounts in accordance with Mexican GAAP: |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|Cash and cash equivalents                |  |                                                            | 17,252  |   |                             |     | 49,588  |      |  |     | 79,714  |   |  |      | 87,701  |   |         |     | 120,827   |   |  |   | 11,211  |  
|Total assets                             |  |                                                            | 663,225 |   |                             |     | 834,485 |      |  |     | 918,998 |   |  |      | 979,106 |   |         |     | 1,042,560 |   |  |   | 96,733  |  
|Long-term debt                           |  |                                                            | 147,142 |   |                             |     | 215,920 |      |  |     | 330,017 |   |  |      | 419,360 |   |         |     | 501,593   |   |  |   | 46,540  |  
|Total long-term liabilities              |  |                                                            | 432,534 |   |                             |     | 592,935 |      |  |     | 720,326 |   |  |      | 799,487 |   |         |     | 904,954   |   |  |   | 83,965  |  
|Equity                                   |  |                                                            | 144,715 |   |                             |     | 112,943 |      |  |     | 49,849  |   |  |      | 34,454  |   |         |     | (26,870   | ) |  |   | (2,493  | )
|Amounts in accordance with U.S. GAAP:    |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|Total revenues net of IEPS tax(6)        |  |                                                            | 428,777 |   |                             |     | 426,441 |      |  |     | 580,780 |   |  |      | 749,906 |   |         |     | 920,263   |   |  |   | 85,386  |  
|Operating income net of IEPS tax(6)      |  |                                                            | 174,533 |   |                             |     | 182,091 |      |  |     | 268,327 |   |  |      | 418,205 |   |         |     | 495,924   |   |  |   | 46,014  |  
|Comprehensive financing (cost) income    |  |                                                            | 865     |   |                             |     | (9,185  | )    |  |     | (29,144 | ) |  |      | 2,152   |   |         |     | (10,899   | ) |  |   | (1,011  | )
|Loss for the period                      |  |                                                            | (25,374 | ) |                             |     | (35,507 | )    |  |     | (72,076 | ) |  |      | (13,445 | ) |         |     | (73,905   | ) |  |   | (6,857  | )
|Total assets                             |  |                                                            | 687,277 |   |                             |     | 826,918 |      |  |     | 886,390 |   |  |      | 943,433 |   |         |     | 1,000,091 |   |  |   | 92,793  |  
|Equity (deficit)                         |  |                                                            | 68,953  |   |                             |     | 18,621  |      |  |     | (48,283 | ) |  |      | (50,484 | ) |         |     | (112,021  | ) |  |   | (10,394 | )
|Other Financial Data                     |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|Amounts in accordance with Mexican GAAP: |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|Depreciation and Amortization            |  |                                                            | 34,739  |   |                             |     | 36,755  |      |  |     | 44,070  |   |  |      | 43,296  |   |         |     | 52,791    |   |  |   | 4,898   |  
|Investments in fixed assets at cost(7)   |  |                                                            | 61,728  |   |                             |     | 103,229 |      |  |     | 73,766  |   |  |      | 77,564  |   |         |     | 83,227    |   |  |   | 7,722   |  
|Ratio of earnings to fixed charges:      |  |                                                            |         |   |                             |     |         |      |  |     |         |   |  |      |         |   |         |     |           |   |  |   |         |  
|Mexican GAAP(8)                          |  |                                                            |        |   |                             |     |        |      |  |     |        |   |  |      |        |   |         |     |          |   |  |   |        |  
|U.S. GAAP(8)                             |  |                                                            |        |   |                             |     |        |      |  |     |        |   |  |      |        |   |         |     |          |   |  |   |        |  

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|(1) | Includes Petróleos Mexicanos, the subsidiary entities and the subsidiary companies (including the Pemex Project Funding Master Trust and, for U.S. GAAP purposes, Pemex
Finance, Ltd.). For Mexican GAAP purposes, beginning with the year ended December 31, 2005, we include the financial position and results of Pemex Finance, Ltd. For Mexican GAAP and U.S. GAAP purposes, beginning with the year ended
December 31, 2003, we include the financial position and results of Fideicomiso F/163 and RepCon Lux S.A.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mexican GAAP differs from U.S. GAAP. For the most significant differences between U.S. GAAP and Mexican GAAP affecting our consolidated financial statements, see Note 20 to our
consolidated financial statements included herein and Item 5Operating and Financial Review and ProspectsU.S. GAAP Reconciliation.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Our consolidated financial statements for each of the five years ended December 31, 2005 were prepared in accordance with Mexican GAAP, including the recognition of the effect
of inflation in accordance with Bulletin B-10.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Translations into U.S. dollars of amounts in pesos have been made at the established exchange rate for accounting purposes of Ps. 10.7777 = U.S. $1.00 at
December 31, 2005. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollar amounts at the foregoing or any other rate.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes the Special Tax on Production and Services (the IEPS tax) as part of the sales price of the products sold.
|--- | ---------------------------------------------------------------------------------------------------------------------

|(6) | Figures are net of the IEPS tax.
|--- | --------------------------------

|(7) | Includes investments in fixed assets and capitalized interest. For 2003, it excludes certain expenditures charged to the oil field exploration and depletion reserve. See Note 2e. to
our financial statements included herein and Item 5Operating and Financial Review and ProspectsLiquidity and Capital Resources.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Under U.S. GAAP, earnings for the years ended December 31, 2001, 2002, 2003, 2004 and 2005 were insufficient to cover fixed charges. The amount by which fixed charges exceeded
earnings was Ps. 31,585 million, Ps. 42,030 million, Ps. 80,722 million, Ps. 18,847 million and Ps. 76,760 million, respectively. Under Mexican GAAP, earnings for the years ended December 31, 2001, 2002, 2003, 2004 and
2005 were insufficient to cover fixed charges. The amount by which fixed charges exceeded earnings was Ps. 37,658 million, Ps. 32,709 million, Ps. 52,076 million, Ps. 30,830 million and Ps. 81,415 million, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Source: PEMEXs financial statements.



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##### Table of Contents

EXCHANGE RATES

The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rate for the purchase of U.S. dollars, expressed in pesos per U.S. dollar. These rates have not been restated
in constant currency units.



|                        |      |               |     |        |            |        |            |       
|----------------------- | ---- | ------------- | --- | ------ | ---------- | ------ | ---------- | ------
|Period                  |      | Exchange Rate
|                        | High |               | Low |        | Average(1) |        | Period End
|Year Ended December 31, |      |               |     |        |            |        |            |       
|2001                    |      | 9.972         |     | 8.946  |            | 9.326  |            | 9.156 
|2002                    |      | 10.425        |     | 9.001  |            | 9.746  |            | 10.425
|2003                    |      | 11.406        |     | 10.113 |            | 10.846 |            | 11.242
|2004                    |      | 11.635        |     | 10.805 |            | 11.309 |            | 11.154
|2005                    |      | 11.411        |     | 10.414 |            | 10.894 |            | 10.628
|                        |      |               |     |       
|2006                    |      |               |     |        |            |        |            |       
|January                 |      | 10.643        |     | 10.437 |            | 10.542 |            | 10.440
|February                |      | 10.529        |     | 10.432 |            | 10.484 |            | 10.454
|March                   |      | 10.947        |     | 10.462 |            | 10.749 |            | 10.898
|April                   |      | 11.160        |     | 10.856 |            | 11.049 |            | 11.089
|May                     |      | 11.305        |     | 10.841 |            | 11.091 |            | 11.288
|June(2)                 |      | 11.460        |     | 11.282 |            | 11.399 |            | 11.418

---

|(1) | Average of month-end rates, except for 2006 monthly exchange rates.
|--- | -------------------------------------------------------------------

|(2) | For the period beginning June 1, 2006 to June 27, 2006.
|--- | -------------------------------------------------------

|Source: | Noon buying rate for cable transfers in New York reported by the Federal Reserve Bank of New York.
|------- | --------------------------------------------------------------------------------------------------

The noon buying rate for cable transfers in New York reported by the Federal Reserve Bank of New York on June 27, 2006 was Ps. 11.418 =
U.S. $1.00.

RISK FACTORS

Risk
Factors Related to the Operations of PEMEX

Crude oil and natural gas prices are volatile, and low oil and natural gas prices negatively affect
PEMEXs income

International crude oil and natural gas prices are subject to global supply and demand and fluctuate due to
many factors beyond our control. These factors include competition within the oil and natural gas industry and with other industries in supplying clients with competing commodities, international economic trends, exchange rate fluctuations,
expectations of inflation, domestic and foreign government regulations, political and other events in major oil and natural gas producing and consuming nations and actions taken by Organization of the Petroleum Exporting Countries (OPEC) members and
other oil exporting countries.

When international crude oil and natural gas prices are low, we earn less export sales revenue and,
therefore, earn less income because our costs remain roughly constant. Conversely, when crude oil and natural gas prices are high, we earn more export sales revenue and our income increases. As a result, future fluctuations in international crude
oil and natural gas prices will directly affect our results of operations and financial condition.

PEMEX is an integrated oil and gas company and is
exposed to production, equipment and transportation risks

We are subject to several risks that are common among oil and gas
companies. These risks include production risks (fluctuations in production due to operational hazards, natural disasters or weather, accidents, etc.), equipment risks (relating to the adequacy and condition of our facilities and equipment) and
transportation risks (relating to the condition and vulnerability of pipelines and other modes of transportation).



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More specifically, our business is subject to the risks of explosions in pipelines, refineries, plants,
drilling wells and other facilities, hurricanes in the Gulf of Mexico and other natural or geological disasters and accidents, fires and mechanical failures. The occurrence of any of these events could result in personal injuries, loss of life,
equipment damage, and environmental damage and the resulting clean-up and repair expenses.

Although we have purchased insurance policies
covering some of these risks, these policies may not cover all liabilities, and insurance may not be available for all risks. See Item 4Information on the CompanyBusiness OverviewPEMEX Corporate MattersInsurance.

PEMEX has a substantial amount of debt that could adversely affect our financial health and results of operations

We have a substantial amount of debt. At December 31, 2005, our total indebtedness, excluding accrued interest but including notes payable to
contractors, was approximately U.S. $49.8 billion, which is a 23.9% increase over our total indebtedness, excluding accrued interest, of U.S. $40.2 billion at December 31, 2004. Our level of debt may not decrease in the near or medium
term and may have an adverse effect on our financial condition and results of operations.

To service our debt, we rely on a combination of
cash flows provided by operations, drawdowns under our available credit facilities and the incurrence of additional indebtedness. Certain rating agencies have expressed concern regarding the total amount of debt, our increase in indebtedness over
the last several years and our substantial unfunded reserve for retirement pensions and seniority premiums. Due to our heavy tax burden, we have resorted to financings to fund our capital investment projects. Any lowering of our credit ratings may
have adverse consequences on our ability to access the financial markets and/or our cost of financing. We rely primarily on debt to finance our investments in capital expenditures. If we are unable to obtain financing on terms that are favorable,
this may hamper our ability to obtain further financing, and, as a result, we may not be able to make the capital expenditures needed to maintain our current production levels and increase Mexicos hydrocarbon reserves. See PEMEX
must make significant capital expenditures to maintain its current production levels and increase Mexicos hydrocarbon reserves. Mexican Government budget cuts, reductions in PEMEXs income and inability to obtain financing may limit
PEMEXs ability to make capital investments below.

PEMEXs compliance with environmental regulations in Mexico could result in
material adverse effects on our results of operations

A wide range of general and industry-specific Mexican federal and state
environmental laws and regulations apply to our operations. Numerous Mexican Government agencies and departments issue rules and regulations which are often difficult and costly to comply with and which carry substantial penalties for
non-compliance. This regulatory burden increases our costs because it requires us to make significant capital expenditures and limits our ability to extract hydrocarbons, resulting in lower revenues. For an estimate of our accrued environmental
liabilities, see Item 4Information on the CompanyEnvironmental RegulationEnvironmental Liabilities.

PEMEX publishes
less U.S. GAAP financial information than U.S. companies are required to file with the U.S. Securities and Exchange Commission

We
prepare our financial statements according to Mexican GAAP, which differs in certain significant respects from U.S. GAAP. See Item 3Key InformationSelected Financial Data and Note 20 to our consolidated financial statements
included herein. As a foreign issuer, we are not required to prepare quarterly U.S. GAAP financial information, and we therefore generally prepare U.S. GAAP information on a yearly basis only. As a result, there may be less or different publicly
available information about us than there is about U.S. issuers.



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Risk Factors Related to the Relationship between PEMEX and the Mexican Government

The Mexican Government controls PEMEX, it could limit PEMEXs ability to satisfy its external debt obligations, and the Mexican Government could privatize
PEMEX

Petróleos Mexicanos is a decentralized public entity of the Mexican Government, and therefore the Mexican Government
controls us, as well as our annual budget, which is approved by the Mexican Congress. However, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government. The Mexican Government has the power to
intervene directly or indirectly in our commercial affairs. Intervention by the Mexican Government could adversely affect our ability to make payments under any securities issued or guaranteed by us.

The Mexican Governments agreements with international creditors may affect our external debt obligations. In certain past debt restructurings of
the Mexican Government, Petróleos Mexicanos external indebtedness was treated on the same terms as the debt of the Mexican Government and other public sector entities. In addition, Mexico has entered into agreements with official
bilateral creditors to reschedule public sector external debt. Mexico has not requested restructuring of bonds or debt owed to multilateral agencies.

The Mexican Government would have the power, if federal law and the Constitución Política de los Estados Unidos Mexicanos(the Political Constitution of the United Mexican States) were amended, to
privatize or transfer all or a portion of Petróleos Mexicanos and the subsidiary entities or its assets. A privatization could adversely affect production, cause a disruption in our workforce and our operations, and cause us to default on
certain obligations. See also Considerations Related to Mexico below.

Petróleos Mexicanos and the subsidiary entities pay
special taxes, duties and dividends to the Mexican Government

The Mexican Government taxes Petróleos Mexicanos and the
subsidiary entities heavily. In 2005, approximately 67.2% of the sales revenues of Petróleos Mexicanos and the subsidiary entities were used to pay taxes to the Mexican Government. The Mexican Congress determines the rates of taxes and duties
applicable to Petróleos Mexicanos and the subsidiary entities from year to year depending on a variety of factors. For further information, see Item 4Information on the CompanyTaxes and Duties and Item
5Operating and Financial Review and ProspectsIEPS Tax, Excess Gains Duty, Hydrocarbon Duties and Other Taxes. In addition, Petróleos Mexicanos is obligated to pay minimum guaranteed dividends to the Mexican Government. For
further information on how the minimum guaranteed dividend is determined, see Item 5Operating and Financial Review and ProspectsLiquidity and Capital ResourcesEquity Structure and the Certificates of Contribution
A, Item 8Financial InformationDividends and Note 15 to our consolidated financial statements included herein.

The Mexican Government has entered into agreements with other nations to limit production

Although Mexico is not a
member of OPEC, in the past it has entered into agreements with OPEC and non-OPEC countries to reduce global crude oil supply. We do not control the Mexican Governments international affairs and the Mexican Government could agree with OPEC or
other countries to reduce our crude oil production or exports in the future. A reduction in our oil production or exports could reduce our revenues. For more information, see Item 5Operating and Financial Review and ProspectsExport
Agreements.

The Mexican Government has imposed price controls in the domestic market on our products

During the third quarter of 2005, the Mexican Government imposed a freeze on the prices of natural gas and liquefied petroleum gas (LPG) sold by PEMEX in
the domestic market and, as a result, PEMEX was not able to pass on all of the increases in the prices of its product purchases to its customers in the domestic market. We do not control the Mexican Governments domestic policies and the
Mexican Government could impose additional



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price controls in the domestic market on natural gas and LPG or other petroleum products in the future. The imposition of such price controls would reduce
our revenues. For more information, see Item 4Information on the CompanyBusiness OverviewGas and Basic PetrochemicalsPricing Decrees.

The Mexican nation, not PEMEX, owns the hydrocarbon reserves in Mexico

The Political
Constitution of the United Mexican States provides that the Mexican nation, not PEMEX, owns the petroleum and other hydrocarbon reserves located in Mexico. Although Mexican law gives Petróleos Mexicanos and the subsidiary entities the
exclusive right to exploit Mexicos hydrocarbon reserves, it does not preclude the Mexican Congress from changing current law and assigning some or all of these rights to another company. Such an event would adversely affect our ability to
generate income.

Information on Mexicos hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions

The information on oil, gas and other reserves set forth in this Form 20-F is based on estimates. Reserves valuation is a
subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner; the accuracy of any reserve estimate depends on the quality and reliability of available data, engineering and
geological interpretation and subjective judgment. Additionally, estimates may be revised based on subsequent results of drilling, testing and production. Therefore, proved reserve estimates may differ materially from the ultimately recoverable
quantities of crude oil and natural gas. Pemex-Exploration and Production revises its estimates of Mexicos hydrocarbon reserves annually, which may result in material revisions to our estimates of Mexicos hydrocarbon reserves.

PEMEX must make significant capital expenditures to maintain its current production levels and increase Mexicos hydrocarbon reserves. Mexican
Government budget cuts, reductions in PEMEXs income and inability to obtain financing may limit PEMEXs ability to make capital investments

We invest funds to increase the amount of extractable hydrocarbon reserves in Mexico. We also continually invest capital to enhance our hydrocarbon recovery ratio and improve the reliability and productivity of our
infrastructure. Our ability to make these capital expenditures is limited by the substantial taxes that we pay and cyclical decreases in our revenues primarily related to lower oil prices. In addition, budget cuts imposed by the Mexican Government
and the availability of financing may also limit our ability to make capital investments. For more information, see Item 4Information on the CompanyCapital Expenditures and Investments.

PEMEX may claim some immunities under the Foreign Sovereign Immunities Act and Mexican law, and your ability to sue or recover may be limited

Petróleos Mexicanos and the subsidiary entities are decentralized public entities of the Mexican Government. Accordingly, you may not be able to
obtain a judgment in a U.S. court against us unless the U.S. court determines that we are not entitled to sovereign immunity with respect to that action. In addition, Mexican law does not allow attachment prior to judgment or attachment in aid of
execution upon a judgment by Mexican courts upon the assets of Petróleos Mexicanos or the subsidiary entities. As a result, your ability to enforce judgments against us in the courts of Mexico may be limited. We also do not know whether
Mexican courts would enforce judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws. Therefore, even if you were able to obtain a U.S. judgment against us, you might not be able to obtain a judgment in
Mexico that is based on that U.S. judgment. Moreover, you may not be able to enforce a judgment against our property in the United States except under the limited circumstances specified in the Foreign Sovereign Immunities Act. Finally, if you were
to bring an action in Mexico seeking to enforce our obligations under any of our securities, satisfaction of those obligations would be made in pesos, pursuant to the laws of Mexico.

Our directors and officers, as well as some of the experts named in this Form 20-F, reside outside the United States. Substantially all of our assets and
those of most of our directors, officers and experts are located outside the United States. As a result, you may not be able to effect service of process on our directors or officers or those experts within the United States.



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Considerations Related to Mexico

Economic conditions and government policies in Mexico may have a material impact on PEMEXs operations

A deterioration in Mexicos economic conditions, social instability, political unrest or other adverse social developments in Mexico could adversely affect our business and financial condition. Those events could
also lead to increased volatility in the foreign exchange and financial markets, thereby affecting our ability to obtain and service foreign debt. In addition, the Mexican Government may cut spending in the future. These cuts could adversely affect
our business, financial condition and prospects. In the past, Mexico has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation and other economic problems. These problems may
reemerge in the future, and could adversely affect our business and our ability to service our debt.

Changes in exchange rates or in Mexicos
exchange control laws may hamper the ability of PEMEX to service its foreign currency debt

While the Mexican Government does not
currently restrict the ability of Mexican companies or individuals to convert pesos into dollars or other currencies, in the future, the Mexican Government could impose a restrictive exchange control policy, as it has done in the past. We cannot
assure you that the Mexican Government will maintain its current policies with regard to the peso or that the pesos value will not fluctuate significantly in the future. The peso has been subject to significant devaluations against the U.S.
dollar in the past and may be subject to significant fluctuations in the future. Mexican Government policies affecting the value of the peso could prevent us from paying our foreign currency obligations.

Most of our debt is denominated in U.S. dollars, as is all of the debt of Pemex Finance, Ltd., a Cayman Islands company with limited liability
established to issue securities backed by crude oil receivables sold through our subsidiary P.M.I. Comercio Internacional, S.A. de C.V. (which we refer to as PMI, and together with P.M.I. Trading Ltd. and their affiliates, the PMI Group) to
provide financing for investments in certain of our largest capital expenditures for long-term productive infrastructure projects, which we refer to as PIDIREGAS. In the future, Pemex Finance, Ltd. and we may incur additional indebtedness
denominated in U.S. dollars or other currencies. Declines in the value of the peso relative to the U.S. dollar or other currencies may increase our interest costs in pesos and result in foreign exchange losses.

For information on historical peso/U.S. dollar exchange rates, see Item 3Key InformationExchange Rates above.

Political conditions in Mexico could materially and adversely affect Mexican economic policy and, in turn, PEMEXs operations

Political events in Mexico may significantly affect Mexican economic policy and, consequently, our operations. The national elections held in 2000 ended
71 years of rule by a one-party state and resulted in the increased representation of opposition parties in the Mexican Congress. No political party has an absolute majority in either chamber of the Mexican Congress. There have not been any material
adverse repercussions for us resulting from these political changes.

Presidential and federal congressional elections in Mexico will be
held in July 2006. The Mexican presidential election will result in a change in administration, as presidential reelection is not permitted in Mexico. As a result, we cannot predict whether changes in Mexican governmental policy will result from a
change in administration. Such changes may adversely affect economic conditions or the industry in which we operate in Mexico and therefore our results of operations and financial position.



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Other Risk Factors

If we are not able to adequately implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and are the subject of sanctions or investigation, our results of operations and our ability to provide timely and
reliable financial information may be adversely affected

Changing laws, regulations and standards relating to corporate governance
and public disclosure, including the Sarbanes-Oxley Act of 2002 and related regulations implemented by the SEC and the Public Company Accounting Oversight Board, or PCAOB, are creating uncertainty for public companies, increasing legal and financial
compliance costs and making some activities more time consuming. We will be evaluating our internal control over financial reporting to allow management to report on, and our registered independent public accounting firm to attest to, our internal
controls over financial reporting. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act, which we are required to comply within our annual report which we will file in 2008 for our 2007 fiscal year. As a result, we expect to incur substantial additional expenses and diversion of managements time. While we
anticipate being able to fully implement the requirements relating to internal controls and all other aspects of Section 404 by our deadline, we cannot be certain as to the timing of completion of our evaluation, testing and any remediation
actions or the impact of the same on our operations since there is presently no precedent available by which to measure compliance adequacy. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate
compliance, we might be subject to sanctions or investigation by regulatory authorities such as the SEC or the PCAOB. Any such action could adversely affect our financial results. In addition, if we fail to develop and maintain effective controls
and procedures, we may be unable to provide financial information in a timely and reliable manner.



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|Item 4. | Information on the Company
|------- | --------------------------

HISTORY AND
DEVELOPMENT

We are the largest company in Mexico, and according to the December 12, 2005 issue of Petroleum Intelligence
Weekly, we were the ninth largest oil and gas company in the world based on data from the year 2004.In 1938, President Lázaro Cárdenas del Río nationalized the foreign-owned oil companies which were then operating in
Mexico and the Mexican Congress established Petróleos Mexicanos by a decree, effective on July 20, 1938. Since 1938, Mexican federal laws and regulations have entrusted Petróleos Mexicanos with the central planning and management
of Mexicos petroleum industry. On July 17, 1992, the Mexican Congress created the subsidiary entities out of operations that had previously been directly managed by Petróleos Mexicanos. Petróleos Mexicanos and its four
subsidiary entities, Pemex-Exploration and Production, Pemex-Refining, Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals, are decentralized public entities of the Mexican Government, and each is a legal entity empowered to own property and
carry on business in its own name.

PEMEXs executive offices are located at Avenida Marina Nacional No. 329, Colonia Huasteca,
México, D.F. 11311, México. PEMEXs telephone number is (52-55) 1944-2500.

Organizational Laws

The activities of Petróleos Mexicanos and the subsidiary entities are regulated primarily by:



| |  |  | the Ley Reglamentaria del Artículo 27 Constitucional en el Ramo del Petróleo(the Regulatory Law to Article 27 of the Political Constitution of the United
Mexican States Concerning Petroleum Affairs, which we refer to as the Regulatory Law); and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Ley Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (the Organic Law of Petróleos Mexicanos and Subsidiary Entities, which we refer to as
the Organic Law).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Organic Law and related regulations grant Petróleos Mexicanos and certain of the subsidiary
entities the exclusive right to:



| |  |  | explore, exploit, refine, transport, store, distribute and sell (first-hand) crude oil;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | explore, exploit, produce and sell (first-hand) natural gas and transport and store natural gas, to the extent the transportation and storage activities are inextricably linked with
such exploitation and production; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | produce, store, transport, distribute and sell (first-hand) the derivatives of petroleum (including petroleum products) and natural gas used as basic industrial raw materials that
constitute basic petrochemicals, which include ethane, propane, butanes, pentanes, hexanes, heptanes, naphthas, carbon black feedstocks and methane, but in the case of methane, only if obtained from hydrocarbons used as basic raw materials by the
petrochemical industry and obtained from deposits located in Mexico.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Organic Law allocates the operating functions of
Petróleos Mexicanos among the four subsidiary entities, each of which has the characteristics of a subsidiary of Petróleos Mexicanos. The principal objectives of the subsidiary entities are as follows:



| |  |  | Pemex-Exploration and Production explores for and exploits crude oil and natural gas and transports, stores and markets these hydrocarbons;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pemex-Refining refines petroleum products and derivatives that may be used as basic industrial raw materials and stores, transports, distributes and markets these products and
derivatives;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pemex-Gas and Basic Petrochemicals processes natural gas, natural gas liquids and derivatives that may be used as basic industrial raw materials and stores, transports, distributes
and markets these products and produces, stores, transports, distributes and markets basic petrochemicals; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Pemex-Petrochemicals engages in industrial petrochemical processes and stores, distributes and markets petrochemicals other than basic petrochemicals.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

In 1995, the Mexican Congress amended the Regulatory Law to allow private and social sector companies, which include labor-controlled organizations and
industries, to participate, with the Mexican Governments approval, in the storage, distribution and transportation of natural gas. Pursuant to the Regulatory Law, as amended, these types of companies may construct, own and operate pipelines,
installations and equipment. Since 1997, the Mexican Government has required that we divest our existing natural gas distribution assets but has allowed us to retain exclusive authority over the exploration, exploitation, production and first-hand
sale of natural gas, as well as the transportation and storage inextricably linked with this type of exploitation and production. See Gas and Basic PetrochemicalsPrivate Sector Participation in Natural Gas Distribution
below.

In January 2006, the Mexican Congress amended the Regulatory Law and the Organic Law to allow us to co-generate electric energy and
to enter into agreements with the Comisión Federal de Electricidad (Federal Electricity Commission) and Luz y Fuerza del Centro (Central Light and Power) to sell our excess production to these entities. The funds and the public
investment projects required to carry out these works and allow the acquisition of any additional production by these entities will be presented in the draft of the Presupuesto de Egresos de la Federación (Federal Disbursements
Budget), which is subject to discussion by and approval of the Chamber of Deputies.

Capital Expenditures and Investments

We fund our annual budget (not including PIDIREGAS) through revenue generated by our operations and financing activities. Capital expenditures are
undertaken by Petróleos Mexicanos and the subsidiary entities. Capital expenditures and operating expenses must be authorized in our annual budget, which is approved by the Mexican Congress. PIDIREGAS are long-term productive infrastructure
projects funded through financing activities of the Pemex Project Funding Master Trust and the Fideicomiso F/163 or directly by a contractor and must also be authorized in a budget approved by the Mexican Congress. Thus, each year, we submit
proposals to and negotiate with the Mexican Government regarding how our after-tax funds should be allocated.

PIDIREGAS.An
important component of our capital expenditures are PIDIREGAS. Because of federal budgetary constraints, the Mexican Government has sought private sector participation in the building and financing of PIDIREGAS. The Mexican Government approves the
designation of certain infrastructure projects as PIDIREGAS. This designation means that these projects are treated as off-balance sheet items for annual budgetary purposes, until delivery of the completed project to us or until our payment
obligations begin under the contract.

The Ley General de Deuda Pública (General Law of Public Debt) and the Ley Federal
de Presupuesto y Responsabilidad Hacendaria(Federal Law of Budget and Corporate Accountability) define the PIDIREGAS legal framework. Article 18 of the General Law of Public Debt outlines the treatment of financial obligations under PIDIREGAS,
defining as a direct liability the amounts payable under a financing during the current and immediately following fiscal years, and the remaining amounts as a contingent liability until its full payment. Article 32 of the Federal Law of Budget and
Corporate Accountability grants PIDIREGAS preferential and priority treatment for inclusion in the Mexican Governments budget in future years, until the full payment of a projects costs.

PIDIREGAS have three stages:



| |  |  | The Mexican Government identifies a project as a PIDIREGAS and authorizes expenditures related to their development by the private sector;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Private sector companies, in cooperation with us, build and deliver the project to us; and
| | - |  | ------------------------------------------------------------------------------------------



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| |  |  | We, with the Mexican Governments authorization, pay all amounts owing to contractors and make final payments to receive delivery of the completed project and then record as a
liability the full principal amount of all indebtedness incurred to finance the project.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Compliance with the Mexican
Governments Financial Reporting Standards and the Guidelines for the Accounting Treatment of Investments in Long-Term Productive Infrastructure Projects (Technical Release NIF-09-B), which outlines the accounting and budgetary treatment
applicable to PIDIREGAS, is mandatory during the construction period and after delivery of the PIDIREGAS. The distinction between PIDIREGAS and non-PIDIREGAS expenditures is an important factor for budgetary purposes, since a projects
designation as a PIDIREGAS guarantees that its financing is immune from across-the-board budget cuts. For the purposes of our consolidated financial statements included herein and in accordance with Mexican GAAP, all of the accounts related to
PIDIREGAS were incorporated into the consolidated financial statements, i.e., all of the effects of Technical Release NIF-09-B are excluded. These expenditures and liabilities are included in our consolidated financial statements in
accordance with Mexican GAAP Bulletin B-8 Consolidated and Combined Financial Statements and Valuation of Permanent Investments in Stocks.

In recent years, PIDIREGAS have represented a significant portion of our total annual capital expenditures. PIDIREGAS capital expenditures alone totaled, in nominal terms, Ps. 105.6 billion in 2005 (83.1% of our
total capital expenditures), Ps. 110.6 billion in 2004 (90.0% of our total capital expenditures) and Ps. 94.7 billion in 2003 (83.0% of our total capital expenditures). For 2006, we have budgeted, in nominal terms, Ps. 102.7 billion
for PIDIREGAS expenditures (or approximately 86.2% of our total budgeted capital expenditures).

The following table sets forth our capital
expenditures for PIDIREGAS for the five years ended December 31, 2005, and the budget for such expenditures for 2006.



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PIDIREGAS Capital Expenditures



|                                                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|----------------------------------------------- |  | ------------------------------ | ------ | ---- | ------------------------------- | ------ |  | ---- | ------ | ---- | --- | ------- | -------------- | --- | ------- |  |  | --- | -------
|                                                |  | Year ended December 31, (1)(2)
|                                                |  | 2001                           |        | 2002 |                                 | 2003   |  | 2004 |        | 2005 |     |         | Budget 2006(3)
|                                                |  | (millions of nominal pesos)    |        |      | (millions ofconstant2006 pesos)
|Pemex-Exploration and Production                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Cantarell                                       |  | Ps.                            | 25,867 |      | Ps.                             | 24,397 |  | Ps.  | 23,011 |      | Ps. | 27,240  |                | Ps. | 25,030  |  |  | Ps. | 19,319 
|Strategic Gas Program(4)                        |  |                                | 1,594  |      |                                 | 8,967  |  |      | 18,079 |      |     | 23,413  |                |     | 20,635  |  |  |     | 16,566 
|Ku-Maloob-Zaap                                  |  |                                |       |      |                                 | 865    |  |      | 3,072  |      |     | 10,222  |                |     | 16,424  |  |  |     | 20,811 
|Burgos                                          |  |                                | 7,018  |      |                                 | 9,383  |  |      | 10,995 |      |     | 16,344  |                |     | 12,439  |  |  |     | 11,969 
|Antonio J. Bermúdez                             |  |                                |       |      |                                 | 471    |  |      | 3,622  |      |     | 6,270   |                |     | 7,045   |  |  |     | 5,488  
|Arenque                                         |  |                                |       |      |                                 | 183    |  |      | 1,089  |      |     | 2,274   |                |     | 2,344   |  |  |     | 1,534  
|Jujo-Tecominoacán                               |  |                                |       |      |                                 | 279    |  |      | 1,668  |      |     | 1,699   |                |     | 2,340   |  |  |     | 1,928  
|Chuc                                            |  |                                |       |      |                                 | 302    |  |      | 1,753  |      |     | 4,152   |                |     | 2,266   |  |  |     | 2,506  
|El Golpe-Puerto Ceiba                           |  |                                |       |      |                                 | 396    |  |      | 1,915  |      |     | 1,695   |                |     | 2,124   |  |  |     | 1,407  
|Caan                                            |  |                                |       |      |                                 | 374    |  |      | 834    |      |     | 1,393   |                |     | 1,808   |  |  |     | 1,268  
|Agua Fría-Coapechaca-Tajín                      |  |                                |       |      |                                 | 93     |  |      | 1,860  |      |     | 2,402   |                |     | 1,628   |  |  |     | 1,386  
|Bellota-Chinchorro                              |  |                                |       |      |                                 | 244    |  |      | 1,399  |      |     | 2,001   |                |     | 1,550   |  |  |     | 1,161  
|Integral Poza Rica                              |  |                                |       |      |                                 | 22     |  |      | 424    |      |     | 938     |                |     | 1,192   |  |  |     | 1,025  
|Delta del Grijalva                              |  |                                | 1,466  |      |                                 | 1,439  |  |      | 641    |      |     | 728     |                |     | 1,100   |  |  |     | 1,540  
|Ek-Balam                                        |  |                                |       |      |                                 | 99     |  |      | 748    |      |     | 668     |                |     | 639     |  |  |     | 996    
|Cactus-Sitio Grande                             |  |                                |       |      |                                 | 114    |  |      | 1,276  |      |     | 918     |                |     | 493     |  |  |     | 890    
|Taratunich                                      |  |                                |       |      |                                 | 92     |  |      | 938    |      |     | 787     |                |     | 489     |  |  |     | 375    
|Abkatún Integral                                |  |                                |       |      |                                 | 529    |  |      | 1,856  |      |     | 2,769   |                |     | 409     |  |  |     | 49     
|Integral Yaxche                                 |  |                                |       |      |                                 |       |  |      | 18     |      |     | 158     |                |     | 383     |  |  |     | 142    
|Och-Uech-Kax                                    |  |                                |       |      |                                 | 261    |  |      | 750    |      |     | 718     |                |     | 347     |  |  |     | 314    
|Carmito-Artesa                                  |  |                                |       |      |                                 | 187    |  |      | 606    |      |     | 614     |                |     | 320     |  |  |     | 371    
|Amatitlán-Profeta-Tzapotempa-Vinazco            |  |                                |       |      |                                 | 8      |  |      | 465    |      |     | 650     |                |     | 291     |  |  |     | 131    
|Pol                                             |  |                                |       |      |                                 | 720    |  |      | 1,466  |      |     | 481     |                |     | 217     |  |  |     | 73     
|Cárdenas                                        |  |                                |       |      |                                 | 44     |  |      | 241    |      |     | 215     |                |     | 143     |  |  |     | 197    
|Integral Kanaab                                 |  |                                |       |      |                                 | 13     |  |      | 284    |      |     | 186     |                |     | 121     |  |  |     | 37     
|Ayín-Alux                                       |  |                                |       |      |                                 | 17     |  |      | 37     |      |     | 108     |                |     | 30      |  |  |     | 115    
|Integral Batab                                  |  |                                |       |      |                                 | 57     |  |      | 388    |      |     | 593     |                |     | 17      |  |  |     | 70     
|                                                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Total                                           |  |                                | 35,945 |      |                                 | 49,557 |  |      | 79,435 |      |     | 109,638 |                |     | 101,823 |  |  |     | 91,667 
|                                                |  |                                |        |      |                                 |       
|Pemex-Refining                                  |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Cadereyta(5)                                    |  |                                |       |      |                                 | 115    |  |      |       |      |     |        |                |     |        |  |  |     |       
|Madero(6)                                       |  |                                |       |      |                                 | 6,608  |  |      | 11,323 |      |     |        |                |     |        |  |  |     |       
|Salamanca(7)                                    |  |                                |       |      |                                 |       |  |      | 2,679  |      |     |        |                |     |        |  |  |     |       
|Tula(8)                                         |  |                                |       |      |                                 | 1,461  |  |      | 133    |      |     |        |                |     |        |  |  |     |       
|Minatitlán                                      |  |                                |       |      |                                 |       |  |      |       |      |     | 445     |                |     | 2,459   |  |  |     | 7,428  
|                                                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Total                                           |  |                                |       |      |                                 | 8,184  |  |      | 14,134 |      |     | 445     |                |     | 2,459   |  |  |     | 7,428  
|                                                |  |                                |        |      |                                 |       
|Pemex-Gas and Basic Petrochemicals              |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Modular Cryogenic Plants in Reynosa             |  |                                |       |      |                                 | 75     |  |      | 1,105  |      |     | 537     |                |     | 1,270   |  |  |     | 2,466  
|                                                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Total                                           |  |                                |       |      |                                 | 75     |  |      | 1,105  |      |     | 537     |                |     | 1,270   |  |  |     | 2,466  
|                                                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Pemex-Petrochemicals                            |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Aromatics Train 1 at Petroquímica La Cangrejera |  |                                |       |      |                                 |       |  |      |       |      |     |        |                |     |        |  |  |     | 1,122  
|                                                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Total                                           |  |                                |       |      |                                 |        |  |      |       |      |     |        |                |     |        |  |  |     | 1,122  
|                                                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        
|Total PIDIREGAS Expenditures                    |  | Ps.                            | 35,945 |      | Ps.                             | 57,815 |  | Ps.  | 94,674 |      | Ps. | 110,620 |                | Ps. | 105,552 |  |  | Ps. | 102,682
|                                                |  |                                |        |      |                                 |        |  |      |        |      |     |         |                |     |         |  |  |     |        

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Amounts based on cash basis method of accounting.
|--- | -------------------------------------------------

|(2) | Includes capitalized interest during construction period.
|--- | ---------------------------------------------------------

|(3) | Approved budget.
|--- | ----------------



16



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|(4) | The Strategic Gas Program includes 23 different natural gas projects expected to increase domestic supply of natural gas, thereby minimizing imports.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | In November 2003, the Cadereyta project was certified as 99.31% complete and formally concluded.
|--- | ------------------------------------------------------------------------------------------------

|(6) | The Madero project was completed on October 24, 2002, and the final payment was made to the contractor on March 3, 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------

|(7) | The Salamanca project was completed on January 9, 2003.
|--- | -------------------------------------------------------

|(8) | The Tula project was completed and contractors were paid in August 2002, although amounts were budgeted for and paid in 2003 to cover potential adjustments or additional works
required in connection with this project.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Source: Petróleos Mexicanos.

During 2005, Pemex-Exploration and Production implemented 27 PIDIREGAS. Pemex-Exploration and Production will continue to implement these projects in
2006.



17



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##### Table of Contents

The following table sets forth our approved capital expenditures budget for PIDIREGAS projects for 2006
through 2009.

PIDIREGAS Approved Budget Capital Expenditures



|                                                                                     |  |                                   |         |      |     |         |  |      |         |  |     |        
|------------------------------------------------------------------------------------ |  | --------------------------------- | ------- | ---- | --- | ------- |  | ---- | ------- |  | --- | -------
|                                                                                     |  | Year ended December 31, (1)(2)   
|                                                                                     |  | 2006                              |         | 2007 |     | 2008    |  | 2009
|                                                                                     |  | (millions of constant 2006 pesos)
|Pemex-Exploration and Production                                                     |  |                                   |         |      |     |         |  |      |         |  |     |        
|Cantarell                                                                            |  | Ps.                               | 19,319  |      | Ps. | 20,697  |  | Ps.  | 15,827  |  | Ps. | 12,153 
|Strategic Gas Program                                                                |  |                                   | 16,566  |      |     | 21,232  |  |      | 16,212  |  |     | 10,190 
|Ku-Maloob-Zaap                                                                       |  |                                   | 20,811  |      |     | 12,709  |  |      | 10,725  |  |     | 9,423  
|Burgos                                                                               |  |                                   | 11,969  |      |     | 23,292  |  |      | 25,472  |  |     | 23,935 
|Antonio J. Bermúdez                                                                  |  |                                   | 5,488   |      |     | 5,134   |  |      | 4,175   |  |     | 2,546  
|Arenque                                                                              |  |                                   | 1,534   |      |     | 1,962   |  |      | 1,151   |  |     | 1,947  
|Jujo-Tecominoacán                                                                    |  |                                   | 1,928   |      |     | 910     |  |      | 596     |  |     | 617    
|Chuc                                                                                 |  |                                   | 2,506   |      |     | 3,331   |  |      | 1,826   |  |     | 1,331  
|El Golpe-Puerto Ceiba                                                                |  |                                   | 1,407   |      |     | 1,482   |  |      | 2,161   |  |     | 270    
|Caan                                                                                 |  |                                   | 1,268   |      |     | 1,180   |  |      | 1,166   |  |     | 971    
|Agua Fría-Coapechaca-Tajín(3)                                                        |  |                                   | 1,386   |      |     | 5,414   |  |      | 7,071   |  |     | 10,184 
|Bellota-Chinchorro                                                                   |  |                                   | 1,161   |      |     | 2,693   |  |      | 1,915   |  |     |       
|Integral Poza Rica                                                                   |  |                                   | 1,025   |      |     | 1,028   |  |      | 965     |  |     | 838    
|Delta del Grijalva                                                                   |  |                                   | 1,540   |      |     | 1,645   |  |      |        |  |     |       
|Ek-Balam                                                                             |  |                                   | 996     |      |     | 388     |  |      | 489     |  |     | 346    
|Cactus-Sitio Grande                                                                  |  |                                   | 890     |      |     | 1,408   |  |      | 1,013   |  |     | 469    
|Taratunich                                                                           |  |                                   | 375     |      |     | 554     |  |      | 296     |  |     | 153    
|Abkatún Integral                                                                     |  |                                   | 49      |      |     |         |  |      |        |  |     |       
|Integral Yaxche                                                                      |  |                                   | 142     |      |     | 574     |  |      | 511     |  |     | 67     
|Och-Uech-Kax                                                                         |  |                                   | 314     |      |     | 281     |  |      | 106     |  |     | 164    
|Carmito-Artesa                                                                       |  |                                   | 371     |      |     | 480     |  |      | 387     |  |     | 222    
|Amatitlán-Profeta-Tzapotempa-Vinazco(3)                                              |  |                                   | 131     |      |     | 1,495   |  |      | 2,190   |  |     | 3,099  
|Pol                                                                                  |  |                                   | 73      |      |     |        |  |      |        |  |     |       
|Cárdenas                                                                             |  |                                   | 197     |      |     | 305     |  |      | 322     |  |     | 193    
|Integral Kanaab                                                                      |  |                                   | 37      |      |     |        |  |      |        |  |     |       
|Ayín-Alux                                                                            |  |                                   | 115     |      |     | 110     |  |      | 1,277   |  |     | 2,099  
|Integral Batab                                                                       |  |                                   | 70      |      |     | 126     |  |      | 28      |  |     | 11     
|                                                                                     |  |                                   |         |      |     |         |  |      |         |  |     |        
|Total                                                                                |  |                                   | 91,667  |      |     | 108,429 |  |      | 95,879  |  |     | 81,227 
|                                                                                     |  |                                   |         |     
|Pemex-Refining                                                                       |  |                                   |         |      |     |         |  |      |         |  |     |        
|Minatitlán                                                                           |  |                                   | 7,428   |      |     | 12,733  |  |      | 2,734   |  |     |       
|Salina Cruz                                                                          |  |                                   |        |      |     |        |  |      | 1,786   |  |     | 6,999  
|Fuel Quality Investments                                                             |  |                                   |         |      |     | 4,733   |  |      | 11,428  |  |     | 12,247 
|                                                                                     |  |                                   |         |      |     |         |  |      |         |  |     |        
|Total                                                                                |  |                                   | 7,428   |      |     | 17,466  |  |      | 15,948  |  |     | 19,246 
|                                                                                     |  |                                   |         |     
|Pemex-Gas and Basic Petrochemicals                                                   |  |                                   |         |      |     |         |  |      |         |  |     |        
|Modular Cryogenic Plants in Reynosa                                                  |  |                                   | 2,466   |      |     | 1,454   |  |      | 57      |  |     |       
|                                                                                     |  |                                   |         |      |     |         |  |      |         |  |     |        
|Total                                                                                |  |                                   | 2,466   |      |     | 1,454   |  |      | 57      |  |     |       
|                                                                                     |  |                                   |         |     
|Pemex-Petrochemicals                                                                 |  |                                   |         |      |     |         |  |      |         |  |     |        
|Modernization and Enlargement of the Aromatics Train 1 at Petroquímica La Cangrejera |  |                                   | 1,122   |      |     | 1,209   |  |      | 268     |  |     |       
|                                                                                     |  |                                   |         |      |     |         |  |      |         |  |     |        
|Total                                                                                |  |                                   | 1,122   |      |     | 1,209   |  |      | 268     |  |     |       
|                                                                                     |  |                                   |         |     
|Total PIDIREGAS Budget                                                               |  | Ps.                               | 102,682 |      | Ps. | 128,558 |  | Ps.  | 112,151 |  | Ps. | 100,473
|                                                                                     |  |                                   |         |      |     |         |  |      |         |  |     |        

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Amounts based on cash basis method of accounting.
|--- | -------------------------------------------------

|(2) | Includes capitalized interest during the construction period.
|--- | -------------------------------------------------------------

|(3) | PIDIREGAS relating to the development of the Chicontepec field.
|--- | ---------------------------------------------------------------

|Source: | Petróleos Mexicanos.
|------- | --------------------

Non-PIDIREGAS
Capital Expenditures. In addition to the Ps. 105.5 billion spent on PIDIREGAS in 2005, in nominal terms we spent Ps. 21.4 billion in 2005 on other capital expenditures excluding PIDIREGAS (which we refer to as non-PIDIREGAS capital
expenditures), which represents a 75.4% increase from the Ps. 12.2 billion in nominal terms of non-PIDIREGAS capital expenditures in 2004. Of the Ps. 21.4 billion in non-PIDIREGAS capital expenditures



18



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##### Table of Contents

during 2005, we directed Ps. 11.0 billion (or 51.4% of total non-PIDIREGAS capital expenditures) to exploration and production programs. Of the
Ps. 12.2 billion in non-PIDIREGAS capital expenditures during 2004, we directed Ps. 3.7 billion (or 30.3% of total non-PIDIREGAS capital expenditures) to exploration and production programs.

Excluding PIDIREGAS expenditures, we have budgeted a total of Ps. 16.4 billion in nominal terms for capital expenditures in 2006. We expect to
direct Ps. 6.0 billion (or 36.6% of total non-PIDIREGAS capital expenditures) to exploration and production programs in 2006. In addition to our budgeted capital expenditures, the Mexican Congress allocates money in our budget to make principal
payments on our PIDIREGAS debt. These payments are expected to total Ps. 31.5 billion in 2006. The amounts allocated by the Mexican Congress to make payments on our PIDIREGAS debt are not included in any of the tables or discussions of capital
expenditures herein, as these amounts do not reflect actual capital expenditures.

Our non-PIDIREGAS capital expenditures for the five
years ended December 31, 2005 and budgeted for 2006 and 2007 were distributed and budgeted among the subsidiary entities as follows:

Non-PIDIREGAS Capital Expenditures(1)



|                                   |  |                                |        |      |     |        |  |      |        |      |     |               |  |               |        |  |     |        |  |     |       
|---------------------------------- |  | ------------------------------ | ------ | ---- | --- | ------ |  | ---- | ------ | ---- | --- | ------------- |  | ------------- | ------ |  | --- | ------ |  | --- | ------
|                                   |  | Year ended December 31,       
|                                   |  | 2001                           |        | 2002 |     | 2003   |  | 2004 |        | 2005 |     | Budget2006(3) |  | Budget2007(4)
|                                   |  | (in millions of nominal pesos)
|Pemex-Exploration and Production   |  | Ps.                            | 17,501 |      | Ps. | 13,443 |  | Ps.  | 8,945  |      | Ps. | 3,694         |  | Ps.           | 11,040 |  | Ps. | 6,004  |  | Ps. | 20,735
|Pemex-Refining                     |  |                                | 5,501  |      |     | 5,893  |  |      | 5,744  |      |     | 4,647         |  |               | 6,542  |  |     | 5,369  |  |     | 10,442
|Pemex-Gas and Basic Petrochemicals |  |                                | 2,567  |      |     | 1,721  |  |      | 2,148  |      |     | 1,961         |  |               | 1,936  |  |     | 3,064  |  |     | 4,401 
|Pemex-Petrochemicals               |  |                                | 1,058  |      |     | 1,454  |  |      | 1,627  |      |     | 1,598         |  |               | 1,530  |  |     | 1,599  |  |     | 3,066 
|Petróleos Mexicanos Corporate(2)   |  |                                | 366    |      |     | 432    |  |      | 549    |      |     | 343           |  |               | 388    |  |     | 357    |  |     | 660   
|                                   |  |                                |        |      |     |        |  |      |        |      |     |               |  |               |        |  |     |        |  |     |       
|Total                              |  | Ps.                            | 26,993 |      | Ps. | 22,942 |  | Ps.  | 19,013 |      | Ps. | 12,243        |  | Ps.           | 21,436 |  | Ps. | 16,393 |  | Ps. | 39,304
|                                   |  |                                |        |      |     |        |  |      |        |      |     |               |  |               |        |  |     |        |  |     |       

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | There are no capital expenditures at the subsidiary company level.
|--- | ------------------------------------------------------------------

|(2) | Petróleos Mexicanos Corporate consists of the operations of the central management of Petróleos Mexicanos.
|--- | ----------------------------------------------------------------------------------------------------------

|(3) | Approved modified budget. The 2006 non-PIDIREGAS budget is expected to be flexible, with more resources being allocated as production goals increase.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Subject to approval by the Mexican Congress during the 2007 budgetary process.
|--- | ------------------------------------------------------------------------------

|Source: | Petróleos Mexicanos.
|------- | --------------------

Our principal
objectives for upstream investment are to maximize the long-term economic value, and increase and improve the quality, of Mexicos oil and gas reserves, increase our light crude oil production capacity, enhance Pemex-Exploration and
Productions recovery ratio and improve the reliability of its production and transportation infrastructure for crude oil and natural gas operations. In 2006, Pemex-Exploration and Production plans to continue its Strategic Gas Program to
increase the supply of natural gas for the domestic market in the medium to long term. The 2006 budget objectives are to increase the supply of hydrocarbons and high-quality petrochemicals and increase refining capacity in order to satisfy the
domestic demand for refined products. Moreover, our production goals for 2006 include producing, on average, 4.1% more crude oil and 8.1% more natural gas as compared to 2005, in order to satisfy domestic demand for, and to slow the rate of increase
of imports of natural gas and crude oil and natural gas derivatives.

Our downstream investment program seeks to improve the quality of our
product selection and the reliability of our logistic and distribution services, to achieve a level of efficiency similar to that of our international competitors and to continue to emphasize industrial safety and environmental compliance.



19



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##### Table of Contents

BUSINESS OVERVIEW

Overview by Business Segment

Exploration and Production

Pemex-Exploration and Production explores for and produces crude oil and natural gas, primarily in the northeastern and southeastern regions of Mexico and
offshore in the Gulf of Mexico. In nominal peso terms, our capital investment in exploration and production activities decreased by 0.4% in 2005, but we continued to finance an array of programs to expand production capacity and efficiency. As a
result of our investments in previous years, our total hydrocarbon production reached a level of approximately 4,395 thousand barrels of oil equivalent per day in 2005. Pemex-Exploration and Productions crude oil production decreased by
1.5% from 2004 to 2005, averaging 3,333 thousand barrels per day in 2005. Pemex-Exploration and Productions natural gas production (excluding natural gas liquids) increased by 5.4% from 2004 to 2005, averaging 4,818 million cubic
feet per day in 2005. Exploration drilling activity decreased by 28.2%, from 103 exploratory wells in 2004 to 74 exploratory wells in 2005, including Niquel-1, Antiguo-8 and Caravana-1 in Burgos, Huace-1 in Veracruz, Pit-1 and Ichalkil-1 in Campeche
Oriente, and Xanab-1 in Crudo Ligero Marino. Development drilling activity rose 7.1%, from 624 development wells in 2004 to 668 development wells in 2005. In 2005, we completed the drilling of 742 wells, the highest number of wells completed in one
year in the last 45 years. Our drilling activity in 2005 was directed at increasing the production of non-associated gas in the Burgos, Veracruz and Macuspana regions.

Our offshore drilling efforts in 2005 led to significant discoveries of heavy, light and extra-light crude oil sources, particularly in the Marine region. Our current challenge with respect to these discoveries is the
short-term development of these new resources.

Refining

Pemex-Refining converts crude oil into gasoline, jet fuel, diesel, fuel oil, asphalts and lubricants. It also distributes and markets most of these
products throughout Mexico, where it experiences a significant demand for its refined products. Pemex-Refinings atmospheric distillation refining capacity remained constant at approximately 1,540 thousand barrels per day during 2005. In
2005, Pemex-Refining produced 1,338 thousand barrels per day of refined products, as compared to 1,361 thousand barrels per day of refined products in 2004.

Gas and Basic Petrochemicals

Pemex-Gas and Basic Petrochemicals processes wet natural gas in order
to obtain dry natural gas, liquefied petroleum gas and other natural gas liquids. Furthermore, it transports, distributes and sells natural gas and liquefied petroleum gas throughout Mexico and produces and sells several basic petrochemical
feedstocks, which are used by Pemex-Refining or Pemex-Petrochemicals. In 2005, Pemex-Gas and Basic Petrochemicals total sour natural gas processing capacity remained constant at approximately 4,503 million cubic feet per day. Pemex-Gas
and Basic Petrochemicals processed 3,153 million cubic feet per day of sour natural gas in 2005, a 5.9% decrease from the 3,349 million cubic feet per day of sour natural gas processed in 2004. It produced 436 thousand barrels per day
of natural gas liquids in 2005, a 3.3% decrease from natural gas liquid production of 451 thousand barrels per day in 2004. It also produced 3,147 million cubic feet per day of dry gas in 2005, a 0.1% increase from the 3,144 million
cubic feet per day produced in 2004.

Petrochemicals

Pemex-Petrochemicals manufactures different petrochemical products, including: (1) methane derivatives, such as ammonia and methanol; (2) ethane derivatives, such as ethylene, polyethylenes, vinyl chloride
monomer and ethylene oxide; (3) aromatics and their derivatives, such as styrene, toluene and paraxylene; (4) propylene and its derivatives, such as acrylonitrile; and (5) oxygen, nitrogen and other products.
Pemex-Petrochemicals



20



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##### Table of Contents

total annual production (excluding ethane and butane gases) decreased by 0.1% in 2005, from 6,223 thousand tons in 2004 to 6,219 thousand tons in
2005, mainly due to a decrease in the production of ammonia, methanol and styrene, which was partially offset by an increase in the production of vinyl chloride monomer, ethylene oxide and low density polyethylene.

International Trading

In 2005, our
crude oil exports, which we export through our subsidiary PMI, decreased by 2.8% in 2005, from 1,870.3 thousand barrels per day in 2004 to 1,817.1 thousand barrels per day in 2005. Natural gas imports decreased by 37.3% in 2005, from
765.6 million cubic feet per day in 2004 to 480.4 million cubic feet per day in 2005. In 2005, exports of petrochemical products by volume decreased by 6.8%, from 915.7 thousand metric tons in 2004 to 853.3 thousand metric tons
in 2005, while imports of petrochemical products by volume increased by 43.7%, from 276.6 thousand metric tons in 2004 to 397.4 thousand metric tons in 2005. In 2005, exports of refined products by volume increased by 22.7%, from
151.8 thousand barrels per day in 2004 to 186.2 thousand barrels per day in 2005, while imports of refined products by volume increased by 26.2%, from 310.5 thousand barrels per day in 2004 to 391.9 thousand barrels per day in
2005.

We are a major supplier of crude oil to the United States. The PMI Group provides us and a number of independent customers with
international trading, distribution and related services. PMI and P.M.I. Trading Ltd. sell, buy and transport crude oil, refined products and petrochemicals in world markets. The PMI Group also provides related risk management, insurance,
transportation and storage services to us. The PMI Group has offices in Mexico City, Houston and London. The PMI Groups trading volume of sales and imports totaled U.S. $42,907.4 million in 2005, including U.S. $28,329.5 million in
crude oil sales.

Infrastructure of PEMEX

LOGO



21



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##### Table of Contents

Exploration and Production

Reserves

Under the Political Constitution of the United Mexican States and the Regulatory Law, all
oil and other hydrocarbon reserves within Mexico are owned by the Mexican nation and not by us. Under the Organic Law, Petróleos Mexicanos and the subsidiary entities, except for Pemex-Petrochemicals, have the exclusive right to produce, not
own, these reserves, and sell the resulting production. The exploration and development activities of Petróleos Mexicanos and the subsidiary entities are limited to reserves located in Mexico.

Proved oil and natural gas reserves are those estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditionsi.e., prices and costs at the date of estimation. Mexicos proved reserves are
estimated by Pemex-Exploration and Productions technical staff.

Pemex-Exploration and Production estimates Mexicos reserves
using standard geological and engineering methods generally accepted by the petroleum industry. The choice of method or combinations of methods employed in the analysis of each reservoir is determined by:



| |  |  | experience in the area;
| | - |  | -----------------------



| |  |  | stage of development;
| | - |  | ---------------------



| |  |  | quality and completeness of basic data; and
| | - |  | -------------------------------------------



| |  |  | production and pressure histories.
| | - |  | ----------------------------------

The reserves data set
forth herein represent only estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate depends on the
quality of available data, engineering and geological interpretation and judgment. As a result, estimates of different engineers may vary. In addition, the results of drilling, testing and production subsequent to the date of an estimate may justify
revision of an estimate.

Mexicos total proved developed and undeveloped reserves of crude oil, condensates and liquefiable
hydrocarbons recoverable from processing plants decreased by 7.4% in 2005, from 14.8 billion barrels of oil equivalent at December 31, 2004 to 13.7 billion barrels of oil equivalent at December 31, 2005. Mexicos proved developed
reserves of crude oil, condensates and liquefiable hydrocarbons recoverable from processing plants, decreased by 1.0% in 2005, from 9.7 billion barrels of oil equivalent at December 31, 2004 to 9.6 billion barrels of oil equivalent at
December 31, 2005. Mexicos total proved developed and undeveloped dry gas reserves decreased by 1.4% in 2005, from 14.8 trillion cubic feet at December 31, 2004 to 14.6 trillion cubic feet at December 31, 2005. Mexicos
proved developed dry gas reserves increased by 7.2% in 2005, from 8.3 trillion cubic feet at December 31, 2004 to 8.9 trillion cubic feet at December 31, 2005.

During 2005, Pemex-Exploration and Production retained independent engineering firms to review its estimates of Mexicos proved reserves as of December 31, 2004. These activities were undertaken by
Netherland, Sewell International, S. de R.L. de C.V., which reviewed the reserves from the Northeastern Marine Region and Southern Region, DeGolyer and MacNaughton, which reviewed the reserves from the Southwestern Marine Region, and Ryder Scott
Company L.P., which reviewed the reserves in the Northern Region. During the second half of 2006, Pemex-Exploration and Production intends to again retain independent engineering firms to review its estimates of Mexicos proved reserves as of
December 31, 2005.



22



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##### Table of Contents

The following two tables of crude oil and dry gas reserves set forth our estimates of Mexicos
proved reserves determined in accordance with Rule 4-10(a) of Regulation S-X of the Securities Act.

Crude Oil and Condensate Reserves

(including natural gas liquids)(1)



|                                          |  |                          |   |  |        |   |  |        |   |  |        |   |  |        |  
|----------------------------------------- |  | ------------------------ | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | -
|                                          |  | 2001                     |   |  | 2002   |   |  | 2003   |   |  | 2004   |   |  | 2005   |  
|                                          |  | (in millions of barrels) |  
|Proved developed and undeveloped reserves |  |                          |  
|At January 1                              |  | 20,186                   |   |  | 18,767 |   |  | 17,196 |   |  | 16,041 |   |  | 14,803 |  
|Revisions                                 |  | (144                     | ) |  | (247   | ) |  | 120    |   |  | (109   | ) |  | 197    |  
|Extensions and discoveries(2)             |  | 2                        |   |  | (36    | ) |  | 84     |   |  | 245    |   |  | 25     |  
|Production                                |  | (1,277                   | ) |  | (1,288 | ) |  | (1,359 | ) |  | (1,374 | ) |  | (1,354 | )
|                                          |  |                          |   |  |        |   |  |        |   |  |        |   |  |        |  
|At December 31                            |  | 18,767                   |   |  | 17,196 |   |  | 16,041 |   |  | 14,803 |   |  | 13,671 |  
|                                          |  |                          |   |  |        |   |  |        |   |  |        |   |  |        |  
|Proved developed reserves at December 31  |  | 12,622                   |   |  | 11,725 |   |  | 10,473 |   |  | 9,745  |   |  | 9,617  |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Crude oil and condensate reserves include the fraction of liquefiable hydrocarbons recoverable in natural gas processing plants.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(2) | Extensions include positive and negative changes due to new data gathered through drilling of extension wells.
|--- | --------------------------------------------------------------------------------------------------------------

|Source: | Pemex-Exploration and Production.
|------- | ---------------------------------

Dry Gas
Reserves



|                                          |  |                             |   |  |        |   |  |        |   |  |        |   |  |        |  
|----------------------------------------- |  | --------------------------- | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | -
|                                          |  | 2001                        |   |  | 2002   |   |  | 2003   |   |  | 2004   |   |  | 2005   |  
|                                          |  | (in billions of cubic feet) |  
|Proved developed and undeveloped reserves |  |                             |  
|At January 1                              |  | 17,365                      |   |  | 16,256 |   |  | 14,985 |   |  | 14,850 |   |  | 14,807 |  
|Revisions                                 |  | (78                         | ) |  | (443   | ) |  | 695    |   |  | 547    |   |  | 661    |  
|Extensions and discoveries(1)             |  | 98                          |   |  | 313    |   |  | 354    |   |  | 641    |   |  | 394    |  
|Production(2)                             |  | (1,129                      | ) |  | (1,141 | ) |  | (1,184 | ) |  | (1,231 | ) |  | (1,305 | )
|                                          |  |                             |   |  |        |   |  |        |   |  |        |   |  |        |  
|At December 31                            |  | 16,256                      |   |  | 14,985 |   |  | 14,850 |   |  | 14,807 |   |  | 14,557 |  
|                                          |  |                             |   |  |        |   |  |        |   |  |        |   |  |        |  
|Proved developed reserves at December 31  |  | 8,776                       |   |  | 8,572  |   |  | 8,094  |   |  | 8,325  |   |  | 8,888  |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Extensions include positive and negative changes due to new data gathered through drilling of extension wells.
|--- | --------------------------------------------------------------------------------------------------------------

|(2) | Natural gas production reported in other tables refers to wet, sour gas. There is a shrinkage in volume when natural gas liquids and impurities are extracted to obtain dry gas.
Therefore, reported natural gas volumes are greater than dry gas volumes.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Pemex-Exploration and Production.
|------- | ---------------------------------



23



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##### Table of Contents

The following table sets forth the number of proved developed and undeveloped reserves, the number of
producing wells, and the number of proved undeveloped locations for the fields that contain over 85% of Mexicos proved reserves, as of December 31, 2005.



|                           |  |                                                  |   |  |                   |   |  |                     |   |  |                |  |                     
|-------------------------- |  | ------------------------------------------------ | - |  | ----------------- | - |  | ------------------- | - |  | -------------- |  | --------------------
|Field                      |  | ProvedReserves                                   |   |  | DevelopedReserves |   |  | UndevelopedReserves |   |  | ProducingWells |  | UndevelopedLocations
|                           |  | (in millions of barrels of crude oil equivalent)
|Akal                       |  | 5,563.1                                          |   |  | 4,813.0           |   |  | 750.1               |   |  | 193            |  | 17                  
|Ku-Maloob-Zaap             |  | 2,056.0                                          |   |  | 1,006.1           |   |  | 1,049.8             |   |  | 62             |  | 97                  
|Samaria                    |  | 956.5                                            |   |  | 620.7             |   |  | 335.8               |   |  | 48             |  | 15                  
|Jujo-Tecominoacán          |  | 868.8                                            |   |  | 586.3             |   |  | 282.5               |   |  | 55             |  | 16                  
|Iride                      |  | 664.4                                            |   |  | 487.0             |   |  | 177.4               |   |  | 32             |  | 12                  
|Chicontepec                |  | 635.5                                            |   |  | 136.0             |   |  | 499.4               |   |  | 513            |  | 2,601               
|Sihil                      |  | 294.4                                            |   |  | 81.7              |   |  | 212.7               |   |  | 3              |  | 8                   
|Cunduacán                  |  | 271.2                                            |   |  | 115.7             |   |  | 155.5               |   |  | 19             |  | 10                  
|Chuc                       |  | 176.8                                            |   |  | 173.6             |   |  | 3.2                 |   |  | 19             |  | 3                   
|Caan                       |  | 171.0                                            |   |  | 171.0             |   |  | 0.0                 |   |  | 24             |  | 0                   
|Oxiacaque                  |  | 164.3                                            |   |  | 46.7              |   |  | 117.5               |   |  | 4              |  | 4                   
|May                        |  | 145.9                                            |   |  | 41.5              |   |  | 104.4               |   |  | 4              |  | 13                  
|Ixtal                      |  | 133.1                                            |   |  | 17.6              |   |  | 115.5               |   |  | 1              |  | 7                   
|Puerto Ceiba               |  | 131.8                                            |   |  | 84.2              |   |  | 47.6                |   |  | 15             |  | 8                   
|Sinán                      |  | 129.5                                            |   |  | 77.4              |   |  | 52.0                |   |  | 5              |  | 11                  
|Cactus                     |  | 119.2                                            |   |  | 63.4              |   |  | 55.8                |   |  | 22             |  | 7                   
|Muspac                     |  | 115.9                                            |   |  | 115.9             |   |  | 0.0                 |   |  | 17             |  | 0                   
|Chiapas-Copanó             |  | 107.7                                            |   |  | 107.7             |   |  | 0.0                 |   |  | 15             |  | 0                   
|Ogarrio                    |  | 102.7                                            |   |  | 58.0              |   |  | 44.8                |   |  | 53             |  | 24                  
|Cárdenas                   |  | 100.9                                            |   |  | 79.0              |   |  | 22.0                |   |  | 19             |  | 2                   
|Bolontikú                  |  | 93.8                                             |   |  | 47.4              |   |  | 46.3                |   |  | 2              |  | 3                   
|Poza Rica                  |  | 93.2                                             |   |  | 89.4              |   |  | 3.8                 |   |  | 100            |  | 3                   
|Balam                      |  | 90.8                                             |   |  | 90.8              |   |  | 0.0                 |   |  | 3              |  | 0                   
|Sen                        |  | 88.2                                             |   |  | 56.9              |   |  | 31.3                |   |  | 12             |  | 6                   
|Caparroso-Pijije-Escuintle |  | 75.4                                             |   |  | 58.2              |   |  | 17.2                |   |  | 12             |  | 2                   
|Abkatún                    |  | 62.5                                             |   |  | 62.5              |   |  | 0.0                 |   |  | 14             |  | 0                   
|Paredón                    |  | 55.8                                             |   |  | 55.8              |   |  | 0.0                 |   |  | 7              |  | 0                   
|Lum                        |  | 54.7                                             |   |  | 0.0               |   |  | 54.7                |   |  | 0              |  | 7                   
|Platanal                   |  | 52.8                                             |   |  | 11.5              |   |  | 41.3                |   |  | 1              |  | 3                   
|Papan                      |  | 45.7                                             |   |  | 21.8              |   |  | 23.9                |   |  | 0              |  | 5                   
|Ayín                       |  | 45.5                                             |   |  | 0.0               |   |  | 45.5                |   |  | 0              |  | 5                   
|Alux                       |  | 36.8                                             |   |  | 0.0               |   |  | 36.8                |   |  | 0              |  | 4                   
|Ek                         |  | 35.1                                             |   |  | 35.1              |   |  | 0.0                 |   |  | 2              |  | 0                   
|Cuitláhuac                 |  | 34.1                                             |   |  | 28.9              |   |  | 5.2                 |   |  | 218            |  | 13                  
|Bacab                      |  | 30.2                                             |   |  | 30.2              |   |  | 0.0                 |   |  | 1              |  | 0                   
|Culebra                    |  | 29.5                                             |   |  | 19.7              |   |  | 9.9                 |   |  | 392            |  | 79                  
|Tizón                      |  | 28.4                                             |   |  | 10.4              |   |  | 18.0                |   |  | 2              |  | 3                   
|Arcabuz                    |  | 24.5                                             |   |  | 14.4              |   |  | 10.1                |   |  | 141            |  | 134                 
|Ixtoc                      |  | 20.6                                             |   |  | 20.6              |   |  | 0.0                 |   |  | 3              |  | 0                   
|Kutz                       |  | 19.6                                             |   |  | 19.6              |   |  | 0.0                 |   |  | 3              |  | 0                   
|Misón                      |  | 16.4                                             |   |  | 0.0               |   |  | 16.4                |   |  | 0              |  | 4                   
|Pol                        |  | 16.1                                             |   |  | 16.1              |   |  | 0.0                 |   |  | 12             |  | 0                   
|Arcos                      |  | 12.7                                             |   |  | 11.1              |   |  | 1.5                 |   |  | 143            |  | 5                   
|Nohoch                     |  | 11.2                                             |   |  | 11.2              |   |  | 0.0                 |   |  | 4              |  | 0                   
|Chac                       |  | 9.5                                              |   |  | 9.5               |   |  | 0.0                 |   |  | 2              |  | 0                   
|Luna-Palapa                |  | 6.0                                              |   |  | 6.0               |   |  | 0.0                 |   |  | 7              |  | 0                   
|Citam                      |  | 3.0                                              |   |  | 1.9               |   |  | 1.2                 |   |  | 1              |  | 1                   
|Escarbado                  |  | 1.6                                              |   |  | 1.6               |   |  | 0.0                 |   |  | 1              |  | 0                   
|                           |  |                                                  |   |  |                   |   |  |                     |   |  |                |  |                     
|Total                      |  | 14,002.4                                         |   |  | 9,613.2           |   |  | 4,389.2             |   |  | 2,206          |  | 3,132               
|                           |  |                                                  |   |  |                   |   |  |                     |   |  |                |  |                     
|Mexicos proved reserves   |  | 16,469.6                                         |   |  | 11,325.6          |   |  | 5,144.0             |   |  |                |  |                     
|Percentage                 |  | 85                                               | % |  | 85                | % |  | 85                  | % |  |                |  |                     

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|Source: | Pemex-Exploration and Production.
|------- | ---------------------------------



24



---

##### Table of Contents

Exploration and Drilling

We seek to identify new oil reservoirs through our exploration program in order to maintain an adequate level of reserves. From 1990 through 2005, we
completed 4,560 exploration and development wells. During 2005, the average success rate for exploratory wells was 53% and the average success rate for development wells was 92%. From 2001 to 2005, we discovered 24 new crude oil fields and 80 new
natural gas fields, bringing the total number of our crude oil and natural gas fields in production to 357 at the end of 2005.

While most
of our offshore production in the Gulf of Mexico occurs in waters less than 100 meters deep, our exploration program for 2005 included exploration of regions located in deeper waters. In 2005, our deep-water exploration activities focused on the
acquisition of three-dimensional seismic information to better identify potentially valuable oil sources. The Magno three-dimensional seismic study, for example, allowed us to obtain information on 4,200 square kilometers in the Perdido Area
project. One of the principal achievements of our deep-water activities is the drilling of the Noxal-1 well, in the Campeche Bay region, located in offshore waters at a depth of 935.9 meters. Our most productive crude oil and natural gas fields in
the Gulf of Mexico are the Cantarell complex, Ku-Maloob-Zaap in the Northeastern Marine region and Caan, Abkatún and Chuc in the Southwestern Marine region. The Cantarell complex, for example, produced 2,016 thousand barrels per day of
crude oil in 2005, or 60.5% of our total 2005 crude oil production, and 738 million cubic feet per day of natural gas in 2005, or 15.3% of our total 2005 natural gas production.

The following table summarizes our drilling activity for the five years ended December 31, 2005.



|                                                           |  |                         |  |       |  |       |  |       |  |      
|---------------------------------------------------------- |  | ----------------------- |  | ----- |  | ----- |  | ----- |  | -----
|                                                           |  | Year Ended December 31,
|                                                           |  | 2001                    |  | 2002  |  | 2003  |  | 2004  |  | 2005 
|Wells drilled                                              |  | 449                     |  | 447   |  | 653   |  | 733   |  | 759  
|Wells completed                                            |  | 459                     |  | 459   |  | 593   |  | 727   |  | 742  
|Exploratory wells                                          |  | 53                      |  | 55    |  | 88    |  | 103   |  | 74   
|Success rate %                                             |  | 53                      |  | 49    |  | 60    |  | 41    |  | 53   
|Development wells                                          |  | 406                     |  | 404   |  | 505   |  | 624   |  | 668  
|Success rate %                                             |  | 91                      |  | 88    |  | 90    |  | 94    |  | 92   
|Producing wells (annual averages)                          |  | 4,435                   |  | 4,590 |  | 4,941 |  | 5,286 |  | 5,682
|Marine region                                              |  | 352                     |  | 346   |  | 369   |  | 380   |  | 388  
|Southern region                                            |  | 1,066                   |  | 1,000 |  | 979   |  | 935   |  | 959  
|Northern region                                            |  | 3,017                   |  | 3,245 |  | 3,593 |  | 3,972 |  | 4,335
|Fields in production                                       |  | 301                     |  | 309   |  | 340   |  | 355   |  | 357  
|Marine region                                              |  | 19                      |  | 20    |  | 23    |  | 25    |  | 29   
|Southern region                                            |  | 96                      |  | 93    |  | 102   |  | 97    |  | 84   
|Northern region                                            |  | 186                     |  | 196   |  | 215   |  | 233   |  | 244  
|Drilling Rigs                                              |  | 50                      |  | 70    |  | 101   |  | 132   |  | 116  
|Kilometers drilled                                         |  | 1,098                   |  | 1,186 |  | 1,763 |  | 2,106 |  | 2,004
|Average depth by well (meters)                             |  | 2,359                   |  | 2,478 |  | 2,904 |  | 2,704 |  | 2,828
|Discovered fields(1)                                       |  | 15                      |  | 16    |  | 33    |  | 24    |  | 16   
|Crude oil                                                  |  | 0                       |  | 2     |  | 11    |  | 8     |  | 3    
|Natural gas                                                |  | 15                      |  | 14    |  | 22    |  | 16    |  | 13   
|Crude oil and natural gas output by well (barrels per day) |  | 923                     |  | 900   |  | 880   |  | 833   |  | 774  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Includes only fields with proved reserves.
|--- | ------------------------------------------

|Source: | Pemex-Exploration and Production.
|------- | ---------------------------------



25



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##### Table of Contents

The following table sets forth our lifting costs (the average amount in U.S. dollars that it costs us to
extract a barrel of oil equivalent) for each of the last three years.



|                                              |  |                           |  |      
|--------------------------------------------- |  | ------------------------- |  | -----
|Average Lifting Costs Year Ended December 31,
|2003                                          |  | 2004                      |  | 2005 
|                                              |  | (U.S. dollars per barrel) |  |      
|                                              |  |                          
|$3.26                                         |  | $3.78                     |  | $4.24

---

Source: Pemex-Exploration and Production.

Our lifting costs increased by 12.2% from 2004 to 2005, primarily as a result of an increase in maintenance expenses and in the
average cost of gas used for pneumatic pumping, from U.S. $5.39 per million cubic feet in 2004 to U.S. $7.20 per million cubic feet in 2005, as well as due to an increase in the volume of gas used for pneumatic pumping, from 455.2 billion
cubic feet in 2004 to 455.7 billion cubic feet in 2005.

Pemex-Exploration and Production calculates and discloses its lifting costs (the
cost of producing oil from a well) in accordance with international practice. The lifting cost per barrel is calculated by dividing the total lifting cost (in U.S. dollars) into the total production of hydrocarbons (in barrels of oil equivalent)
over the relevant period. The lifting costs are calculated in accordance with SFAS No. 19 Financial Accounting and Reporting by Oil and Gas Producing Companies for U.S. GAAP purposes.

The total lifting cost consists of all direct and indirect costs incurred to produce oil and gas, including costs incurred to operate and maintain wells
and related equipment and facilities. In addition, it includes costs of labor to operate the wells and facilities, the costs of materials, supplies and fuel consumed, including gas used for gas lifting, nitrogen and other chemicals, repair and
non-capitalized maintenance costs, and other costs, such as fees for general services, a labor fund for active personnel, corporate services and indirect overhead, but excludes non-cash expenses such as reserves for depletion, amortization of
capitalized well expenses, the depreciation of fixed assets, and expenses associated with the distribution and handling of hydrocarbons that are related to exploration and drilling activities.

Extensions and Discoveries

During
2005, we discovered new sources of crude oil and natural gas reserves in the Southwestern and Northeastern Marine regions, the Northern region and the Southern region. The new discoveries yielded a total of 136.8 million barrels of crude oil
equivalent of proved reserves. The extensions yielded a total of 36.3 million barrels of crude oil equivalent of proved reserves.

In
the Southwestern Marine region, the drilling of the Kux-1, Ichalkil-1, Sikil-1, Kach-1, Behelae-1 and Xanab-1 wells led to the addition of 47.8 million barrels of proved oil reserves, and 17.7 billion cubic feet of proved natural gas reserves.
In the Northeastern Marine region, the drilling of wells did not lead to any proved natural gas reserves. The drilling of wells in the Northern region led to the addition of 419.2 billion cubic feet of proved natural gas reserves, mainly in the
Veracruz sector, where Papan-1, Arquimia-101, Huace-1, Espejo-1 and Soterrillo-1 wells added 333.3 billion cubic feet of proved natural gas reserves. Other important discoveries in the Burgos basin and Poza Rica field led to the addition of 42.7
billion and 43.2 billion cubic feet of proved natural gas reserves, respectively. The Poza Rica sector also led to the addition of 7.3 million barrels of proved oil reserves. Finally, in the Southern region, the exploration activities in the
Tiumut-1 and Agave-1001 wells led to the addition of 1.6 million barrels and 4.0 billion cubic feet of proved oil and natural gas reserves, respectively.

Investment in Exploration and Production

In nominal peso terms, we invested Ps. 112,863 million
in exploration and production in 2005, as compared to Ps. 113,332 million in 2004, representing a 0.4% decrease in nominal terms in investment in exploration and



26



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##### Table of Contents

production. An important component of our investment budget consists of projects financed under the Mexican Governments program for PIDIREGAS. In 2005,
in nominal peso terms, Pemex-Exploration and Productions PIDIREGAS investments totaled approximately Ps. 101,823 million, including Ps. 25,030 million in investments in the Cantarell fields, Ps. 20,635 million in the Strategic
Gas Program, Ps. 16,424 million in investments in the Ku-Maloob-Zaap fields, Ps. 12,439 million for development of the Burgos natural gas fields, Ps. 7,045 million in investments in the Antonio J. Bermúdez fields,
Ps. 2,344 million in investments in the Arenque fields, Ps. 2,340 million in the Jujo-Tecominoacán fields and Ps. 2,266 million in investments in the Chuc fields.During 2005, the investments in these eight projects
amounted to 86.9% of all PIDIREGAS investments in exploration and production. The remaining 13.1% amounted to Ps. 13,300 million in nominal terms, which was invested in the 19 remaining projects, 18 of which were commenced in 2002. The
Cantarell, Strategic Gas Program, Ku-Maloob-Zaap, Burgos, Antonio J. Bermúdez, Arenque, Jujo-Tecominoacán and Chuc PIDIREGAS are described below.

Cantarell.In nominal peso terms, Pemex-Exploration and Production invested Ps. 23,011 million in 2003, Ps. 27,240 million in 2004 and Ps. 25,030 million in 2005 in the development of the
Cantarell reservoirs in the Marine region. For 2006, we have budgeted Ps. 19,319 million for Cantarell investments. By the end of 2006, we expect our investments in the Cantarell project to total approximately U.S. $20.0 billion.

On October 10, 1997, we awarded a build-own-operate contract for a nitrogen cryogenic plant at the Cantarell oil and natural gas
field to a consortium formed by BOC Holdings, Linde, Marubeni, West Coast Energy and ICA Fluor Daniel. Under this contract, the consortium is responsible for the financing, design, construction and operation of the plant. The plant cost
approximately Ps. 10,131 million in nominal terms. Pursuant to the terms of the agreement, the consortium has legal ownership of the plant, and Pemex-Exploration and Production has committed to buy from the consortium 1.2 billion cubic feet per
day of nitrogen for a period of 15 years. The plant began operations in 2000. During 2005, Pemex-Exploration and Production paid approximately U.S. $173 million under this contract for a total volume of approximately 413 billion cubic feet
of nitrogen. In 2006, Pemex-Exploration and Production expects to pay approximately U.S. $186 million under this contract for a total volume of approximately 466 billion cubic feet of nitrogen. This amount includes the addition of a fifth module to
the nitrogen plant, which should increase its production capacity by approximately 300 million cubic feet per day, in order to reach a total nitrogen production of approximately 1.5 billion cubic feet per day. We plan to inject approximately
1.07 billion cubic feet per day into the Cantarell reservoirs in 2007 and 0.93 billion cubic feet per day from 2008 to 2016. After 2016, we will gradually reduce the amount of nitrogen we inject into the Cantarell reservoirs and the excess nitrogen
will be injected in other fields in the Marine region. We expect this project will increase our crude oil recovery rates by injecting nitrogen into the Cantarell reservoirs, which should help maintain pressure during crude oil extraction. By
maintaining favorable crude oil recovery rates at Cantarell, we expect that the injection program will yield long-term benefits, including increasing the productive life of the wells and the volume of oil recovered. In the event that the agreement
is rescinded due to a cause imputed to us, we will be obligated under the agreement to purchase the nitrogen production plant, with an estimated value of approximately U.S. $392 million as of December 31, 2005.

Strategic Gas Program. In 2001, Pemex-Exploration and Production initiated a nine-year, U.S. $8,105 million investment project named the
Strategic Gas Program. Our total projected investment for the program increased from Ps. 18,079 million in 2003 to Ps. 23,413 million in 2004 and decreased to Ps. 20,635 million in 2005. During this period, we initiated three new
exploratory projects: Integral Tampico Misantla Sur de Burgos, Veracruz Marino and Cazones. The purpose of the program is to increase Mexicos supply of natural gas and develop a reserve that will satisfy the domestic demand for natural gas,
thereby reducing future reliance on imports. Field development and optimization of production will represent 59% of investments, with the goal of increasing the production of natural gas to 2,890 million cubic feet per day by 2015. Exploration
activities will represent 34% of investments with the goal of increasing proved reserves in twelve different exploratory natural gas and integral gas projects. Finally, development of newly discovered fields will represent 7% of the investment
amount. In nominal peso terms, Pemex-Exploration and Production invested Ps. 20,635 million in the program in 2005, as compared with Ps. 23,413 million in 2004. For 2006, we expect to invest Ps. 16,566 million,



27



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##### Table of Contents

which would bring our total investment in the program to approximately U.S. $8.2 billion through December 31, 2006. During the period from 2001 to
2005, average production was 715 million cubic feet per day of natural gas. Since 2001, 142 exploratory wells demonstrated offshore and onshore gas potential, resulting in a 37% exploratory success ratio. During 2005, three fields were
discovered: Espejo and Papan in the Veracruz basin (onshore), and Xanab, in the Marine province of Coatzacoalcos.

Ku-Maloob-Zaap.The Ku-Maloob-Zaap project is one of the main producers of heavy crude oil and plays an important part in the production of the Maya crude oil mix. In order to maintain our volume of production, this project plans to increase the drilling of
wells and to implement pressure maintenance systems. In nominal peso terms, we invested Ps. 3,072 million in 2003, Ps. 10,222 million in 2004 and Ps. 16,424 million in 2005 in the Ku-Maloob-Zaap project. For 2006, we anticipate that
our investments in this project will reach Ps. 20,811 million and that our total accumulated investments will reach approximately U.S. $4.2 billion. The pressure maintenance project, which will be implemented beginning in 2007, is expected
to reach an average nitrogen injection rate of 400 million cubic feet per day while the project is operational, by taking advantage of the fifth module to be added to the Cantarell nitrogen cryogenic plant.

Burgos.In 1997, Pemex-Exploration and Production initiated a 15-year project to develop the Burgos natural gas fields in Northern Mexico, which
accounted for 11% of our total natural gas production in 1997. We expect that the Burgos project will better enable us to meet increasing domestic demand for natural gas and thereby reduce our imports of natural gas in the future. Three major
turn-key contracts have been awarded to Dowell-Schlumberger México (worth U.S. $108 million), Industrial Perforadora de Campeche, S.A. de C.V. (worth U.S. $96.4 million) and Halliburton International Inc. (worth U.S. $71
million) for this project. From 2002 to 2005, exploration activities and reclassification of reserves in the Burgos area increased estimated proved reserves by 25.5 million barrels of oil equivalent, and production in this period was
297.0 million barrels of oil equivalent. During 2005, reserves decreased by 23.2 million barrels of oil equivalent, from 427.8 million barrels of oil equivalent in 2004 to 404.6 million barrels of oil equivalent in 2005. In
nominal peso terms, we invested Ps. 10,995 million in 2003, Ps. 16,344 million in 2004 and Ps. 12,439 million in 2005 in the Burgos project. For 2006, we anticipate that our investments in this project will amount to Ps. 11,969
million and that our total accumulated investments will reach approximately U.S. $8.5 billion.

Antonio J. Bermúdez.In
2002, we began investing in the Antonio J. Bermúdez project, the main PIDIREGAS project in the Southern region. This project is designed to accelerate reserve recovery, as well as increase the recovery factor by drilling additional wells and
implementing a pressure maintenance system.In nominal peso terms, we invested Ps. 3,622 million in 2003, Ps. 6,270 million in 2004 and Ps. 7,045 million in 2005 in the Antonio J. Bermúdez project. For 2006, we
anticipate that our investments in this project will amount to Ps. 5,488 million and that our total accumulated investments will reach approximately U.S. $2.1 billion. The pressure maintenance project is expected to be implemented
beginning in 2007, through the injection of 190 million cubic feet per day of nitrogen supplied by a modular plant to be constructed near the field.

Arenque.In 2002, Pemex-Exploration and Production initiated this project to recover light crude oil reserves with high gas-oil relation. The Arenque project includes drilling and secondary recovery processes,
as well as exploratory studies. In nominal peso terms, we invested Ps. 1,089 million in 2003, Ps. 2,274 million in 2004 and Ps. 2,344 million in 2005 in the Arenque project. In 2006, we expect to invest Ps. 1,534 million in this
project, bringing our total investment in the Arenque Project to approximately U.S. $697 million.

Jujo-Tecominoacán.
This field is the second largest crude oil producer in the Southern region and has been exploited by Pemex-Exploration and Production since 1980. Our investments in the Jujo-Tecominoacán fields since 2002 are designed to slow the decrease in
oil production in recent years, by drilling additional wells and implementing maintenance programs. In nominal peso terms, we invested Ps. 1,668 million in 2003, Ps. 1,699 million in 2004 and Ps. 2,340 million in 2005 in the
Jujo-Tecominoacán project. In 2006, we expect to invest Ps. 1,928 million in this project, bringing our total investment in the Jujo-Tecominoacán Project to approximately U.S. $0.7 billion. We plan to convert a production
well into an injection well in 2006. In 2007, we expect to



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begin injecting nitrogen supplied by a modular plant to be constructed near the field, at a volume of 90 million cubic feet per day, in order to
maintain the fields pressure.

Chuc.The Chuc project is part of an integrated strategy of light crude oil production
in the Southwestern Marine region. It is part of the operating and maintenance of the Pol-A facility and water injection complexes. In nominal peso terms, we invested Ps. 1,753 million in 2003, Ps. 4,152 million in 2004 and Ps.
2,266 million in 2005 in the Chuc project. In 2006, we expect to invest Ps. 2,506 million in this project and anticipate that our total accumulated investments will reach approximately U.S. $1,042 million.

Non-PIDIREGAS Investments. In addition to PIDIREGAS investments, Pemex-Exploration and Production makes non-PIDIREGAS investments called
Recursos Propios (Proprietary Funds) or Inversiones Programables (Programmed Investments), authorized by the Ministry of Finance and Public Credit and the Mexican Congress. In nominal peso terms, in 2005, non-PIDIREGAS investments of
Pemex-Exploration and Production totaled Ps. 11,040 million, of which Ps. 6,018 million, or 54.5%, was invested in strategic projects and Ps. 5,022 million, or 45.5%, in general operating improvements. Our investments consisted of
Ps. 1,812 million in oil and gas exploration and Ps. 9,228 million in general field development and facilities.

2006
Exploration and Production Investment Budget. For 2006, Pemex-Exploration and Production anticipates investing Ps. 6,004 million in non-PIDIREGAS expenditures. Approximately Ps. 242 million, or 4.0% of this amount, is to be allocated
to investments in projects relating to field development, pipelines and exploration activities, including the continuation of certain projects that began during the period from 1999 to 2005. Approximately Ps. 5,762 million, or 96.0%, will be
allocated to operating projects as well as to projects relating to maintenance facilities, industrial safety and environmental projects. In addition to these non-PIDIREGAS investments, the 2006 budget includes all of the 27 on-going PIDIREGAS
strategic exploration and production projects for a total PIDIREGAS budget of approximately Ps. 91,667 million. This amount includes Ps. 20,811 million for Ku-Maloob-Zaap, Ps. 19,319 million for Cantarell, Ps. 16,566 million for the
Strategic Gas Program, Ps. 11,969 million for Burgos, Ps. 5,488 million for Antonio J. Bermúdez and Ps. 17,514 million for the other PIDIREGAS projects.

Exploration and Production Investment Trends.From 2001 to 2004, our investments in exploration increased significantly. In nominal peso terms, in
2005, we invested Ps. 14,653 million, or 13.0% of the total capital expenditures for Pemex-Exploration and Production, in exploration activities, which represents a 32.4% decrease from the Ps. 21,664 million, or 19.1% of the total capital
expenditures of Pemex-Exploration and Production, invested in exploration activities in 2004. In 2005, we invested Ps. 75,794 million in nominal terms, or 67.2% of the total capital expenditures for Pemex-Exploration and Production in
development activities, which represents a 9.6% increase from the amount invested in development activities in 2004, with the remaining investments directed towards major maintenance of production facilities. In 2004, we invested Ps. 69,129
million in nominal terms, or 61.0% of the total capital expenditures for Pemex-Exploration and Production, in development activities. The remaining investments are directed towards major maintenance in production facilities.

In 2006, we have budgeted Ps. 69,790 million, or 71.5% of total capital expenditures, for the development activities of Pemex-Exploration and
Production, which represents a 7.9% decrease in nominal terms from 2005. For exploration activities, we have budgeted Ps. 10,854 million, or 11.1% of total capital expenditures, which represents a 25.9% decrease in nominal terms from the
amounts that Pemex-Exploration and Production invested in development and exploration activities, respectively, in 2005, and a 13.5% decrease in overall investment. In 2007, we expect to spend Ps. 12,993 million, or 10.1% of the total capital
expenditures for Pemex-Exploration and Production, in exploration activities, which represents a 19.7% increase in nominal terms from the amount projected for 2006. In 2008, we expect to spend Ps. 11,238 million, or 10.8% of the total capital
expenditures for Pemex-Exploration and Production, in exploration activities, which represents a 13.5% decrease in nominal terms from the amount projected for 2007. In 2009, we expect to spend Ps. 9,852 million, or 10.5% of the total capital
expenditures for Pemex-Exploration and Production, in exploration activities, which represents a 12.3%



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decrease in nominal terms from the amount projected for 2008. These estimates are subject to the approval of the Mexican Congress of our budget for each
year.

Capital expenditures for Pemex-Exploration and Production as a percentage of PEMEXs total capital expenditures have been
increasing in recent years, from 84.9% in 2001 to 88.9% in 2005; however, this trend will reverse slightly in upcoming years, with capital expenditures for Pemex-Exploration and Production as a percentage of PEMEXs total capital expenditures
declining to 82.0% in 2006 and 76.9% in 2007.

The following table sets forth our capital expenditures related to exploration, development
and maintenance during the five years ended December 31, 2005, and the budget for such expenditures for 2006.

Exploration,
Development and Maintenance Capital Expenditures for 2000-2005



|            |  |                             |        |      |     |        |  |      |        |      |     |               |  |     |         |  |     |       
|----------- |  | --------------------------- | ------ | ---- | --- | ------ |  | ---- | ------ | ---- | --- | ------------- |  | --- | ------- |  | --- | ------
|            |  | Year ended December 31,(1) 
|            |  | 2001                        |        | 2002 |     | 2003   |  | 2004 |        | 2005 |     | Budget2006(2)
|            |  | (millions of nominal pesos)
|Exploration |  | Ps.                         | 4,186  |      | Ps. | 8,552  |  | Ps.  | 16,411 |      | Ps. | 21,664        |  | Ps. | 14,653  |  | Ps. | 10,854
|Development |  |                             | 32,504 |      |     | 32,630 |  |      | 44,577 |      |     | 69,129        |  |     | 75,794  |  |     | 69,790
|Maintenance |  |                             | 16,756 |      |     | 21,817 |  |      | 27,389 |      |     | 22,539        |  |     | 22,416  |  |     | 17,027
|            |  |                             |        |      |     |        |  |      |        |      |     |               |  |     |         |  |     |       
|Total       |  | Ps.                         | 53,446 |      | Ps. | 63,000 |  | Ps.  | 88,380 |      | Ps. | 113,332       |  | Ps. | 112,863 |  | Ps. | 97,671
|            |  |                             |        |      |     |        |  |      |        |      |     |               |  |     |         |  |     |       

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Amounts based on cash basis method of accounting.
|--- | -------------------------------------------------

|(2) | Approved budget.
|--- | ----------------

The following table sets forth our
estimated capital expenditures budget for exploration, development and maintenance for 2006 through 2009:

Estimated Exploration,
Development and Maintenance Capital Expenditures for 2006-2009



|               |  |                             |        |      |     |         |  |      |         |  |     |       
|-------------- |  | --------------------------- | ------ | ---- | --- | ------- |  | ---- | ------- |  | --- | ------
|               |  | Year ended December 31,(1) 
|               |  | 2006(2)                     |        | 2007 |     | 2008    |  | 2009
|               |  | (millions of nominal pesos)
|Exploration(3) |  | Ps.                         | 10,854 |      | Ps. | 12,993  |  | Ps.  | 11,238  |  | Ps. | 9,852 
|Development(3) |  |                             | 69,790 |      |     | 91,583  |  |      | 74,253  |  |     | 66,437
|Maintenance(3) |  |                             | 17,027 |      |     | 24,589  |  |      | 18,092  |  |     | 17,738
|               |  |                             |        |      |     |         |  |      |         |  |     |       
|Total          |  | Ps.                         | 97,671 |      | Ps. | 129,164 |  | Ps.  | 103,583 |  | Ps. | 94,027
|               |  |                             |        |      |     |         |  |      |         |  |     |       

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Amounts based on cash basis method of accounting.
|--- | -------------------------------------------------

|(2) | Approved budget.
|--- | ----------------

|(3) | Estimated budgets for 2007 through 2009 are based on amounts authorized by the Ministry of Finance and Public Credit for projects in 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

Financed Public Works Contracts

Our
Financed Public Works Contracts program, or FPWC, previously know as the Multiple Services Contracts program, was first announced in December 2001. The objective of the program is to provide a contractual framework that promotes an efficient
execution of public works, in order to increase Mexicos hydrocarbons production. The FPWC are public works contracts based on unit prices that aggregate a number of



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different services into a single contract. Under the FPWC framework, Pemex-Exploration and Production retains the rights and title to all hydrocarbons
produced and works performed under each FPWC, as all works are performed on behalf of Pemex-Exploration and Production.

The invitation for
bids for the two rounds of FPWC bidding, corresponding to works and services necessary for non-associated natural gas production in eight blocks in the Burgos basin, occurred in July 2003 and in the second half of 2004, respectively. The following
table summarizes the results of those rounds.



|                  |  |                   |  |                                                                                                                                                                                                                             |  |                                             |      
|----------------- |  | ----------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | -----
|Block             |  | Signature date    |  | Contractor                                                                                                                                                                                                                  |  | Contract amount(in millions ofU.S. dollars)
|Reynosa-Monterrey |  | November 14, 2003 |  | Repsol Exploración México, S.A. de C.V.                                                                                                                                                                                     |  | $                                           | 2,437
|                  |  |                   | 
|Cuervito          |  | November 21, 2003 |  | PTD Servicios Múltiples, S. de R.L. de C.V., a consortium comprised by Petróleo Brasileiro, S.A. (Petrobras), Teikoku Oil Co., Ltd. and D&S Petroleum                                                                       |  |                                             | 260  
|                  |  |                   | 
|Misión            |  | November 28, 2003 |  | Servicios Múltiples de Burgos, S.A. de C.V., a consortium comprised by Tecpetrol (a subsidiary of Techint Group) and Industrial Perforadora de Campeche. S.A. de C.V.                                                       |  |                                             | 1,036
|                  |  |                   | 
|Fronterizo        |  | December 8, 2003  |  | PTD Servicios Múltiples, S. de R.L. de C.V., a consortium comprised by Petróleo Brasileiro, S.A. (Petrobras), Teikoku Oil Co., Ltd. and D&S Petroleum                                                                       |  |                                             | 265  
|                  |  |                   | 
|Olmos             |  | February 9, 2004  |  | Lewis Energy México, S. de R.L. de C.V.                                                                                                                                                                                     |  |                                             | 344  
|                  |  |                   | 
|Pandura-Anáhuac   |  | December 9, 2004  |  | Industrial Perforadora de Campeche S.A. de C.V. and Compañía de Desarrollo y Servicios Petroleros, S.A. de C.V.                                                                                                             |  |                                             | 900  
|                  |  |                   | 
|Pirineo           |  | March 23, 2005    |  | Monclova Pirineo Gas, S. de R.L. de C.V., a consortium comprised by Constructora Industrial Monclova, Materiales la Gloria, Alianz Petroleum, Steel Serv., Suelopetrol, NCT, Estudios y Proyectos
and Petrotesting Colombia |  |                                             | 645  
|                  |  |                   |  |                                                                                                                                                                                                                             |  |                                             |      
|                  |  |                   |  | Total                                                                                                                                                                                                                       |  | U.S.$                                       | 5,887
|                  |  |                   |  |                                                                                                                                                                                                                             |  |                                             |      

---

Source: Pemex-Exploration and Production.

On February 8, 2005, we announced that the companies that had acquired bidding documents for the Ricos block chose not to submit
final proposals. The contract for the Monclova block was awarded on February 17, 2005 to a consortium comprised by Hullera Mexicana, Energy Milenium, Andrews Technologies de México, Yuma Exploration and Production Inc. and Aries
Operating L.P.; however, the contract was not signed due to disagreements among the members of the consortium not attributable to Pemex-Exploration and Production. No other public bidding was held in 2005. As of December 31, 2005, seven
contracts had been awarded under the FPWC program, for a total amount of U.S. $5,887 million.

During 2005, through the FPWC program, among
other projects, 65 wells were drilled, 60 of those wells were completed and 511 square kilometers of three-dimensional seismic information was acquired. The projects carried out in 2005 represented an investment of approximately U.S. $113 million.
At the end of 2005, natural gas production in the seven blocks listed in the table above reached 118 million cubic feet per day.



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During 2005, the Auditoría Superior de la Federación (the Supreme Auditor of the
Federation, which we refer to as the ASF), an entity of the Mexican Congress, recommended that before proceeding with future FPWC bidding rounds for non-associated natural gas projects in the Burgos basin, the scope of the terms
exploration and exploitation be clarified and, if necessary, redefined under the Regulatory Law. After conducting the appropriate legal analysis, we clarified the terminology used in the FPWC and in May 2006, we were notified
that all observations made by the ASF regarding the FPWC program had been resolved. We expect to carry out further FPWC rounds in the near future once the appropriate technical information is duly integrated.

There are two pending claims related to the FPWC program. See Item 8Financial InformationLegal ProceedingsCivil Actions.

Crude Oil Production

In 2005, we produced an average of 3,333 thousand barrels per day of crude oil, 1.5% lower than our average daily production in 2004 of 3,383 thousand barrels per day of crude oil.The decrease was mainly due to adverse
weather conditions, in particular hurricanes Emily and Wilma, which did not cause any damage to our infrastructure but caused decreases in our production of heavy crude oil of 71 thousand barrels per day, 2.9% lower than the average daily
production in 2004, as a result of temporary shut-downs and inventory accumulations. This decrease in average daily production was partially offset by an increase in light and extra-light crude oil production of 21 thousand barrels per day, or
2.3%, as compared to 2004, due to the progress in the completion and workover of wells at the Bellota-Jujo, Samaria-Luna and Litoral de Tabasco complexes.

Crude oil can be classified by sulphur content. Sour crudes contain 3.4% or greater sulphur content by weight and sweet crudes contain less than 1.0% sulphur content by weight. Most of our
production is classified as sour crudes.

Pemex-Exploration and Production produces four types of crude oil:



| |  |  | Altamira, a heavy crude oil;
| | - |  | ----------------------------



| |  |  | Maya, a heavy crude oil;
| | - |  | ------------------------



| |  |  | Isthmus, a light crude oil; and
| | - |  | -------------------------------



| |  |  | Olmeca, a very light crude oil.
| | - |  | -------------------------------

Most of
Pemex-Exploration and Productions production consists of Isthmus and Maya crude oil. In 2005, 71.6% of Pemex-Exploration and Productions total production of crude oil consisted of heavy crudes and 28.4% consisted of light and very light
crudes. The Marine region yields mostly heavy crude oil (84.7% of this regions production in 2005), although significant volumes of light crude oil are also produced (15.3% of this regions production). The Southern region yields mainly
light and very light crudes (together, 95.8% of this regions production), and the Northern region yields a mixture of both heavy crude oil (42.4% of this regions production in 2005) and light and very light crudes (57.6% of this
regions production in 2005).



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##### Table of Contents

The following table sets forth our annual crude oil production rates for the five years ended
December 31, 2005.



|                      |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|--------------------- |  | --------------------------------- |  | ------------- |  | ------- |  | ------- |  | ------- |  | ----- | -
|                      |  | Year Ended December 31,           |  | 2005 vs. 2004 | 
|                      |  | 2001                              |  | 2002(1)       |  | 2003    |  | 2004    |  | 2005    | 
|                      |  | (in thousands of barrels per day) |  | (%)           | 
|Marine region         |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Heavy crude oil       |  | 1,953.7                           |  | 2,127.1       |  | 2,380.9 |  | 2,412.3 |  | 2,330.8 |  | (3.4  | )
|Light crude oil       |  | 586.2                             |  | 476.7         |  | 433.0   |  | 416.7   |  | 422.5   |  | 1.4   |  
|                      |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Total                 |  | 2,539.9                           |  | 2,603.8       |  | 2,813.9 |  | 2,829.0 |  | 2,753.3 |  | (2.7  | )
|Southern region(1)    |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Heavy crude oil       |  |                                  |  | 6.2           |  | 6.4     |  | 7.1     |  | 20.8    |  | 193.0 |  
|Light crude oil       |  | 508.7                             |  | 492.2         |  | 476.9   |  | 465.6   |  | 475.7   |  | 2.2   |  
|                      |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Total                 |  | 508.7                             |  | 498.4         |  | 483.3   |  | 472.7   |  | 496.6   |  | 5.1   |  
|Northern region       |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Heavy crude oil       |  | 43.3                              |  | 40.3          |  | 38.0    |  | 38.6    |  | 35.4    |  | (8.3  | )
|Light crude oil       |  | 35.2                              |  | 34.6          |  | 35.6    |  | 42.6    |  | 48.1    |  | 12.9  |  
|                      |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Total                 |  | 78.5                              |  | 74.9          |  | 73.6    |  | 81.2    |  | 83.5    |  | 2.8   |  
|                      |  |                                   |  |               |  |        
|Total heavy crude oil |  | 1,997.0                           |  | 2,173.7       |  | 2,425.4 |  | 2,458.0 |  | 2,387.0 |  | (2.9  | )
|Total light crude oil |  | 1,130.1                           |  | 1,003.5       |  | 945.5   |  | 924.9   |  | 946.4   |  | 2.3   |  
|                      |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Total crude oil       |  | 3,127.0                           |  | 3,177.1       |  | 3,370.9 |  | 3,382.9 |  | 3,333.3 |  | (1.5  | )
|                      |  |                                   |  |               |  |         |  |         |  |         |  |       |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | As of year 2002, certain crude oil types previously classified as very light crude oil were reclassified as light crude oil in the Southern region.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Pemex-Exploration and Production
|------- | --------------------------------

In 2005, the
Marine regions offshore facilities, which are located in the Campeche Sound in the Gulf of Mexico, produced 82.6% of Pemex-Exploration and Productions total crude oil production. Approximately 14.9% of crude oil production came from
onshore facilities in the Southern region. Inland facilities in the Northern region accounted for the remaining 2.5% of total crude oil production. Due to the high productivity of certain wells, 23 fields accounted for 90.0% of Pemex-Exploration and
Productions total crude oil production in 2005.

The Marine region is an area of approximately 21,000 square kilometers in the
Campeche Sound in the Gulf of Mexico. Our production area covers 9,000 square kilometers of the Marine region. We began geophysical operations in this region in 1972, commenced drilling in 1974 and began production in June 1979. In 2005, the average
production level for this region was 2,753.3 thousand barrels per day. The Marine regions production area includes 29 oil fields that are less than 100 meters below sea level and have an average well depth of 3,500 meters.

The Southern region covers an area of approximately 23,000 square kilometers, with our production area in this region comprising 9,000 square kilometers
in the states of Chiapas and Tabasco. In 2005, production in the Southern region totaled 496.6 thousand barrels per day. This production area included 84 oil fields with an average well depth of 5,500 meters.

The Northern region, including the continental shelf area in the Gulf of Mexico, covers an area of approximately 2 million square kilometers. Our
production area in this region is located in the states of Veracruz, Tamaulipas, Nuevo León, Coahuila, San Luis Potosí and the continental platform in the Gulf of Mexico. In 2005, production in the Northern region totaled
83.5 thousand barrels of crude oil per day and 1,835 million cubic feet of natural gas per day. This production area included 244 oil fields with an average well depth of 2,100 meters.



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##### Table of Contents

Production by Fields

We conduct exploration, production and development activities in fields throughout Mexico. Mexicos main fields are described below.

Cantarell Complex.Cantarell is located on the continental shelf of the Gulf of Mexico. It consists of the Akal, Chac, Ixtoc, Kutz, Nohoch and Sihil fields, which extend over an area of 162 square kilometers.
The Akal field is considered one of the last giant oil fields in the world discovered in the past 20 years. As of December 31, 2005, there were a total of 413 wells drilled, 208 of which were producing. During 2005, the complex was the most
important producer of crude oil in Mexico, averaging 2.0 million barrels per day of crude oil and 759.2 million cubic feet per day of natural gas. As of December 31, 2005, cumulative production was 11,554.1 million barrels of
crude oil and 4.7 trillion cubic feet of natural gas. Proved hydrocarbon reserves totaled 5,146.7 million barrels of crude oil and 3.0 trillion cubic feet of natural gas as of December 31, 2005. Total proved reserves were 5.9 billion
barrels of crude oil equivalent as of December 31, 2005, of which 5.0 billion were developed.

Ku-Maloob-Zaap Complex.This
complex of fields is located off the coast of Campeche in Mexican territorial waters in the Gulf of Mexico. This is Mexicos third most important complex of fields in terms of total remaining hydrocarbon reserves. It is composed of the Ku,
Maloob and Zaap fields, and extends over an area of 121 square kilometers. As of December 31, 2005, there were a total of 77 wells drilled, 62 of which were producing. In terms of crude oil production, this complex was the second most important
in Mexico, producing an average of 319.0 thousand barrels of crude oil and 166.4 million cubic feet of natural gas per day in 2005. As of December 31, 2005, cumulative production was 2.0 billion barrels of crude oil and 1.1 trillion
cubic feet of natural gas. Proved hydrocarbon reserves totaled 1.7 billion barrels of crude oil and 1.1 trillion cubic feet of natural gas as of December 31, 2005. Total proved reserves were 2.1 billion barrels of crude oil equivalent as of
December 31, 2005, of which 1.0 billion were developed.

Abkatún-Pol-Chuc Complex. This area is made up of three fields
in the Southwestern offshore region which extend over an area of 198 square kilometers. As of December 31, 2005, there were a total of 197 wells drilled, 6 of which were injectors. Currently, there are 45 producing wells. During 2005, the
complex was the third most important crude oil producer, averaging 164.3 thousand barrels of crude oil and 165.4 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 3.8 billion barrels of
crude oil and 3.5 trillion cubic feet of natural gas. Proved hydrocarbon reserves totaled 206.6 million barrels of crude oil and 230.6 billion cubic feet of natural gas as of December 31, 2005. Total proved reserves were 255.4 million
barrels of crude oil equivalent as of December 31, 2005, of which 252.2 million were developed.

Antonio J. Bermúdez
Complex.This complex of fields is the largest crude oil producer in the Southern region and the fourth largest in Mexico. It consists of the Samaria, Cunduacán, Oxiacaque, Iride, Platanal and Carrizo fields and covers an area of
192 square kilometers. As of December 31, 2005, there were a total of 420 wells drilled, 104 of which were producing. During 2005, the complex produced an average of 150.1 thousand barrels of crude oil and 284.3 million cubic
feet of natural gas per day. As of December 31, 2005, cumulative production was 2.6 billion barrels of crude oil and 3.6 trillion cubic feet of natural gas, and proved hydrocarbon reserves totaled 1.4 billion barrels of crude oil and 2.9
trillion cubic feet of natural gas. Total proved reserves were 2.1 billion barrels of crude oil equivalent as of December 31, 2005, of which 1.3 billion were developed.

Caan Field.This field is located in the Southwestern offshore region and covers an area of 46 square kilometers. As of December 31, 2005,
there were a total of 42 wells drilled, 24 of which were producing. During 2005, the field was the fifth most important crude oil producer, averaging 97.8 thousand barrels of crude oil and 206.5 million cubic feet of natural gas per day.
As of December 31, 2005, cumulative production was 750.4 million barrels of crude oil and 1.3 trillion cubic feet of natural gas. Proved hydrocarbon reserves totaled 96.2 million barrels of crude oil and 331.6 billion cubic feet of
natural gas as of December 31, 2005. Total proved reserves were 171.0 million barrels of crude oil equivalent as of December 31, 2005, all of which were developed.



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##### Table of Contents

Puerto Ceiba Field.This field was the first crude oil producer in the Southern region and in 2005
was the sixth largest producer in Mexico, covering an area of 41.2 square kilometers. As of December 31, 2005, there were 41 wells drilled in the field, 15 of which were producing. During 2005, this field produced an average of
77.3 thousand barrels of crude oil and 51.5 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 115.3 million barrels of crude oil and 75.4 billion cubic feet of natural gas. Proved
hydrocarbon reserves in this field totaled 116.3 million barrels of crude oil and 77.7 billion cubic feet of natural gas as of December 31, 2005. Total proved reserves were 131.8 million barrels of crude oil equivalent as of
December 31, 2005, of which 84.2 million were developed.

Jujo-Tecominoacán Field.This field is the second largest
crude oil producer in the Southern region and the seventh largest producer in Mexico and covers an area of 74 square kilometers. As of December 31, 2005, there were a total of 121 wells drilled, 55 of which were producing. During 2005, the
field produced an average of 72.0 thousand barrels of crude oil and 88.0 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 1.0 billion barrels of crude oil and 1.1 trillion cubic feet of
natural gas, and proved hydrocarbon reserves totaled 533.6 million barrels of crude oil and 1.3 trillion cubic feet of natural gas. Total proved reserves were 868.8 million barrels of crude oil equivalent as of December 31, 2005, of
which 586.3 million were developed.

Delta del Grijalva Project.In terms of production, this project is the fourth most
important in the Southern region and the eighth most important in Mexico. It includes the fields of Caparroso-Pijije-Escuintle, Escarbado, Luna-Palapa, Sen and Tizón. During 2005, the fields produced an average of 45.3 thousand barrels
of crude oil and 154.6 million cubic feet of natural gas per day. The most important producers are Sen, Luna-Palapa and Caparroso-Pijije-Escuintle.



| |  |  | Sen. This field covers an area of 41 square kilometers. As of December 31, 2005, there were a total of 33 wells drilled, 12 of which were producing. During 2005, the
field produced an average of 18.8 thousand barrels of crude oil and 46.6 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 184.2 million barrels of crude oil and 506.2 billion cubic
feet of natural gas, and proved hydrocarbon reserves totaled 54.6 million barrels of crude oil and 139.4 billion cubic feet of natural gas. Total proved reserves were 88.2 million barrels of crude oil equivalent as of December 31,
2005, of which 56.9 million were developed.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Luna-Palapa. This field covers an area of 17 square kilometers. As of December 31, 2005, there were a total of 42 wells drilled, 7 of which were producing. During
2005, the field produced an average of 3.6 thousand barrels of crude oil and 25.2 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 116.0 million barrels of crude oil and 648.5 billion
cubic feet of natural gas, and proved hydrocarbon reserves totaled 2.8 million barrels of crude oil and 13.3 billion cubic feet of natural gas. Total proved reserves were 6.0 million barrels of crude oil equivalent as of December 31,
2005, all of which are developed.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Caparroso-Pijije-Escuintle. This field covers an area of 16.6 square kilometers. As of December 31, 2005, there were a total of 34 wells drilled, 12 of which were
producing. During 2005, the field produced an average of 16.5 thousand barrels of crude oil and 50.7 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 116.6 million barrels of crude oil
and 339.2 billion cubic feet of natural gas, and proved hydrocarbon reserves totaled 43.5 million barrels of crude oil and 132.3 billion cubic feet of natural gas. Total proved reserves were 75.4 million barrels of crude oil equivalent as
of December 31, 2005, 58.2 million of which were developed.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Paleocanal de Chicontepec. This complex of
fields (which we refer to as Chicontepec) is part of the Northern region of our operations and is divided into 29 areas, which extend over an area of 3,731 square kilometers. As of December 31, 2005, there were a total of 1,397 wells drilled,
513 of which were producing. During 2005, Chicontepec produced an average of 24.1 thousand barrels of crude oil and 27.3 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 133.2 million
barrels of crude oil



35



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and 231.7 billion cubic feet of natural gas. Proved hydrocarbon reserves totaled 488.1 million barrels of crude oil and 0.7 trillion cubic feet of
natural gas as of December 31, 2005. Total proved reserves were 635.5 million barrels of crude oil equivalent as of December 31, 2005, of which 136.0 million were developed.

Burgos Project. The Burgos fields of northern Mexico produced an average of 1.2 billion cubic feet of natural gas per day in 2005. This complex of
fields is the largest producer of non-associated gas in Mexico. The most important producers are the Arcabuz-Culebra, Cuitláhuac and Arcos fields.



| |  |  | Arcabuz-Culebra. This field covers an area of 380 square kilometers. As of December 31, 2005, there were a total of 704 wells drilled in this area, 533 of which were
producing. During 2005, the field produced an average of 237.5 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 1,324.7 billion cubic feet of natural gas, and proved hydrocarbon reserves totaled
286.7 billion cubic feet of natural gas, of which 179.0 billion were developed.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cuitláhuac. This field covers an area of 190 square kilometers. As of December 31, 2005, there were a total of 314 wells drilled in this area, 218 of which were
producing. During 2005, the field produced an average of 116.3 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 436.6 billion cubic feet of natural gas, and proved hydrocarbon reserves totaled
152.2 billion cubic feet of natural gas, of which 128.9 billion were developed.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Arcos. This field covers an area of 45 square kilometers. As of December 31, 2005, there were a total of 176 wells drilled in this area, 143 of which were producing.
During 2005, the field produced an average of 92.9 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 515.1 billion cubic feet of natural gas, and proved hydrocarbon reserves totaled 69.7 billion
cubic feet of natural gas, of which 61.3 billion were developed.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Muspac Field. Muspac is the most important gas
producer in the Southern region and the fourth most important in the country, covering an area of 17 square kilometers. As of December 31, 2005, there were a total of 31 wells drilled, 17 of which were producing. During 2005, the field produced
an average of 1.8 thousand barrels of crude oil and 115.0 million cubic feet of natural gas per day. As of December 31, 2005, cumulative production was 73.1 million barrels of crude oil and 1.4 trillion cubic feet of natural gas.
Proved hydrocarbon reserves totaled 5.8 million barrels of crude oil and 450.0 billion cubic feet of natural gas as of December 31, 2005. Total proved reserves were 115.9 million barrels of crude oil equivalent as of December 31,
2005, all of which were developed.

Pipelines

The crude oil and natural gas pipeline network owned by Pemex-Exploration and Production connects crude oil and natural gas producing centers with refineries and petrochemical plants. At the end of 2005, this pipeline
network consisted of approximately 34,082 kilometers of pipe, of which 3,070 kilometers were located in the Marine region, 11,583 kilometers were located in the Southern region and 19,429 kilometers were located in the Northern region. For a
description of products transported by the pipeline network, see Transportation and Distribution below.

Crude Oil
Sales

During 2005, domestic consumption of crude oil amounted to approximately 1,487 thousand barrels per day, which represented
45% of our total crude oil production. Through PMIs activities, we sold the remainder of our crude oil production abroad. See International Trading below. Maya crude oil accounted for 83% of exported crude oil volume sold by
PMI in 2005, but only 45% of domestic consumption.



36



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##### Table of Contents

The following table sets forth crude oil distribution for the past five years.

Crude Oil Distribution



|                                        |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|--------------------------------------- |  | --------------------------------- |  | ------------- |  | ------- |  | ------- |  | ------- |  | ----- | -
|                                        |  | At December 31,                   |  | 2005 vs. 2004 | 
|                                        |  | 2001                              |  | 2002          |  | 2003    |  | 2004    |  | 2005    | 
|                                        |  | (in thousands of barrels per day) |  | (%)           | 
|                                        |  |                                   |  |               |  |        
|Production                              |  | 3,127.0                           |  | 3,177.1       |  | 3,370.9 |  | 3,382.9 |  | 3,333.3 |  | (1.5  | )
|                                        |  |                                   |  |               |  |        
|Distribution                            |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Refineries                              |  | 1,140.4                           |  | 1,171.9       |  | 1,246.4 |  | 1,257.9 |  | 1,274.9 |  | 1.4   |  
|Products under processing agreements(1) |  | 62.3                              |  | 130.4         |  | 112.5   |  | 97.4    |  | 81.4    |  | (16.4 | )
|Petrochemicals                          |  | 146.2                             |  | 144.5         |  | 150.4   |  | 133.8   |  | 131.0   |  | (2.1  | )
|Exports                                 |  | 1,756.6                           |  | 1,716.2       |  | 1,848.3 |  | 1,873.6 |  | 1,832.6 |  | (2.2  | )
|                                        |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Total                                   |  | 3,105.6                           |  | 3,163.1       |  | 3,357.6 |  | 3,362.7 |  | 3,319.9 |  | (1.3  | )
|                                        |  |                                   |  |               |  |         |  |         |  |         |  |       |  
|Stock changes, statistical differences  |  | 21.4                              |  | 14.0          |  | 13.3    |  | 20.3    |  | 13.4    |  | (34.0 | )

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Represents exports to third-party processors for re-import into Mexico.
|--- | -----------------------------------------------------------------------

|Source: | Pemex-Exploration and Production
|------- | --------------------------------

Due to its
higher sulphur content, Maya crude oil requires extra processing and has lower refining yields than most valuable sweet crudes, and thus requires extra investment by the purchaser to refine. Therefore, we receive a lower price for Maya crude oil
than we do for sweeter crude oils that cost less to refine. As a consequence of this price difference, we must continue to support the export value of sour crude oil such as Maya crude oil in relation to other grades of crude oil by creating
incentives for refiners to invest in high-conversion refineries capable of upgrading the relatively large proportion of residue produced from processing sour crude oil in less efficient refining complex configurations. We may do this by entering
into long-term Maya crude oil supply agreements pursuant to which purchasers agree to undertake projects to expand the capacity of their respective refineries to upgrade residue from Maya crude oil. See International TradingGeographic
Distribution of Export Sales below.

Gas Flaring

The flaring of produced gas, which is the process of burning off surplus combustible vapors from a well, either as a means of disposal or as a safety measure to relieve well pressure, is considered to be one of the
most significant sources of air emissions from offshore oil and gas installations. In 2005, gas flaring represented 3.8% of our total natural gas production, which is an increase from 2004, when gas flaring represented 3.3% of total natural gas
production. This increase was mainly a result of repairs on a 48-inch natural gas pipeline that runs from the Dos Bocas Marine Terminal to the compression facilities in Cunduacán.

Refining

Refining Processes and Capacity

Pemex-Refinings production processes include the following:



| |  |  | Atmospheric distillation. This process heats crude oil in a tube furnace at atmospheric pressure to distill refined products. The primary products produced are gasoline,
kerosene, jet fuel, diesel, atmospheric gas oil and atmospheric reduced crude oil.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Vacuum distillation. This process heats crude oil or other feedstock in a vacuum distillation column, which is operated at low pressures. The objective of this process is to
maximize production of heavy vacuum gas oil, which is produced by boiling crude oil.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | Cracking. This process uses either heat and pressure or a catalytic agent to increase gasoline yields from crude oil.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | Visbreaking. This is a thermal cracking process, which uses a horizontal-tube heater fired to a high temperature. Visbreaking reduces flasher bottom viscosity and produces
some heavy gas oil.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reforming processes. These processes use heat and catalysts to transform smaller or unstable hydrocarbon molecules into larger, more useful refining or blending products. For
example, Pemex-Refining uses reforming processes to convert low-octane gasoline into higher-octane stocks that are suitable for blending into finished gasoline and to convert naphthas into more volatile, higher-octane products.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hydrotreatment or resid hydrocracking. This process uses a catalyst and hydrogen at high temperature and pressure to remove sulphur, nitrogen and some aromatic compounds.
Hydrotreatment also processes some lighter liquid product off-take.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Alkylation and isomerization. This polymerization process unites olefins and isoparaffins. Butylenes and isobutanes are combined with sulphuric acid or hydrofluoric acid to
rearrange straight-chain hydrocarbon molecules into branched-chain products. Pentanes and hexanes, which are difficult to reform, are isomerized through the use of aluminum chloride and other precious-metal catalysts. Normal butane may be isomerized
to provide a portion of the isobutane feed needed for the alkylation process. The process produces a high octane, low sensitivity blending agent for gasoline.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Coking. This process is a severe method of thermal cracking used to upgrade heavy residuals into lighter products or distillates. Coking produces straight-run gasoline (coker
naphtha) and various middle-distillate fractions used as catalytic feedstock, thus generating a concentrated solid material called coke of petroleum.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These production processes together constitute Pemex-Refinings production capacity as set forth in the table below.

Refining Capacity by Production Process



|                             |  |                                   |  |         |  |         |  |         |  |        
|---------------------------- |  | --------------------------------- |  | ------- |  | ------- |  | ------- |  | -------
|                             |  | At December 31,                  
|                             |  | 2001                              |  | 2002    |  | 2003    |  | 2004    |  | 2005   
|                             |  | (in thousands of barrels per day)
|Production Process           |  |                                   |  |         |  |         |  |         |  |        
|Atmospheric distillation     |  | 1,559.0                           |  | 1,540.0 |  | 1,540.0 |  | 1,540.0 |  | 1,540.0
|Vacuum distillation          |  | 773.8                             |  | 768.4   |  | 768.4   |  | 768.4   |  | 768.4  
|Cracking                     |  | 375.0                             |  | 395.5   |  | 395.5   |  | 374.5   |  | 374.5  
|Visbreaking                  |  | 141.0                             |  | 141.0   |  | 141.0   |  | 141.0   |  | 141.0  
|Reforming                    |  | 268.8                             |  | 301.3   |  | 301.3   |  | 301.3   |  | 301.3  
|Hydrotreatment               |  | 848.0                             |  | 987.1   |  | 987.1   |  | 987.1   |  | 987.1  
|Alkylation and isomerization |  | 138.8                             |  | 143.9   |  | 143.9   |  | 143.9   |  | 143.9  
|Coking                       |  |                                  |  |        |  | 100.0   |  | 100.0   |  | 100.0  

---

Source: Base de Datos Institucional (Pemex BDI).

At the end of 2005, Pemex-Refining owned and operated six refineries: Cadereyta, Madero, Minatitlán, Salamanca, Salina Cruz and
Tula, and one topping unit located in the petrochemical complex of La Cangrejera.Our refineries are comprised of atmospheric and vacuum distillation units, where the bulk of crude oil input is processed. Secondary processing facilities
include desulphurization units and facilities for catalytic cracking, reforming and hydrotreating. During 2005, our refineries processed 1,284 thousand barrels per day of crude oil (195 thousand barrels at Cadereyta, 142 thousand barrels
at Madero, 163 thousand barrels at Minatitlán, 197 thousand barrels at Salamanca, 293 thousand barrels at Salina Cruz and 296 thousand barrels at Tula), which consisted of 746 thousand barrels per day of Olmeca and
Isthmus crude oil and 538 thousand barrels per day of Maya crude oil.



38



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##### Table of Contents

Since 1993, through our subsidiary company, P.M.I. Norteamérica, S.A. de C.V., we have
participated in a limited partnership with Shell Oil Company in a refinery located in Deer Park, Texas. Under the Deer Park Limited Partnership agreement, P.M.I. Norteamérica, S.A. de C.V. and Shell Oil Company each provides 50% of the
refinerys crude oil input and owns 50% of the refinerys output. The partnership completed a substantial upgrading program in mid-1995 to enable it to process Maya crude oil. PEMEX and Shell Oil Company completed an expansion project at
the refinery in Deer Park in April 2001, thereby increasing the capacity of the refinery by 60 thousand barrels per day to 340 thousand barrels per day. The expansion project included an expansion of the refinerys existing coking unit, a
new sulphur plant and upgrades to the crude distillation, distillates hydrotreating and hydrocracking units.

Production

Pemex-Refining produces a wide range of products derived from crude oil and natural gas, including liquefied petroleum gas, gasoline, jet fuel, diesel,
fuel oil, asphalts, lubricants and other refined oil and natural gas products. Pemex-Refining produced 1,338 thousand barrels per day of refined products (including dry gas by-products of the refining process) in 2005, a decrease of 1.7% from
2004 levels.

The following table sets forth, by category, Pemex-Refinings production of refined products from 2001 through 2005.

Pemex-Refining Production



|                          |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|------------------------- |  | --------------------------------- |  | ------------ |  | ------- |  | ------- |  | ------- |  | ----- | -
|                          |  | Year Ended December 31,           |  | 2005vs. 2004 | 
|                          |  | 2001                              |  | 2002         |  | 2003    |  | 2004    |  | 2005    | 
|                          |  | (in thousands of barrels per day) |  | (%)          | 
|                          |  |                                   |  |              |  |        
|Refinery crude oil runs   |  | 1,251.9                           |  | 1,245.4      |  | 1,285.9 |  | 1,303.4 |  | 1,284.4 |  | (1.5  | )
|Refined products          |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Liquefied petroleum gas   |  | 27.8                              |  | 31.3         |  | 33.8    |  | 28.0    |  | 30.6    |  | 9.3   |  
|Gasoline                  |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Nova (leaded)/Base        |  | 22.4                              |  | 16.4         |  | 10.5    |  | 3.9     |  | 4.8     |  | 23.1  |  
|Pemex Magna               |  | 349.4                             |  | 359.4        |  | 396.5   |  | 418.5   |  | 412.0   |  | (1.6  | )
|Pemex Premium             |  | 17.3                              |  | 21.8         |  | 37.6    |  | 43.8    |  | 38.2    |  | (12.8 | )
|Others                    |  | 1.2                               |  | 0.7          |  | 0.6     |  | 0.4     |  | 0.1     |  | (75.0 | )
|                          |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Total                     |  | 390.3                             |  | 398.2        |  | 445.2   |  | 466.7   |  | 455.1   |  | (2.5  | )
|Kerosenes                 |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Jet fuel                  |  | 56.7                              |  | 56.7         |  | 59.6    |  | 62.1    |  | 63.3    |  | 1.9   |  
|Other kerosenes           |  | 0.3                               |  |             |  |        |  |        |  |        |  |      |  
|                          |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Total                     |  | 57.0                              |  | 56.7         |  | 59.6    |  | 62.1    |  | 63.3    |  | 1.9   |  
|Diesel                    |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Pemex Diesel              |  | 266.6                             |  | 246.7        |  | 290.8   |  | 319.6   |  | 312.3   |  | (2.3  | )
|Low sulphur diesel        |  | 1.1                               |  | 0.7          |  | 0.6     |  |        |  |        |  |      |  
|Others                    |  | 13.9                              |  | 19.5         |  | 16.4    |  | 5.1     |  | 5.9     |  | 15.7  |  
|                          |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Total                     |  | 281.6                             |  | 266.9        |  | 307.8   |  | 324.7   |  | 318.2   |  | (2.0  | )
|Fuel oil                  |  | 435.9                             |  | 449.6        |  | 396.5   |  | 368.0   |  | 350.8   |  | (4.7  | )
|Other refined products    |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Asphalts                  |  | 28.7                              |  | 28.8         |  | 25.6    |  | 27.2    |  | 29.3    |  | 7.7   |  
|Lubricants                |  | 5.2                               |  | 4.9          |  | 5.5     |  | 5.4     |  | 5.2     |  | (3.7  | )
|Paraffins                 |  | 1.2                               |  | 1.0          |  | 0.9     |  | 1.0     |  | 1.1     |  | 10.0  |  
|Still gas                 |  | 39.0                              |  | 37.4         |  | 51.3    |  | 49.9    |  | 51.9    |  | 4.0   |  
|Other refined products(1) |  | 0.6                               |  | 1.1          |  | 16.7    |  | 28.2    |  | 32.8    |  | 16.3  |  
|                          |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Total                     |  | 74.7                              |  | 73.3         |  | 100.1   |  | 111.7   |  | 120.2   |  | 7.6   |  
|                          |  |                                   |  |              |  |         |  |         |  |         |  |       |  
|Total refined products    |  | 1,267.3                           |  | 1,275.9      |  | 1,342.9 |  | 1,361.2 |  | 1,338.3 |  | (1.7  | )
|                          |  |                                   |  |              |  |         |  |         |  |         |  |       |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Includes aeroflex 1-2, coke and furfural extract.
|--- | -------------------------------------------------

|Source: | Pemex BDI.
|------- | ----------



39



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##### Table of Contents

Fuel oil, automotive gasoline and diesels represent the bulk of Pemex-Refinings production. In
2005, fuel oil represented 26.2%, gasoline represented 34.0% and diesels represented 23.8% of total refined product production. Jet fuel represented 4.7% and liquefied petroleum gas represented 2.3% of total production of refined products in 2005.
The remainder of Pemex-Refinings production consisted of a variety of other refined products.

As a result of our strategy of
investing in technology to improve the quality of our fuels, over the past several years Pemex-Refining has increased its production of unleaded gasoline (including Pemex Premium) in relation to leaded gasoline. All of our automotive gasoline
production now consists of unleaded gasoline. In addition, we introduced new environmentally sound products such as Pemex Diesel, with 0.05% sulphur content. The share of Pemex Diesel as a percentage of total diesel produced by Pemex-Refining has
increased from 95% in 2001 to 98% in 2005. We also promote liquefied petroleum gas as an environmentally sound substitute fuel for gasoline in motor vehicles.

Domestic Sales

We market a full range of refined products, including gasoline, jet fuel, diesel,
fuel oil and petrochemicals. We are one of a few major producers of crude oil worldwide that experiences significant domestic demand for our refined products.

Over the five years ended December 31, 2005, the value of Pemex-Refinings domestic sales of refined products was as follows:

Value of Domestic Sales(1)



|                       |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|---------------------- |  | ------------------------------------------------------- | --------- | ------------- | --- | --------- |  | ---- | --------- | ---- | --- | --------- |  | --- | --------- |  | ----- | -
|                       |  | Year Ended December 31,                                 |           | 2005 vs. 2004 |    
|                       |  | 2001                                                    |           | 2002          |     | 2003      |  | 2004 |           | 2005 |    
|                       |  | (in millions of constant pesos at December 31, 2005)(2) |           | (%)           |    
|Oil Products           |  |                                                         |           |               |     |          
|Gasoline               |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Pemex Magna            |  | Ps.                                                     | 74,152.3  |               | Ps. | 66,637.1  |  | Ps.  | 89,643.8  |      | Ps. | 121,303.2 |  | Ps. | 150,793.1 |  | 24.3  |  
|Pemex Premium          |  |                                                         | 13,276.8  |               |     | 14,447.3  |  |      | 20,358.0  |      |     | 28,510.7  |  |     | 33,857.6  |  | 18.8  |  
|Aviation fuels         |  |                                                         | 137.0     |               |     | 145.7     |  |      | 144.3     |      |     | 123.7     |  |     | 172.0     |  | 39.0  |  
|Others                 |  |                                                         | 212.7     |               |     | 142.7     |  |      | 94.0      |      |     | 93.9      |  |     | 61.2      |  | (34.8 | )
|                       |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Total                  |  |                                                         | 87,778.8  |               |     | 81,372.7  |  |      | 110,240.2 |      |     | 150,031.5 |  |     | 184,883.9 |  | 23.2  |  
|Kerosenes              |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Jet fuel               |  |                                                         | 6,936.8   |               |     | 6,037.4   |  |      | 8,013.9   |      |     | 11,316.1  |  |     | 16,241.3  |  | 43.5  |  
|Other kerosenes        |  |                                                         | 152.6     |               |     | 154.6     |  |      | 127.5     |      |     | 134.8     |  |     | 147.4     |  | 9.3   |  
|                       |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Total                  |  |                                                         | 7,089.4   |               |     | 6,192.0   |  |      | 8,141.4   |      |     | 11,450.8  |  |     | 16,388.7  |  | 43.1  |  
|Diesel                 |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Pemex Diesel           |  |                                                         | 33,684.3  |               |     | 29,553.8  |  |      | 40,506.2  |      |     | 53,398.1  |  |     | 67,014.4  |  | 25.5  |  
|Others                 |  |                                                         | 7,574.1   |               |     | 5,602.7   |  |      | 9,054.8   |      |     | 10,123.8  |  |     | 11,722.1  |  | 15.8  |  
|                       |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Total                  |  |                                                         | 41,258.6  |               |     | 35,156.4  |  |      | 49,561.0  |      |     | 63,521.9  |  |     | 78,736.5  |  | 24.0  |  
|Fuel oil               |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Total                  |  |                                                         | 33,762.1  |               |     | 31,046.6  |  |      | 34,251.0  |      |     | 32,579.6  |  |     | 39,520.7  |  | 21.3  |  
|Other refined products |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Industrial gas oil     |  |                                                         | 11.3      |               |     |          |  |      |          |      |     |          |  |     |          |  |      |  
|Asphalts               |  |                                                         | 1,848.1   |               |     | 2,106.3   |  |      | 2,554.4   |      |     | 2,953.0   |  |     | 3,538.3   |  | 19.8  |  
|Lubricants             |  |                                                         | 1,230.9   |               |     | 994.2     |  |      | 1,249.0   |      |     | 1,286.5   |  |     | 1,536.3   |  | 19.4  |  
|Paraffins              |  |                                                         | 172.4     |               |     | 142.8     |  |      | 132.7     |      |     | 149.5     |  |     | 201.3     |  | 34.6  |  
|Others(3)              |  |                                                         | 0.6       |               |     | 1.2       |  |      | 26.7      |      |     | 33.7      |  |     | 46.7      |  | 38.6  |  
|                       |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Total                  |  |                                                         | 3,263.3   |               |     | 3,244.3   |  |      | 3,962.8   |      |     | 4,422.7   |  |     | 5,322.6   |  | 20.3  |  
|                       |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Total Oil Products     |  | Ps.                                                     | 173,152.2 |               | Ps. | 157,012.2 |  | Ps.  | 206,156.3 |      | Ps. | 262,006.7 |  | Ps. | 324,852.4 |  | 24.0  |  
|                       |  |                                                         |           |               |     |           |  |      |           |      |     |           |  |     |           |  |       |  
|Petrochemicals(4)      |  | Ps.                                                     | 839.4     |               | Ps. | 636.3     |  | Ps.  | 1,017.2   |      | Ps. | 1,743.9   |  | Ps. | 2,071.9   |  | 18.8  |  



40



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##### Table of Contents

---

|Notes: | Numbers may not total due to rounding.
|------ | --------------------------------------

|(1) | Excludes IEPS tax and value added tax. See Taxes and Duties below.
|--- | ---------------------------------------------------------------------

|(2) | Figures have been restated to constant pesos as of December 31, 2005, by applying the inflation factors, as measured by the NCPI, from the respective years through
December 31, 2005. For the five years ended December 31, 2005, the inflation factor is the average inflation rate for each of these years.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes aeroflex 1-2, coke and furfural extract. Since 2003, figure also includes sales of coke from the coker at the Cadereyta refinery, which started operating in 2003.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | These are petrochemical products produced at refineries operated by Pemex-Refining.
|--- | -----------------------------------------------------------------------------------

|Source: | Pemex BDI.
|------- | ----------

The largest consumers of fuels in
Mexico are the Federal Electricity Commission and our subsidiary entities. The Federal Electricity Commission consumed approximately 78% of our fuel oil production during 2005 pursuant to a fuel oil supply contract entered into in November 1995 and
amended effective January 1, 2005. Pursuant to this amendment, the minimum amount of fuel oil that we have agreed to supply to the Federal Electricity Commission decreased from 270,000 barrels of fuel oil per day to 230,285 barrels of fuel oil
per day, in accordance with the supply capacity of Pemex-Refining and the reduced requirements of the Federal Electricity Commission under its program of substitution of fuel oil with natural gas. The price per cubic meter of the fuel oil supplied
to the Federal Electricity Commission is based on the three-month average spot price per cubic meter of Fuel Oil No. 6 (3% sulphur) at Houston, Texas, as quoted in Platts U.S. Marketscan and adjusted for quality and transportation cost
differentials. In addition, the price of the fuel oil is discounted by a commercial margin on each cubic meter of fuel oil. In 2005, this volume discount amounted to approximately 1.2% of total fuel oil sales to the Federal Electricity Commission.
The contract can be terminated by either party upon six months notice. The total amount paid to us by the Federal Electricity Commission under this contract in 2005 was Ps. 30,000 million and represented 9.2% of our total revenues from
domestic sales of refined products.

Our domestic sales of refined oil products increased by 24.0% in value, or Ps. 62,845.7 million,
in 2005, as compared to 2004 levels. This increase was due primarily to a 22.6% average increase in international prices of refined products, as well as a 4.8% increase in domestic sales volumes and increased sales of products with greater added
value. For example, the average price of automotive gasoline increased by 21.0%, the average price of automotive diesel increased by 21.5% and the average price of jet fuel increased by 46.4%.

The volume of our domestic gasoline sales in 2005 increased by 5.6%, from 636.7 thousand barrels per day in 2004 to 672.1 thousand barrels per
day in 2005. The volume of our domestic diesel sales increased by 5.7%, from 302.7 thousand barrels per day in 2004 to 320.1 thousand barrels per day in 2005. The volume of our domestic sales of fuel oil increased by 2.4%, from
332.5 thousand barrels per day in 2004 to 340.6 thousand barrels per day in 2005, primarily due to the higher demand from the Federal Electricity Commission, in spite of its program of substitution of fuel oil with natural gas.



41



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##### Table of Contents

The volume of Pemex-Refinings domestic sales of refined products for the five-year period ended
December 31, 2005 was distributed as follows:

Volume of Domestic Sales



|                   |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|------------------ |  | ------------------------------------------------------------------- |  | ------------- |  | ------- |  | ------- |  | ------- |  | ----- | -
|                   |  | Year Ended December 31,                                             |  | 2005 vs. 2004 | 
|                   |  | 2001                                                                |  | 2002          |  | 2003    |  | 2004    |  | 2005    | 
|                   |  | (in thousands of barrels per day, except where otherwise indicated) |  | (%)           | 
|Oil Products       |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Gasoline           |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Pemex Magna        |  | 476.5                                                               |  | 476.5         |  | 500.2   |  | 525.5   |  | 559.6   |  | 6.5   |  
|Pemex Premium      |  | 73.9                                                                |  | 88.5          |  | 100.1   |  | 110.4   |  | 111.7   |  | 1.2   |  
|Aviation fuels     |  | 0.4                                                                 |  | 0.4           |  | 0.4     |  | 0.4     |  | 0.5     |  | 25.0  |  
|Others             |  | 1.0                                                                 |  | 0.8           |  | 0.4     |  | 0.4     |  | 0.3     |  | (25.0 | )
|                   |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Total              |  | 551.8                                                               |  | 566.2         |  | 601.2   |  | 636.7   |  | 672.1   |  | 5.6   |  
|Kerosenes          |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Jet fuel           |  | 55.3                                                                |  | 53.3          |  | 54.2    |  | 57.8    |  | 58.7    |  | 1.6   |  
|Other kerosenes    |  | 0.8                                                                 |  | 0.8           |  | 0.7     |  | 0.7     |  | 0.8     |  | 14.3  |  
|                   |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Total              |  | 56.1                                                                |  | 54.1          |  | 54.9    |  | 58.5    |  | 59.5    |  | 1.7   |  
|Diesel             |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Pemex Diesel       |  | 226.4                                                               |  | 228.0         |  | 240.7   |  | 255.4   |  | 273.4   |  | 7.0   |  
|Others             |  | 49.4                                                                |  | 42.7          |  | 54.0    |  | 47.3    |  | 46.7    |  | (1.3  | )
|                   |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Total              |  | 275.8                                                               |  | 270.7         |  | 294.7   |  | 302.7   |  | 320.1   |  | 5.7   |  
|Fuel oil           |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Total              |  | 474.9                                                               |  | 406.2         |  | 354.6   |  | 332.5   |  | 340.6   |  | 2.4   |  
|Other oil products |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Industrial gas oil |  | 0.0                                                                 |  |              |  |        |  |        |  |        |  |      |  
|Asphalts           |  | 20.9                                                                |  | 21.6          |  | 22.2    |  | 24.5    |  | 26.9    |  | 9.8   |  
|Lubricants         |  | 5.5                                                                 |  | 5.2           |  | 5.7     |  | 5.7     |  | 5.7     |  | 0.0   |  
|Paraffins          |  | 1.2                                                                 |  | 1.1           |  | 1.0     |  | 1.1     |  | 1.1     |  | 0.0   |  
|Others(1)          |  | 0.4                                                                 |  | 1.3           |  | 22.8    |  | 28.4    |  | 31.2    |  | 9.9   |  
|                   |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Total              |  | 28.0                                                                |  | 29.1          |  | 51.7    |  | 59.7    |  | 64.8    |  | 8.5   |  
|                   |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Total oil products |  | 1,386.7                                                             |  | 1,326.2       |  | 1,357.1 |  | 1,390.0 |  | 1,457.1 |  | 4.8   |  
|                   |  |                                                                     |  |               |  |         |  |         |  |         |  |       |  
|Petrochemicals(2)  |  | 301.6                                                               |  | 235.3         |  | 272.3   |  | 286.0   |  | 289.0   |  | 1.0   |  

---

|Note: | Numbers may not total due to rounding
|----- | -------------------------------------

|(1) | Includes aeroflex 1-2, coke and furfural extract. Since 2003, figure also includes sales of coke from the coker at the Cadereyta refinery, which started operating in 2003.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In thousands of metric tons. These are petrochemical by-products of the refining process produced and sold by Pemex-Refining.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|Source: | Pemex BDI.
|------- | ----------

Since 1998, at the retail level, we
have offered standard and premium grades of unleaded gasoline throughout the country. Our efforts to build and enhance our brands have also progressed during the past four years. All of Mexicos independent gasoline service stations now
participate in our franchise program, which provides financial assistance to upgrade equipment and facilities and technical assistance in the development of marketing and customer service programs. At the end of 2005, there were 7,172 retail service
stations in Mexico, of which 7,125 were privately owned and operated as franchises.



42



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##### Table of Contents

Investments

Over the last eleven years, Pemex-Refining has focused its investment program on enhancing the quality of gasoline and diesel to meet new environmental standards in Mexico, improving its ability to process heavy
crudes in order to optimize the crude oil blend in its refineries and increasing the production of unleaded gasoline and diesel to supply growing demand at low cost, as opposed to increasing its overall crude oil processing capacity.This
focus is primarily the result of the abundance of heavy crudes in Mexico. In addition, due to the reduced availability of heavy crudes in the export markets, the lower cost of raw materials in Mexico leads to higher profit margins on the heavy
crudes we do export. In the medium-term, Pemex-Refining will continue to import unleaded gasoline to satisfy domestic demand. During 2005, Pemex-Refining imported approximately 163.9 thousand barrels per day of unleaded gasoline, which
represented 24.4% of total domestic demand for unleaded gasoline in that year.

Non-PIDIREGAS Investments.In nominal terms, in
2005, Pemex-Refining invested Ps. 6,542 million, excluding capital expenditures related to PIDIREGAS, as compared to Ps. 4,647 million in 2004, representing a 40.8% increase.Pemex-Refining invested 27% of this total amount to
expand and upgrade refineries and related installations, 13% in environmental and industrial safety projects, 41% in maintenance and rehabilitation projects and 19% in other projects and acquisitions.

Cadereyta Project. In November 1997, Pemex-Refining awarded a U.S. $1.6 billion contract to upgrade and renovate the Cadereyta refinery to
Conproca, S.A. de C.V. (CONPROCA), a consortium formed by SK Engineering & Construction Co., Ltd., Siemens AG and Triturados Basálticos y Derivados, S.A. de C.V. We expect the project to increase clean fuel production substantially,
specifically gasoline and diesel, which will enable Pemex-Refining to fulfill future demand requirements in northern Mexico and comply with future environmental regulations. In November 2003, the project was certified as 99.31% complete and formally
concluded. Pemex-Refining makes semi-annual amortization payments on June 15 and December 15 of each year, the first of which was a payment of U.S. $53.2 million on December 15, 2000. During 2005, Pemex-Refining made amortization
payments totaling U.S. $157.4 million. Semi-annual amortization payments will continue until June 15, 2010.

Madero
Project. In February 1999, Pemex-Refining awarded a U.S. $1.2 billion contract for the Madero refinery upgrading project to another consortium, PEMOPRO, S.A. de C.V., led by SK Engineering & Construction Co., Ltd., Siemens AG and
Triturados Basálticos y Derivados, S.A. de C.V. The total cost of the project was U.S. $1.8 billion and involved the construction of ten new plants and the upgrading of seven others at the Madero complex in the state of Tamaulipas in
northeastern Mexico. Between 1999 and 2005, the project increased the Madero refinerys processing capacity for heavy crude oil (Maya) by 100 thousand barrels per day, increased gasoline production by 15 thousand barrels per day,
increased middle distillates (diesel and jet fuel) production by approximately 10 thousand barrels per day and reduced production of high sulphur fuel oil by 22 thousand barrels per day. The project was completed on October 25, 2002.
Payments on this project are due in April, June, October and December of each year. The first amortization payments of U.S. $136.5 million were made in 2003. During 2005, Pemex-Refining made amortization payments totaling U.S. $136.5
million in respect of this project. Amortization payments will continue until 2022.

Tula and Salamanca Projects. On
November 11, 1999, Pemex-Refining awarded the Tula and Salamanca projects to Samsung Ingeniería Tula, S.A. de C.V. / Siemens, S.A. de C.V. and to Samsung Ingeniería México, S.A. de C.V. / Siemens AG and Siemens S.A. de
C.V., respectively, through an international bidding process. These projects are dedicated exclusively to increasing gasoline quality, whereas the Cadereyta and Madero projects are dedicated to increasing heavy crude oil processing capacities
through residual conversion. The construction period for the Tula and Salamanca projects lasted 29 and 34 months, respectively. Total costs were U.S. $160.5 million for the Tula project and U.S. $257.0 million for the Salamanca project.
The Tula project was completed on August 27, 2002, and the Salamanca project was completed on January 9, 2003. Payments on the Tula project are due in February, April and August of each year, and payments on the Salamanca project are due



43



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##### Table of Contents

in April, June, October and December of each year. The first amortization payments of U.S. $22.0 million for the Tula project and U.S. $33.6
million for the Salamanca project were made in 2003. During 2005, Pemex-Refining made amortization payments of U.S. $22.0 million and U.S.$ 33.6 million, respectively, for each of these two projects. The last payments under these two
projects will be made in 2022.

Minatitlán Project. This refining project is intended to increase production of high quality
gasoline and middle distillates and to improve the crude oil blend. The project consists of six bidding packages, each of which was published during 2003. Pemex-Refining awarded the first contract of Ps. 379 million to Tradeco Infraestructura
S.A. de C.V. on December 8, 2003. The construction period for the first contract was originally expected to last approximately 600 days, but the project was completed in September 2005, in 689 days, due to delays in the construction. The second
contract of U.S. $684.4 million was awarded to ICA Fluor Daniel, S. de R.L. de C.V. in October 2004. The construction period for this contract was originally expected to last approximately 1,290 days. The third contract of U.S. $534.1
million was awarded to Dragados, Proyectos Industriales de México, S.A. de C.V. and Dragados Industrial, S.A., in October 2004. The construction period for this contract was originally expected to last approximately 1,128 days. The fourth
contract of U.S. $317.0 million was awarded to Mina-Trico, S. de R.L. de C.V. This contract was signed in February 2005, and the construction period was originally expected to last approximately 1,064 days. The fifth contract of
U.S. $317.9 million was awarded to Proyectos Ebramex, S. de R.L. de C.V. The contract was signed in January 2005, and the construction period was originally expected to last approximately 1,128 days. The sixth contract of U.S. $154 million
was granted to Samsung Engineering, Co. Ltd. The contract was executed in February 2005, and the construction period was originally expected to last approximately 1,002 days. Due to delays in the construction, we now expect the five remaining
projects to be completed between 2007 and 2008.

2006 Refining Investment Budget. For 2006, Pemex-Refining has budgeted
Ps. 7,428 million for investment in PIDIREGAS. Pemex-Refining had initially budgeted Ps. 8,895 million for investments in 2006, excluding expenditures related to PIDIREGAS. Although the Ministry of Finance and Public Credit has authorized
only Ps. 5,369 million for these non-PIDIREGAS investments, Pemex-Refining expects to receive additional resources in order to meet all of its financial commitments. Pemex-Refining will invest 26% of the total amount to expand and upgrade
refineries and related installations, 25% in environmental and industrial safety projects, 34% in maintenance and rehabilitation projects and 15% in other projects and acquisitions.

Gas and Basic Petrochemicals

Natural Gas and Condensates

Pemex-Exploration and Productions average natural gas production increased by 5.4%, from 4,573 million cubic feet per day in 2004 to
4,818 million cubic feet per day in 2005, while the average wet natural gas processed by Pemex-Gas and Basic Petrochemicals decreased by 2.1%, from 3,963 million cubic feet per day in 2004 to 3,879 million cubic feet per day in 2005.
Natural gas production associated with crude oil production accounted for 61.3% of total natural gas production in 2005, with the remainder of natural gas production consisting of extraction from fields holding natural gas reserves. Although natural
gas production is more geographically diverse than crude oil production, 100 fields (or 28% of the 357 producing fields) accounted for 91.7% of all production in 2005. Of the total production, 33% originated in the Marine region, 29% in the Southern
region and the remainder, 38%, in the Northern region.

All wet natural gas production is directed to Pemex-Gas and Basic
Petrochemicals gas processing facilities. At the end of 2005, Pemex-Gas and Basic Petrochemicals owned 12 facilities.

The following
facilities are located in the Southern region:



| |  |  | Cactus: This facility contains twenty-two plants that together produced 624 million cubic feet per day of dry gas (which is natural gas with a methane content of more
than 90%), 19 thousand barrels per day of ethane, 40 thousand barrels per day of liquefied gas, 22 thousand barrels per day of naphtha and 262 thousand tons of sulphur in 2005.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



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##### Table of Contents

| |  |  | Ciudad Pemex: This facility contains eight plants that together produced 745 million cubic feet per day of dry gas and 202 thousand tons of sulphur in 2005.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | La Cangrejera: This facility contains two plants that together produced 37 thousand barrels per day of ethane, 44 thousand barrels per day of liquefied gas and
12 thousand barrels per day of naphtha in 2005.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Morelos: This facility contains one plant that produced 33 thousand barrels per day of ethane, 42 thousand barrels per day of liquefied gas and 9 thousand
barrels per day of naphtha in 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Nuevo Pemex: This facility contains thirteen plants that together produced 936 million cubic feet per day of dry gas, 26 thousand barrels per day of ethane,
70 thousand barrels per day of liquefied gas, 33 thousand barrels per day of naphtha and 204 thousand tons of sulphur in 2005.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pajaritos: This facility contains one plant that produced 9 thousand barrels per day of ethane in 2005.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | La Venta: This facility contains one plant that produced 92 million cubic feet per day of dry gas in 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Matapionche: This facility contains five plants that together produced 66 million cubic feet per day of dry gas, 2 thousand barrels per day of liquefied gas,
1 thousand barrels per day of naphtha and 11 thousand tons of sulphur in 2005.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following facilities are
located in the Northern region:



| |  |  | Reynosa: This facility contains two plants that together produced 204 million cubic feet per day of dry gas, 1 thousand barrels per day of ethane, 4 thousand
barrels per day of liquefied gas, 7 thousand barrels per day of naphtha and 2 thousand barrels per day of other products in 2005.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Poza Rica: This facility contains four plants that together produced 89 million cubic feet per day of dry gas, 3 thousand barrels per day of ethane, 3 thousand
barrels per day of liquefied gas, 1 thousand barrels per day of naphtha and 10 thousand tons of sulphur in 2005.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Arenque: This facility contains three plants that together produced 30 million cubic feet per day of dry gas, 1 thousand barrels per day of carbon dioxide liquids
and 3 thousand tons of sulphur in 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Burgos: This facility contains three plants that together produced 361 million cubic feet per day of dry gas, 10 thousand barrels per day of liquefied gas and
5 thousand barrels per day of naphtha in 2005.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following tables set forth Pemex-Gas and Basic Petrochemicals
total natural gas processing and production, as well as processing capacity, for the five years ended December 31, 2005.

Natural
Gas and Condensates Processing and Production(1)



|                                      |  |                                                                       |  |               |  |       |  |       |  |       |  |       |  
|------------------------------------- |  | --------------------------------------------------------------------- |  | ------------- |  | ----- |  | ----- |  | ----- |  | ----- | -
|                                      |  | Year Ended December 31,                                               |  | 2005 vs. 2004 | 
|                                      |  | 2001                                                                  |  | 2002          |  | 2003  |  | 2004  |  | 2005  | 
|                                      |  | (in millions of cubic feet per day, except where otherwise indicated) |  | (%)           | 
|Processing                            |  |                                                                       |  |               |  |       |  |       |  |       |  |       |  
|Wet gas                               |  | 3,677                                                                 |  | 3,770         |  | 3,853 |  | 3,963 |  | 3,879 |  | (2.1  | )
|Sour gas                              |  | 3,227                                                                 |  | 3,260         |  | 3,360 |  | 3,349 |  | 3,153 |  | (5.9  | )
|Sweet gas(2)                          |  | 450                                                                   |  | 510           |  | 492   |  | 614   |  | 726   |  | 18.2  |  
|Condensates(3)                        |  | 105                                                                   |  | 94            |  | 95    |  | 107   |  | 102   |  | (4.7  | )
|Gas to natural gas liquids extraction |  | 3,693                                                                 |  | 3,746         |  | 3,829 |  | 3,925 |  | 3,810 |  | (2.9  | )
|Wet gas                               |  | 3,526                                                                 |  | 3,600         |  | 3,689 |  | 3,803 |  | 3,712 |  | (2.4  | )
|Reprocessing streams(4)               |  | 166                                                                   |  | 146           |  | 141   |  | 123   |  | 98    |  | (20.3 | )
|Production                            |  |                                                                       |  |               |  |       |  |       |  |       |  |       |  
|Dry gas(5)                            |  | 2,804                                                                 |  | 2,916         |  | 3,029 |  | 3,144 |  | 3,147 |  | 0.1   |  
|Natural gas liquids(6)(7)             |  | 443                                                                   |  | 418           |  | 428   |  | 451   |  | 436   |  | (3.3  | )
|Liquefied petroleum gas(6)            |  | 206                                                                   |  | 205           |  | 212   |  | 225   |  | 215   |  | (4.4  | )
|Ethane(6)                             |  | 147                                                                   |  | 127           |  | 125   |  | 133   |  | 129   |  | (3.0  | )
|Naphtha(6)(8)                         |  | 88                                                                    |  | 84            |  | 86    |  | 90    |  | 88    |  | (2.2  | )
|Sulphur(9)                            |  | 684                                                                   |  | 703           |  | 757   |  | 759   |  | 692   |  | (8.8  | )



45



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##### Table of Contents

---

|Note: | Numbers may not total due to rounding
|----- | -------------------------------------

|(1) | Excludes operations of Pemex-Exploration and Production. Pemex-Exploration and Production produced a total of 4,818 million cubic feet per day of natural gas in 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes sweet vapor from condensates.
|--- | --------------------------------------

|(3) | Includes internal streams.
|--- | --------------------------

|(4) | Reprocessing of pipeline dry gas at various cryogenic plants.
|--- | -------------------------------------------------------------

|(5) | Does not include ethane reinjected into the natural gas stream.
|--- | ---------------------------------------------------------------

|(6) | In thousands of barrels per day.
|--- | --------------------------------

|(7) | Includes stabilized condensates, reprocessing streams from La Cangrejera petrochemical complex and other streams for fractionating.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes pentanes.
|--- | ------------------

|(9) | In thousands of tons.
|--- | ---------------------

|Source: | Pemex BDI.
|------- | ----------

Processing Capacity



|                                           |  |                                                                       |  |       |  |       |  |       |  |      
|------------------------------------------ |  | --------------------------------------------------------------------- |  | ----- |  | ----- |  | ----- |  | -----
|                                           |  | Year Ended December 31,                                              
|                                           |  | 2001                                                                  |  | 2002  |  | 2003  |  | 2004  |  | 2005 
|                                           |  | (in millions of cubic feet per day, except where otherwise indicated)
|Sweetening plants                          |  |                                                                       |  |       |  |       |  |       |  |      
|Sour condensates(1)(2)                     |  | 144                                                                   |  | 144   |  | 144   |  | 144   |  | 144  
|Sour natural gas(2)(3)                     |  | 3,923                                                                 |  | 4,173 |  | 4,503 |  | 4,503 |  | 4,503
|                                           |  |                                                                       |  |       | 
|Natural gas liquids recovery plants        |  |                                                                       |  |       |  |       |  |       |  |      
|Cryogenics(4)                              |  | 4,559                                                                 |  | 4,559 |  | 4,592 |  | 4,992 |  | 4,992
|Absorption(3)(5)                           |  | 475                                                                   |  | 475   |  | 554   |  | 554   |  | 350  
|                                           |  |                                                                       |  |       |  |       |  |       |  |      
|Total                                      |  | 5,034                                                                 |  | 5,034 |  | 5,146 |  | 5,546 |  | 5,342
|Natural gas liquids fractionating(1)(3)(5) |  | 554                                                                   |  | 563   |  | 569   |  | 574   |  | 574  
|Processing of hydrosulphuric acid(6)       |  | 219                                                                   |  | 219   |  | 219   |  | 219   |  | 219  

---

|(1) | In thousands of barrels per day.
|--- | --------------------------------

|(2) | In 2001, two sour condensates sweetening plants at Ciudad Pemex were modified to process sour natural gas. In 2002, sour gas sweetening plants No. 1 and No. 2 at Ciudad
Pemex increased production capacity from 400 to 525 million cubic feet per day. In 2003, a sour natural gas sweetening plant began operations at the Arenque complex, with a capacity of 34 million cubic feet per day.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In 2003, as a result of Pemex-Gas and Basic Petrochemicals processing capacity review, adjustments set forth above to the capacity of plants to process sour natural gas,
absorb natural gas liquids and fractionate natural gas liquids were made.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes the cryogenic plant located in La Cangrejera. In 2003, a new cryogenic plant began operations at the Arenque complex, with a capacity of 33 million cubic feet per day.
In 2004, two modular cryogenic plants started operations at the Burgos complex, each with a capacity of 200 million cubic feet per day.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | In 2002, the La Cangrejera plant increased its liquids fractionating capacity from 104 thousand barrels per day to 113 thousand barrels per day. In 2004, a liquids
fractionating plant began operations at the Burgos complex, with a capacity of 5.7 thousand barrels per day.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | In 2003, one sulphur recovery plant began operations at the Arenque complex, with a capacity of 13 tons per day of sulphur production. This increase in capacity was offset by a
decrease in capacity at Matapionche.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Pemex BDI.
|------- | ----------

Domestic consumption of dry gas
totaled 4,665 million cubic feet per day in 2005, a 3.1% decrease from the 2004 domestic consumption of 4,813 million cubic feet per day. The subsidiary entities consumed approximately



46



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43.6% of the total domestic dry gas consumed in 2005, while the industrial-distributor sector consumed 23.0%, the electrical sector consumed 30.4% and the
electrical autogeneration sector consumed 3.0%.

We import dry gas to satisfy shortfalls in our production and to meet demand in areas of
northern Mexico which, due to their distance from the fields, can be supplied more efficiently by importing natural gas from the United States. We imported 480 million cubic feet per day of dry gas in 2005, a 37.3% decrease from the
766 million cubic feet per day imported in 2004.

Pemex-Gas and Basic Petrochemicals also produces liquid hydrocarbons obtained from
sweet natural gas and recovered in surface separating facilities and liquid hydrocarbons condensed in natural gas pipelines. Our production of natural gas liquids, including stabilized condensates and reprocessing and other fractionating streams,
decreased by 3.3%, from 451 thousand barrels per day in 2004 to 436 thousand barrels per day in 2005, due to the reduction in supply of sour wet gas.

Pemex-Gas and Basic Petrochemicals processes sour condensates, which have a higher sulphur content, to produce stabilized sweet condensates. The volume of sour condensates we processed from Pemex-Exploration and
Production and internal streams of Pemex-Gas and Basic Petrochemicals amounted to 94 thousand barrels per day in 2005, a 6.0% decrease from 100 thousand barrels per day in 2004. Of these amounts, 81 thousand barrels per day
(86%) resulted in stabilized condensates during 2005, and 87 thousand barrels per day (87%) resulted in stabilized condensates during 2004. Pemex-Gas and Basic Petrochemicals also processes sweet condensates at its Reynosa and Burgos
facilities to produce solvents, naphtha and heavy naphtha.

In March and May of 2004, Pemex-Gas and Basic Petrochemicals started operations
of two modular cryogenic plants and a liquid fractionating plant at the Burgos gas processing center in northern Mexico to recover the liquid hydrocarbons associated with the natural gas production in the Burgos basin and ensure an effective supply
of natural gas in Mexico. Each cryogenic plant has a processing capacity of 200 million cubic feet per day of sweet wet gas, while the fractionating plant has a processing capacity of 5.7 thousand barrels per day of sweet condensates.

In October 2004 and April 2005, Pemex-Gas and Basic Petrochemicals executed two contracts to build two new modular cryogenic plants. These
plants are also located at the Burgos gas processing center and have the same processing capacity as the two modular cryogenic plants mentioned above. The first new modular cryogenic plant began operating in March 2006 and the second new plant is
expected to begin operations before the end of 2006.

The Regulatory Law limits basic petrochemicals to the following nine products that
are used in the petrochemical production process: ethane, propane, butane, pentanes, hexane, heptane, carbon black, naphthas and methane, when obtained from hydrocarbon reservoirs in Mexico and used as raw material for petrochemical industrial
processes. Pemex-Gas and Basic Petrochemicals produces methane, ethane, propane, butane and naphtha. All other petrochemical products may be produced by Pemex-Petrochemicals, Pemex-Refining or by private sector companies. However, the Regulatory Law
also allows companies that produce basic petrochemicals, as by-products of non-basic petrochemical production, to sell these basic petrochemicals internally within plants in the same unit or complex or to sell them to us.



47



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Over the five years ended December 31, 2005, the value of Pemex-Gas and Basic Petrochemicals
domestic sales were distributed as follows:

Value of Domestic Sales of Pemex-Gas and Basic Petrochemicals(1)



|                        |  |                                                         |          |               |     |          |  |      |          |      |     |           |  |     |           |  |       |  
|----------------------- |  | ------------------------------------------------------- | -------- | ------------- | --- | -------- |  | ---- | -------- | ---- | --- | --------- |  | --- | --------- |  | ----- | -
|                        |  | Year Ended December 31,                                 |          | 2005 vs. 2004 |    
|                        |  | 2001                                                    |          | 2002          |     | 2003     |  | 2004 |          | 2005 |    
|                        |  | (in millions of constant pesos at December 31, 2005)(2) |          | (%)           |    
|Natural gas             |  | Ps.                                                     | 35,301.8 |               | Ps. | 35,235.8 |  | Ps.  | 56,747.1 |      | Ps. | 71,501.5  |  | Ps. | 79,038.5  |  | 10.5  |  
|Liquefied petroleum gas |  |                                                         | 35,806.1 |               |     | 30,382.1 |  |      | 40,857.2 |      |     | 44,084.7  |  |     | 48,530.8  |  | 10.1  |  
|Petrochemicals          |  |                                                         |          |               |     |          |  |      |          |      |     |           |  |     |           |  |       |  
|Hexane                  |  |                                                         | 174.1    |               |     | 155.7    |  |      | 241.2    |      |     | 295.5     |  |     | 406.7     |  | 37.6  |  
|Dissolving agents       |  |                                                         | 460.3    |               |     | 248.0    |  |      | 46.6     |      |     | 64.5      |  |     | 111.9     |  | 73.5  |  
|Sulphur                 |  |                                                         | 88.9     |               |     | 128.4    |  |      | 215.3    |      |     | 195.3     |  |     | 185.4     |  | (5.1  | )
|Carbon black            |  |                                                         | 146.6    |               |     | 157.7    |  |      | 304.2    |      |     | 383.4     |  |     | 636.5     |  | 66.0  |  
|Pentanes                |  |                                                         | 3.3      |               |     | 55.1     |  |      | 25.6     |      |     | 47.8      |  |     | 38.8      |  | (18.8 | )
|Heptane                 |  |                                                         | 30.1     |               |     | 23.6     |  |      | 33.4     |      |     | 43.0      |  |     | 64.6      |  | 50.2  |  
|Butane                  |  |                                                         | 47.8     |               |     | 42.4     |  |      | 60.7     |      |     | 72.0      |  |     | 88.2      |  | 22.5  |  
|Propane                 |  |                                                         | 28.5     |               |     | 21.8     |  |      | 31.0     |      |     | 42.2      |  |     | 43.9      |  | 4.0   |  
|Isobutane               |  |                                                         | 7.7      |               |     | 2.9      |  |      | 0.4      |      |     | 0.0       |  |     | 0.0       |  | 0.0   |  
|Others                  |  |                                                         | 192.1    |               |     | 129.7    |  |      | 8.7      |      |     | 14.3      |  |     | 4.4       |  | (69.2 | )
|                        |  |                                                         |          |               |     |          |  |      |          |      |     |           |  |     |           |  |       |  
|Total Petrochemicals    |  |                                                         | 1,179.3  |               |     | 965.7    |  |      | 967.0    |      |     | 1,157.9   |  |     | 1,580.6   |  | 36.5  |  
|                        |  |                                                         |          |               |     |          |  |      |          |      |     |           |  |     |           |  |       |  
|Total                   |  | Ps.                                                     | 72,287.4 |               | Ps. | 66,583.7 |  | Ps.  | 98,571.3 |      | Ps. | 116,744.0 |  | Ps. | 129,149.8 |  | 10.6  |  
|                        |  |                                                         |          |               |     |          |  |      |          |      |     |           |  |     |           |  |       |  

---

|Note: | Numbers may not total due to rounding
|----- | -------------------------------------

|(1) | Excludes value added tax.
|--- | -------------------------

|(2) | Figures have been restated to constant pesos as of December 31, 2005, by applying the inflation factors from the respective years through December 31, 2005. For the five
years ended December 31, 2005, the inflation factor is the average inflation rate for each of these years.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Pemex BDI.
|------- | ----------

Subsidiaries of Pemex-Gas and Basic
Petrochemicals

Pemex-Gas and Basic Petrochemicals conducts certain management, real estate and distribution activities through its
subsidiaries and through certain joint ventures. The following table lists Pemex-Gas and Basic Petrochemicals subsidiaries, their principal operating activities and Pemex-Gas and Basic Petrochemicals ownership interest:

Subsidiaries of Pemex-Gas and Basic Petrochemicals(1)(2)



|                               |  |                                                            |  |                   |  
|------------------------------ |  | ---------------------------------------------------------- |  | ----------------- | -
|Subsidiary                     |  | Principal Activity                                         |  | OwnershipInterest |  
|Mex Gas International, Ltd.    |  | Holding company                                            |  | 100.00            | %
|Pasco Terminals, Inc.          |  | Storage and distribution of liquid sulphur                 |  | 100.00            |  
|Pasco International, Ltd.      |  | Holding company                                            |  | 100.00            |  
|Pan American Sulphur, Ltd.     |  | Storage and distribution of sulphuric acid and distillates |  | 99.87             |  
|Terrenos para Industrias, S.A. |  | Real estate holding company                                |  | 100.00            |  

---

|(1) | As of December 31, 2005.
|--- | ------------------------

|(2) | Mex Gas International, Ltd. is the only subsidiary of Pemex-Gas and Basic Petrochemicals that is a consolidated subsidiary company. See Note 2c. to our consolidated financial
statements included herein.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Pemex-Gas and Basic Petrochemicals.
|------- | -----------------------------------



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The following table lists Pemex-Gas and Basic Petrochemicals joint ventures, their principal
operating activities and Pemex-Gas and Basic Petrochemicals ownership interest:

Joint Ventures of Pemex-Gas and Basic
Petrochemicals(1)



|                                            |  |                    |  |                   |  
|------------------------------------------- |  | ------------------ |  | ----------------- | -
|Subsidiary                                  |  | Principal Activity |  | OwnershipInterest |  
|Gasoductos de Chihuahua, S. de R.L. de C.V. |  | Transport of gas   |  | 50.00             | %
|CH4 Energía, S.A. de C.V.                   |  | Trading of gas     |  | 50.00             |  

---

|(1) | As of December 31, 2005.
|--- | ------------------------

|Source: | Pemex-Gas and Basic Petrochemicals.
|------- | -----------------------------------

Private
Sector Participation in Natural Gas Distribution

The Regulatory Law, as amended on May 12, 1995, provides that private and
social sector companies may, with governmental authorization, store, distribute or transport natural gas, and may construct, own and operate natural gas pipelines, facilities and equipment. The regulations implementing this amendment
went into effect on November 9, 1995.

Since 1997, the Regulatory Law has required us to provide the private sector with open access
to our transportation system for distribution, ending our prior exclusive rights over the distribution lines. We continue to market natural gas and may develop natural gas storage systems.

In 1996, the Comisión Reguladora de Energía (Energy Regulatory Commission) approved the Gradual Access Program for 1996-1997, which
required that we open access to our natural gas distribution system to the private sector and prohibited vertical integration between transportation and distribution. As a result, Pemex-Gas and Basic Petrochemicals distribution assets located
within the following official distribution zones have been privatized: Chihuahua, Toluca, Saltillo, Nuevo Laredo, Río Pánuco, Norte de Tamaulipas, Distrito Federal, Valle de Cuautitlán Texcoco, Querétaro, La Laguna,
Bajío Norte, Puebla-Tlaxcala, Guadalajara, Piedras Negras and Ciudad Juárez. As of 1999, all of our natural gas distribution pipelines were opened to private sector use and there were no further distribution assets left to divest
pursuant to the program, although a portion of these assets are still held in trust and the distribution assets located within Veracruz have not yet been divested.

Pricing Decrees

On February 27, 2003, President Fox issued an executive decree establishing
maximum prices on first-hand and end-user sales of liquefied petroleum gas as part of a Mexican Government program to stabilize LPG prices. The purpose of this program was to curtail seasonal price fluctuations that can adversely affect economic
development. Pursuant to the decree, the maximum prices of first hand sales are adjusted periodically according to a formula determined by the Mexican Government, and the Secretaría de Economía(the Ministry of Economy) fixes
the end-users purchase price. The decree will expire in December 2006.

In addition, on September 12, 2005, President Fox issued
an executive decree establishing maximum prices on first-hand and end-user sales of natural gas for industrial use and to local distribution companies as part of a Mexican Government program to stabilize natural gas prices. The purpose of this
program was to curtail the effects of the increase in natural gas prices due to the impact of Hurricane Katrina on the production in the Gulf of Mexico. Pursuant to the decree, the maximum prices of first hand sales were adjusted periodically
according to a formula determined by the Mexican Government, and the Ministry of Economy fixed the industrial and local distribution company purchase price from September 2005 through January 2006. The decree expired in January 2006.



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Natural Gas Hedging Operations

Pemex-Gas and Basic Petrochemicals offers its customers financial instruments as a value added service and we provide various hedging contracts to our
customers in order to give them the option of protecting against fluctuations in the price of our products. On January 17, 2001, the Ministry of Finance and Public Credit, the Ministry of Economy, the Secretaría de Energía
(the Ministry of Energy) and PEMEX announced a program that would stabilize natural gas prices for certain industrial consumers in Mexico who chose to join it. Most of the Mexican industrial consumers decided to participate through a 3-year contract
with a fixed price of U.S. $4.00 per million British Thermal Units (BTUs) (from January 2001 through December 2003). This program represented a 1.6% cost savings to our customers on the sales price over that period. In 2001, we hedged
approximately 91% of the total volume of natural gas sold under this program. This price represented a discount of approximately 58% from the spot prices for natural gas offered in the market as of January 17, 2001, and it was a price 14%
greater than the spot prices offered in the market in September 2002. In 2001, we hedged approximately 91% of the total volume of natural gas sold under this program.

At the end of 2003, the Ministry of Energy published a bulletin announcing two hedging mechanisms that Pemex-Gas and Basic Petrochemicals would offer to its natural gas customers for the period from January 1,
2004 through December 31, 2006 to replace the aforementioned program. This program applies to approximately 20% of our total domestic sales of natural gas to industrial customers. These mechanisms provide two alternatives:



| |  |  | Customers can purchase natural gas swaps from us at a fixed price equal to a maximum of U.S. $4.50 per million BTUs over the period from January 1, 2004 through
December 31, 2006 for purchases of up to 10 million cubic feet per day. If the customers requirements are higher (up to 20 million cubic feet per day), the fixed price would be U.S. $4.55 per million BTUs; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Customers could purchase natural gas swaps from us for the period between January 2004 through December 2004 at a lower fixed price of U.S. $4.425 per million BTUs, so long as
the reference price in Reynosa did not exceed U.S. $6.00 per million BTUs. If the reference price exceeded that amount, the customer would also pay the difference between U.S. $6.00 per million BTUs and the average spot price. In June
2004, all the customers who had already entered the program agreed to renew their respective contracts for the period from 2005 through 2006.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pemex-Gas and Basic Petrochemicals modified its traditional risk profile for natural gas in order to mitigate the potential volatility in income resulting from the sale of this product. This strategy does not leave
Pemex-Gas and Basic Petrochemicals with any exposure to basis risk (i.e., the risk arising from the price of a derivative being based on a different reference price than that of the underlying commodity), due to the fact that the derivatives
are now priced using the same market indices as the ones used to price Pemex-Gas and Basic Petrochemicals natural gas sales.

For
more information on these fixed price sales, see Item 11Quantitative and Qualitative Disclosures about Market RiskCommodity Price Risk.

Investments

In nominal peso terms,
Pemex-Gas and Basic Petrochemicals invested Ps. 3,206 million in 2005, as compared to Ps. 2,498 million in 2004, in projects primarily related to natural gas and condensates processing, transportation and storage. For 2006, the Mexican
Government approved Ps. 2,466 million in nominal terms for capital expenditures for investment in new PIDIREGAS for Pemex-Gas and Basic Petrochemicals at the modular cryogenic plants in Reynosa. In addition to this, Ps. 3,064 million in
nominal terms has been budgeted for Pemex-Gas and Basic Petrochemicals non-PIDIREGAS-related capital expenditures in 2006.



50



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##### Table of Contents

Petrochemicals

Capacity

At the end of 2005, Pemex-Petrochemicals operated six petrochemical complexes and one
petrochemical unit for the production of non-basic petrochemical products. Pemex-Petrochemicals also owns the Camargo petrochemical complex, which stopped operating four years ago, and a petrochemical unit at Reynosa, which stopped operating in
August 1998. At the end of 2005, Pemex-Petrochemicals owned 51 plants, including those that were not producing. Pemex-Petrochemicals had a total installed capacity sufficient to produce 12.57 million tons of petrochemical products per year in
2005, 0.2% higher than its 2004 installed capacity of 12.55 million tons per year, due to the increased production capacity of low density polyethylene at La Cangrejera petrochemical complex. Pemex-Petrochemicals total production capacity
for the last five years was distributed among its facilities as set forth below:

Pemex-Petrochemicals Total Capacity



|                       |  |                         |  |        |  |        |  |        |  |       
|---------------------- |  | ----------------------- |  | ------ |  | ------ |  | ------ |  | ------
|                       |  | Year ended December 31,
|                       |  | 2001                    |  | 2002   |  | 2003   |  | 2004   |  | 2005  
|                       |  | (In thousands of tons) 
|Petrochemical Facility |  |                         |  |        |  |        |  |        |  |       
|Cosoleacaque           |  | 4,736                   |  | 4,998  |  | 4,975  |  | 4,975  |  | 4,975 
|La Cangrejera          |  | 2,297                   |  | 2,427  |  | 3,205  |  | 3,255  |  | 3,280 
|Morelos                |  | 2,134                   |  | 2,107  |  | 2,263  |  | 2,263  |  | 2,263 
|Pajaritos              |  | 1,066                   |  | 1,021  |  | 1,021  |  | 1,021  |  | 1,021 
|Escolín                |  | 337                     |  | 337    |  | 337    |  | 337    |  | 337   
|San Martín Texmelucan  |  | 260                     |  | 268    |  | 288    |  | 288    |  | 288   
|Camargo                |  | 297                     |  | 333    |  | 333    |  | 333    |  | 333   
|Tula                   |  | 62                      |  | 71     |  | 76     |  | 76     |  | 76    
|                       |  |                         |  |        |  |        |  |        |  |       
|Total                  |  | 11,189                  |  | 11,561 |  | 12,496 |  | 12,546 |  | 12,571
|                       |  |                         |  |        |  |        |  |        |  |       

---

Note: Numbers may
not total due to rounding.

Source: Pemex BDI.

Production

Pemex-Petrochemicals manufactures different non-basic petrochemical products, including:



| |  |  | methane derivatives, such as ammonia and methanol;
| | - |  | --------------------------------------------------



| |  |  | ethane derivatives, such as ethylene, polyethylenes, vinyl chloride monomer and ethylene oxide;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | aromatics and their derivatives, such as styrene, toluene, xylenes and paraxylene;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | propylene and its derivatives, such as acrylonitrile; and
| | - |  | ---------------------------------------------------------



| |  |  | other products, such as oxygen, nitrogen, pentane, hexane and heptane liquids.
| | - |  | ------------------------------------------------------------------------------

Our combined total annual petrochemical production decreased by 1.2%, from 10,731 thousand tons in 2004 to 10,603 thousand tons in 2005. Of this amount, Pemex-Petrochemicals produced 6,219 thousand tons
of petrochemicals in 2005, representing a 0.1% decrease from its production of 6,223 thousand tons in 2004, in spite of an increase in ammonia production and the resumption of operations in the paraxylene plant in La Cangrejera petrochemical
complex. The remainder was produced by Pemex-Gas and Basic Petrochemicals. For information on Pemex-Gas and Basic Petrochemicals petrochemical production, see Gas and Basic Petrochemicals above.



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Pemex-Petrochemicals production decreased slightly in 2005, and it still remains less than its
aggregate production in 2000 due to adverse petrochemical market conditions in Mexico. The following table summarizes the annual production associated with the principal petrochemical activities of Pemex-Petrochemicals for the five years ended
December 31, 2005.

Pemex-Petrochemicals Production



|                          |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|------------------------- |  | ------------------------------- |  | ------------- |  | ----- |  | ----- |  | ----- |  | ----- | -
|                          |  | Year Ended December 31,         |  | 2005 vs. 2004 | 
|                          |  | 2001                            |  | 2002          |  | 2003  |  | 2004  |  | 2005  | 
|                          |  | (in thousands of tons per year) |  | (%)           | 
|Liquids                   |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Hexanes                   |  | 62                              |  | 57            |  | 70    |  | 66    |  | 66    |  | 0.0   |  
|Heptanes                  |  | 13                              |  | 8             |  | 18    |  | 11    |  | 15    |  | 36.4  |  
|                          |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Total                     |  | 75                              |  | 65            |  | 88    |  | 77    |  | 81    |  | 5.2   |  
|                          |  |                                 |  |               |  |      
|Other inputs              |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Oxygen                    |  | 380                             |  | 376           |  | 399   |  | 418   |  | 433   |  | 3.6   |  
|Nitrogen                  |  | 96                              |  | 109           |  | 106   |  | 112   |  | 118   |  | 5.4   |  
|Hydrogen                  |  |                                |  |              |  | 167   |  | 162   |  | 184   |  | 13.6  |  
|                          |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Total                     |  | 476                             |  | 485           |  | 672   |  | 692   |  | 735   |  | 6.2   |  
|                          |  |                                 |  |               |  |      
|Petrochemicals            |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Methane derivatives       |  | 1,752                           |  | 1,663         |  | 1,383 |  | 1,668 |  | 1,242 |  | (25.5 | )
|Ethane derivatives        |  | 2,408                           |  | 2,309         |  | 2,218 |  | 2,073 |  | 2,440 |  | 17.7  |  
|Aromatics and derivatives |  | 642                             |  | 670           |  | 795   |  | 1,222 |  | 1,187 |  | (2.9  | )
|Propylene and derivatives |  | 127                             |  | 115           |  | 125   |  | 116   |  | 104   |  | (10.3 | )
|Others                    |  | 396                             |  | 467           |  | 723   |  | 327   |  | 321   |  | (1.8  | )
|                          |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Total                     |  | 5,325                           |  | 5,224         |  | 5,244 |  | 5,406 |  | 5,294 |  | (2.1  | )
|                          |  |                                 |  |               |  |      
|Other products            |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Hydrochloric acid         |  | 87                              |  | 92            |  | 66    |  | 38    |  | 93    |  | 144.7 |  
|Muriatic acid             |  | 31                              |  | 24            |  | 14    |  | 11    |  | 16    |  | 45.5  |  
|                          |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Total                     |  | 118                             |  | 116           |  | 81    |  | 49    |  | 109   |  | 122.4 |  
|                          |  |                                 |  |               |  |       |  |       |  |       |  |       |  
|Total                     |  | 5,994                           |  | 5,889         |  | 6,085 |  | 6,223 |  | 6,219 |  | (0.1  | )
|                          |  |                                 |  |               |  |       |  |       |  |       |  |       |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

Source: Pemex BDI.

Investments

Pemex-Petrochemicals invested Ps. 1,530 million in 2005 in non-PIDIREGAS-related capital expenditures, as compared to Ps. 1,598 million in 2004, in nominal peso terms, in projects such as derivative plants at La Cangrejera
petrochemical complex, the expansion of its high density polyethylene plant to produce linear high and low density polyethylene and the second phase of the ethylene cracker renovation process at the Morelos petrochemical facility. For 2006,
Pemex-Petrochemicals expects to invest Ps. 1,599 million in non-PIDIREGAS-related capital expenditures in projects such as the renovation of the styrene plant at La Cangrejera petrochemical complex, the expansion of transportation and storage
facilities for the high-density polyethylene plant and the second phase of the ethylene cracker renovation process at the Morelos petrochemical facility. Pemex-Petrochemicals 2006 budget also includes Ps. 1,122 million in PIDIREGAS
capital expenditures related to the renovation of the aromatics plant at La Cangrejera petrochemical complex.

In addition,
Pemex-Petrochemicals is developing the Fénix Project with the participation of private investment. This project includes the expansion of ethylene crackers at La Cangrejera and the Morelos



52



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##### Table of Contents

petrochemical complexes. The expanded facilities will require natural gasoline, which will be supplied by PEMEX and which was previously exported due to our
lack of processing capacity. The petrochemicals products obtained from these new facilities will be used as inputs for a polyethylene plant and a new aromatics production line, which PEMEX expects to build in association with national and
international commercial partners. We are currently continuing to negotiate with these commercial partners as to the ultimate scope of the project.

Domestic Sales

In 2005, the value of the domestic sales of petrochemical products by Pemex-Petrochemicals increased by
16.3%, from Ps. 16,959.9 million in 2004 to Ps. 19,727.4 million in 2005. This increase was primarily due to a significant increase in the prices of some of the products manufactured by Pemex-Petrochemicals, such as polyethylenes, ethylene
oxide and monoethylene glycol, and the production of an additional 159 kilotons of vinyl chloride monomer in Pajaritos as compared to 2004.

Over the five years ended December 31, 2005, the value of Pemex-Petrochemicals domestic sales was distributed as set forth in the table below. The sales of petrochemical products by Pemex-Gas and Basic Petrochemicals and
Pemex-Refining are included under Gas and Basic Petrochemicals and Refining above.

Value of Domestic
Sales(1)



|                          |  |                                                         |         |               |     |         |  |      |          |      |     |          |  |     |          |  |      |  
|------------------------- |  | ------------------------------------------------------- | ------- | ------------- | --- | ------- |  | ---- | -------- | ---- | --- | -------- |  | --- | -------- |  | ---- | -
|                          |  | Year Ended December 31,                                 |         | 2005 vs. 2004 |    
|                          |  | 2001                                                    |         | 2002          |     | 2003    |  | 2004 |          | 2005 |    
|                          |  | (in millions of constant pesos at December 31, 2005)(2) |         | (%)           |    
|Petrochemical Product     |  |                                                         |         |               |     |        
|Methane derivatives       |  | Ps.                                                     | 1,755.6 |               | Ps. | 1,272.9 |  | Ps.  | 1,815.9  |      | Ps. | 2,240.5  |  | Ps. | 2,543.7  |  | 13.5 |  
|Ethane derivatives        |  |                                                         | 5,829.9 |               |     | 4,712.3 |  |      | 6,866.5  |      |     | 8,604.6  |  |     | 10,266.8 |  | 19.3 |  
|Aromatics and derivatives |  |                                                         | 1,511.6 |               |     | 1,525.1 |  |      | 2,118.5  |      |     | 4,810.0  |  |     | 5,563.8  |  | 15.7 |  
|Propylene and derivatives |  |                                                         | 559.1   |               |     | 611.4   |  |      | 843.6    |      |     | 1,154.1  |  |     | 1,087.3  |  | (5.8 | )
|Others                    |  |                                                         | 47.6    |               |     | 101.1   |  |      | 146.3    |      |     | 150.7    |  |     | 265.9    |  | 76.4 |  
|                          |  |                                                         |         |               |     |         |  |      |          |      |     |          |  |     |          |  |      |  
|Total                     |  | Ps.                                                     | 9,703.9 |               | Ps. | 8,222.7 |  | Ps.  | 11,790.8 |      | Ps. | 16,959.9 |  | Ps. | 19,727.4 |  | 16.3 |  
|                          |  |                                                         |         |               |     |         |  |      |          |      |     |          |  |     |          |  |      |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Excludes value added tax.
|--- | -------------------------

|(2) | Figures have been restated to constant pesos as of December 31, 2005, by applying the inflation factors from the respective years through December 31, 2005. For the five
years ended December 31, 2005, the inflation factor is the average inflation rate for each of these years.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Pemex BDI.
|------- | ----------

Private Sector Participation in
Petrochemicals Sector

As of December 31, 2005, Pemex-Petrochemicals, Petróleos Mexicanos and, in some cases, Pemex-Refining
were the sole shareholders and owned the following seven subsidiaries:



| |  |  | Petroquímica Cosoleacaque, S.A. de C.V.;
| | - |  | ----------------------------------------



| |  |  | Petroquímica Escolín, S.A. de C.V.;
| | - |  | -----------------------------------



| |  |  | Petroquímica Tula, S.A. de C.V.;
| | - |  | --------------------------------



| |  |  | Petroquímica Camargo, S.A. de C.V.;
| | - |  | -----------------------------------



| |  |  | Petroquímica La Cangrejera, S.A. de C.V.;
| | - |  | -----------------------------------------



| |  |  | Petroquímica Morelos, S.A. de C.V.; and
| | - |  | ---------------------------------------



| |  |  | Petroquímica Pajaritos, S.A. de C.V.
| | - |  | ------------------------------------



53



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On September 15, 2004, a resolution was published in the Diario Oficial de la Federación(Official Gazette of the Federation) authorizing the Ministry of Energy to carry out the merger of the seven subsidiaries of Pemex-Petrochemicals into Pemex-Petrochemicals. The merger process was completed on May 1, 2006, after obtaining
all the necessary legal and corporate authorizations. The assets and liabilities associated with the production of non-basic petrochemicals, as well as the real estate corresponding to each complex or plant of these seven subsidiaries, were
integrated into Pemex-Petrochemicals.

We expect that this merger will be beneficial to us, as we anticipate that it will allow us to do
the following:



| |  |  | take advantage of the existing production chains in these former subsidiaries to improve our production process and maximize the return on our investments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | generate synergies with respect to the installations, inventory, purchases and specialized technical resources of each of our production centers;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | improve the management of our supply chains and our relationships with our suppliers and customers; and
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | reduce our operational expenses.
| | - |  | --------------------------------

International Trading

The PMI Group

The
PMI Group includes PMI and the other PEMEX subsidiaries and affiliates that conduct international commercial activities for our products, except for natural gas, which is marketed directly by Pemex-Gas and Basic Petrochemicals. The PMI Groups
main objective is to assist in maximizing our profitability and optimizing our operations through the use of international trade, facilitating the link between the international markets and us and pursuing new business opportunities in marketing our
products. The PMI Group manages the international sales of our crude oil and petroleum products and acquires in the international markets those petroleum products that we import to satisfy domestic demand. Sales and purchases of petroleum products
(refined products, petrochemical products and liquefied petroleum gas) in the international markets are carried out through P.M.I. Trading Ltd. P.M.I. Trading Ltd. also performs third-party trading, transportation and risk-management activities.

Exports and Imports

PMI purchases crude oil from Pemex-Exploration and Production and then sells it to PMIs customers. PMI sold an average of 1,817.1 thousand barrels per day of crude oil in 2005, which represented 54.5% of our total crude oil
production.

The following tables set forth the composition and average prices of our crude oil exports for the periods indicated:



|                                   |  |                         |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|---------------------------------- |  | ----------------------- |  | ---- |  | ------ |  | ---- |  | ------ |  | --- |  | ------ |  | --- |  | ------ |  | ---
|                                   |  | Year Ended December 31,
|                                   |  | 2001                    |  | 2002 |  | 2003   |  | 2004 |  | 2005  
|                                   |  | (tbpd)                  |  | (%)  |  | (tbpd) |  | (%)  |  | (tbpd) |  | (%) |  | (tbpd) |  | (%) |  | (tbpd) |  | (%)
|Crude oil exports (by volume)      |  |                         |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Olmeca (API gravity of 38°-39°)    |  | 317                     |  | 18   |  | 245    |  | 14   |  | 216    |  | 12  |  | 221    |  | 12  |  | 216    |  | 12 
|Isthmus (API gravity of 32°-33°)   |  | 87                      |  | 5    |  | 46     |  | 3    |  | 25     |  | 1   |  | 27     |  | 1   |  | 81     |  | 4  
|Maya (API gravity of 21°-22°)      |  | 1,332                   |  | 76   |  | 1,398  |  | 82   |  | 1,590  |  | 86  |  | 1,608  |  | 86  |  | 1,506  |  | 83 
|Altamira (API gravity 15.0°-16.5°) |  | 20                      |  | 1    |  | 17     |  | 1    |  | 14     |  | 1   |  | 13     |  | 1   |  | 15     |  | 1  
|                                   |  |                         |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Total                              |  | 1,756                   |  | 100  |  | 1,705  |  | 100  |  | 1,844  |  | 100 |  | 1,870  |  | 100 |  | 1,817  |  | 100
|                                   |  |                         |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    



54



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##### Table of Contents

---

|Notes: | Numbers may not total due to rounding.
|------ | --------------------------------------

| | tbpd = thousand barrels per day.
| | --------------------------------

| | API gravity refers to the specific gravity, or density, of liquid petroleum products measured in degrees on the American Petroleum Institute scale. On the API scale, oil with the
least specific gravity has the highest API gravity. In addition, if all other things are equal, the higher the API gravity, the greater the value of the crude oil.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | PMI operating statistics, which are based on information in bills of lading.
|------- | ----------------------------------------------------------------------------



|                                |  |                           |       |      |       |       |  |       |       |      |       |       |  |       |       |  |       |      
|------------------------------- |  | ------------------------- | ----- | ---- | ----- | ----- |  | ----- | ----- | ---- | ----- | ----- |  | ----- | ----- |  | ----- | -----
|                                |  | Year Ended December 31,  
|                                |  | 2000                      |       | 2001 |       | 2002  |  | 2003  |       | 2004 |       | 2005 
|                                |  | (U.S. dollars per barrel)
|Crude Oil Prices                |  |                           |       |      |       |       |  |       |       |      |       |       |  |       |       |  |       |      
|Olmeca                          |  | U.S.$                     | 29.00 |      | U.S.$ | 23.96 |  | U.S.$ | 24.87 |      | U.S.$ | 29.32 |  | U.S.$ | 39.34 |  | U.S.$ | 53.91
|Isthmus                         |  |                           | 27.87 |      |       | 22.27 |  |       | 23.48 |      |       | 28.08 |  |       | 38.04 |  |       | 53.11
|Maya                            |  |                           | 22.99 |      |       | 17.19 |  |       | 20.89 |      |       | 24.13 |  |       | 29.82 |  |       | 40.61
|Altamira                        |  |                           | 19.67 |      |       | 12.75 |  |       | 19.41 |      |       | 22.81 |  |       | 28.12 |  |       | 36.08
|Weighted average realized price |  | U.S.$                     | 24.79 |      | U.S.$ | 18.61 |  | U.S.$ | 21.52 |      | U.S.$ | 24.78 |  | U.S.$ | 31.05 |  | U.S.$ | 42.71

---

|Source: | PMI operating statistics, which are based on information in bills of lading.
|------- | ----------------------------------------------------------------------------

Geographic Distribution of Export Sales

In 2005, 98% of PMIs sales of our crude oil exports
were to customers located in the western hemisphere. As of December 31, 2005, PMI had 29 customers in 13 countries. Among these countries, the largest proportion of our exports has consistently been to customers in the United States, Spain, the
Netherlands Antilles and Canada.

The following table sets forth our crude oil export sales by country.

Crude Oil Exports by Country



|                     |  |                       |   |  |       |   |  |       |   |  |       |   |  |       |  
|-------------------- |  | --------------------- | - |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | -
|                     |  | Percentage of Exports |  
|                     |  | 2001                  |   |  | 2002  |   |  | 2003  |   |  | 2004  |   |  | 2005  |  
|United States        |  | 75.3                  | % |  | 78.6  | % |  | 78.0  | % |  | 79.2  | % |  | 78.6  | %
|Spain                |  | 8.4                   |   |  | 8.3   |   |  | 7.8   |   |  | 8.0   |   |  | 8.9   |  
|Netherlands Antilles |  | 7.6                   |   |  | 5.3   |   |  | 5.7   |   |  | 6.2   |   |  | 5.2   |  
|Japan                |  | 1.0                   |   |  | 0.6   |   |  | 0.6   |   |  | 0.0   |   |  | 0.0   |  
|Canada               |  | 1.6                   |   |  | 1.2   |   |  | 1.6   |   |  | 1.5   |   |  | 2.0   |  
|Others               |  | 6.2                   |   |  | 6.1   |   |  | 6.4   |   |  | 5.0   |   |  | 5.4   |  
|                     |  |                       |   |  |       |   |  |       |   |  |       |   |  |       |  
|Total                |  | 100.0                 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %
|                     |  |                       |   |  |       |   |  |       |   |  |       |   |  |       |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|Source: | PMI operating statistics, which are based on information in bills of lading.
|------- | ----------------------------------------------------------------------------



55



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##### Table of Contents

The following table sets forth the geographic distribution of PMIs sales of crude oil exports from
January 1, 2001 through December 31, 2005. The table also presents the distribution of exports among PMIs crude oil types for those years.

Composition and Geographic Distribution of Crude Oil Export Sales



|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|------------------------------------- |  | --------------- |  | ---- |  | ------ |  | ---- |  | ------ |  | --- |  | ------ |  | --- |  | ------ |  | ---
|                                      |  | At December 31,
|                                      |  | 2001            |  | 2002 |  | 2003   |  | 2004 |  | 2005  
|                                      |  | (tbpd)          |  | (%)  |  | (tbpd) |  | (%)  |  | (tbpd) |  | (%) |  | (tbpd) |  | (%) |  | (tbpd) |  | (%)
|PMI Crude Oil Export Sales to:        |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|United States and Canada              |  | 1,349           |  | 77   |  | 1,360  |  | 80   |  | 1,467  |  | 80  |  | 1,510  |  | 81  |  | 1,464  |  | 81 
|Europe                                |  | 184             |  | 10   |  | 181    |  | 11   |  | 176    |  | 10  |  | 178    |  | 10  |  | 194    |  | 11 
|Central and South America             |  | 179             |  | 10   |  | 117    |  | 7    |  | 137    |  | 7   |  | 145    |  | 8   |  | 125    |  | 7  
|Far East                              |  | 37              |  | 2    |  | 47     |  | 3    |  | 63     |  | 3   |  | 36     |  | 2   |  | 34     |  | 2  
|Africa                                |  | 6               |  | 0    |  |       |  |     |  | 1      |  | 0   |  | 0      |  | 0   |  | 0      |  | 0  
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Total                                 |  | 1,756           |  | 100  |  | 1,705  |  | 100  |  | 1,844  |  | 100 |  | 1,870  |  | 100 |  | 1,817  |  | 100
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Olmeca (API gravity of 38°-39°)       |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|United States and Canada              |  | 292             |  | 17   |  | 225    |  | 13   |  | 195    |  | 11  |  | 208    |  | 11  |  | 200    |  | 11 
|Others                                |  | 25              |  | 1    |  | 20     |  | 1    |  | 21     |  | 1   |  | 14     |  | 1   |  | 16     |  | 1  
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Total                                 |  | 317             |  | 18   |  | 245    |  | 14   |  | 216    |  | 12  |  | 221    |  | 12  |  | 216    |  | 12 
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Isthmus (API gravity of 32°-33°)      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|United States and Canada              |  | 56              |  | 3    |  | 29     |  | 2    |  | 11     |  | 1   |  | 6      |  | 0   |  | 38     |  | 2  
|Others                                |  | 31              |  | 2    |  | 17     |  | 1    |  | 14     |  | 1   |  | 22     |  | 1   |  | 43     |  | 2  
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Total                                 |  | 87              |  | 5    |  | 46     |  | 3    |  | 25     |  | 1   |  | 27     |  | 1   |  | 81     |  | 4  
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Maya (API gravity of 21°-22°)         |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|United States and Canada              |  | 982             |  | 56   |  | 1,090  |  | 64   |  | 1,247  |  | 68  |  | 1,283  |  | 69  |  | 1,212  |  | 67 
|Others                                |  | 350             |  | 20   |  | 308    |  | 18   |  | 342    |  | 19  |  | 325    |  | 17  |  | 294    |  | 16 
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Total                                 |  | 1,331           |  | 76   |  | 1,398  |  | 82   |  | 1,590  |  | 86  |  | 1,608  |  | 86  |  | 1,506  |  | 83 
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Altamira (API gravity of 15.0°-16.5°) |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|United States and Canada              |  | 20              |  | 1    |  | 17     |  | 1    |  | 14     |  | 1   |  | 13     |  | 1   |  | 15     |  | 1  
|Others                                |  |                |  |     |  |       |  |     |  |       |  |    |  |       |  |    |  |       |  |   
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    
|Total                                 |  | 20              |  | 1    |  | 17     |  | 1    |  | 14     |  | 1   |  | 13     |  | 1   |  | 15     |  | 1  
|                                      |  |                 |  |      |  |        |  |      |  |        |  |     |  |        |  |     |  |        |  |    

---

|Notes: | Numbers may not total due to rounding.
|------ | --------------------------------------

| | tbpd = thousands barrels per day
| | --------------------------------

| | API gravity refers to the specific gravity, or density, of liquid petroleum products measured in degrees on the American Petroleum Institute scale. On the API scale, oil with the
least specific gravity has the highest API gravity. In addition, if all other things are equal, the higher the API gravity, the greater the value of the crude oil.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | PMI operating statistics, which are based on information in bills of lading.
|------- | ----------------------------------------------------------------------------

PMI makes a significant percentage of its crude oil sales under evergreen contracts, which can be terminated by either party pursuant to a three month phase-out clause. PMI sells most of its remaining exports to the
same customers that purchase under evergreen contracts, but PMI makes these sales pursuant to separate supply contracts, which apply the pricing formulas included in the evergreen contracts. PMI generally sells crude oil on a Free On Board
basis (at the shipping point). In practically all cases, PMI sells refined products on Free on Board and Cost and Freight bases and buys refined products on Delivery Ex-ship or Delivery at Frontier and Cost and
Freight bases.



56



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##### Table of Contents

PMI has entered into several long-term Maya crude oil supply agreements pursuant to which the purchasers
have agreed to undertake projects to expand the capacity of their respective refineries to upgrade residue from Maya crude oil. Under these agreements, PMI provides the purchasers with certain support mechanisms that will protect, under certain
adverse market conditions, the investments that the purchasers undertake in accordance with the agreements. These agreements include:



| |  |  | an agreement with Port Arthur Coker Co., signed on March 10, 1998, to supply its Port Arthur, Texas refinery with Maya crude oil for a period of eight years following project
completion, which occurred in March 2001; the amount of Maya crude oil supplied is adjusted monthly and is currently set at 207 thousand barrels per day;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an agreement with Coastal Aruba Refining Company N.V. (which was assigned to Valero Energy Corporation on March 5, 2004 following its acquisition of Coastal Aruba Refining
Company N.V.), signed on July 30, 1998, to supply its refinery in Aruba with approximately 100 thousand barrels per day of Maya crude oil for a period of five years following project completion, which occurred in April 2000. The agreement
was extended until July 2005, after which time PMI continued to supply the same amount of Maya crude oil for the refinery under an evergreen contract signed in July 1996 with Valero Marketing & Supply Company;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an agreement with Exxon Company U.S.A. and Exxon Trading Company International, signed on September 25, 1998, to supply its Baytown, Texas refinery with approximately
65 thousand barrels per day of Maya crude oil for a period of five years following project completion, which occurred in December 2001. Following the merger of Exxon Corporation and Mobil Corporation, this agreement was replaced with a new
agreement containing similar terms and provisions, signed by Exxon Mobil Sales & Supply Corporation in December 1999.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an agreement with Pecten Trading Company, which is a trading subsidiary of Shell Oil Company, signed on May 1, 1999, and an agreement with P.M.I. Norteamérica, S.A. de
C.V., signed on the same date, to supply the Deer Park refinery joint venture with a total of approximately 50 thousand barrels per day of Maya crude oil for a period of seven years following project completion, which occurred in April 2001,
and up to 170 thousand barrels per day until 2023;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an agreement with Marathon Petroleum Supply LLC, (formerly Marathon Ashland Supply LLC) signed on May 19, 1999, to supply its Garyville, Louisiana refinery with approximately
100 thousand barrels per day of Maya crude oil for a period of five years following project completion, which occurred in December 2001;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an agreement with Valero Marketing and Supply Company and Valero RefiningTexas, L.P., signed on December 17, 2001, to supply their Texas City, Texas refinery with
approximately 90 thousand barrels per day of Maya crude oil for a period of five years following project completion, which occurred in January 2004; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an agreement with Chevron Products Company, a division of Chevron U.S.A. Inc., signed on March 6, 2002, to supply its Pascagoula, Mississippi refinery with approximately
130 thousand barrels per day of Maya crude oil for a period of five years following project completion, which occurred in May 2003.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These long-term Maya crude oil supply agreements further our strategy of supporting the export value of Maya crude oil in relation to the value of other grades of crude oil by creating incentives for refiners to
invest in new high-conversion refineries, which will be capable of upgrading the significant proportion of residue produced from processing Maya crude oil in less-efficient refining complex configurations.

The Ministry of Energy has entered into certain agreements to reduce or increase exports of crude oil as discussed below in Trade Regulations
and Export Agreements.



57



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##### Table of Contents

The following table sets forth the average volume of our exports and imports of crude oil, natural gas
and petroleum products for the five years ended December 31, 2005.

Volume of Exports and Imports



|                          |  |                                                 |  |               |  |         |  |         |  |         |  |       |  
|------------------------- |  | ----------------------------------------------- |  | ------------- |  | ------- |  | ------- |  | ------- |  | ----- | -
|                          |  | Year Ended December 31,                         |  | 2005 vs. 2004 | 
|                          |  | 2001                                            |  | 2002          |  | 2003    |  | 2004    |  | 2005    | 
|                          |  | (in thousands barrels per day, except as noted) |  | (%)           | 
|Exports                   |  |                                                 |  |               |  |         |  |         |  |         |  |       |  
|Crude Oil                 |  |                                                 |  |               |  |         |  |         |  |         |  |       |  
|Olmeca                    |  | 317.4                                           |  | 244.8         |  | 215.6   |  | 221.4   |  | 215.8   |  | (2.5  | )
|Isthmus                   |  | 86.8                                            |  | 45.8          |  | 24.9    |  | 27.4    |  | 81.0    |  | 195.6 |  
|Altamira                  |  | 19.5                                            |  | 16.9          |  | 13.7    |  | 13.4    |  | 14.7    |  | 9.7   |  
|Maya                      |  | 1,331.9                                         |  | 1,397.6       |  | 1,589.6 |  | 1,608.1 |  | 1,505.6 |  | (6.4  | )
|                          |  |                                                 |  |               |  |         |  |         |  |         |  |       |  
|Total crude oil           |  | 1,755.7                                         |  | 1,705.1       |  | 1,843.9 |  | 1,870.3 |  | 1,817.1 |  | (2.8  | )
|                          |  |                                                 |  |               |  |        
|Natural gas(1)            |  | 24.9                                            |  | 4.4           |  |        |  |        |  | 23.9    |  |      |  
|Refined products          |  | 102.5                                           |  | 155.9         |  | 178.9   |  | 151.8   |  | 186.2   |  | 22.7  |  
|Petrochemical products(2) |  | 794.0                                           |  | 801.7         |  | 834.8   |  | 915.7   |  | 853.3   |  | (6.8  | )
|                          |  |                                                 |  |               |  |        
|Imports                   |  |                                                 |  |               |  |         |  |         |  |         |  |       |  
|Natural gas(3)            |  | 292.2                                           |  | 592.5         |  | 756.9   |  | 765.6   |  | 480.4   |  | (37.3 | )
|Refined products          |  | 382.0                                           |  | 349.9         |  | 287.2   |  | 310.5   |  | 391.9   |  | 26.2  |  
|Petrochemical products(2) |  | 280.3                                           |  | 295.3         |  | 532.4   |  | 276.6   |  | 397.4   |  | 43.7  |  

---

|Note: | Numbers are subject to adjustment because the volume of crude oil exports actually sold during December 2005 may be adjusted to reflect the percentage of water in each shipment.
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(1) | Fuel oil equivalent.
|--- | --------------------

|(2) | Thousands of metric tons.
|--- | -------------------------

|(3) | Millions of cubic feet per day.
|--- | -------------------------------

|Source: | PMI operating statistics, which are based on information in bills of lading.
|------- | ----------------------------------------------------------------------------

Crude oil exports decreased by 2.8% in 2005, from 1,870.3 thousand barrels per day in 2004 to 1,817.1 thousand barrels per day in 2005, principally as a result of the severe hurricane season for the United
States Gulf Coast. Natural gas imports decreased by 37.3% in 2005, from 765.6 million cubic feet per day in 2004 to 480.4 million cubic feet per day in 2005, due to higher production and lower domestic demand in Mexico. Although we
normally do not export natural gas, we exported 23.9 million cubic feet per day of natural gas in 2005, due to decreased domestic demand in certain periods and the resulting excess supply of natural gas in our pipelines.In 2005, exports
of petrochemical products by volume decreased by 6.8%, from 915.7 thousand metric tons in 2004 to 853.3 thousand metric tons in 2005, while imports of petrochemical products by volume increased by 43.7%, from 276.6 thousand metric
tons in 2004 to 397.4 thousand metric tons in 2005, due to an increase in imports of methane and ethane derivatives. In 2005, exports of refined products by volume increased by 22.7%, from 151.8 thousand barrels per day in 2004 to
186.2 thousand barrels per day in 2005, while imports of refined products by volume increased by 26.2%, from 310.5 thousand barrels per day in 2004 to 391.9 thousand barrels per day in 2005. During 2006, import volumes of refined
products are likely to continue to increase as a result of the expected increased demand for these products.



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The following table sets forth the value of exports and imports of crude oil, natural gas and petroleum
products for the five years ended December 31, 2005.

Value of Exports and Imports(1)



|                       |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  
|---------------------- |  | ------------------------------------- | -------- | ------------ | - | -------- |  | ---- | -------- | ---- | - | -------- |  | - | -------- |  | ----- | -
|                       |  | Year ended December 31,               |          | 2005vs. 2004 |  
|                       |  | 2001                                  |          | 2002         |   | 2003     |  | 2004 |          | 2005 |  
|                       |  | (in millions of nominal U.S. dollars) |          | (%)          |  
|Exports                |  |                                       |          |              |   |         
|Olmeca                 |  | $                                     | 2,775.7  |              | $ | 2,222.9  |  | $    | 2,307.7  |      |   | 3,187.9  |  |   | 4,246.2  |  | 33.2  |  
|Isthmus                |  |                                       | 705.9    |              |   | 392.5    |  |      | 255.4    |      |   | 380.9    |  |   | 1,569.6  |  | 312.1 |  
|Altamira               |  |                                       | 90.9     |              |   | 119.6    |  |      | 114.5    |      |   | 138.2    |  |   | 193.8    |  | 40.2  |  
|Maya                   |  |                                       | 8,355.1  |              |   | 10,657.2 |  |      | 13,998.7 |      |   | 17,551.0 |  |   | 22,319.8 |  | 27.2  |  
|                       |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  
|Total crude oil(2)     |  | $                                     | 11,927.6 |              | $ | 13,392.2 |  | $    | 16,676.3 |      | $ | 21,257.9 |  | $ | 28,329.5 |  | 33.3  |  
|                       |  |                                       |          |              |   |         
|Natural gas            |  |                                       | 47.8     |              |   | 4.0      |  |      |         |      |   |         |  |   | 78.9     |  |      |  
|Refined products       |  |                                       | 896.5    |              |   | 1,288.1  |  |      | 1,743.4  |      |   | 2,036.8  |  |   | 3,119.2  |  | 53.1  |  
|Petrochemical products |  |                                       | 145.2    |              |   | 145.3    |  |      | 186.0    |      |   | 250.8    |  |   | 356.3    |  | 42.1  |  
|                       |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  
|Total products         |  | $                                     | 1,089.5  |              | $ | 1,437.4  |  | $    | 1,929.4  |      | $ | 2,287.6  |  | $ | 3,554.4  |  | 55.4  |  
|                       |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  
|Total exports          |  | $                                     | 13,017.1 |              | $ | 14,829.6 |  | $    | 18,605.6 |      | $ | 23,545.4 |  | $ | 31,883.9 |  | 35.4  |  
|                       |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  
|Imports                |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  
|Natural gas            |  | $                                     | 423.8    |              | $ | 775.4    |  | $    | 1,526.2  |      | $ | 1,715.1  |  | $ | 1,397.9  |  | (18.5 | )
|Refined products       |  |                                       | 4,170.0  |              |   | 3,827.4  |  |      | 3,777.3  |      |   | 5,306.2  |  |   | 9,418.2  |  | 77.5  |  
|Petrochemical products |  |                                       | 83.9     |              |   | 70.5     |  |      | 105.5    |      |   | 145.9    |  |   | 207.4    |  | 42.2  |  
|                       |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  
|Total imports          |  | $                                     | 4,677.7  |              | $ | 4,673.3  |  | $    | 5,409.0  |      | $ | 7,167.2  |  | $ | 11,023.5 |  | 53.8  |  
|                       |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  
|Net exports            |  | $                                     | 8,339.4  |              | $ | 10,156.3 |  | $    | 13,196.7 |      | $ | 16,378.2 |  | $ | 20,860.4 |  | 27.4  |  
|                       |  |                                       |          |              |   |          |  |      |          |      |   |          |  |   |          |  |       |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Does not include crude oil, refined products, petrochemicals and natural gas purchased by P.M.I. Trading Ltd. or P.M.I. Norteamérica, S.A. de C.V. from third parties outside
of Mexico and resold in the international markets. The figures expressed in this table differ from the amounts contained in the financial statements under Net Sales because of the differences in methodology associated with the
calculation of the exchange rates and other minor adjustments.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Crude oil exports are subject to adjustment to reflect the percentage of water in each shipment.
|--- | ------------------------------------------------------------------------------------------------

|Sources: | PMI operating statistics, which are based on information in bills of lading.
|-------- | ----------------------------------------------------------------------------

Imports of natural gas decreased in value by 18.5% during 2005, as a result of lower domestic demand for natural gas.

In 2005, we continued to be a net importer of refined products, with imports of refined products increasing in value by 77.5%, while exports of refined products increased in value by 53.1%. Our net imports of refined
products for 2005 totaled U.S. $6,299 million, a 92.7% increase from the refined products trade deficit of U.S. $3,269.4 million in 2004.



59



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The following table describes the composition of our imports and exports of selected refined products in
2003, 2004 and 2005.

Imports and Exports of Selected Refined Products



|                        |  |                         |  |       |      |  |        |      |       |   |  |        |  |       |  
|----------------------- |  | ----------------------- |  | ----- | ---- |  | ------ | ---- | ----- | - |  | ------ |  | ----- | -
|                        |  | Year Ended December 31, | 
|                        |  | 2003                    |  |       | 2004 |  |        | 2005 |      
|                        |  | (tbpd)                  |  | (%)   |      |  | (tbpd) |      | (%)   |   |  | (tbpd) |  | (%)   |  
|Imports                 |  |                         |  |       |      |  |        |      |       |   |  |        |  |       |  
|Gasoline(1)             |  | 145.2                   |  | 50.6  |      |  | 192.6  |      | 62.0  |   |  | 249.4  |  | 63.6  |  
|Fuel oil                |  | 20.3                    |  | 7.1   |      |  | 17.1   |      | 5.5   |   |  | 27.5   |  | 7.0   |  
|Liquefied petroleum gas |  | 85.2                    |  | 29.7  |      |  | 84.4   |      | 27.2  |   |  | 72.9   |  | 18.6  |  
|Diesel                  |  | 9.9                     |  | 3.5   |      |  | 3.6    |      | 1.2   |   |  | 24.9   |  | 6.4   |  
|Others                  |  | 26.5                    |  | 9.2   |      |  | 12.8   |      | 4.1   |   |  | 17.2   |  | 4.4   |  
|                        |  |                         |  |       |      |  |        |      |       |   |  |        |  |       |  
|Total                   |  | 287.2                   |  | 100.0 | %    |  | 310.5  |      | 100.0 | % |  | 391.9  |  | 100.0 | %
|                        |  |                         |  |       |      |  |        |      |       |   |  |        |  |       |  
|Exports                 |  |                         |  |       |      |  |        |      |       |   |  |        |  |       |  
|Gasoline(1)             |  | 70.9                    |  | 39.6  |      |  | 76.7   |      | 50.5  |   |  | 81.3   |  | 43.7  |  
|Diesel                  |  | 2.5                     |  | 1.4   |      |  | 7.7    |      | 5.1   |   |  | 0.4    |  | 0.2   |  
|Liquefied petroleum gas |  | 0.3                     |  | 0.2   |      |  | 0.2    |      | 0.2   |   |  | 1.8    |  | 0.9   |  
|Jet fuel                |  | 7.6                     |  | 4.2   |      |  | 6.8    |      | 4.5   |   |  | 6.9    |  | 3.7   |  
|Fuel oil                |  | 23.6                    |  | 13.2  |      |  | 3.5    |      | 2.3   |   |  | 0.8    |  | 0.4   |  
|Others                  |  | 73.9                    |  | 41.3  |      |  | 56.9   |      | 37.5  |   |  | 94.9   |  | 51.0  |  
|                        |  |                         |  |       |      |  |        |      |       |   |  |        |  |       |  
|Total                   |  | 178.9                   |  | 100.0 | %    |  | 151.8  |      | 100.0 | % |  | 186.2  |  | 100.0 | %
|                        |  |                         |  |       |      |  |        |      |       |   |  |        |  |       |  

---

|Notes: | tbpd = thousands of barrels per day.
|------ | ------------------------------------

| | Numbers may not total due to rounding.
| | --------------------------------------

|(1) | Includes methyl terbutyl ether (MTBE) and pentanes.
|--- | ---------------------------------------------------

|Source: | PMI operating statistics based on INCOTERMS (International Commercial Terms).
|------- | -----------------------------------------------------------------------------

For the three years ended December 31, 2005, our imports and exports of selected petrochemicals were as follows:

Imports and Exports of Selected Petrochemicals



|              |  |                         |  |       |      |  |       |      |       |   |  |       |  |       |  
|------------- |  | ----------------------- |  | ----- | ---- |  | ----- | ---- | ----- | - |  | ----- |  | ----- | -
|              |  | Year Ended December 31, | 
|              |  | 2003                    |  |       | 2004 |  |       | 2005 |      
|              |  | (tmt)                   |  | (%)   |      |  | (tmt) |      | (%)   |   |  | (tmt) |  | (%)   |  
|Imports       |  |                         |  |       |      |  |       |      |       |   |  |       |  |       |  
|Xylenes       |  | 2.0                     |  | 0.4   |      |  | 18.5  |      | 6.7   |   |  | 22.8  |  | 5.7   |  
|Propylene     |  | 0.4                     |  | 0.1   |      |  | 0.1   |      | 0.0   |   |  | 0.0   |  | 0.0   |  
|Ammonia       |  | 35.2                    |  | 6.6   |      |  | 14.7  |      | 5.3   |   |  | 74.6  |  | 18.8  |  
|Others        |  | 494.8                   |  | 92.9  |      |  | 243.4 |      | 88.0  |   |  | 300.0 |  | 75.5  |  
|              |  |                         |  |       |      |  |       |      |       |   |  |       |  |       |  
|Total         |  | 532.4                   |  | 100.0 | %    |  | 276.6 |      | 100.0 | % |  | 397.4 |  | 100.0 | %
|              |  |                         |  |       |      |  |       |      |       |   |  |       |  |       |  
|Exports       |  |                         |  |       |      |  |       |      |       |   |  |       |  |       |  
|Sulphur       |  | 552.6                   |  | 66.2  |      |  | 607.2 |      | 66.3  |   |  | 487.1 |  | 57.1  |  
|Ammonia       |  | 0.1                     |  | 0.0   |      |  | 35.9  |      | 3.9   |   |  | 0.0   |  | 0.0   |  
|Ethylene      |  | 94.0                    |  | 11.3  |      |  | 154.3 |      | 16.9  |   |  | 163.9 |  | 19.2  |  
|Polyethylenes |  | 34.3                    |  | 4.1   |      |  | 25.5  |      | 2.8   |   |  | 38.9  |  | 4.6   |  
|Others        |  | 153.8                   |  | 18.4  |      |  | 92.9  |      | 10.1  |   |  | 163.4 |  | 19.1  |  
|              |  |                         |  |       |      |  |       |      |       |   |  |       |  |       |  
|Total         |  | 834.8                   |  | 100.0 | %    |  | 915.7 |      | 100.0 | % |  | 853.3 |  | 100.0 | %
|              |  |                         |  |       |      |  |       |      |       |   |  |       |  |       |  

---

|Notes: | tmt = thousands of metric tons.
|------ | -------------------------------

| | Numbers may not total due to rounding.
| | --------------------------------------

|Source: | PMI operating statistics based on INCOTERMS (International Commercial Terms).
|------- | -----------------------------------------------------------------------------



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##### Table of Contents

Hedging Operations

P.M.I. Trading Ltd. engages in hedging operations to cover the variations in the purchase and sale prices for petroleum products. Our internal policies establish a limit on the maximum capital at risk. Capital at risk
is calculated daily in order to compare the actual figures with the aforementioned limit. Internal controls include a risk comptroller responsible for ensuring compliance, an internal auditing department and a risk management committee. See
Item 11Quantitative and Qualitative Disclosures about Market RiskCommodity Price Risk.

Transportation and Distribution

Our pipelines connect crude oil and natural gas producing centers with refineries and petrochemical plants, and the refineries and
petrochemical plants with Mexicos major cities. At the end of 2005, our pipeline network measured approximately 60,757 kilometers in length. Of the total network, approximately 9,147 kilometers of pipelines transport crude oil, approximately
13,846 kilometers transport petroleum products and petrochemicals, 16,329 kilometers transport natural gas, 1,622 kilometers transport liquefied petroleum gas, 1,372 kilometers transport basic petrochemicals and the remaining pipelines are crude oil
and natural gas gathering pipelines. Ownership of the pipelines is distributed among our subsidiary entities according to the products they transport.

At the end of 2005, we obtained the necessary authorization to build a liquefied petroleum gas pipeline, which will transport up to 30 thousand barrels per day of liquefied petroleum gas from the Burgos gas
processing center to the city of Monterrey. By the end of 2007, PEMEX expects to finish the construction of the Emiliano Zapata Compression Station in the State of Veracruz. This compression station will help increase the transportation of dry gas
from the South to Central and Northern Mexico.

The transportation of crude oil, natural gas and other products through a pipeline network
is subject to leaks and spills in soil. See Item 3Key InformationRisk Factors Risk Factors Related to the Operations of PEMEX. In 2005, we began the process of updating and modernizing the Supervisory, Control and Data
Acquisition System, which is used for real-time monitoring of the operating conditions of our pipeline system, in order to increase the safety of the pipelines connecting our production centers. The objective of this project is to
control in real-time the operating conditions and the levels of gas in the pipelines that transport both natural and liquefied gas. In the first stage of the project, completed at the end of 2005, we modernized the SCADA computer system
(both hardware and software), with the assistance of Telvent Canada Ltd., a company that specializes in industrial supervisory control. In the second stage of the project, launched in April 2006, we expect to integrate into our modernized system 20
petrochemical pipelines, which represent 1,216 kilometers of our pipeline network, and to put in place 34 strategic installations to monitor certain operating conditions, such as the pressure and temperature of our pipelines. In addition, in 2006,
as part of our Emergency Program for Strengthening Safety, Health and Environmental Protection, we will inspect and repair 10,224 kilometers of our pipeline network. In 2006, we have budgeted a total of Ps. 3.9 billion for the remediation and
maintenance of our pipelines and we expect to invest up to a total of Ps. Ps. 13.0 billion in the remediation and maintenance of our pipeline network through 2008. For more information on recent problems with our pipeline network, see
Item 4Information on the CompanyEnvironmental RegulationEnvironmental Liabilities.

During 2005, we
transported approximately 80.2 billion tons per kilometer of crude oil and petroleum products to be processed in our refining system and petroleum products to satisfy domestic demand, as compared to the 79.8 billion tons per kilometer carried in
2004. Of the total amount of tons per kilometer we transported in 2005, we carried 57.4% through pipelines, 42.6% by vessels and the remainder by train tank cars and tank trucks.

At the end of 2005, we owned 10 refined product tankers and leased another 12. We also owned 77 major wholesale storage centers.



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PEMEX Corporate Matters

In addition to the operating activities that we undertake through the activities of our subsidiary entities and subsidiary companies, we have certain centralized corporate operations that coordinate general labor,
safety, insurance and legal matters.

Industrial Safety and Environmental Protection

Petróleos Mexicanos Corporate Direction of Operations is responsible for planning, conducting and coordinating programs to:



| |  |  | foster a company culture of safety and environmental protection;
| | - |  | ----------------------------------------------------------------



| |  |  | improve the safety of our workers and facilities;
| | - |  | -------------------------------------------------



| |  |  | reduce risks to the residents surrounding our facilities; and
| | - |  | -------------------------------------------------------------



| |  |  | protect the environment.
| | - |  | ------------------------

We intend to develop further
the industrial safety and environmental programs for each subsidiary entity. The environmental and safety division of each subsidiary entity coordinates closely with the Corporate Direction of Operations.

Insurance

We maintain general and
civil liability insurance coverage for our onshore property, such as refineries, process plants, pipelines and storage facilities, and our offshore properties such as drilling platforms, rigs, gas gathering systems, floating docks and production
facilities. Our insurance covers risks of sudden and accidental physical destruction or loss or damage to our properties. Our offshore general and civil liability insurance also covers extraordinary costs related to the operation of offshore wells,
such as control and repair costs, evacuation costs and costs associated with spills. We maintain additional coverage for offshore environmental liabilities. We also maintain protection and indemnity insurance, life insurance, as well as insurance
for automobiles and heavy equipment, electronic equipment and cargo and hull insurance for our shipping fleet.

We contract all of our
insurance policies through Mexican insurance carriers. These policies have limits of U.S. $1.3 billion for each onshore and offshore property, U.S. $150 million for extraordinary costs related to the operation of offshore wells,
U.S. $1.0 billion for protection and indemnification for marine-related liabilities and U.S. $500 million for civil liabilities. Since June 2003, we have stopped purchasing business interruption insurance that compensated us for loss of
revenues derived from damages to our facilities because mitigating factors related to the nature and operation of our facilities, such as the ability of any of our six refineries to compensate for the loss of any one refinery, the separation of
plants within the refineries and the excess processing capacity available across our different lines of business, as well as the available coverage and restrictive conditions in the international insurance and reinsurance markets, led us to conclude
that the benefits of this type of coverage were outweighed by the costs. Instead, we have purchased business interruption mitigation insurance that compensates us only for the expenses necessary to recover our production capabilities in the least
time possible. Our insurance policies are reinsured through Kot Insurance Company AG, our wholly-owned subsidiary organized under the laws of Switzerland (previously organized under the laws of Bermuda as Kot Insurance Company Ltd.). The purpose of
Kot Insurance Company AG, which we refer to as Kot AG, is to reinsure policies of the insurers of Petróleos Mexicanos, the subsidiary entities, the subsidiary companies and their affiliates. Kot AG reinsures 90.9% of its reinsurance policies
with unaffiliated third party reinsurers.

Property, Plants and Equipment

General

Substantially all of our
property, consisting of refineries, storage, production, manufacturing and transportation facilities and certain retail outlets, is located in Mexico, including Mexican waters in the Gulf of



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Mexico. The location, character, utilization and productive capacity of our exploration, drilling, refining, petrochemical production, transportation and
storage facilities are described above. See Exploration and Production, Refining, Gas and Basic Petrochemicals, Petrochemicals and Transportation and
Distribution.

Reserves

Under Mexican law, all oil and other hydrocarbon reserves within Mexico are owned by the Mexican nation and not by us. Petróleos Mexicanos and the subsidiary entities have the exclusive right to exploit those reserves under the
Regulatory Law and related laws and regulations. Our estimates of Mexicos hydrocarbon reserves are described in Exploration and ProductionReserves.

GENERAL REGULATORY FRAMEWORK

The Mexican Government and its agencies closely
regulate and supervise our operations. The Ministry of Energy monitors our activities and the Secretary of Energy acts as the chairman of the Board of Directors of Petróleos Mexicanos. The Ministry of Finance and Public Credit approves the
annual budget and financing program of Petróleos Mexicanos and the subsidiary entities. The Mexican Government incorporates the annual budget and financing program of Petróleos Mexicanos and the subsidiary entities into its budget,
which the Mexican Congress must approve each year. The Mexican Government is not, however, directly liable for the financial obligations that we incur. The Secretaría de Medio Ambiente y Recursos Naturales(the Ministry of the
Environment and Natural Resources), which we refer to as SEMARNAT, in conjunction with other federal and state authorities, regulates our activities that affect the environment. The Secretaría de la Función Pública(the
Ministry of the Public Function), which we refer to as SFP (formerly known as SECODAM), appoints the external auditors of Petróleos Mexicanos and the subsidiary entities.

The ASF reviews annually the Cuenta Pública(public account) of the various federal government entities on an annual basis, including
Petróleos Mexicanos and the subsidiary entities. This review focuses mainly on the entities compliance with budgetary benchmarks and budget and accounting laws. The ASF prepares reports of its observations based on this review. The
reports are subject to our analysis and, if necessary, our clarification and explanation of any issues raised during the audit. Discrepancies in amounts spent may subject our officials to legal sanctions. However, in most instances the observed
issues are explained and clarified. The financial information provided to the ASF is prepared in accordance with Mexican Financial Reporting Standards applicable to Mexican public sector entities, which differ in several aspects from Mexican GAAP.
As a result, our financial statements reflect different financial data than that included in the public account.

ENVIRONMENTAL
REGULATION

Legal Framework

We are
subject to various laws related to the environmental protection of natural resources, as well as the management of hazardous and non-hazardous wastes. In particular, we are subject to the provisions of the Ley General del Equilibrio
Ecológico y la Protección al Ambiente(General Law on Ecological Equilibrium and Environmental Protection, which we refer to as the Environmental Law), the regulations issued thereunder and several technical environmental norms
issued by the SEMARNAT, which is in charge of supervising and regulating environmental matters relating to the oil and gas industry in Mexico. The Secretaría de Salud (the Ministry of Health), theSecretaría de Comunicaciones
y Transportes (the Ministry of Communications and Transportation), the Secretaría de Marina(Ministry of Navy) and the Ministry of Energy assist the SEMARNAT in its functions. In addition, we are subject to the environmental laws
and regulations issued by the governments of each of the states of Mexico where our facilities are located.



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The Environmental Law and Regulations of the Ministry of the Environment and Natural Resources

The Environmental Law and related regulations require that we obtain certain authorizations from the SEMARNAT before we carry out any activity that may
have an adverse effect on the environment. In particular, these environmental regulations apply to chemical, petrochemical, crude oil refining and extraction activities, as well as the construction of crude oil and natural gas pipelines. Before
authorizing a new project, the SEMARNAT requires the submission of an environmental impact analysis and any other information that it may request. The SEMARNAT is entitled to grant or deny its authorization of any activity.

The environmental regulations that apply generally to Mexican industry apply to us. These regulations specify, among other matters, permissible levels of
emissions, water discharges and hazardous substances discharges as well as atmospheric pollution level limits. The technical regulations for oil and petrochemical industries set forth maximum permissible levels of pollution in residual water
discharges and natural gas emissions. These regulations also establish procedures for measuring pollution levels. Mexico generally updates and revises its environmental regulatory framework as necessary, and we participate with the Mexican
Government in developing environmental regulations that are related to our activities.

In April 1997, the SEMARNAT issued regulations
governing the procedures for obtaining an environmental license, under which new industrial facilities can comply with all applicable environmental requirements by way of a single administrative procedure. Each environmental license integrates all
of the different permits, licenses and authorizations related to environmental matters for a particular facility. Since these regulations went into effect, we have been required to obtain an environmental license for any new facility, while our
facilities that existed prior to the effectiveness of these regulations are not subject to this obligation.

Federal and state authorities
in Mexico may inspect any facility to determine compliance with the Environmental Law, local environmental laws, regulations and technical environmental regulations. Violations or non-compliance with the legal provisions may result in the
application of substantial fines, temporary or permanent shutdown of a facility, required capital expenditures to minimize the effect of our operations on the environment, cleanup of contaminated land and water, cancellation of a concession or
revocation of authorization to carry out certain activities and, in certain cases, criminal prosecution of employees and individuals.

On
March 29, 2005, the SEMARNAT issued a Norma Oficial Mexicana (Official Mexican Rule) identified as NOM-138-SEMARNAT/SS-2003, which establishes maximum permissible limits for hydrocarbons in soil and specifications for its
characterization and remediation. On January 30, 2006, the SEMARNAT issued NOM-086-SEMARNAT-SENER-SCFI-2005, which sets forth environmental specifications for fossil fuels. On April 3, 2006, the SEMARNAT issued NOM-EM-148-SEMARNAT-2006,
which establishes standards for sulfur recovery in refineries. On June 23, 2006, the SEMARNAT issued NOM-052-SEMARNAT-2005, which sets forth the procedures and standards to be followed to identify and classify hazardous residuals. We are
currently evaluating the scope of the impact of these new regulations.

PEMEXs Internal Monitoring

We believe that we are currently in substantial compliance with current federal and state environmental laws as those laws have been historically
interpreted and enforced. We maintain an organizational structure that permits us to implement and monitor our environmental program. The subsidiary entities have specialized departments, depending on the size and geographic distribution of their
respective sites, which implement their own environmental programs and conduct internal environmental audits and inspections of their sites and their immediate surroundings based on the standards of the SEMARNAT. When these internal audits reveal
deficiencies, the subsidiary entities take the necessary remedial actions to eliminate these deficiencies. If soil or bodies of water are contaminated at levels that exceed the levels stipulated in the applicable regulation, the remediation
requirements derived from these internal audits and inspections are recorded in our financial statements as environmental liabilities when they are known and estimable.



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Our Corporate Direction of Operations has developed an integrated safety and environmental protection
management system and is currently implementing strategies within PEMEX to create a company culture focused on improving industrial safety and environmental protection. This system is an administrative tool composed of diverse, interdependent and
interrelated elements, focused on diagnosis, evaluation, implementation and continuing preventive improvements related to safety and environmental protection. The diagnosis and evaluation stages have been completed; the system is now in an advanced
stage of implementation.

We maintain an internal structure to identify and solve environmental problems and retain external consultants to
perform operational audits at our industrial plants, including cost estimates for remedying any shortfall in compliance with Mexican environmental laws. Such remedies can include improving the operating efficiency of plants, cleaning up contaminated
land and water and capital expenditures to minimize the effect of our operations on the environment.

In addition to our internal
monitoring structure for identifying affected areas, areas of non-compliance and improvement opportunities, our environmental program is subject to the review of the Procuraduría Federal de Protección al Ambiente(the Office of
the Federal Attorney for Environmental Protection, which we refer to as PROFEPA). PROFEPA administers the Mexican environmental regulatory rubric and establishes acceptable standards of environmental remediation. Although PROFEPA has the authority
to review and inspect remediation works performed by us and compliance with permitted contamination levels established by laws and regulations, it does not determine our environmental liabilities. We maintain proper records of all of the studies,
estimations, performed works and any other information that PROFEPA may request from time to time.

Since 1993, we have participated in a
voluntary environmental audit program with PROFEPA. As each environmental audit is completed, we send the audit report (which includes the estimated costs for remedying environmental anomalies) to PROFEPA for its review and approval. After approval
by PROFEPA, we review the audits and determine which findings can be resolved by changing current plant or drilling operations and implementing the current capital expenditures plan. If the audit report is approved by PROFEPA, we negotiate a
corrective action plan with PROFEPA, stipulating the time period, amounts to be expended and the steps to be taken to bring each site into compliance. As of December 31, 2005, with respect to Petróleos Mexicanos and the subsidiary
entities, 456 environmental audits, including the negotiation of a corrective action plan, had been concluded under the program with PROFEPA, and all main facilities had been covered. As of December 31, 2005, corrective action plans for 369
audits had been implemented and all of these sites have received and retained clean industry certifications from PROFEPA.With respect to the remaining 87 audits, the corrective action plans have been agreed upon and are being
implemented.

During 2005, Petróleos Mexicanos experienced 25 major accidents, in which eight Mexican states (Veracruz, Tabasco,
Puebla, Tamaulipas, Estado de México, Coahuila, Guanajuato and Michoacán) were affected. In coordination with the state governments, the military, civil protection services and local authorities, among others, we implemented emergency
action plans in order to protect and restore the local residents health and safety in the affected areas, as well as to offset any negative environmental impact. In order to protect itself from civil environmental liabilities, Petróleos
Mexicanos has increased its insurance coverage, which covers most of the expenses directly related to these accidents. This coverage does not, however, cover the deductible and those expenses excluded from the insurance policies, such as fines,
public relations expenses and site clean-up not directly related to the accident, among others. For information relating to our environmental liabilities, see Item 4Information on the CompanyEnvironmental
RegulationEnvironmental Liabilities below. The majority of the remediation activities in connection with the 25 major accidents have been completed, but some of the legal proceedings are still pending resolution by the Mexican
environmental authorities, as a result of various administrative delays, including site analysis and other investigations into the causes of the accidents.

Of the 25 accidents in 2005, the two most significant accidents occurred in the states of Veracruz and Tabasco. In April 2005, the La Cangrejera-Pajaritos 10-inch pipeline ruptured near Nanchital, releasing over



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80 tons of ammonia. The blast of ammonia gas from this accident caused the death of six people. In July 2005, the Escribano-Dos Bocas 48-inch pipeline
ruptured. The resulting gas leak caused an explosion that killed four people. After each of these two accidents, we developed an emergency action plan, in coordination with local authorities and private companies, which reinforced the existing
emergency procedures and helped to isolate the damaged areas and to evacuate nearby towns in a very short period of time, and in such a way that damage to local residents and properties was significantly reduced. In each case, PROFEPA requested that
we initiate environmental impact evaluations. It is anticipated that during the second half of 2006, the results of these evaluations will provide estimates of the areas that have been impacted as well as recommendations for environmental
remediation measures.

On April 29, 2005, the Board of Directors of Petróleos Mexicanos approved the Emergency Plan for
Strengthening Safety, Health and Environmental Protection. The implementation of the plan commenced with the audits of the high-risk pipelines and facilities by a multidisciplinary task force. This initial review identified critical areas that
required attention. Through this Emergency Plan, several measures were put into practice to limit the quantity and severity of personal and industrial incidents. During 2005, as a result of the implementation of the plan, our accident frequency rate
decreased by 29% as compared to 2004, from 1.50 to 1.06 per million man hours worked with exposure to risk. To achieve zero incidents, injuries, emissions of pollutants and illnesses for all of our work centers, in January 2006, we began to
implement the PEMEX Safety, Health and Environmental Protection System (PEMEX SSPA), which is expected to be fully implemented over a period of three years. The system includes the incorporation of 12 of the worlds best preventive and
corrective safety practices, as well as the revision of and adherence to root-cause analysis; process safety management, with strong emphasis on mechanical integrity; environmental protection; occupational health; operational discipline; effective
audits; emergency response plans; protection tests and risk analysis systems.

In August 2005, the sulfur recovery plant at La Cangrejera
gas processing center began operations. This plant has a nominal capacity of 10 tons per day and it is designed to recover 96% of the sulfur content of the acid gas stream coming from the sweetening section of the fractionation plant located in La
Cangrejera gas processing center. As a result, maximum sulfur dioxide emissions will be 50 kg per ton of sulfur processed. This figure is less than 50% of the maximum amount set by the applicable Mexican and international standards.

Other than as disclosed herein, there are currently no material legal or administrative proceedings pending against us with respect to any environmental
matters, and we do not believe that continued compliance with environmental laws will have a material adverse effect on our financial condition or results of operations.

Environmental Liabilities

At December 31, 2005, our estimated and accrued environmental
liabilities totaled Ps. 1,727.3 million. Of this total, Ps. 753.6 million were attributable to Pemex-Exploration and Production, Ps. 665.2 million to Pemex-Refining, Ps. 258.6 million to Pemex-Gas and Basic Petrochemicals and
Ps. 49.9 million to Pemex-Petrochemicals. There were no environmental liabilities at the subsidiary company level. The following charts detail our environmental liabilities by subsidiary entity and operating region at December 31, 2005.

Pemex-Exploration and Production



|                           |  |                         |  |                         |        
|-------------------------- |  | ----------------------- |  | ----------------------- | -------
|                           |  | Estimated Affected Area |  | Estimated Liability    
|                           |  | (in hectares)           |  | (in thousands of pesos)
|Northern region            |  | 280.25                  |  | Ps.                     | 560,491
|Southern region            |  | 7.37                    |  |                         | 9,696  
|Southeastern Marine region |  |                        |  |                         |       
|                           |  |                         |  |                         |        
|Total(1)                   |  | 287.62                  |  | Ps.                     | 570,187
|                           |  |                         |  |                         |        



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---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | During 2005, environmental remediation was completed on 31.29 hectares. There were 28.31 hectares of additional affected areas, including 7.60 hectares in the Northern region and
20.71 hectares in the Southern region, which were affected as a result of spills from pipelines.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | PEMEX.
|------- | ------



|                                                                              |  |                        |  |                        |        
|----------------------------------------------------------------------------- |  | ---------------------- |  | ---------------------- | -------
|                                                                              |  | Holding Ponds Drainage
|                                                                              |  | Number ofHolding Ponds |  | EstimatedLiability    
|                                                                              |  |                        |  | (in thousands ofpesos)
|Northern region(1)                                                            |  | 327                    |  | Ps.                    | 162,913
|Southern region                                                               |  | 10                     |  |                        | 20,456 
|                                                                              |  |                        |  |                        |        
|Total                                                                         |  | 337                    |  |                        | 183,369
|                                                                              |  |                        |  |                        |        
|Total estimated environmental liabilities of Pemex-Exploration and Production |  |                        |  | Ps.                    | 753,556
|                                                                              |  |                        |  |                        |        

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | A total of 364 holding ponds, 353 in the Northern region and 11 in the Southern region, were restored and discharged as liabilities for 2005. A total of 280 holding ponds, 277 in
the Northern region and three in the Southern region, were classified as new liabilities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | PEMEX.
|------- | ------

Pemex-Refining



|                                         |  |                        |  |                        |        
|---------------------------------------- |  | ---------------------- |  | ---------------------- | -------
|                                         |  | Estimatedaffected area |  | EstimatedLiability    
|                                         |  | (in hectares)          |  | (in thousandsof pesos)
|Pipelines                                |  | 7.47                   |  | Ps.                    | 63,012 
|Refineries(1)                            |  | 182.31                 |  |                        | 209,078
|Storage and Distribution Terminals(2)(3) |  | 121.46                 |  |                        | 242,532
|Other affected areas(4)                  |  | 52.00                  |  |                        | 150,537
|                                         |  |                        |  |                        |        
|Total                                    |  | 363.24                 |  | Ps.                    | 665,159
|                                         |  |                        |  |                        |        

---

|Note: | Numbers may not total due to rounding
|----- | -------------------------------------

|(1) | In 2005, environmental remediation activities were initiated on 12.10 hectares, with an estimated cost of Ps. 13.876 million.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(2) | Of the 27 terminals which required environmental remediation, the estimated affected area of one storage and distribution terminal has not yet been determined; however, the
estimated liability includes the cost estimate for such area based on available information.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In 2005, restoration activities with an associated cost of Ps. 45.58 million and recent information resulting in a better definition of an affected area decreased
the estimated liability of these sites by Ps. 10.62 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Estimated liability of the Santa Alejandrina swamp in Minatitlán, Veracruz.
|--- | ---------------------------------------------------------------------------

|Source: | PEMEX.
|------- | ------



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Pemex-Gas and Basic Petrochemicals



|                          |  |                        |  |                        |        
|------------------------- |  | ---------------------- |  | ---------------------- | -------
|                          |  | Estimatedaffected area |  | EstimatedLiability    
|                          |  | (in hectares)          |  | (in thousandsof pesos)
|Gas Complex Processors(1) |  | 23.410                 |  | Ps.                    | 249,197
|Pipelines(2)              |  | 1.800                  |  |                        | 9,399  
|                          |  |                        |  |                        |        
|Total                     |  | 25.210                 |  | Ps.                    | 258,597
|                          |  |                        |  |                        |        

---

|Note: | Numbers may not total due to rounding
|----- | -------------------------------------

|(1) | Seven gas processing plant complexes and one gas processing plant have been audited and six gas processing plant complexes were determined to require environmental remediation. The
surface of the affected area at the gas processing plant complex of La Venta has increased, with an associated cost of Ps. 14.21 million, as a result of an improved characterization site study. In the processing plants complex at Reynosa,
new information regarding the affected area increased the restoration cost by Ps. 18.119 million. The surface of the affected areas at the Ciudad Pemex and Arenque processing plants have also increased, with an aggregate associated cost of Ps. 0.716
million. In the affected areas of the Poza Rica and Cactus complexes, the restoration cost decreased by Ps. 4.435 million, due to a revised evaluation of the contaminated sites.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Following an evaluation, the estimated costs of remediation activities were increased by Ps. 3.181 million, based on new information resulting from the evaluation in the
pipeline sector of Minatitlán.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | PEMEX.
|------- | ------

Pemex-Petrochemicals



|                                         |  |                        |  |                        |       
|---------------------------------------- |  | ---------------------- |  | ---------------------- | ------
|                                         |  | Estimatedaffected area |  | EstimatedLiability    
|                                         |  | (in hectares)          |  | (in thousandsof pesos)
|Petroquímica La Cangrejera, S.A. de C.V. |  | 0.30                   |  | Ps.                    | 1,780 
|Petroquímica Pajaritos, S.A. de C.V.(1)  |  | 10.53                  |  |                        | 48,114
|                                         |  |                        |  |                        |       
|Total(2)                                 |  | 10.83                  |  | Ps.                    | 49,894
|                                         |  |                        |  |                        |       

---

|Note: | Numbers may not total due to rounding
|----- | -------------------------------------

|(1) | New information from evaluation and restoration activities at Petroquímica Pajaritos S.A. de C.V. resulted in an increase in the estimated remediation cost.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | All of Pemex-Petrochemicals plants have been audited and the table above reflects the only plants determined to require environmental remediation.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | PEMEX.
|------- | ------

Our estimates of environmental liabilities
include cost estimates for general and site-specific evaluation studies and the corresponding remediation. The remediation sites consist of sites identified in the audit process described above as well as those previously identified sites in more
mature petroleum operating areas that were not cleaned up in the past. Our environmental liabilities also include the elimination of holding ponds created by abandoned petroleum wells. Additionally, our environmental liabilities include an accrual
for information requested and received periodically from field managers as to probable environmental liabilities identified in their respective areas of responsibility. We accrue environmental liabilities when sufficient basic knowledge is available
to form a preliminary estimation as to remediation cost. Although the full potential scope of the remediation cost may not be known with certainty, these accruals are made when the liability is probable and the amount is reasonably estimable, in
accordance with Bulletin C-12 Contingencies and Commitments for Mexican GAAP purposes and with SFAS No. 5 Accounting for Contingencies for U.S. GAAP purposes. These estimated liabilities include assumptions resulting
from an initial evaluation of damage, including land acreage to be remediated, depth of contamination and type of contamination. While the initial evaluation is extensive, there is a possibility that the actual scope of remediation could vary
depending upon information gained during the remediation process. For a further discussion of our environmental liabilities, see Note 20 IIc. to our consolidated financial statements included herein.



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Unasserted or additional claims are not reflected in our identified liabilities. We are not aware of any
such claims that would be of such a magnitude as to materially affect our estimates of environmental liabilities.

At the end of 2005, we
were not aware of uncertainties with respect to joint and several liabilities that could affect our assessment of environmental contingencies or otherwise result in a major environmental liability. We are responsible for all production, processing,
storage and distribution of petroleum and its derivatives in Mexico. As a result, we believe we are positioned to know immediately of any claims and are therefore directly accountable for any claims that may be brought against us.

The timing of remediation or cleanup of the sites accounted for in these environmental liabilities is a function of the annual budget assigned to us by
the Mexican Congress.

Environmental Projects and Expenditures

In 2005, we spent approximately Ps. 2,901 million in environmental projects and related expenditures, as compared to Ps. 2,514 million in 2004. For 2006, we have budgeted Ps. 3,859 million for
development of basic environmental infrastructure. These environmental projects and expenditures are primarily directed to the modernization of installations, the implementation of systems and mechanisms to monitor and control atmospheric pollution,
the acquisition of equipment to address the contingencies of hydrocarbon spills, the expansion of water effluent systems, the restoration and reforestation of affected areas, studies for environmental investigation and the conducting of
environmental audits. In addition, we continue to conduct extensive research and development efforts to increase our capacity to produce gasoline, diesel and fuel oil with lower sulphur content. We are developing procedures to track the costs and
expenses of our industrial safety measures and environmental compliance.

We do not believe that the cost of complying with environmental
laws or environmental requirements related to the North American Free Trade Agreement (NAFTA) among the governments of Mexico, the United States and Canada, the Vienna Convention for the Protection of the Ozone Layer, the Agreement on Environmental
Cooperation between the Governments of Mexico and Canada or Mexicos membership in the Organization for Economic Cooperation and Development, has caused or will cause a significant increase in our environmental expenditures.

TRADE REGULATIONS AND EXPORT AGREEMENTS

Although it is not a member of OPEC, since 1998 Mexico has entered into agreements with OPEC and non-OPEC members to reduce its oil exports in order to stabilize international oil prices. Under three agreements, in 1998 and 1999, Mexico
agreed to reduce our oil exports by 325 thousand barrels per day through most of 1999. These agreements were successful in stabilizing oil prices in 1999.

Since then, the Ministry of Energy of Mexico has periodically announced increases and decreases in crude oil exports in conjunction with production revisions by other oil producing countries in order to stabilize oil
prices. During 2002, the Ministry of Energy announced a decrease in crude oil exports of 100 thousand barrels per day, to a level of 1.66 million barrels per day, in line with OPEC announcements to reduce crude oil production levels that
year.

During 2003, as a result of increasing market demand and the reduction by more than 2 million barrels per day of Venezuelan
crude oil exports, Mexico announced increases in crude oil exports totaling 220 thousand barrels per day to a level of 1.88 million barrels per day.

In March 2004, OPEC announced that it would cut crude oil production by one million barrels per day beginning April 1, 2004. In June 2004, OPEC announced that it would increase crude oil production by



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500 thousand barrels per day beginning August 1, 2004. In September 2004, OPEC announced that it would increase crude oil production by
1 million barrels per day beginning November 1, 2004. In March 2005, OPEC announced that it would raise its oil production ceiling from 27 million barrels per day to 27.5 million barrels per day with immediate effect. In June
2005, OPEC announced that it would increase crude oil production by 0.5 million barrels per day beginning July 1, 2005. The current oil production ceiling of 28.0 million barrels per day has since been maintained. OPEC members met
during the first week of June 2006 in Venezuela and decided to leave oil production levels unchanged despite current high crude oil prices, since crude oil stocks levels are above average in the U.S. and markets are considered to be well supplied.
As of the date of this report, Mexico has not announced any revisions to its current levels of crude oil exports of 1.868 million barrels per day as a result of these latest announcements by OPEC, and Mexico has no plans to change its current
levels of crude oil exports.

For more information on these agreements and announcements, see Item 5Operating and
Financial Review and ProspectsSales Volumes and PricesExport Agreements.

NAFTA did not affect the exclusive
rights of Mexico, through PEMEX, to explore and exploit crude oil and natural gas in Mexico, to refine or process crude oil and natural gas and to produce basic petrochemicals in Mexico. Since 2003, non-basic petrochemical products enjoy zero tariff
under NAFTA and, subject to limited exceptions, exports of crude oil and petroleum products from Mexico to the United States and Canada are free or exempt from tariffs. Similarly, since 2003, imports of petroleum products from the United States and
Canada to Mexico are free or exempt from tariffs. In addition, in 2004, NAFTA phased in lower tariffs on certain materials and equipment that we import into Mexico. The zero tariff on imports of non-basic petrochemicals from the United States and
Canada to Mexico could, over time, increase competition in the non-basic petrochemicals industry in Mexico. To the extent that domestic and international prices for our products remain constant, lower tariffs on the products, materials and equipment
that we import from and export to the United States and Canada will decrease our expenses and increase our income.

TAXES AND DUTIES

General

Taxes and duties
applicable to PEMEX are a significant source of revenues to the Mexican Government. In 2005, PEMEX paid a number of special hydrocarbon taxes and duties, in addition to the other taxes and duties paid by some of the subsidiary companies, as
described below under Other Taxes. The rates at which the Mexican Congress assessed hydrocarbon taxes and duties could vary from year to year and were set after taking into consideration our operating budget, our capital
expenditure program and our financing needs. The aggregate tax rate for all special hydrocarbon taxes and duties could not exceed 60.8% of the revenues of sales to third parties under the oil price set for the particular year.

If the indirect IEPS tax that we collect is taken into account, we contributed approximately 40% of the Mexican Governments revenues in 2005 and
39% in 2004.

Fiscal Reform

Over the
past few years, we have been discussing various proposals with the Mexican Government for reforming the Mexican federal tax regime applicable to us. The proposals have generally sought to change the current applicable tax law so that our fiscal
burdens are similar to those of state-owned oil companies in other countries. In particular, we have presented alternative internal revenue strategies that allow the Mexican Government to recover income from hydrocarbon extraction while improving
our ability to finance more efficiently our operations.



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On April 27, 2005, the Chamber of Senators approved a proposal to modify the fiscal regime of PEMEX.
This proposal was approved by the Chamber of Deputies on June 28, 2005. This proposal was not signed into law by President Vicente Fox and was returned to the Mexican Congress on September 1, 2005. After discussing the observations made by
the President, the Mexican Congress approved the proposal to modify the fiscal regime of PEMEX on November 10, 2005. The new fiscal regime went into effect on January 1, 2006.

Under the new fiscal regime, Pemex-Exploration and Production is governed by the Ley Federal de Derechos (Federal Duties Law), while the other
Subsidiary Entities are governed by the Ley de Ingresos de la Federación para el Ejercicio Fiscal de 2006 (Federal Annual Revenue Law for the Fiscal Year of 2006). The Federal Annual Revenue Law is discussed and approved on an annual
basis by the Mexican Congress. The new fiscal regime for Pemex-Exploration and Production consists of the following duties:



|                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Ordinary Hydrocarbons Duty                                            |  | For the years 2006 to 2009, a variable tax rate, which will fluctuate between 78.68% and 87.81%, will apply depending on the weighted average Mexican crude oil export price and the year. As of
2010, the applicable rate will be 79%. This duty is applied to the annual value of extracted production of crude oil and natural gas minus certain permitted deductions (including specific investments, certain costs and expenses, and the other duties
referred to below, subject to certain conditions).                                                                   
|                                                                      | 
|Hydrocarbon Duty for the Oil Revenues Stabilization Fund              |  | Rates between 1% and 10% are applied to the value of the extracted crude oil production when the weighted average crude oil export price for a
certain year exceeds U.S.$22.00 per barrel.                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                      | 
|Duty for the Fund for Scientific and Technological Research on Energy |  | A rate of 0.05% is applied to the value of extracted crude oil and natural gas production for the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                      | 
|Duty for Fiscal Monitoring of Oil Activities                          |  | A rate of 0.003% is applied to the value of extracted production of crude oil and natural gas for the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                      | 
|Extraordinary Duty on Crude Oil Exports                               |  | A rate of 13.1% is applied to the value resulting from the multiplication of the difference between the annual weighted average price of the Mexican
barrel of crude oil over the budgeted crude oil price times the annual exports volume.                                                                                                                                                                                                                                                                                                                                     
|                                                                      | 
|Additional Duty                                                       |  | This duty is applied if and only if annual crude oil production is below target production from 2006 to 2008, according to a formula based on the difference between target production and the
actual crude oil production.                                                                                                                                                                                                                                                                                                                                                     
|                                                                      | 
|Excess Gains Revenue Duty                                             |  | This duty equals 6.5% of the revenues from crude oil export sales when the weighted average price of crude oil exceeds the threshold crude oil price
set for the year, which in 2006 is U.S.$36.50 per barrel. This duty will be credited against the Hydrocarbon Duty for the Oil Revenues Stabilization Fund and, if necessary, against the Ordinary Hydrocarbons Duty.  In 2005, the excess gains revenue duty replaced the infrastructure duty, and the threshold price
above which this duty must be paid for 2005 was U.S. $23.00. See Excess Gains Revenue Duty below.



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The new fiscal regime for Petróleos Mexicanos and its subsidiary entities, with the exception of
Pemex-Exploration and Production, consists of the following taxes and duties:



|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Hydrocarbon Income Tax |  | This tax is equivalent to the regular income tax applied to all Mexican corporations, a tax to which Petróleos Mexicanos and its subsidiary entities are not subject. A tax rate of 30% is
applied to net income, as determined in accordance with the Federal Annual Revenue Law for the fiscal year of 2006 and the applicable provisions of the Ley del Impuesto sobre la Renta (Income Tax Law).                                                                                                                                                                                                                                                                                                                                                                                                                                     
|IEPS Tax               |  | The Special Tax on Production and Services (which we refer to as the IEPS Tax) is an indirect tax on domestic sales of gasoline and diesel that Pemex-Refining collects on behalf of the Mexican
Government. The IEPS Tax on the sale of gasoline and diesel is equivalent to the difference between the international reference price of each product (adjusted by freight costs and quality factors) and the retail price of the product to its
customers (not including value added tax, the retailers margin and freight costs). Thus, the Mexican Government ensures that we retain an amount reflecting the international prices (adjusted as described above) of these products, while the
Mexican Government collects the difference between the international prices and the prices at which these products are sold in Mexico.

PEMEX expects that the new fiscal regime will result in savings of approximately Ps. 25
billion in 2006 and that this amount will increase gradually over the following years. However, no assurance can be given that PEMEXs tax regime will not be changed in the future.

Prior Fiscal Regime

Before the new fiscal regime went into effect, the most important taxes and
duties that we were required to pay but are no longer applicable to us, and their applicable rates, were the following:



|                                          |  |                                                                                                                                                                                                                                                                                                                      
|----------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                          | 
|Hydrocarbon Extraction Duty               |  | Only Pemex-Exploration and Production paid this duty. A rate of 52.3% was applied to the net cash flow that resulted from deducting all cash expenditures (including operating expenses and
capital expenditures) from the cash revenues generated by Pemex-Exploration and Productions sales of goods and services.
|Extraordinary Hydrocarbon Extraction Duty |  | Only Pemex-Exploration and Production paid this duty, which was calculated on the same basis as the hydrocarbon extraction duty, using a tax rate of 25.5%.                                                                                                                                                          
|Additional Hydrocarbon Extraction Duty    |  | Only Pemex-Exploration and Production paid this duty, which was calculated on the same basis as the hydrocarbon extraction duty, using a tax rate of 1.1%.                                                                                                                                                           

We make advance payments to the Mexican Government in respect of our ordinary hydrocarbon duty,
hydrocarbon income tax, excess gains revenue duty and IEPS tax. These are credited against our liability under the foregoing duties and taxes. In 2005, the sum of the hydrocarbon extraction duty, the extraordinary hydrocarbon extraction duty, the
additional hydrocarbon extraction duty, the hydrocarbon income tax and the IEPS tax (which we refer to collectively as the Taxes and Duties) was equal to the hydrocarbon duty. In addition, in 2005, the hydrocarbon duty was calculated by applying a
rate of 60.8% to the sales revenues of Petróleos Mexicanos and subsidiary entities from the PMI Group and third parties, including the IEPS tax generated by Pemex-Refining, but excluding the value added tax.

In the event that the sum of the Taxes and Duties was not equal to the hydrocarbon duty, the rates of the hydrocarbon extraction duty, the extraordinary
hydrocarbon extraction duty and the additional hydrocarbon extraction duty was adjusted to ensure that the sum of the Taxes and Duties equaled the hydrocarbon duty.



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Excess Gains Revenue Duty

In 2002 and 2003, we paid an excess gains revenue duty in an amount equal to 39.2% of those revenues in excess of the threshold price set for that year. Thus, in 2002 and 2003, for every dollar exceeding the threshold
price, we paid to the Mexican Government 60.8 cents in hydrocarbon duty and 39.2 cents in excess gains revenue duty so that all revenues above the threshold amount for those years of U.S. $15.50 per barrel and U.S. $18.35 per barrel,
respectively, were payable to the Mexican Government. However, for the amount up to the threshold price, we paid only the hydrocarbon duty. We paid this duty in 2002 and 2003. In 2004, instead of paying the excess gains revenue duty to the Mexican
Government, we were obligated to pay the infrastructure duty, the proceeds of which were dedicated for investment in infrastructure works for exploration, gas, refining and petrochemicals that were carried out by us and our subsidiary entities. Like
the excess gains revenue duty, this duty equaled 39.2% of our revenues from crude oil export sales in excess of the threshold crude oil price set for that year (which in 2004 was U.S. $20.00 per barrel). See also Item 5Operating and
Financial Review and ProspectsGeneralIEPS Tax, Excess Gains Revenue Duty, Hydrocarbon Duties and Other Taxes.

Beginning
in 2005, we were obligated to pay the excess gains revenue duty to the Mexican Government instead of the infrastructure duty, in an amount equal to 39.2% of the revenues from crude oil export prices in excess of the threshold crude oil price set for
the year (which in 2005 was U.S. $23.00 per barrel). Thus, for every dollar exceeding the threshold price, we were obligated to pay to the Mexican Government 60.8 cents in hydrocarbon duty and 39.2 cents in excess gains revenue duty so that all
revenues above the threshold amount for that year were payable to the Mexican Government. However, for the amount up to the threshold price, we paid only the hydrocarbon duty. The portion of the excess gains duty generated in respect of revenues in
excess of U.S. $27.00 was allocated as follows:



| |  |  | 50% for capital expenditures in exploration, production, refining, gas and pretrochemical activities of Petróleos Mexicanos and the subsidiary entities; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 50% for expenditures of infrastructure and equipment programs and investment projects carried out by the Mexican states.
| | - |  | ------------------------------------------------------------------------------------------------------------------------

Other Taxes

Since 1994, our interest payments on our
external debt have been subject to Mexican Government withholding taxes. In 1994, the Mexican Government credited our withholding tax payments against our tax liability, but since the end of 1994, the Mexican Government has not allowed such a
credit. Nevertheless, withholding taxes do not represent a substantial portion of our total tax liability.

Beginning in 1995, we have been
subject to municipal and state taxes, such as real property and payroll taxes. However, because most of our facilities are located on federal property, which is not subject to municipal taxation, real property taxes are not a significant part of our
overall taxes. Similarly, payroll taxes do not represent a substantial portion of our total tax liability.

Petróleos Mexicanos and
the subsidiary entities are exempt from Mexican corporate income tax; however, some of our subsidiary companies are Mexican corporations and are subject to the tax regime applicable to all other Mexican corporations. Mexican companies are generally
required to pay the higher of their income tax liability (determined at a rate of 35% for 2000 through 2002, 34% for 2003, 33% for 2004, 30% for 2005 and 29% thereafter) or their asset tax liability (determined at a rate of 1.8% of the average tax
value of virtually all of their assets, less the average tax value of certain liabilitiesbasically liabilities with Mexican residents excluding debts with financial institutions or their intermediaries). To the extent a company is required to
pay the asset tax in any year, the portion of that tax that exceeds the companys income tax liability may be credited against the companys income tax liability in subsequent years.

In addition, we have a number of non-Mexican subsidiary companies that may be subject to taxation in the jurisdiction of their incorporation or
operations. The aggregate taxes paid by the subsidiary companies were Ps. 777 million in 2003 and Ps. 1,359 million in 2004, and Ps. 3,629 million in 2005.



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UNITED MEXICAN STATES

The information in this section with regard to Mexico has been included due to Petróleos Mexicanos and the subsidiary entities
relationship with the Mexican Government and has been reviewed by the Ministry of Finance and Public Credit.

Form of Government

The President is the chief of the executive branch of the Mexican Government. The current President of Mexico is Vicente Fox Quesada, whose term expires
on November 30, 2006. The Political Constitution of the United Mexican States limits the President to one six-year term and does not allow reelection for any additional terms.

In the Congressional election held on July 6, 2003, all of the seats in the Chamber of Deputies were up for election. The members of the Senate were
elected on June 2, 2000. The following table provides the current distribution of Congressional seats, reflecting certain post-election changes in the party affiliations of certain senators and deputies:

Party Representation in the Mexican Congress



|                                  |  |        |  |               |                     |  |       |  |               |  
|--------------------------------- |  | ------ |  | ------------- | ------------------- |  | ----- |  | ------------- | -
|                                  |  | Senate |  |               | Chamber of Deputies | 
|                                  |  | Seats  |  | % of    Total |                     |  | Seats |  | % of    Total |  
|Institutional Revolutionary Party |  | 58     |  | 45.3          |                     |  | 204   |  | 40.8          |  
|National Action Party             |  | 47     |  | 36.7          |                     |  | 148   |  | 29.6          |  
|Democratic Revolution Party       |  | 15     |  | 11.7          |                     |  | 97    |  | 19.4          |  
|Ecological Green Party of Mexico  |  | 5      |  | 3.9           |                     |  | 17    |  | 3.4           |  
|Independent                       |  | 3      |  | 2.3           |                     |  | 23    |  | 4.6           |  
|Labor Party                       |  | 0      |  | 0.0           |                     |  | 6     |  | 1.2           |  
|Convergence for Democracy         |  | 0      |  | 0.0           |                     |  | 5     |  | 1.0           |  
|                                  |  |        |  |               |                     |  |       |  |               |  
|Total                             |  | 128    |  | 100.0         | %                   |  | 500   |  | 100.0         | %
|                                  |  |        |  |               |                     |  |       |  |               |  

---

|Note: | Totals may differ due to rounding.
|----- | ----------------------------------

|Source: | Chamber of Deputies and Senate.
|------- | -------------------------------

On July 2,
2006, a general election is scheduled to be held in Mexico. At the federal level, Mexicans will elect a new President, 500 new deputies to all of the seats of the Chamber of Deputies and 128 new senators to all of the seats of the Senate. Several
local elections will also take place on the same date, including the governorships of the Federal District and the state of Nuevo León.

The
Economy

National Development Program

On June 11, 2002, the Mexican Government announced the Programa Nacional de Financiamiento del Desarrollo 2002-2006 (National Development Financing Program 2002-2006, or PRONAFIDE 2002-2006). The goals of
the PRONAFIDE 2002-2006 are to:



| |  |  | generate the resources needed to finance social programs contemplated by the National Development Plan 2001-2006;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | increase the rate of economic growth;
| | - |  | -------------------------------------



| |  |  | generate jobs consistent with population dynamics; and
| | - |  | ------------------------------------------------------



| |  |  | consolidate a stable macroeconomic environment.
| | - |  | -----------------------------------------------



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##### Table of Contents

The basic strategies that the Mexican Government expects to employ in connection with the PRONAFIDE
2002-2006 are as follows:



| |  |  | implementation of structural reforms aimed at fostering a legal and economic environment favorable to the competitive participation of the private sector in productive activities;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | promotion of public sector savings in order to increase the availability of financial resources for the private sector;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | promotion of private sector domestic savings, with an emphasis on both popular and long-term savings;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | promotion of external savings only as a complement to domestic savings; and
| | - |  | ---------------------------------------------------------------------------



| |  |  | strengthening of the financial system and modernization of development banks in order to foster economic growth in the medium term.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Notwithstanding these initiatives, significant new investment in infrastructure, industrial and agricultural modernization, training and environmental protection will be required
for continued growth and development. The Mexican economy is also likely to continue to be subject to the effects of adverse domestic and external factors such as declines in foreign direct and portfolio investment, high interest rates and low oil
prices, which may lead to volatility in the foreign exchange and financial markets and may affect Mexicos ability to service its foreign debt.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The PRONAFIDE 2002-2006 presents the medium-term strategy aimed at creating and strengthening domestic sources of financing within a stable macroeconomic environment and contemplates a medium-term fiscal stance that
includes the following:



| |  |  | maintaining the public sector debt within sustainable levels;
| | - |  | -------------------------------------------------------------



| |  |  | reducing the Mexican Governments absorption of domestic financial resources, limiting the crowding-out effect of fiscal policy to private investment in the medium term; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | strengthening the capacity of the Mexican Government to fulfill its social mandate.
| | - |  | -----------------------------------------------------------------------------------

The Role of the Mexican Government in the Economy; Privatization

In November 2005, Consorcio
Aeroméxico, S.A. de C.V. (formerly known as Cintra, S.A. de C.V.), a company controlled by the Mexican Government and that owns the two most important Mexican airlines (Mexicana Airlines and Aeroméxico), sold Grupo
Mexicana for approximately U.S. $165 million plus debt and other liabilities. In December 2005, the Mexican Government sold a 36% stake in Grupo Aeroportuario del Centro Norte, S.A. de C.V., the company that owns the concessions to
operate, maintain and develop 13 airports in the central and northern regions of Mexico, for approximately U.S. $203 million. On March 1, 2006, the Mexican Government sold its remaining 85% stake in Grupo Aeroportuario del Pacífico,
S.A. de C.V., the company that owns the concessions to operate, maintain and develop 12 airports in the Pacific region of Mexico, through a public offering for proceeds of approximately U.S. $1 billion.

The Mexican Government believes that increased private investment in the generation, distribution and transmission of electrical energy is necessary in
order to increase Mexicos electrical capacity to ensure that Mexico will have a sufficient and reliable supply of adequately priced electricity in the long term. A 1992 law currently allows private companies to generate electricity only for
their own use or for sale to the Federal Electricity Commission. The executive branch of the Mexican Government presented a proposal to opposing political parties in August 2002 for an amendment to the Federal Electricity Commission norms and a
constitutional amendment to achieve this objective. Past legislative initiatives to allow greater private sector participation in this sector have not succeeded.



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Gross Domestic Product

According to preliminary figures, Mexicos gross domestic product (GDP) increased by 4.2% in real terms during 2004. GDP increased by 3.6% in the
first quarter of 2004, by 3.7% in the second quarter, by 4.5% in the third quarter and by 4.8% in the fourth quarter, each in real terms and as compared to the same period of 2003.

According to preliminary figures, GDP grew by 3.0% in real terms during 2005. This growth was led by the transportation, storage and communications
sector, which grew by 7.1% in real terms. The financial services, insurance and real estate sector grew by 5.8%, the construction sector grew by 3.3%, the commerce, hotels and restaurants sector grew by 3.1%, the community, social and personal
services sector grew by 2.1%, the electricity, gas and water sector grew by 1.4%, the manufacturing sector grew by 1.2% and the mining, petroleum and gas sector grew by 1.2%, each in real terms. The agriculture, livestock, fishing and forestry
sector contracted by 1.5% in real terms in 2005.

According to preliminary figures, GDP grew by 5.5% in real terms during the first quarter
of 2006, as compared with the same period of 2005. The transportation, storage and communications sector grew by 8.8%, the construction sector grew by 8.3%, the manufacturing sector grew by 7.1%, the mining, petroleum and gas sector grew by 5.9%,
the financial services, insurance and real estate sector grew by 5.7%, the commerce, hotels and restaurants sector grew by 5.3%, the electricity, gas and water sector grew by 4.1% and the community, social and personal services sector grew by 2.9%,
each in real terms. The agriculture, livestock, fishing and forestry sector contracted by 2.6% in real terms in the first quarter of 2006.

The following table sets forth the change in Mexicos real GDP growth by sector for the periods indicated.

Real GDP Growth
by Sector



|                                              |  |      |    |  |      |   |  |         |   |  |         |   |  |         |   |  |                                 |  
|--------------------------------------------- |  | ---- | -- |  | ---- | - |  | ------- | - |  | ------- | - |  | ------- | - |  | ------------------------------- | -
|                                              |  | 2001 |    |  | 2002 |   |  | 2003(1) |   |  | 2004(1) |   |  | 2005(1) |   |  | First threemonths of 2006(1)(2) |  
|GDP (constant 1993 prices)                    |  | (0.2 | )% |  | 0.8  | % |  | 1.4     | % |  | 4.2     | % |  | 3.0     | % |  | 5.5                             | %
|Agriculture, livestock, fishing and forestry  |  | 3.5  |    |  | 0.1  |   |  | 3.1     |   |  | 3.5     |   |  | (1.5    | ) |  | 2.6                             |  
|Mining, petroleum and gas                     |  | 1.5  |    |  | 0.4  |   |  | 3.7     |   |  | 3.4     |   |  | 1.2     |   |  | 5.9                             |  
|Manufacturing                                 |  | (3.8 | )  |  | (0.7 | ) |  | (1.3    | ) |  | 4.0     |   |  | 1.2     |   |  | 7.1                             |  
|Construction                                  |  | (5.7 | )  |  | 2.1  |   |  | 3.3     |   |  | 6.1     |   |  | 3.3     |   |  | 8.3                             |  
|Electricity, gas and water                    |  | 2.3  |    |  | 1.0  |   |  | 1.5     |   |  | 2.8     |   |  | 1.4     |   |  | 4.1                             |  
|Transportation, storage and communications    |  | 3.8  |    |  | 1.8  |   |  | 5.0     |   |  | 9.2     |   |  | 7.1     |   |  | 8.8                             |  
|Commerce, hotels and restaurants              |  | (1.2 | )  |  | 0.0  |   |  | 1.5     |   |  | 5.5     |   |  | 3.1     |   |  | 5.3                             |  
|Financial services, insurance and real estate |  | 4.5  |    |  | 4.2  |   |  | 3.9     |   |  | 3.9     |   |  | 5.8     |   |  | 5.7                             |  
|Community, social and personal services       |  | (0.3 | )  |  | 0.9  |   |  | (0.6    | ) |  | 0.6     |   |  | 2.1     |   |  | 2.9                             |  

---

|Note: | Totals may differ due to rounding.
|----- | ----------------------------------

|(1) | Preliminary.
|--- | ------------

|(2) | First three months of 2006 results as compared to the same period of 2005.
|--- | --------------------------------------------------------------------------

|Source: | National Institute of Statistics, Geography and Informatics.
|------- | ------------------------------------------------------------

Prices and Wages

Inflation during 2004 (as measured by the change in the NCPI) was 5.2%, 1.2
percentage point higher than during 2003. The increase in inflation in 2004 was attributable primarily to increases in the prices of inputs and raw materials internationally. Inflation during 2005 was 3.3%, 0.3 percentage point higher than the
official inflation target for the year and 1.9 percentage point lower than during 2004. The performance of inflation in 2005 was attributable primarily to two factors, the dilution of several supply disturbances that affected the economy during 2004
and the monetary policies that were adopted in 2005. Inflation for the five months ended May 31, 2006 was 0.6%, 0.3 percentage point lower than during the same period of 2005.



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Interest Rates

During 2004, interest rates on 28-day Treasury bills (Cetes) averaged 6.8% and interest rates on 91-day Cetes averaged 7.1%, as compared with average rates on 28-day and 91-day Cetes of 6.2% and
6.5%, respectively, during 2003. Domestic interest rates were at historically low levels during 2003, largely due to reduced inflationary expectations and favorable conditions in the financial markets.

During 2005, interest rates on 28-day Cetes averaged 9.2% and interest rates on 91-day Cetes averaged 9.3%, 2.4 and 2.2 percent points
higher, respectively, than the average rates during 2004. These increases in interest rates were primarily the result of the high inflationary expectations that were caused by supply disturbances experienced in 2004 and the monetary policies that
were adopted in 2005 to reduce the existing inflationary pressures.

During the first five months of 2006, interest rates on both 28-day
and 91-day Cetes averaged 7.4%, as compared with average rates on 28-day Cetes and 91-day Cetes of 9.3% and 9.5%, respectively, during the same period of 2005. On June 20, 2006, the 28-day Cetes rate was 7.1% and the
91-day Cetes rate was 7.4%.

Financial System

2005 Monetary Program

Mexicos monetary program for 2005 had as its principal objective the
achievement of an inflation rate not exceeding 3.0% by the end of 2005. Mexicos monetary program for 2005 was made up of the following elements:



| |  |  | inflation objectives;
| | - |  | ---------------------



| |  |  | a reference guideline for the analysis of the economic situation and inflationary pressures;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | a framework for the monetary instruments to be used by the Central Bank to achieve its objectives; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | a plan for regular communications with the public that promotes the transparency, credibility and effectiveness of monetary policy.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------

Banco de México uses a short mechanism to induce the necessary changes in interest rates to achieve inflation objectives. Under the
mechanism, Banco de México sets a predetermined amount at which the daily average of the net total balance of all current accounts of banks accumulated during a certain period will close and controls that amount by restricting the amount of
credit it auctions to banks on a daily basis. Prior to April 10, 2003, that amount was set based on a 28-day period. On April 10, 2003, the period was changed from 28 days to a daily average balance. When the predetermined amount is
negative, or short, Banco de México exerts upward pressure on interest rates by leaving the market short of pesos and by increasing the interest rate on a portion of the credit it auctions on that day. This mechanism allows Banco
de México to combat inflationary pressures and disorderly conditions in the money and foreign exchange markets and to ensure that changes in the monetary base follow a path consistent with the assumed inflation rate.

Using the daily average balance mechanism, Banco de México increased the short on three occasions during 2005, from Ps.
69 million to Ps. 75 million on January 28, 2005, from Ps. 75 million to Ps. 77 million on February 25, 2005 and from Ps. 77 million to Ps. 79 million on March 23, 2005. These increases were made in
response to internal and external factors that could have threatened the achievement of the 3.0% inflation target for 2005. For the remaining of the year, the short was maintained at Ps. 79 million.

During 2005, the Ml money supply (defined as bills and coins held by the public, plus checking accounts denominated in local currency and foreign
currency, plus interest-bearing deposits denominated in pesos and operated by debit cards) increased by 10.8% in real terms, as compared with 2004. This growth was driven by an increase in checking account deposits denominated in pesos of 13.7% in
real terms, as compared with 2004.



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During 2005, financial savings increased by 11.5% in real terms, as compared with 2004. Savings generated
by Mexican residents increased by 11.0% in real terms, while savings generated by non-residents increased by 33.3% in real terms in 2005, each as compared with 2004.

At December 30, 2005, the monetary base totaled Ps. 380.0 billion, an 11.7% nominal increase from the level of Ps. 340.2 billion at December 31, 2004.

2006 Monetary Program

Mexicos
monetary program for 2006 has as its principal objective an inflation rate no higher than 3.0% by the end of 2006. Mexicos monetary program for 2006 is made up of the following elements:



| |  |  | inflation objectives;
| | - |  | ---------------------



| |  |  | a reference guideline for the analysis of the economic situation and inflationary pressures;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | a framework for the monetary instruments to be used by the Central Bank to achieve its objectives; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | a plan for regular communication with the public that promotes the transparency, credibility and effectiveness of the monetary policy.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

On May 26, 2006, Banco de México announced that the short will remain unchanged at Ps. 79 million until further notice. The
decision of Banco de México to maintain the short at the same level at which it was set on March 23, 2005 was based on the continued positive outlook of the world and Mexican economies.

During the first three months of 2006, the Ml money supply increased by 13.7% in real terms, as compared with the same period of 2005. This growth was
driven by an increase in checking account deposits denominated in pesos of 12.7% in real terms during the first three months of 2006, as compared with the same period of 2005.

During the first three months of 2006, financial savings increased by 10.2% in real terms, as compared with the same period of 2005. Savings generated by
Mexican residents increased by 9.8% in real terms and savings generated by non-residents increased by 24.0% in real terms during the first three months of 2006, each as compared with the same period of 2006.

At June 20, 2006, the monetary base totaled Ps. 360.1 billion, a 5.2% nominal decrease from the level of Ps. 380 billion at December 31,
2005.Banco de México estimates that the monetary base will total approximately Ps. 419.7 billion at December 31, 2006.

Banking System

In connection with the implementation of NAFTA, amendments to several laws relating to financial services,
including the Banking Law and the Ley del Mercado de Valores (Securities Market Law), became effective on January 1, 1994. These measures permit non-Mexican financial groups and financial intermediaries, through Mexican subsidiaries, to
engage in various activities in the Mexican financial system, including banking and securities activities. In April 1994, the Ministry of Finance and Public Credit issued regulations that implemented these amendments, as well as provisions of NAFTA
dealing with financial services and any future trade agreements incorporating similar provisions. These regulations set forth rules under which Canadian and U.S. financial institutions (and other foreign financial institutions acting through
Canadian or U.S. affiliates) are permitted to establish or acquire Mexican financial institutions and financial holding companies. Pursuant to these rules, the aggregate net capital of Mexican commercial banks controlled by foreign financial
institutions established pursuant to NAFTA and other trade treaties, excluding Mexican banks acquired pursuant to a program approved by the Ministry of Finance and Public Credit, could not exceed 25% of the total net capitalization of all Mexican
banks until January 1, 2000.



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In December 1998, the Mexican Congress approved legislation introducing a package of financial and
banking reforms which supplemented reforms in place since 1995. The 1998 reforms did not affect the general foreign ownership restrictions under the Banking Law and NAFTA regulations discussed above. Under the 1998 reforms, all remaining
restrictions on foreign ownership of the largest Mexican banks were removed. Foreign ownership was previously restricted in any Mexican bank whose net capital exceeded 6% of the aggregate net capital of all Mexican banks. In addition, the aggregate
foreign shareholdings of Mexican-controlled banks was limited to 49% and no foreign shareholder was authorized to own, directly or indirectly, more than 5% of the equity of any Mexican bank (or 20%, with the approval of the Ministry of Finance and
Public Credit). Those limits did not, however, apply to any foreign financial institution that acquired control (i.e., more than 51% of the common stock) of a smaller-sized Mexican bank (i.e., one whose net capital did not exceed 6% of
the Mexican banking systems aggregate net capital).

The Banking Law was amended on June 4, 2001 to:



| |  |  | enhance corporate governance by (1) expanding minority shareholders rights, (2) introducing independent board members and (3) requiring an audit committee of
the board of directors;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | improve the framework for banking operations by (1) providing adequate regulation regarding the provision of banking services using new technologies, (2) allowing banks to
offer additional services and (3) setting a new framework for related operations; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | strengthen regulation and surveillance while reducing their cost by (1) introducing prompt corrective actions based on banks capitalization levels, (2) defining
responsibilities and activities of the various financial authorities and (3) expanding the role of external auditors.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Banking Supervision and Support

The 1994-95 peso devaluation and ensuing financial crisis created concerns about the
stability of the Mexican banking system. The devaluation, higher domestic interest rates and contraction in real GDP combined to weaken the quality of the assets of Mexican banks, caused the capitalization of several banks to fall below the minimum
required levels and created funding difficulties for many banks.

The weakening of the banking system prompted the Mexican Government to
enact policies aimed at increasing the capitalization of Mexican banks. New reserve requirements were introduced by Banco de México to facilitate the regulation of liquidity. Pursuant to these requirements, which took effect in March 1995, a
bank that overdraws its account with Banco de México must subsequently deposit funds, and maintain amounts on deposit, at least equal to the amount of the overdraft. Substantial fines may be imposed if a bank fails to make and maintain such
deposits. The new reserve requirements were intended to reduce Banco de Méxicos daily net extension of credit. In addition, in 1997 the National Banking and Securities Commission (CNBV) adopted significant changes in the accounting
practices applicable to Mexican commercial banks and development banks, with the intent of making those practices more consistent with international accounting standards, including U.S. GAAP.

In response to the 1994-95 financial crisis, the Mexican Government took a number of additional steps to support the banking system, including broadening
the scope for investment by foreign and domestic investors in the equity of Mexican financial institutions, enhancing the power of the CNBV to supervise and intervene in the activities of financial holding companies and creating a number of debtor
support programs to restructure past-due loans caused by the crisis, then-rising interest rates and the ongoing recession. From 1994 to 1996, the CNBV exercised its authority to intervene in the management of a number of Mexican financial
institutions, including the Cremi/Union financial group, Grupo Financiero Asemex Banpaís, S.A. de C.V. and its banking and insurance subsidiaries, Banco Capital, S.A. and Banco del Sureste, S.A.

In addition, the Mexican Government established the Temporary Capitalization Program (PROCAPTE), a voluntary program to assist viable but
undercapitalized banks, under which the Banking Fund for the Protection



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of Savings (FOBAPROA) advanced funds to participating banks in exchange for five-year, mandatorily convertible bonds. By May 1995, the value of bonds issued
through PROCAPTE reached Ps. 7,008 million. In February of 1997, the last bank participating in PROCAPTE liquidated its total participation, thus concluding the PROCAPTE program.

Through FOBAPROA, the Mexican Government made foreign exchange available through a foreign exchange credit window to help banks meet dollar liquidity
needs. Outstanding drawings under this program reached their highest point of U.S. $3.8 billion in April 1995 and were completely repaid by August 31, 1995. No such drawings were made after that date.

In 1995 and 1996, the Ministry of Finance and Public Credit approved recapitalization plans for twelve of Mexicos financial institutions, many of
which involved strategic investments by foreign financial institutions and the purchase by FOBAPROA of large portions of the loan portfolios of the affected banks.

In 1999, the Mexican Governments program to rescue troubled banks, which was first implemented in 1995, was restructured. Under the revised scheme, FOBAPROA was replaced by the Bank Savings Protection Institute,
or IPAB, which assumed FOBAPROAs assets and liabilities, except for certain liabilities that were explicitly excluded under the financial reforms. IPAB also manages a deposit insurance program. During 1999, IPAB commenced a transition program
under which deposit insurance limits were introduced gradually. Deposit insurance is now limited to 400,000 Unidades de Inversión (or UDIs, units of account whose value in pesos is indexed to inflation on a daily basis, as measured by
the change in the national consumer price index), per person or entity, per institution. At June 24, 2006, one UDI was worth Ps. 3.67455.

The Mexican Congress allocates funds to IPAB on an annual basis to manage and service IPABs net liabilities, but those liabilities generally have not become public sector debt as had been originally proposed. In emergency situations,
IPAB is permitted to contract additional financing in an amount not exceeding 6% of the total liabilities of banking institutions without congressional authorization. At March 31, 2006, IPABs debt totaled Ps. 764.9 billion.

In addition to Mexicos auctions of debt securities in the domestic market, IPAB also sells peso-denominated debt securities in
Mexico. IPAB uses the proceeds of these sales to service its maturing obligations, to improve the maturity profile of its indebtedness and to reduce its financing costs. IPABs securities are sold through auctions conducted by Banco de
México.

In addition to its other activities, IPAB is now in the process of disposing of the loan portfolios and other assets
acquired by FOBAPROA during the 1994-1996 period. In 2005, IPAB conducted about 10 auctions of these loan portfolios and other assets.

The
Ministry of Finance and Public Credit issued new rules governing the capitalization requirements of Mexican commercial banks effective on January 1, 2000. These rules currently require Mexican commercial banks to:



| |  |  | maintain at 20% the amount of deferred taxes arising from fiscal losses that may be included as Tier 1 capital;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | include all new issuances of subordinated convertible debt as Tier 2 capital. Outstanding subordinated mandatorily convertible debt, subject to current limitations, will remain as
Tier 1 capital until its maturity or conversion;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | exclude investments in non-financial companies and companies whose shares are not traded on the Mexican Stock Exchange from Tier 1 capital, except where those investments result
from the capitalization of restructured loans; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | exclude from Tier 2 capital certain specific assets, including credit card debt, mortgages and commercial loans, and establish general loan loss reserves for these types of assets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The new rules also allow Mexican commercial banks, as part of a capitalization program, to issue
cumulative and noncumulative subordinated debt securities through a special purpose vehicle, providing them with a new financing alternative in international markets. These securities have a minimum maturity of ten years, are unsecured and deeply
subordinated and provide for the deferral (cumulative) or cancellation (noncumulative) of interest payments in certain circumstances and payment of the face value at the maturity date. Subject to limitations, noncumulative instruments may be
included as Tier 1 capital.

During the second half of 2000, the Mexican Government continued to establish rules and criteria for the
regulation of banking institutions in accordance with accepted international practices. In September 2000, the Mexican Government issued new rules for classifying the quality of loan portfolios of commercial banking institutions. At the same time,
the rules governing the capitalization requirements of commercial banks were modified. In October 2000 and more recently in September 2003, the Mexican Government announced new rules for classifying the credit portfolios of development banks.

At December 31, 2005, calculated in accordance with the accounting criteria applicable to credit institutions since the beginning of
1998, the total amount of past-due loans of commercial banks (excluding banks under Mexican Government intervention and those in special situations) was Ps. 20.9 billion, as compared with Ps. 27.0 billion at December 31, 2004. The total loan
portfolio of the banking system increased by 3.6% in real terms during 2005 as compared with 2004. The past-due loan ratio of commercial banks was 1.8% at December 31, 2005, as compared to 2.5% at December 31, 2004. The amount of loan loss
reserves created by commercial banks (excluding banks under Mexican Government intervention and those in special situations) totaled Ps. 50.5 billion at the end of December 2005, as compared with Ps. 54.5 billion at December 31, 2004. At
this level, commercial banks had reserves covering 241.3% of their past-due loans, exceeding the minimum reserve level of 45% required by the applicable accounting criteria.

The Securities Market

The Mexican
Stock Exchange is Mexicos only stock exchange and is located in Mexico City. The Mexican Stock Exchange is organized as a corporation with shares owned by 31 brokerage firms, each of which is authorized to trade on the exchange floor. Both
debt and equity securities are traded on the Mexican Stock Exchange, including stocks and bonds of private sector corporations, equity certificates or shares issued by banks, commercial paper, bankers acceptances, certificates of deposit,
Mexican Government debt and special hedging instruments linked to the dollar. Currently, institutional investors are the most active participants in the Mexican Stock Exchange, although retail investors also play a role in the market. The Mexican
equity market is one of Latin Americas largest in terms of market capitalization, but it remains relatively small and illiquid compared to major world markets.

Effective June 1, 2001, the Securities Market Law was amended to promote the securities market by making it more transparent, liquid and efficient and by implementing stricter corporate governance rules, which
are intended to strengthen the rights of minority shareholders of public companies and brokerage houses, among other things. The amended law requires issuers of securities to appoint an audit committee of the board which will have full access to the
issuers information, appoint independent board members and limit the amount of non-voting and voting-restricted stock they issue. In addition, the reforms introduced provisions intended to regulate the duties of board members and the liability
of board members for acting in violation of such duties. The amendments also broadened the scope of insider trading provisions and introduced more severe penalties for insider trading violations.

In December 2005, the Mexican Congress passed a new securities law to enhance the institutional framework necessary for a stronger development of the
securities market in Mexico. The new law, which will enter into effect on June 28, 2006, clarifies several aspects of the currently existing law, such as the disclosure mechanisms and the reach of its application to holding companies and
subsidiaries. In addition, the new law improves minority shareholders rights and introduces certain new requirements and fiduciary duties applicable



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to board members, officers and external auditors. The new law also redefines the responsibilities of the corporate structure, requiring the creation of audit
and corporate governance committees with independent board members.

At December 31, 2005, the Stock Market Index stood at 17,802.7
points, representing a 37.8% increase in nominal peso terms from the level of 12,917.9 points at December 31, 2004. At June 22, 2006, the Stock Market Index stood at 18,210.8 points, representing a 2.3% increase from the level at
December 30, 2005.

External Sector of the Economy

Foreign Trade

During 2005, according to preliminary figures, Mexico registered a trade deficit of
U.S. $7.6 billion, as compared with a trade deficit of U.S. $8.8 billion during 2004. Merchandise exports increased by 14.0% in 2005, to U.S. $214.2 billion, as compared with U.S. $188.0 billion in 2004. During 2005, petroleum exports increased by
34.8%, while non-petroleum exports increased by 11.0%, each as compared with 2004.

During 2005, according to preliminary figures, total
imports grew by 12.7% to U.S. $221.8 billion, as compared with U.S. $196.8 billion in 2004. In 2005, imports of intermediate goods increased by 10.3%, imports of capital goods increased by 16.0% and imports of consumer goods increased by 24.0%, each
as compared with 2004.

During the first four months of 2006, according to preliminary figures, Mexico registered a trade surplus of U.S.
$1.2 billion, as compared with a trade deficit of U.S. $2.5 billion for the same period of 2005. Merchandise exports increased by 22.4% during the first four months of 2006, to U.S. $78.7 billion, as compared to U.S. $64.3 billion for the same
period of 2005. During the first four months of 2006, petroleum exports increased by 50.4%, while non-petroleum exports increased by 17.9%, each as compared with the same period of 2005.

During the first four months of 2006, according to preliminary figures, total imports grew by 16.0% to U.S. $77.5 billion, as compared with U.S. $66.8
billion for the same period of 2005. During the first four months of 2006, imports of intermediate goods increased by 15.1%, imports of capital goods increased by 17.0% and imports of consumer goods increased by 19.7%, each as compared with the
first four months of 2005.

A free trade agreement with Uruguay, signed in November 2003, went into effect on July 15, 2004. On
September 17, 2004, Mexico signed a free trade agreement with Japan, which entered into effect on April 1, 2005.

Balance of
International Payments

According to preliminary figures, during 2005, Mexicos current account registered a deficit of U.S. $4.8
billion, or 0.6% of GDP, a 27.6% decrease in nominal terms as compared with the current account deficit registered in 2004. The capital account surplus for 2005 totaled U.S. $12.8 billion, as compared with a surplus of U.S. $10.8 billion in 2004.
Foreign investment in Mexico, as recorded in the balance of payments, totaled U.S. $28.2 billion in 2005 and was composed of direct foreign investment inflows totaling U.S. $18.1 billion and foreign portfolio investment (including securities placed
abroad) inflows totaling U.S. $10.2 billion.

According to preliminary figures, during the first quarter of 2006, Mexicos current
account registered a surplus of 0.1% of GDP, or U.S. $8.8 billion, as compared to a deficit of U.S. $2.8 billion for the same period of 2005. The capital account registered a deficit of U.S. $1.8 billion in the first quarter of 2006, as compared
with a U.S. $2.0 billion surplus for the same period of 2005. Foreign investment in Mexico, as recorded in the balance of payments, totaled U.S. $3.6 billion during the first quarter of 2006 and was composed of direct foreign investment inflows
totaling U.S. $3.0 billion and foreign portfolio investment (including securities placed abroad) inflows totaling U.S. $0.5 billion.



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In August 1996, the Foreign Exchange Commission, composed of members of the Ministry of Finance and
Public Credit and Banco de México, announced a plan to increase Mexicos reserves by conducting monthly auctions of options to sell U.S. dollars to Banco de México. The auctions took place among commercial banks, which could
assign their rights arising therefrom. The auctions allowed Banco de México to accumulate international assets without creating distortions in the currency markets. On May 18, 2001, the Foreign Exchange Commission determined that
accumulated reserve levels were high enough to justify suspending until further notice the sale of options after the auction held on June 29, 2001.

On March 20, 2003, the Foreign Exchange Commission announced that it had adopted a new mechanism to moderate the rate of accumulation of international reserves expected in 2003. Under the mechanism, Banco de
México announced every quarter, beginning in May 2003, the total amount of dollars it would supply to the currency market in the following three-month period. The amount of dollars to be sold, which were sold exclusively to Mexican credit
institutions, equaled 50% of the increase in net international reserves registered during the previous quarter less the sales of dollars made through this mechanism during the previous quarter. The total amount of dollars to be sold in a quarter was
sold through daily auctions, each for an amount equal to the total for the quarter divided by the number of business days in the quarter.

On March 12, 2004, the Foreign Exchange Commission announced that it would adjust the mechanism to moderate the rate of accumulation of international reserves that it had adopted on March 20, 2003 and that commenced on May 2,
2003. Under the adjusted mechanism, which remains in effect, Banco de México continues to make quarterly announcements regarding the daily amounts of dollars to be supplied to the currency market pursuant to the same formula, but the total
amount announced is divided into four equal portions to be sold in the following four quarters. The new mechanism commenced on May 3, 2004. The amount of dollars auctioned during the quarter from May through July 2004 (U.S. $22.0 million) was
based retroactively on the accumulation of net international reserves registered in the four quarters from April 16, 2003 through April 16, 2004. The total auctioned for the quarter from May through July 2004 was, therefore, equal to the
sum of one-fourth of each of the total amounts announced for the quarters ended in July 2003, October 2003, January 2004 and April 2004. On April 18, 2006, Banco de México announced that the daily amount of dollars to be
auctioned pursuant to this procedure for the period from May 2, 2006 to July 31, 2006 would be U.S. $25.0 million.

At
December 30, 2005, Mexicos international reserves totaled U.S. $68.7 billion, an increase of U.S. $7.2 billion from the level at December 31, 2004. The net international assets of Banco de México totaled U.S. $74.1 billion at
December 30, 2005, an increase of U.S. $9.9 billion from the level at December 31, 2004.

At May 31, 2006, Mexicos
international reserves totaled U.S. $75.6 billion, an increase of U.S. $6.9 billion from the level at December 30, 2005. The net international assets of Banco de México totaled U.S. $81.5 billion at June 23, 2006, an increase of
U.S. $7.4 billion from the level at December 30, 2005.

Direct Foreign Investment in Mexico

According to preliminary figures, during 2005, direct foreign investment in Mexico notified to the National Foreign Investment Commission totaled
approximately U.S. $13.8 billion. Total accumulated direct foreign investment in Mexico during the 2000-2005 period amounted to approximately U.S. $109.7 billion. Of the total direct foreign investment during 2005, 40.0% has been channeled to
manufacturing, 30.9% to financial services, 8.2% to transportation and communications and 9.9% to commerce.

According to preliminary
figures, during 2005, foreign investment in Mexico, as recorded in the balance of payments, totaled U.S. $28.2 billion, comprising direct foreign investment inflows of U.S. $18.1 billion and foreign portfolio investment (including securities placed
abroad) inflows of U.S. $10.2 billion.



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Exchange Controls and Foreign Exchange Rates

Since December 22, 1994, the Mexican Government has maintained a floating exchange rate policy, with Banco de México intervening in the
foreign exchange market from time to time to minimize volatility and ensure an orderly market. The Mexican Government has also promoted market-based mechanisms for stabilizing the exchange rate, such as over-the-counter forward and options contracts
between banks and their clients in Mexico, and authorization of peso futures trading on the Chicago Mercantile Exchange. In addition, since October 1996, Banco de México has permitted foreign financial institutions to open peso-denominated
accounts and to borrow and lend pesos (subject to general restrictions on conducting banking activities in Mexico).

The peso/dollar
exchange rate closed at Ps. 10.778 = U.S. $1.00 on December 31, 2005, a 4.3% appreciation of the peso in dollar terms as compared to the exchange rate at the end of 2004. During 2005, the average peso/U.S. dollar exchange rate was Ps.
10.898 = U.S. $1.00, as compared to Ps. 11.286 = U.S. $1.00 in 2004. The peso/U.S. dollar exchange rate announced by Banco de México on June 22, 2006 (to take effect on the second business day thereafter) was Ps. 11.441
= U.S. $1.00.

Public Finance

Fiscal Policy

The rationalization of public expenditure and the augmentation of revenue have been important components of
the Mexican Governments economic stabilization strategy. The Mexican Governments fiscal policy has two fundamental objectives: to establish the macroeconomic foundation for sustained growth and to focus the Mexican Governments
resources on those sectors in which the Mexican Government can have the greatest impact in supporting social development and the competitiveness of the Mexican economy.

At present, the Mexican Governments principal short-term fiscal policy objectives, in addition to countering inflation, are:



| |  |  | strengthening economic activity and exports;
| | - |  | --------------------------------------------



| |  |  | maintaining an adequate surplus in the Mexican Governments primary balance while incurring only a moderate public sector deficit;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | continuing the promotion of fiscal federalism; and
| | - |  | --------------------------------------------------



| |  |  | increasing the efficiency and competitiveness of the economy and the effectiveness of the tax collection system.
| | - |  | ----------------------------------------------------------------------------------------------------------------

The Mexican Governments principal medium-term fiscal policy objectives are:



| |  |  | significantly reducing the inflation rate to levels approximating those of Mexicos major trading partners;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | consolidating the process of sustainable economic growth;
| | - |  | ---------------------------------------------------------



| |  |  | promoting private sector savings;
| | - |  | ---------------------------------



| |  |  | continuing to modernize the economy; and
| | - |  | ----------------------------------------



| |  |  | strengthening social policy through increased real spending on social development.
| | - |  | ----------------------------------------------------------------------------------

2005 Budget and Fiscal Results

According to preliminary figures, public sector budgetary revenues in
2005 were less than public sector budgetary expenditures (excluding off-budget revenues and expenditures of the public sector) by approximately Ps. 32 billion in nominal terms. Public sector budgetary revenues increased by 4.3% in real terms as
compared to budgetary revenues for 2004. Within budgetary revenues, non-oil tax revenues increased by 7.7% in real terms, while oil related revenues increased at a real rate of 14.0%.



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The overall public sector balance registered a deficit of Ps. 7.5 billion in nominal terms in 2005,
reflecting a decrease of 63.0% in real terms as compared to the public sector deficit for 2004. The 2005 public sector deficit included gross expenditures of Ps. 4.4 billion related to the costs associated with the Programa de Separación
Voluntaria (Voluntary Retirement Program, or PSV), which was implemented in late 2002 with the long-term goal of reducing the number of Government administrative personnel and which offers severance packages to certain persons who retire
voluntarily. Excluding the gross expenditure related to the PSV, the public sector deficit for 2005 was Ps. 3.1 billion in nominal terms, equivalent to 0.03% of estimated GDP for 2005. The primary surplus, defined as total public sector revenues
less expenditures other than interest payments on public debt, was Ps. 207.4 billion in nominal terms in 2005, 2.7% higher in real terms than the surplus recorded for 2004.

2006 Budget and Fiscal Package

The
Federal Annual Revenue Law for the Fiscal Year of 2006, as approved by the Mexican Congress and the Federal Disbursements Budget for the Fiscal Year of 2006, as passed by the Chamber of Deputies (together, the 2006 Budget), were
published on December 14, 2005 and December 22, 2005, respectively. The 2006 Budget maintains fiscal discipline as the cornerstone of the economic program, and contemplates a public sector balance of 0% of GDP for 2006, i.e., a
balanced budget.

As originally proposed to the Mexican Congress, the 2006 Budget contemplated a public sector surplus of 0.2% of GDP and
was based on an estimated weighted average price of Mexicos oil exports of U.S. $31.50 per barrel. The Mexican Congresss upward revision to U.S. $36.50 per barrel, the 2006 Budgets estimated volume of oil exports of
1,868 thousand barrels per day and the effect of PEMEXs new fiscal regime resulted in Ps. 46.7 billion of additional revenues with respect to the original proposal.

The structure of the budgetary revenues for 2006 differs from that of 2005 as a result of PEMEXs new fiscal regime. This structural difference,
however, will not affect the total amount of oil revenues of the public sector (which includes PEMEXs revenues and the Mexican Governments oil revenues), but only its makeup because PEMEXs revenues after taxes in 2006 are expected
to increase by the same amount (Ps. 23.6 billion) by which the Mexican Governments oil revenues (which consist of taxes and duties collected from PEMEX) are expected to decrease in 2006 as a result of the new fiscal regime.

The results for 2004 and 2005, the revised budget assumptions and targets for 2005 and the budget assumptions and targets for 2006, as set forth in the
2006 Budget passed by the Mexican Congress, are presented below:

2004 and 2005 Results;

2005 Revised Budget Assumptions and Targets;

2006 Budget Assumptions and Targets



|                                                       |  |              |     |  |             |  |              |     |  |            
|------------------------------------------------------ |  | ------------ | --- |  | ----------- |  | ------------ | --- |  | -----------
|                                                       |  | 2004 Results |     |  | 2005 Budget |  | 2005 Results |     |  | 2006 Budget
|Real GDP growth (%)                                    |  | 4.2          | (1) |  | 3.5         |  | 3.0          | (1) |  | 3.6        
|Increase in the national consumer price index (%)      |  | 5.2          |     |  | 3.7         |  | 3.3          |     |  | 3.0        
|Average export price of Mexican oil mix (U.S.$/barrel) |  | 31.05        |     |  | 39.8        |  | 42.69        |     |  | 36.50      
|Current account deficit as % of GDP                    |  | 1.0          | (1) |  | 1.3         |  | 0.6          | (1) |  | 2.2        
|Average exchange rate (Ps./$1.00)                      |  | 11.3         |     |  | 11.0        |  | 10.9         |     |  | 11.4       
|Average rate on 28-day Cetes(%)                        |  | 6.8          |     |  | 9.4         |  | 9.2          |     |  | 8.9        
|Public sector balance as % of GDP                      |  | (0.3)        | (1) |  | (0.2)       |  | (0.1)        | (1) |  | (0.0)      
|Primary balance as % of GDP                            |  | 2.5          | (1) |  | 2.6         |  | 2.5          | (1) |  | N/A        

---

|N/A   = | Not available.
|------- | --------------

|(1) | Preliminary.
|--- | ------------

|Source: | Ministry of Finance and Public Credit.
|------- | --------------------------------------



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Under the 2006 Budget, the Mexican Government estimates that it will devote Ps. 330.6 billion (23.5% of
total budgetary programmable expenditures) to education and Ps. 416.3 billion (29.6% of total budgetary programmable expenditures) to health and social security.

According to preliminary figures, during the first three months of 2006, the public sector overall balance registered a surplus of Ps. 51.6 billion, 88.3% higher in real terms than the surplus for the same period of
2005, and the primary balance registered a surplus of Ps. 112.2 billion, 31.5% higher in real terms than the surplus for the same period of 2005.

Public Debt

Internal Public Debt

Internal debt is presented herein on a net basis, and includes only the internal portion of indebtedness incurred directly by the Mexican Government, Banco de Méxicos general account balance
(which was positive at March 31, 2006, indicating monies owed to the Mexican Government) and the assets of the Fondo del Sistema de Ahorro Para el Retiro(the Retirement Savings System Fund). Net internal debt includes Cetes and
other securities sold to the public in primary auctions, but not such debt allocated to Banco de México for its use in regulating liquidity (Regulación Monetaria). See footnote 2 to the table Net Internal Public Debt
below. Internal debt does not include the debt of IPAB or the debt of budget controlled or administratively controlled agencies. See Financial SystemBanking Supervision and Support.

Over the last decade, the Mexican Government has pursued an internal debt strategy aimed at lengthening the average maturity of its debt in order to
reduce its refinancing risk. To further this goal, the Mexican Government in 1999 offered for the first time 10-year UDI-denominated securities and guaranteed 30-year UDI-indexed bonds, and subsequently began offering three-year, five-year,
seven-year and ten-year fixed rate peso-denominated bonds.

On October 28, 2003, the Mexican Government issued its first twenty-year
fixed rate peso-denominated bonds, placing Ps. 1.0 billion of these instruments in the market. The Mexican Government expects to continue to offer these instruments on a regular basis, along with the shorter-term fixed rate peso-denominated bonds
mentioned above, pursuant to a securities auction calendar published by the Mexican Government each quarter.

With the issuance of these
securities, the Mexican Government has established a long-dated benchmark yield curve and developed a long-term private domestic debt market. The Mexican Government anticipates that the issuance of these instruments has encouraged:



| |  |  | increased use of long-term fixed rate contracts;
| | - |  | ------------------------------------------------



| |  |  | the issuance of long-term peso-denominated securities by Mexican companies;
| | - |  | ---------------------------------------------------------------------------



| |  |  | the development of long-term financial hedging products; and
| | - |  | ------------------------------------------------------------



| |  |  | the potential to direct long-term savings toward the financing of long-term investment projects.
| | - |  | ------------------------------------------------------------------------------------------------

At December 31, 2005, according to preliminary figures, the net internal debt of the Mexican Government totaled Ps. 1,183.3 billion, as compared
with the Ps. 1,030.0 billion outstanding at December 2004. At December 31, 2005, according to preliminary figures, the gross internal debt of the Mexican Government totaled Ps. 1,242.2 billion, as compared to Ps. 1,099.2 billion at December
2004.

At March 31, 2006, according to preliminary figures, the net internal debt of the Mexican Government totaled Ps. 1,222.7
billion, as compared with the Ps. 1,183.3 billion outstanding at December 31, 2005. At March 31, 2006, according to preliminary figures, the gross internal debt of the Mexican Government totaled Ps. 1,284.6 billion, as compared to Ps.
1,242.2 billion at December 31, 2005.



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The following table summarizes the net internal public debt of the Mexican Government at each of the
dates indicated.

Net Internal Public Debt



|                                         |  |                        |       |                   |     |         |  |         |       |         |     |         |  |     |         |  |     |        
|---------------------------------------- |  | ---------------------- | ----- | ----------------- | --- | ------- |  | ------- | ----- | ------- | --- | ------- |  | --- | ------- |  | --- | -------
|                                         |  | December 31,           |       | March 31, 2006(1)
|                                         |  | 2001(1)                |       | 2002(1)           |     | 2003(1) |  | 2004(1) |       | 2005(1) |    
|                                         |  | (in billions of Pesos)
|Total net internal debt(2)               |  | Ps.                    | 691.0 |                   | Ps. | 821.3   |  | Ps.     | 927.1 |         | Ps. | 1,030.0 |  | Ps. | 1,183.3 |  | Ps. | 1,222.7
|Mexican Government                       |  |                        | 691.0 |                   |     | 821.3   |  |         | 927.1 |         |     | 1,030.0 |  |     | 1,183.3 |  |     | 1,222.7
|Peso-denominated(2)                      |  |                        | 691.0 |                   |     | 821.3   |  |         | 927.1 |         |     | 1,030.0 |  |     | 1,183.3 |  |     | 1,222.7
|Foreign currency-denominated (Tesobonos) |  |                        | 0.0   |                   |     | 0.0     |  |         | 0.0   |         |     | 0.0     |  |     | 0.0     |  |     | 0.0    

---

|Note: | Totals may differ due to rounding.
|----- | ----------------------------------

|N.A.  = | Not available.
|------- | --------------

|(1) | Preliminary.
|--- | ------------

|(2) | Does not include securities sold by Banco de México in open-market operations pursuant to Regulación Monetaria, which amounted to approximately Ps. 260.1
billion at December 31, 2005. Regulación Monetaria does not increase the Mexican Governments overall level of internal debt, because Banco de México must reimburse the Mexican Government for any allocated debt that
Banco de México sells into the secondary market and that is presented to the Mexican Government for payment. If Banco de México undertakes extensive sales of allocated debt in the secondary market, however, Regulación
Monetaria can result in a situation in which the level of outstanding internal debt is higher than the Mexican Governments figure for net internal debt.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Ministry of Finance and Public Credit.
|------- | --------------------------------------

External Public Debt

The total external debt of the public sector consists of the external portion of the long-term
indebtedness incurred directly by the Mexican Government, the external long-term indebtedness incurred by budget controlled agencies, the external long-term indebtedness incurred directly or guaranteed by administratively controlled agencies
(including but not limited to national development banks), and the short-term external debt of the public sector.

According to preliminary
figures, outstanding gross external debt decreased by approximately U.S. $7.6 billion during 2005, from U.S. $79.2 billion at December 31, 2004 to U.S. $71.7 billion at December 31, 2005. Of the total external debt at December 31,
2005, U.S. $70.9 billion represented long-term debt and U.S. $786 million represented short-term debt.

According to preliminary figures,
total public debt (gross external debt plus net internal debt) at December 31, 2005 represented approximately 20.9% of nominal GDP, 1.8 percentage points lower than at the end of 2004.

According to preliminary figures, outstanding public sector gross external debt increased by approximately U.S. $0.4 billion during the first quarter of
2006, from U.S. $71.7 billion at December 31, 2005 to U.S. $72.0 billion at March 31, 2006. Of this amount, U.S. $69.3 billion represented long-term debt and U.S. $2.7 billion represented short-term debt.

The following table sets forth a summary of the external public debt of Mexico, which includes the external debt of the Mexican Government, budget
controlled agencies and administratively controlled agencies and a



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breakdown of such debt by currency. External public debt as used in this section does not include, among other things, repurchase obligations of Banco de
México with the International Monetary Fund or the debt of IPAB. See Financial SystemBanking Supervision and Support and footnote 1 to the table Summary of External Public Debt below.

Summary of External Public Debt(1)

By Type



|                  |  |                                              |  |                                          |  |                             |  |                    |  |                       |  |                               
|----------------- |  | -------------------------------------------- |  | ---------------------------------------- |  | --------------------------- |  | ------------------ |  | --------------------- |  | ------------------------------
|                  |  | Long-TermDirect Debt ofthe FederalGovernment |  | Long-TermDebt ofBudgetControlledAgencies |  | OtherLong-TermPublicDebt(2) |  | TotalLong-TermDebt |  | Total Short-Term Debt |  | Total Long-and Short-Term Debt
|                  |  | (in millions of dollars)                    
|December 31,      |  |                                              |  |                                          |  |                             |  |                    |  |                       |  |                               
|2001              |  | 44,070                                       |  | 10,361                                   |  | 22,224                      |  | 76,655             |  | 3,684                 |  | 80,339                        
|2002              |  | 43,554                                       |  | 10,630                                   |  | 21,845                      |  | 76,029             |  | 2,789                 |  | 78,818                        
|2003              |  | 44,898                                       |  | 11,190                                   |  | 21,248                      |  | 77,336             |  | 1,688                 |  | 79,024                        
|2004              |  | 48,561                                       |  | 10,636                                   |  | 17,952                      |  | 77,149             |  | 2,077                 |  | 79,226                        
|2005(4)           |  | 48,689                                       |  | 6,736                                    |  | 15,464                      |  | 70,889             |  | 786                   |  | 71,675                        
|March 31, 2006(4) |  | 47,599                                       |  | 7,297                                    |  | 14,436                      |  | 69,332             |  | 2,716                 |  | 72,048                        

By Currency(3)



|                |  |                   |  |                   |  |                  |  |       |  |                  |  |       |  |                  |  |       |  |                  |  |       |  |                  |  |      
|--------------- |  | ----------------- |  | ----------------- |  | ---------------- |  | ----- |  | ---------------- |  | ----- |  | ---------------- |  | ----- |  | ---------------- |  | ----- |  | ---------------- |  | -----
|                |  | December 31,      |  | March 31, 2006(4)
|                |  | 2001              |  | 2002              |  | 2003             |  | 2004  |  | 2005(4)          | 
|                |  | (in millionsof $) |  | (%)               |  | (inmillionsof $) |  | (%)   |  | (inmillionsof $) |  | (%)   |  | (inmillionsof $) |  | (%)   |  | (inmillionsof $) |  | (%)   |  | (inmillionsof $) |  | (%)  
|U.S. Dollars    |  | 69,933            |  | 87.0              |  | 69,804           |  | 88.6  |  | 70,519           |  | 89.2  |  | 71,220           |  | 89.9  |  | 65,480           |  | 91.4  |  | 65,955           |  | 91.6 
|Japanese Yen    |  | 4,708             |  | 5.9               |  | 3,849            |  | 4.9   |  | 4,013            |  | 5.1   |  | 2,937            |  | 3.7   |  | 1,990            |  | 2.8   |  | 2,022            |  | 2.8  
|Deutsche Marks  |  | 390               |  | 0.5               |  | 0                |  | 0.0   |  | 0                |  | 0.0   |  | 0                |  | 0.0   |  | 0                |  | 0.0   |  | 0                |  | 0.0  
|Pounds Sterling |  | 140               |  | 0.2               |  | 156              |  | 0.2   |  | 173              |  | 0.2   |  | 186              |  | 0.2   |  | 80               |  | 0.1   |  | 81               |  | 0.1  
|French Francs   |  | 170               |  | 0.2               |  | 0                |  | 0.0   |  | 0                |  | 0.0   |  | 0                |  | 0.0   |  | 0                |  | 0.0   |  | 0                |  | 0.0  
|Swiss Francs    |  | 135               |  | 0.2               |  | 173              |  | 0.2   |  | 184              |  | 0.2   |  | 236              |  | 0.3   |  | 171              |  | 0.2   |  | 173              |  | 0.2  
|Others          |  | 4,863             |  | 6.0               |  | 4,836            |  | 6.1   |  | 4,135            |  | 5.3   |  | 4,647            |  | 5.9   |  | 3,954            |  | 5.5   |  | 3,817            |  | 5.3  
|                |  |                   |  |                   |  |                  |  |       |  |                  |  |       |  |                  |  |       |  |                  |  |       |  |                  |  |      
|Total           |  | 80,339            |  | 100.0             |  | 78,818           |  | 100.0 |  | 79,024           |  | 100.0 |  | 79,226           |  | 100.0 |  | 71,675           |  | 100.0 |  | 72,048           |  | 100.0
|                |  |                   |  |                   |  |                  |  |       |  |                  |  |       |  |                  |  |       |  |                  |  |       |  |                  |  |      

---

|Note: | Totals may differ due to rounding.
|----- | ----------------------------------

|(1) | External debt denominated in foreign currencies other than dollars has been translated into dollars at exchange rates as of each of the dates indicated. External public debt does
not include (a) repurchase obligations of Banco de México with the IMF (none of these were outstanding at March 31, 2006), (b) external borrowings by the public sector after March 31, 2006 and (c) loans from the
Commodity Credit Corporation to public sector Mexican banks. External debt is presented herein on a gross basis, and includes external obligations of the public sector at their full outstanding face or principal amount. For certain
informational and statistical purposes, Mexico sometimes reports its external public sector debt on a net or economic basis, which is calculated as the gross debt net of certain financial assets held abroad. These financial
assets include the value of principal and interest collateral on restructured debt and Mexican public sector external debt that is held by public sector entities but that has not been canceled.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes debt of development banks and other administratively controlled agencies whose finances are consolidated with the Mexican Government.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Adjusted to reflect the effect of currency swaps.
|--- | -------------------------------------------------

|(4) | Preliminary.
|--- | ------------

|Source: | Ministry of Finance and Public Credit.
|------- | --------------------------------------



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Subsequent to December 31, 2005:



| |  |  | On February 13, 2006, Mexico commenced a U.S. $1.5 billion program for the offering from time to time of its InterNotes®, a retail-oriented medium-term note program. On February 24, 2006, Mexico issued
U.S. $5,147,000 of its 5.000% InterNotes® due
February 15, 2011 and U.S. $3,030,000 of its 5.100% InterNotes® due February 15, 2013.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pursuant to its Invitation for Offers to Sell Bonds for Cash in a Modified Dutch Auction dated February 23, 2006, as supplemented, on March 10, 2006, Mexico repurchased
the following debt securities and surrendered these debt securities for cancellation:
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                              |  |              |  |                                       |                |                                                        |       |                
|----------------------------- |  | ------------ |  | ------------------------------------- | -------------- | ------------------------------------------------------ | ----- | ---------------
|Title of Purchased Securities |  | ISIN         |  | Aggregate PrincipalAmount Repurchased |                | Aggregate PrincipalAmount Outstanding afterRepurchases
|97/8%
Global Bonds due 2007   |  | US593048BB61 |  | U.S.$                                 | 278,350,000    |                                                        | U.S.$ | 1,128,650,000  
|9.125% Notes due 2007         |  | XS0073433707 |  | ITL                                   | 38,750,000,000 |                                                        | ITL   | 391,250,000,000
|8.625% Global Bonds due 2008  |  | US593048BF75 |  | U.S.$                                 | 226,121,000    |                                                        | U.S.$ | 1,163,879,000  
|4.625% Global Notes due 2008  |  | US91086QAM06 |  | U.S.$                                 | 299,648,000    |                                                        | U.S.$ | 1,200,352,000  
|7.375% Notes of 2001/2008     |  | XS0126200988 |  |                                      | 132,750,000    |                                                        |      | 617,250,000    
|8% Bonds of 1997/2008         |  | DE0001937001 |  | DEM                                   | 72,000,000     |                                                        | DEM   | 678,000,000    
|10.375% Global Bonds due 2009 |  | US593048BG58 |  | U.S.$                                 | 360,460,000    |                                                        | U.S.$ | 1,442,540,000  
|81/4%
Bonds of 1997/2009      |  | DE0001897551 |  | DEM                                   | 127,131,000    |                                                        | DEM   | 1,372,869,000  
|7.50% Notes due 2010          |  | XS0108907303 |  |                                      | 81,034,000     |                                                        |      | 918,966,000    
|7.50% Global Notes due 2012   |  | US91086QAH11 |  | U.S.$                                 | 237,980,000    |                                                        | U.S.$ | 1,262,020,000  
|6.375% Global Notes due 2013  |  | US91086QAK40 |  | U.S.$                                 | 258,066,000    |                                                        | U.S.$ | 1,741,934,000  
|10% Step-down Notes due 2013  |  | XS0085661949 |  | ITL                                   | 67,751,000,000 |                                                        | ITL   | 671,249,000,000
|5.375% Global Notes due 2013  |  | XS0170239932 |  |                                      | 27,160,000     |                                                        |      | 722,840,000    
|6.625% Global Notes due 2015  |  | US91086QAL23 |  | U.S.$                                 | 439,592,000    |                                                        | U.S.$ | 1,560,408,000  
|11% Notes due 2017            |  | XS0075866128 |  | ITL                                   | 12,250,000,000 |                                                        | ITL   | 487,750,000,000
|8.125% Global Notes due 2019  |  | US593048BN00 |  | U.S.$                                 | 36,872,000     |                                                        | U.S.$ | 2,424,468,000  
|8.00% Global Notes due 2022   |  | US91086QAJ76 |  | U.S.$                                 | 6,892,000      |                                                        | U.S.$ | 150,713,000    
|6.75% Notes due 2024          |  | XS0184889490 |  | £                                     | 23,474,000     |                                                        | £     | 476,526,000    
|8.30% Global Notes due 2031   |  | US91086QAG38 |  | U.S.$                                 | 86,770,000     |                                                        | U.S.$ | 2,838,230,000  



| |  |  | Mexico issued U.S. $3,000,000,000 of its 5.625% Global Notes due 2017 on March 10, 2006.
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Mexico issued  19.5 million of its Series XWE Warrants on March 29, 2006.
| | - |  | --------------------------------------------------------------------------



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##### Table of Contents

|Item 5. | Operating and Financial Review and Prospects
|------- | --------------------------------------------

General

We earn income from:



| |  |  | export sales, which consist primarily of sales of crude oil and refined products;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | domestic sales, which consist of sales of natural gas, refined products (such as gasoline, diesel fuel and liquefied petroleum gas) and petrochemical products; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other sources, including investment income.
| | - |  | -------------------------------------------

Our
operating expenses include:



| |  |  | costs of sales (including labor expenses), costs of operating, maintaining and repairing plants and equipment, purchases of refined petroleum and other products, depreciation and
amortization of fixed assets and, until December 31, 2003, costs of increasing the reserve for exploration and depletion of oil fields;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | transportation and distribution costs;
| | - |  | --------------------------------------



| |  |  | administrative expenses; and
| | - |  | ----------------------------



| |  |  | interest expense.
| | - |  | -----------------

Our income is affected by a number of
factors, including:



| |  |  | changes in international prices of crude oil and refined petroleum products, which are denominated in U.S. dollars, and domestic prices of petroleum products, which are denominated
in pesos;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the type and volume of crude oil produced and exported;
| | - |  | -------------------------------------------------------



| |  |  | the type and volume of natural gas produced and sold;
| | - |  | -----------------------------------------------------



| |  |  | the results of development and exploration activities;
| | - |  | ------------------------------------------------------



| |  |  | the amount of taxes and duties that the Mexican Government imposes on us;
| | - |  | -------------------------------------------------------------------------



| |  |  | Mexican inflation;
| | - |  | ------------------



| |  |  | fluctuations in the peso-U.S. dollar exchange rate; and
| | - |  | -------------------------------------------------------



| |  |  | Mexican and global economic conditions, including the levels of international interest rates.
| | - |  | ---------------------------------------------------------------------------------------------

Overview

Our principal objectives are to increase our operating efficiency, increase our crude oil
and natural gas production levels, modernize our infrastructure and improve Mexicos hydrocarbon reserves replacement rate, while maintaining high health, safety and environmental standards.

In order to increase our operating efficiency, we are seeking to optimize the utilization of our plants and pipelines, and to implement best practices in
drilling, project management, procurement processes, corporate service management (including medical and telecom services) and in our compensation system.

To increase our hydrocarbon production, we have established a new strategy for the expanded development of the Cantarell complex to compensate for the future decline in production levels, which is expected to begin in
2006. In addition, we continue to focus our efforts on projects such as Ku-Maloob-Zaap, Crudo Ligero Marino, Jujo-Tecominoacán and Antonio J. Bermúdez, as well as natural gas projects such as Burgos and the Strategic Gas Program,
including the development of the Veracruz basin.



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In 2005, the number of our operating wells reached a historical high of 5,925. The number of wells
drilled also reached a record level of 759 and the number of development wells increased by 44 due to the increased availability of drilling equipment in projects such as Burgos and Veracruz, and greater drilling activity in projects such as
Jujo-Tecominoacán, Ku-Maloob-Zaap and El Golpe-Puerto Ceiba. The number of exploratory wells decreased by 28% in 2005, as a result of the completion of some of our exploratory wells and their reclassification as development wells, adjustments
to our exploration strategy and a decrease in budgetary resources allocated to exploration activities.

In addition, in 2005, we began the
implementation of the Emergency Plan for Strengthening Safety, Health and Environmental Protection, in order to minimize the quantity and severity of personal and industrial accidents in Pemex facilities. As a result of the implementation of this
Emergency Plan, our accident frequency rate in 2005 decreased by 29% as compared with 2004. We will continue our efforts to improve facilities maintenance and safety procedures, as we are committed to carrying out all our operations in a manner that
ensures the safety of our installations and personnel and that respects neighboring communities and the environment. See Item 4Information on the CompanyEnvironmental RegulationPEMEXs Internal Monitoring and
Business OverviewTransportation and Distribution.

Our consolidated financial statements included herein are
presented in constant pesos, so all financial information is restated in constant pesos as of December 31, 2005. Unless otherwise indicated, all amounts included in Item 5 Operating and Financial Review and Prospects are
presented in constant pesos as of December 31, 2005.

We have reported losses in recent years and this trend continued in 2005 as we
reported a loss of Ps. 76.3 billion. As described above, our loss is affected by a number of factors. Of principal importance in 2005, we remained subject to the heavy tax burden imposed on us by the Mexican Government. Approximately 62.5% of
the sales revenues of Petróleos Mexicanos and the subsidiary entities were used to pay taxes to the Mexican Government, which represents an increase of 17.6% in 2005, from Ps. 488.8 billion in 2004 to Ps. 575.0 billion in 2005. In 2004 we
paid to the Mexican Government the infrastructure duty, and in 2005 we paid the excess gains revenue duty. We received Ps. 44.6 billion in 2005 as reimbursement for the excess gains revenue duty. See Item 4Information on the
CompanyTaxes and DutiesExcess Gains Revenue Duty.

In addition, our costs and operating expenses increased in 2005, as a
result of a Ps. 50.2 billion increase in imports of products, primarily refined products, a Ps. 16.9 billion increase in operating expenses, as well as a Ps. 9.5 billion increase in depreciation and amortization costs. The negative effects on
our income as a result of these factors were partially offset by an increase in total revenues mainly due to increased prices. To reduce our losses in the future, we are undertaking a number of initiatives to increase our efficiency by introducing
measures to reduce costs and expenses and increase our profitability.

On November 10, 2005, the Mexican Congress approved a new
fiscal regime for PEMEX, which went into effect as of January 1, 2006. As a result of the new fiscal regime, we are able to retain a portion of our revenues on crude oil sales at prices beyond the threshold price of U.S. $36.50 per barrel, as
well as deduct from our tax payments the cost of facility maintenance, among other things, all of which we expect to translate into increased petroleum activity. This tax regime, together with the implementation of measures to increase our
profitability, should enhance our financial performance. However, only the Mexican Congress has the power to enact further changes in federal tax law, and we cannot predict the extent or nature of any future changes, if any, to the federal
hydrocarbon tax laws applicable to us.

Our capital expenditures (both PIDIREGAS and non-PIDIREGAS) in 2005 totaled Ps. 127.0 billion, 89%
of which was allocated to exploration and production, 7% to refining, 2.5% to gas and basic petrochemicals, 1.2% to petrochemicals and 0.3% to other activities.



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Critical Accounting Policies

Our significant accounting policies are more fully described in Notes 2 and 20 to our consolidated financial statements included herein. Some of our accounting policies require the application of significant judgment
by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to a degree of uncertainty and are based on our historical experience, terms of existing contracts,
managements view of trends in the oil and gas industry, both internationally and within Mexico, economic factors in Mexico and information from outside sources. We believe the following critical accounting policies, among others, affect
managements more significant judgments and estimates used in the preparation of our consolidated financial statements and could potentially impact our financial results and future financial performance. Unless otherwise stated, the following
critical accounting policies apply for both Mexican and U.S. GAAP purposes.

Exploration and Drilling Costs

Until December 31, 2003, under Mexican GAAP, we annually determined a budgeted exploration and drilling cost per barrel based upon internal
engineering studies. To determine the cost per barrel, we took into consideration the budgeted exploration and drilling costs, the estimated annual production of oil and gas and the estimated percentage of non-successful wells. The resulting per
barrel amount was charged as cost of sales in our consolidated statement of income against the equity reserve established for exploration and drilling costs. Changes in the budgeted exploration and drilling cost per barrel would have affected our
recorded cost of sales expense. Under U.S. GAAP, the budgeted exploration and drilling cost recognized as part of the equity reserve was reversed and the successful efforts method of accounting was applied. Since January 1, 2004, we have
applied the successful efforts method of oil and gas accounting, discussed below, for both Mexican and U.S. GAAP purposes.

Successful
Efforts Method of Oil and Gas Accounting

We apply the successful efforts method of oil and gas accounting. This accounting principle
requires that capitalized costs for producing properties be amortized on the basis of crude oil and natural gas reserve quantities. Our reserve estimates are determined in accordance with earth science and petroleum engineering principles and
practices in accordance with Rule 4-10 of Regulation S-X of the Securities Act and can vary as a result of changes in such factors as forecasted oil and gas prices, reservoir performance and oil field technology.

Downward revision of our reserve estimates can result in either: (a) higher depreciation and depletion expense per barrel in future periods,
(b) an immediate write-down of an assets book value in accordance with accounting rules for the impairment of properties, or (c) changes in our accrual of the asset retirement obligation. An impairment of oil- and gas-producing fixed
assets would result if the downward revisions were so significant that the estimated future cash flows from the remaining reserves in the field were insufficient to recover the unamortized capitalized costs. Conversely, if the oil and gas reserve
quantities were revised upward, our per-barrel depreciation and depletion expense would be lower.

The application of successful efforts
accounting can also cause material fluctuations between periods in exploration expense if drilling results are different than expected or if we change our exploration and development plans. The determination that exploratory drilling was
unsuccessful in finding economically producible reserves requires the immediate expensing of previously capitalized drilling costs. We make semi-annual assessments of the amounts included within fixed assets to determine whether capitalization is
initially appropriate and can continue. Exploration wells capitalized beyond 12 months are subject to additional judgment as to whether the facts and circumstances have changed and therefore whether the conditions described in clauses (a) and
(b) below no longer apply. Exploration wells more than 12 months old are expensed unless (a) (i) they are in an area requiring major capital expenditure before production can begin, (ii) commercially productive quantities of
reserves have been found, and (iii) they are subject to further exploration or appraisal activity in that either drilling of additional exploratory wells is under way or firmly planned for the near future, or (b) proved reserves are
recorded within 12 months following the completion of exploratory drilling.



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Environmental Remediation, Asset Retirement Obligations

We also make judgments and estimates in recording liabilities for environmental cleanup and asset retirement obligations. Estimated liabilities for
environmental remediation and asset retirement obligations are subject to change because of matters such as changes in laws, regulations and their interpretation, the review of additional information on the extent and nature of site contamination,
the determination of additional works which need to be undertaken, improvements in technology, the nature and timing of expenditure, foreign currency exchange rates to the extent that some of these costs are incurred in U.S. dollars, and changes in
discount rates. In addition, with respect to offshore properties, our historical dismantlement and plugging experiences have been very limited, and, therefore, our estimates of the expected cost or salvage value may vary from what will actually be
incurred for many of these long-term properties when these activities are ultimately undertaken.

While we believe that our environmental
remediation and asset retirement obligation provisions are adequate and that the interpretations applied of existing law are appropriate, the amounts estimated for future liabilities, which are based on discounted cash flows, may differ materially
from the costs that will actually be incurred to remediate our properties. If we determine that an insufficient environmental remediation or asset retirement obligation provision has been created, earnings will be adjusted as appropriate in the
period in which the determination is made.

Employee Benefit Plans

We provide a range of benefits to our current and retired employees, including pensions, post-retirement health care benefits and post-employment benefits
(primarily health services and supplemental payments). We annually record amounts relating to these plans based on calculations specified by Mexican and U.S. GAAP, respectively, which include various actuarial assumptions, such as real discount
rates, assumed rates of return, compensation increases, turnover rates and health care cost trend rates. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when it is
deemed appropriate to do so. As required by Mexican and U.S. GAAP, the effect of the modifications is generally recorded or amortized over future periods. We believe that the assumptions utilized in recording our obligations under our plans, which
are presented in Notes 12 and 20 II e. and f. to our consolidated financial statements included herein, are reasonable based on our experience and advice from our independent actuaries.

Financial Instruments

Under Mexican
GAAP, effective January 1, 2005, we adopted the provisions of Bulletin C-10, Derivative Financial Instruments and Hedging Operations (which we refer to as Bulletin C-10), which provides expanded guidance for the recognition,
valuation, accounting treatment and disclosures applicable to derivative financial instruments designated as hedges and embedded derivatives. Bulletin C-10 requires that all financial instruments, with the exception of held to maturity
investments, be recorded at fair value. Held to maturity investments are recorded at amortized cost subject to an impairment review.

Quoted market prices for certain derivatives used by us are not readily available. We have calculated the fair value of these derivatives using common market valuation methods and value-influencing market data at the relevant respective
balance sheet dates.

The use of valuation models requires us to make assumptions and estimates regarding the volatility of derivative
contracts at the balance sheet dates, and actual results could differ significantly due to fluctuations in value-influencing market data. The valuation models for our interest rate and currency derivatives are based on calculations and valuations
using a group-wide financial reporting system, which provides consistent market data and valuation algorithms throughout our organization. The algorithms used to obtain valuations are those which are commonly used in the financial markets. In
certain cases, the calculated fair value of derivatives is compared with results which are produced by other market participants, including banks, as well as those available through other internally available systems. The valuations of commodity
instruments are also made utilizing common valuation techniques.



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Through internal guidelines (i.e., group-wide financial guidelines), we ensure that the
derivatives used for risk management purposes are only utilized to hedge booked, contracted or planned underlying transactions. We calculate and assess market risks in accordance with the policies outlined in Item 11Quantitative and
Qualitative Disclosures about Market Risk.

Contracts providing for physical delivery in Mexico are currently accounted for as
contracts with no derivative components, because no sufficient natural gas market mechanism or spot market exists in Mexico so as to allow us to classify gas as readily convertible to cash. In the future, it is possible that a sufficient market
mechanism or spot market for natural gas could emerge, resulting in a need to reassess the Mexican contracts for derivatives under SFAS No. 133. If any such reassessment results in contracts being accounted for as derivatives under SFAS
No. 133, the impact on future operating results would not be significant, because these contracts qualify for the normal purchases and normal sales exceptions.

Impairment of Long-Lived Assets

In addition to our oil and gas assets that could become impaired
under the application of successful efforts accounting, other long-lived assets could become impaired and require write-down if circumstances warrant. Conditions that could cause our assets to become impaired include lower than forecasted commodity
sales prices, changes in our business plans and plant modernizations, or a significant adverse change in the national or international business climate. The amount of an impairment charge would be based on estimates of an assets fair value
compared with its book value. While we believe that our estimates of future cash flows are reasonable, different assumptions regarding projected commodity sales prices, production and overhead costs and foreign currency exchange rates and inflation
could materially affect the anticipated cash flows to be generated by long-lived assets, thereby affecting the evaluations of the carrying values of those long-lived assets.

Accounting for Income Taxes

As described in Note 18 to the PEMEX financial statements, during 2005,
a new fiscal regime applicable to PEMEX and its subsidiaries was enacted. Beginning January 1, 2006, certain subsidiaries companies of PEMEX will be subject to the tax regime applicable to all other Mexican corporations. In general, Mexican
companies are taxed based on pre-tax income at a statutory rate.

As a consequence of the new tax regime applicable to PEMEX and its
subsidiaries, in the preparation of our consolidated financial statements we are required to estimate our expected income taxes for PEMEX and some of its subsidiaries. This process involves an estimation of our actual current tax and an assessment
of temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred assets and liabilities, which are included within our consolidated balance sheet. We must then assess the
likelihood that our deferred assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this
allowance in a period, we must include a charge against the tax provision in the statement of operations.

Significant management judgment
is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax asset. The valuation allowance is based on our estimates of taxable income and the
period over which our deferred tax asset will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance which could
materially impact our financial position and results of operations.

Sales Volumes and Prices

The profitability of our operations in any particular accounting period is directly related to the sales volume of, and average realized prices for, the
crude oil and natural gas that we sell. The average realized prices for crude oil and natural gas fluctuate from one period to another due to world market conditions and other factors.



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Export Volumes and Prices

Pemex-Exploration and Production sells crude oil to PMI, which then sells it to international clients. The volume of crude oil that we export is the
volume delivered to international clients as adjusted for water content according to the bill of lading and standard market practice. We base our crude oil export price formulas on a basket of international reference prices and a constant set
according to specific market conditions. We determine export prices of petroleum products and natural gas by reference to market conditions and direct negotiations with our clients.

Significant changes in international crude oil prices directly affect our financial results. The impact of changes in crude oil prices on our refining
activities and petrochemicals business depends on:



| |  |  | the magnitude of the change in crude oil prices;
| | - |  | ------------------------------------------------



| |  |  | how quickly petroleum and petrochemical product prices in international markets adjust to reflect changes in crude oil prices; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | the extent to which prices in Mexico, where we sell most of our petroleum products and petrochemicals, reflect international prices for those products.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth the weighted average price per barrel of crude oil that PMI received from exports to international customers and the
average price of its benchmark, West Texas Intermediate crude oil, for the years indicated. Note that the average prices of West Texas Intermediate crude oil are higher than the average prices of crude oil that we export. This is primarily due to
the higher cost of refining sour crude oils, which make up a majority of our exports. See Item 4Information on the CompanyBusiness OverviewInternational Trading.



|                                                |  |                         |       |      |   |       |  |      |       |      |   |       |  |   |      
|----------------------------------------------- |  | ----------------------- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                                                |  | Year Ended December 31,
|                                                |  | 2001                    |       | 2002 |   | 2003  |  | 2004 |       | 2005
|                                                |  | (in dollars per barrel)
|West Texas Intermediate crude oil average price |  | $                       | 25.93 |      | $ | 26.08 |  | $    | 31.10 |      | $ | 41.49 |  | $ | 56.59
|PEMEX crude oil weighted average export price   |  |                         | 18.61 |      |   | 21.52 |  |      | 24.78 |      |   | 31.05 |  |   | 42.71

---

|Note: | The numbers in this table are average prices for the full year. Spot prices at year end are different. On June 27, 2006, the spot price for West Texas Intermediate crude oil
was U.S. $71.97 per barrel and the spot price for the PEMEX crude oil basket was an estimated U.S. $56.82 per barrel.
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sources:
PMI operating statistics, which are based on information in bills of lading, and Platts U.S. Market Scan (McGraw-Hill Company).

Domestic Prices

Committees composed of officials of Petróleos Mexicanos and the subsidiary entities and
representatives of various governmental agencies including, among others, the Ministry of Finance and Public Credit, the Ministry of Energy, SFP and the Ministry of Economy set the formulas that we use to determine prices for crude oil and petroleum
products sold in the domestic market. Petróleos Mexicanos and the subsidiary entities, together with the Mexican Government, pursue a policy that keeps domestic wholesale prices generally in line with international prices. We determine
wholesale prices by reference to international prices, but make adjustments to reflect opportunity costs, transportation expenses and differences in the quality of our products relative to international benchmarks. The retail price is comprised of
the wholesale price plus the value added tax, the retailers margin and freight costs. The Ministry of Finance and Public Credit determines retail prices of gasoline and diesel before the beginning of each fiscal year in conjunction with the
preparation of the Mexican Governments budget for that year. The Ministry of Finance and Public Credit also adjusts gasoline and diesel prices so that they are consistent with the Mexican Governments macroeconomic targets.

Our retail prices for gasoline and diesel reflect the addition of the IEPS tax as described below, as well as the value added tax. We charge the IEPS tax
only on gasoline and diesel. See IEPS Tax, Excess Gains Duty,



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Hydrocarbon Duties and Other Taxes below, for a further discussion of the IEPS tax. For financial statement purposes, the IEPS tax is presented as part
of net domestic sales and then deducted after Income before hydrocarbon extraction duties and other, special tax on production and services, and cumulative effect of adoption of new accounting standards.

Natural gas prices for domestic sale are calculated according to the Energy Regulatory Commission directives published on March 20, 1996. These
prices reflect natural gas opportunity costs and competitive conditions in international markets and at the point of sale.

In addition,
our maximum prices on first-hand and end-user sales of liquefied petroleum gas and on first-hand and end-user sales of natural gas for industrial use and to local distribution companies are currently subject to limitations and adjustments by the
Mexican Government and the Ministry of Economy, pursuant to two executive pricing decrees issued by President Fox on February 27, 2003 and September 12, 2005. See Item 4Information on the CompanyBusiness OverviewGas
and Basic PetrochemicalsPricing Decrees.

The following table compares the average prices in nominal terms of petroleum
products in Mexico and in the United States for the years indicated.



|                             |  |        |        |      |   |          |  |      |        |        |   |          |  |        |        |      |   |          |  |      |          |  |   |          |  |   |          |  |   |         
|---------------------------- |  | ------ | ------ | ---- | - | -------- |  | ---- | ------ | ------ | - | -------- |  | ------ | ------ | ---- | - | -------- |  | ---- | -------- |  | - | -------- |  | - | -------- |  | - | --------
|                             |  | 2001   |        | 2002 |   | 2003     |  | 2004 |        | 2005  
|                             |  | Mexico |        | U.S. |   | Mexico   |  | U.S. |        | Mexico |   | U.S.     |  | Mexico |        | U.S. |   | Mexico   |  | U.S.
|Oil Products                 |  |        |        |      |   |          |  |      |        |        |   |          |  |        |        |      |   |          |  |      |          |  |   |          |  |   |          |  |   |         
|Unleaded regular gasoline(1) |  | $      | 92.91  |      | $ | 56.69    |  | $    | 94.70  |        | $ | 53.92    |  | $      | 87.79  |      | $ | 60.94    |  | $    | 86.48    |  | $ | 72.39    |  | $ | 92.05    |  | $ | 92.81   
|Premium gasoline(1)          |  |        | 104.29 |      |   | 64.53    |  |      | 106.32 |        |   | 61.68    |  |        | 98.55  |      |   | 68.78    |  |      | 101.17   |  |   | 80.38    |  |   | 108.84   |  |   | 101.05  
|Jet fuel(2)                  |  |        | 32.47  |      |   | 30.32    |  |      | 30.11  |        |   | 28.96    |  |        | 36.30  |      |   | 34.87    |  |      | 47.92    |  |   | 48.49    |  |   | 71.80    |  |   | 71.96   
|Kerosene(3)                  |  |        | 77.05  |      |   | 32.44    |  |      | 78.50  |        |   | 30.23    |  |        | 72.80  |      |   | 36.68    |  |      | 71.72    |  |   | 50.76    |  |   | 76.29    |  |   | 73.09   
|Natural Gas(4)               |  |        |        |      |   |          |  |      |        |        |   |          |  |        |        |      |   |          |  |      |          |  |   |          |  |   |          |  |   |         
|Industrial                   |  |        | 4.20   |      |   | 5.03     |  |      | 3.15   |        |   | 3.99     |  |        | 5.31   |      |   | 5.81     |  |      | 6.09     |  |   | 6.41     |  |   | 7.82     |  |   | 8.07    
|Residential                  |  |        | 6.48   |      |   | 9.26     |  |      | 5.65   |        |   | 8.45     |  |        | 7.62   |      |   | 10.63    |  |      | 9.58     |  |   | 12.03    |  |   | 11.72    |  |   | 14.90   
|Selected Petrochemicals      |  |        |        |      |   |          |  |      |        |        |   |          |  |        |        |      |   |          |  |      |          |  |   |          |  |   |          |  |   |         
|Ammonia(5)                   |  |        | 157.41 |      |   | 160.55   |  |      | 133.74 |        |   | 127.47   |  |        | 237.03 |      |   | 205.36   |  |      | 272.48   |  |   | 250.68   |  |   | 322.67   |  |   | 282.51  
|Polyethylene L.D.(6)         |  |        | 877.90 |      |   | 1,059.74 |  |      | 735.36 |        |   | 1,013.47 |  |        | 948.07 |      |   | 1,286.82 |  |      | 1,221.15 |  |   | 1,504.37 |  |   | 1,539.29 |  |   | 1,683.71
|Polyethylene H.D.(7)         |  |        | 961.44 |      |   | 1,004.63 |  |      | 699.51 |        |   | 947.90   |  |        | 824.85 |      |   | 1,187.97 |  |      | 978.44   |  |   | 1,364.33 |  |   | 1,349.15 |  |   | 1,513.81
|Styrene(8)                   |  |        | 641.56 |      |   | 690.15   |  |      | 757.67 |        |   | 701.30   |  |        | 885.89 |      |   | 873.94   |  |      | 1,297.79 |  |   | 1,231.44 |  |   | 1,415.85 |  |   | 1,361.91

---

|(1) | In U.S. dollars per barrel. Prices to final consumers including taxes. Premium price in Mexico City. U.S. prices for Houston, Texas.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

Sources: Pemex-Refining and Lundberg Retail Price Survey (Lundberg Survey Inc.).

|(2) | In U.S. dollars per barrel. Mexican prices at the gate of the refineries. U.S. spot prices in Houston, Texas (Jet Fuel Gulf Coast Waterborne).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

Sources: Pemex-Refining and Platts U.S. Market Scan (McGraw-Hill Company).

|(3) | In U.S. dollars per barrel. In both countries, prices to final consumers. Mexico prices include taxes, while U.S. prices exclude them.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

Sources: Pemex-Refining and Petroleum Marketing Monthly published by the Energy Information Administration (DOE) (Kerosene Type Jet Fuel, end users).

|(4) | In U.S. dollars per thousand cubic feet. Prices exclude taxes. Industrial natural gas prices are for Mexico City and surrounding areas. Industrial prices correspond to nomination of
additional volumes under contract with notification to the supplier. Until 2003, residential prices were nationally weighted and since 2004, residential prices are for the sector to which Mexico City belongs. Residential prices reflect the specific
cost of transportation and distribution in that area. U.S. prices are national average industrial prices and Texas residential prices.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sources: Pemex-Gas and Basic Petrochemicals, Energy Regulatory Commission (CRE) and Petroleum Marketing Monthly published by the Energy Information Administration (DOE)

|(5) | In U.S. dollars per ton. Prices exclude taxes. Mexico prices to contract users at Cosoleacaque Petrochemical Plant. U.S. spot prices in Tampa, Florida.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

Sources: Pemex-Petrochemicals, Fertecon Weekly Ammonia Fax (Fertecon Limited) and Fertilizer Market Bulletin (FMB Consultants Ltd.).

|(6) | In U.S. dollars per ton. LPDE film quality. Prices exclude taxes. Mexico prices to spot consumers. U.S. prices are domestic contract average.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

Sources: Pemex-Petrochemicals and ICIS-LOR (Icis-Lor Group Ltd.).

|(7) | In U.S. dollars per ton. Block molding quality. Prices exclude taxes. Mexico prices to spot consumers. U.S. prices are domestic contract average.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

Sources: Pemex-Petrochemicals and ICIS-LOR (Icis-Lor Group Ltd.).

|(8) | In U.S. dollars per ton. Prices exclude taxes. Mexico prices to spot consumers. U.S. prices are average of contract and spot prices.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

Sources: Pemex-Petrochemicals and ICIS-LOR (Icis-Lor Group Ltd.).



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IEPS Tax, Excess Gains Duty, Hydrocarbon Duties and Other Taxes

The following table sets forth the taxes and duties that we recorded each of the past three years.



|                                               |  |                                                        |         |      |     |         |  |     |        
|---------------------------------------------- |  | ------------------------------------------------------ | ------- | ---- | --- | ------- |  | --- | -------
|                                               |  | Year ended December 31,                               
|                                               |  | 2003                                                   |         | 2004 |     | 2005   
|                                               |  | (in millions of constant pesos as ofDecember 31, 2005)
|Hydrocarbon extractions duties and other taxes |  | Ps.                                                    | 313,444 |      | Ps. | 433,614 |  | Ps. | 558,437
|IEPS tax                                       |  |                                                        | 102,258 |      |     | 56,528  |  |     | 20,214 
|Deferred taxes                                 |  |                                                        |        |      |     |        |  |     | 1,978  
|                                               |  |                                                        |         |      |     |         |  |     |        
|Total                                          |  | Ps.                                                    | 415,702 |      | Ps. | 490,142 |  | Ps. | 580,629
|                                               |  |                                                        |         |      |     |         |  |     |        

---

|Note: | For a description of these taxes and duties, see Item 4Information on the CompanyTaxes and Duties above.
|----- | ------------------------------------------------------------------------------------------------------------

Source: PEMEXs financial statements.

The IEPS
tax ensures that we retain the portion of our sales revenues that represents the adjusted international reference prices of our products, and it also gives the Mexican Government the difference between the domestic retail prices, which are prices
that are set by the Mexican Government based on target rates of inflation, and adjusted international reference prices of diesel and gasoline.

LOGO

When international prices increase, our wholesale price will increase and, as a result, the IEPS tax that we
collect from consumers and transfer to the Mexican Government will decrease.

For automotive fuels, the IEPS tax is equal to the retail
price at which Pemex-Refining sells gasoline and automotive diesel to retailers less Pemex-Refinings wholesale price, value added tax and distribution costs.

In addition to the IEPS tax, we are subject to a number of other federal taxes and duties. In 2005, the sum of these taxes and duties totaled Ps. 578,651 million, including the IEPS tax and the excess gains
revenue duty discussed below but excluding deferred taxes. In 2005, we were subject to an additional 39.2% excess gains revenue duty, which applied to the portion of proceeds of our crude oil exports that were attributable to sales at prices in
excess of a specific threshold price per barrel set by the Mexican Government. The effect of the excess gains revenue duty, when combined with the regular duty rate, was that the Mexican Government, not PEMEX, realized all of the benefits of
increases in crude oil prices over the threshold, which was U.S. $23.00 per barrel in 2005. See also Item 4Information on the CompanyTaxes and DutiesExcess Gains Revenue Duty. As a result of the new fiscal regime
approved by the Mexican Congress in November 2005, we expect a reduction in our taxes and duties of approximately Ps. 25,000 million in 2006, as compared to what we would have paid under the previous fiscal regime.

Hydrocarbon taxes and duties affect our income because they are recorded as expenses. However, the IEPS tax and the value added tax are indirect taxes
that do not have an impact on our income because they are pass-through taxes that we collect from consumers and transfer to the Mexican Government.



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Relation to the Mexican Government

Petróleos Mexicanos and the subsidiary entities were created as decentralized public entities of the Mexican Government, rather than Mexican corporations. Therefore, we do not have the power to issue shares of
equity securities evidencing ownership interests and are not required, unlike Mexican corporations, to have multiple shareholders. The Mexican Government closely regulates and supervises our operations. Mexican Government secretaries control key
executive decisions at PEMEX. The Secretary of the Ministry of Energy of Mexico is the Chairman of the Board of Directors of Petróleos Mexicanos. SFP appoints Petróleos Mexicanos and the subsidiary entities external auditors.

The Mexican Government incorporates the annual budget and financing program of Petróleos Mexicanos and the subsidiary entities into
its consolidated annual budget, which it submits to the Mexican Congress for its approval. The Mexican Congress also designates certain of our largest capital expenditures as PIDIREGAS. See Item 4Information on the CompanyHistory
and DevelopmentCapital Expenditures and Investments.

Inflation

Mexico experienced high inflation during the 1980s. The annual rate of inflation (as measured by the change in the NCPI) decreased from a high of 159.2%
in 1987 to 11.9% in 1992, 8.0% in 1993 and 7.1% in 1994. However, the economic events that followed the devaluation of the peso against the U.S. dollar in late 1994 and 1995, and turbulence in international financial markets, caused inflation to
increase to 52.0% in 1995. After 1995, inflation decreased to 27.7% in 1996 and 15.7% in 1997 and increased to 18.6% in 1998. The annual inflation rate decreased to 12.3% in 1999, 9.0% in 2000 and 4.4% in 2001, increased to 5.7% in 2002, decreased
to 4.0% in 2003, increased to 5.19% in 2004 and decreased to 3.33% in 2005.

Mexican inflation has affected our consolidated financial
statements in the following ways:



| |  |  | Each year, we adjust the value of certain of our fixed assets, materials and spare parts on our balance sheet to reflect the effects of inflation. This revaluation will increase our
assets in periods of high inflation. When we revalue fixed assets and inventories to reflect the effects of inflation, our subsequent depreciation and cost of sales charges will increase, reducing our income. The higher carrying value further
exposes us to subsequent impairment charges. Through 2002, we revalued our fixed assets based on a hybrid of NCPI and specific-index items as determined by independent appraisers. The specific-index method takes into account usage, obsolescence,
specific costs of operation and the remaining productive life of the revalued assets. Beginning in 2003, we revalue all of our fixed assets using the NCPI. See Note 2h. to our consolidated financial statements included herein.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mexican GAAP requires that financial statements recognize the effects of inflation in accordance with Bulletin B-10. A component of inflation accounting which is not reflected in
historical based accounting is the recognition of a gain or loss on monetary position, which is included in the income statement as a component of comprehensive financing cost. The gain or loss on monetary position captures the impact of purchasing
power fluctuations on monetary assets and liabilities. To the extent that we have a net monetary liability position, the income statement will reflect a monetary gain as measured by the change in the NCPI. To the extent that we have a net monetary
asset position, the income statement will reflect a monetary loss as measured by the change in the NCPI.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Consolidation

The financial statements, which are prepared in accordance with Mexican GAAP, consolidate the results of Petróleos Mexicanos, the subsidiary
entities and the subsidiary companies. Certain non-material subsidiary companies, however, are not consolidated and are accounted for under either the cost method or the equity method. For a list of the consolidated subsidiary companies, see Note
2c. to our consolidated financial statements



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included herein. For U.S. GAAP purposes, we consolidate the results and financial condition of Pemex Finance, Ltd. For U.S. and Mexican GAAP purposes,
beginning in 2003, we began consolidating the results and financial position of Fideicomiso F/163 and RepCon Lux S.A. For Mexican GAAP purposes, beginning in 2005, the results of Pemex Finance Ltd. are now consolidated in the financial statements of
Petróleos Mexicanos.

Export Agreements

On March 29, 2000, OPEC, excluding Iran, agreed to increase its crude oil production by 1,450 thousand barrels per day. Mexico, which is not a member of OPEC, announced on March 29, 2000, that it would increase its exports of
crude oil by 150 thousand barrels per day, beginning in April 2000. On June 21, 2000, the Ministry of Energy announced an additional increase in crude oil exports of 75 thousand barrels per day, beginning in July 2000.

Following OPECs announcement in January 2001 that it would reduce crude oil production by 1.5 million barrels per day, Mexico announced it
would decrease its crude oil exports by 75 thousand barrels per day, beginning on February 1, 2001. Following a March 2001 announcement by OPEC of an additional 1.0 million barrel per day reduction in crude oil production, on
March 25, 2001, Mexico announced a further reduction in crude oil exports of 40 thousand barrels per day, beginning on April 1, 2001. On July 24, 2001, Mexico announced that it would reduce its crude oil exports by an additional
70 thousand barrels per day, beginning on September 1, 2001.

Following OPECs announcement that it would reduce crude oil
production by 1.5 million barrels per day, on January 2, 2002, Mexico announced it would decrease its crude oil exports by 100 thousand barrels per day, to 1.66 million barrels per day, for six months beginning on January 1,
2002. Mexico maintained that level of exports throughout 2002.

In January 2003, as a result of increasing market demand, Mexico agreed to
increase its crude oil exports by 100 thousand barrels per day to a level of 1.76 million barrels per day. In February 2003, in light of the loss of more than 2 million barrels per day of Venezuelan crude oil, Mexico announced a
further 120 thousand barrel per day increase in its crude oil export to a level of 1.88 million barrels per day. In September 2003, OPEC announced that it would cut crude oil production by 900 thousand barrels per day beginning
November 1, 2003. Following this announcement, Mexico announced that it expected to maintain its crude oil exports at their present levels. In March 2004, OPEC announced that it would cut crude oil production by one million barrels per day
beginning April 1, 2004. In June 2004, OPEC announced that it would increase crude oil production by 500 thousand barrels per day beginning August 1, 2004. In September 2004, OPEC announced that it would increase crude oil production
by 1 million barrels per day beginning November 1, 2004. In March 2005, OPEC announced an additional 500 thousand barrels per day increase in the ceiling to 27.5 million barrels per day in view of the expectation of another year
of strong global oil demand. In June 2005, OPEC announced that it would increase crude oil production by 500 thousand barrels per day beginning July 1, 2005. In September 2005, OPEC announced that it would make available to the market its
members spare capacity of around 2 million barrels per day for a period of three months, starting October 1, 2005, in order to maintain oil market stability. The current oil production ceiling of 28.0 million barrels per day has
since been maintained. OPEC members met during the first week of June 2006 in Venezuela and decided to leave oil production levels unchanged despite current high crude oil prices, since crude oil stocks levels are above average in the U.S. and
markets are considered to be well supplied. As of the date of this report, Mexico has not announced any revisions to its current levels of crude oil exports of 1.868 million barrels per day as a result of these latest announcements by OPEC, and
Mexico has no plans to change its current levels of crude oil exports.

Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and
the Subsidiary CompaniesFor the Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004

Sales

Total sales, net of the IEPS tax, were Ps. 908.4 billion in 2005, an increase of 22.3% from total sales in 2004, net of the IEPS
tax, of Ps. 742.8 billion. The increase in total sales from 2004 to 2005 resulted primarily



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from a 19.0% increase in domestic sales, net of the IEPS tax, in 2005, from Ps. 407.4 billion in 2004 to Ps. 484.9 billion in 2005, due to increased
unit prices and higher sales volumes. In addition, total sales increased due to a 26.3% increase in export sales, from Ps. 335.4 billion in 2004 to Ps. 423.5 billion in 2005, due to increases in crude oil export prices and in the volume of
exports of petroleum products.

Domestic Sales

Domestic sales, net of the IEPS tax, increased by 19.0% in 2005, from Ps. 407.4 billion in 2004 to Ps. 484.9 billion in 2005, due to increases in prices and in the volume of domestic sales of petroleum and
petrochemical products. Domestic sales of petroleum products increased by 21.2% in 2005, from Ps. 314.0 billion in 2004 to Ps. 380.7 billion in 2005, primarily due to increases in the average domestic sales prices and volumes of our principal
petroleum products. The 5.4% increase in the sales volumes of gasoline, from 636.7 thousand barrels per day in 2004 to 671.3 thousand barrels per day in 2005, was primarily due to an increase in the number of vehicles in Mexico. Domestic
petrochemical sales (including sales of certain by-products of the petrochemical production process) increased by 10.6%, from Ps. 19.9 billion in 2004 to Ps. 22.0 billion in 2005, due to an increase in the domestic prices of some of the
products manufactured by Pemex-Petrochemicals, such as polyethylenes, ethylene oxide and monoethylene glycol, and a production increase of 159 kilotons of vinyl chloride monomer in Pajaritos as compared to 2004 production levels. Sales of natural
gas increased by 10.3% in 2005, from Ps. 73.5 billion in 2004 to Ps. 81.1 billion in 2005, as a result of a 25.1% increase in average prices, from U.S. $6.09 per MMBtu in 2004 to U.S $7.62 per MMBtu in 2005.

Export Sales

In 2005, total
consolidated export sales increased by 26.3% in peso terms from Ps. 335.4 billion in 2004 to Ps. 423.5 billion in 2005. Excluding the trading activities of the PMI Group, export sales by the subsidiary entities to the PMI Group and third
parties increased by 24.8% in peso terms, from Ps. 280.9 billion in 2004 to Ps. 350.5 billion in 2005. In dollar terms, excluding the trading activities of the PMI Group, export sales (which are dollar-denominated) increased by 38.9% in 2005,
from U.S. $23.4 billion in 2004 to U.S. $32.5 billion in 2005. This increase was mainly a result of an increase in crude oil export prices. The trading and export activities of the PMI Group generated additional marginal revenues of
Ps. 73.0 billion in 2005, 33.7% higher in peso terms than the Ps. 54.6 billion of additional revenues generated in 2004, mainly due to the increased price of crude oil that we exported. The weighted average price per barrel of crude oil
that the PMI Group sold to third parties in 2005 was U.S. $42.71, 37.6% higher than the weighted average price of U.S. $31.05 in 2004.

Crude oil sales by Pemex-Exploration and Production to PMI for export accounted for 89.4% of export sales (excluding the trading activities of the PMI Group) in 2005, as compared to 90.9% in 2004. These crude oil sales increased in peso
terms by 22.9% in 2005, from Ps. 255.1 billion in 2004 to Ps. 313.6 billion in 2005, and increased in dollar terms by 32.9% in 2005, from U.S. $21.3 billion in 2004 to U.S. $28.3 billion in 2005. The weighted average price per barrel
of crude oil that Pemex-Exploration and Production sold to PMI for export in 2005 was U.S. $42.61, 37.4% higher than the weighted average price of U.S. $31.02 in 2004. The volume of crude oil exports decreased by 2.8%, from
1,870 thousand barrels per day in 2004 to 1,817 thousand barrels per day in 2005, as a result of interruptions in production due to hurricanes in Mexico and in the Gulf of Mexico.

Export sales of petroleum products by Pemex-Refining and Pemex-Gas and Basic Petrochemicals to the PMI Group and third parties, including natural gas
liquids, increased from 8.2% of export sales (excluding the trading activities of the PMI Group) in 2004 to 9.6% in 2005. Export sales of petroleum products, including natural gas liquids, increased by 45.0%, from Ps. 23.1 billion in 2004 to
Ps. 33.5 billion in 2005, primarily due to an increase in sales volume and export prices of petroleum products. In dollar terms, export sales of petroleum products, including natural gas liquids, increased by 57.9%, from U.S. $1.9 billion
in 2004 to U.S. $3.0 billion in 2005.

Petrochemical products accounted for the remainder of export sales in 2004 and 2005. Export
sales of petrochemical products (including certain by-products of the petrochemical process) increased by 30.8%, from



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Ps. 2.6 billion in 2004 to Ps. 3.4 billion in 2005, primarily due to an increase in the volume of benzene and polyethylene exports. In dollar terms,
export sales of petrochemical products (including certain by-products of the petrochemical process) increased by 39.4% in 2005, from U.S. $217.1 million in 2004 to U.S. $302.7 million in 2005.

Other Revenues and Expenses

Other
revenues, net, increased by Ps. 0.3 billion, or 2.6%, from Ps. 11.5 billion in 2004 to Ps. 11.8 billion in 2005, primarily due to an increase in revenues from our natural gas hedging operations, which was partially offset by an increase in
costs related to various accidents during 2005 and the recognition of the impairment of fixed assets for Pemex-Petrochemicals. (See Item 4Information on the CompanyBusiness OverviewGas and Basic PetrochemicalsNatural
Gas Hedging Operations and Item 11Quantitative and Qualitative Disclosure about Market RiskCommodity Price Risk).

Costs and Operating Expenses

Costs of sales, transportation, distribution expenses and administrative expenses increased by
30.7%, from Ps. 329.0 billion in 2004 to Ps. 429.9 billion in 2005. This increase was mainly due to an increase in product purchases, principally petroleum products such as gasolines, diesel and fuel oil, of Ps. 36.3 billion, or 55.2%, as compared
to 2004, an increase in the costs of labor reserve of Ps. 6.5 billion, or 14.2%, as compared to 2004, an increase in costs associated with the acquisition of materials and transportation of Ps. 16.9 billion, or 21.9%, as compared to 2004, an
increase in depreciation and amortization costs of Ps. 9.5 billion, or 22%, as compared to 2004 and an increase in exploration costs of Ps. 7.7 billion, or 94%, as compared to 2004.

In 2005, due to price controls imposed by the Mexican Government on gasoline and diesel products sold in the domestic market, we were not able to pass on
all of the increases in the prices of our product purchases from producers to our retail prices in Mexico. In addition, since September 12, 2005, a presidential decree has limited our maximum sales price on first-hand and end-user sales of
natural gas for industrial use and to local distribution companies to the natural gas price in Reynosa, Tamaulipas in August 2005 (U.S. $7.253 per million British Thermal Units), plus 21% of the difference between the current Reynosa price and U.S.
$7.253. PEMEX therefore bears the cost of 79% of any increase in import prices of natural gas, which it cannot pass on to its retail customers. See Item 4Information on the CompanyBusiness OverviewGas and Basic
PetrochemicalsPricing Decrees.

Comprehensive Financing Cost

Under Mexican GAAP, comprehensive financing cost reflects interest income (including gains and losses on certain derivative instruments), interest
expense, foreign exchange gain or loss and the gain or loss attributable to the effects of inflation on monetary liabilities and assets. A substantial portion of our indebtedness (80.5% at December 31, 2005) is denominated in foreign
currencies, so a depreciation of the peso results in foreign exchange loss and higher interest expense in peso terms.

In 2005,
comprehensive financing cost decreased by Ps. 2.8 billion, or 38.4%, from Ps. 7.3 billion in 2004 to Ps. 4.5 billion in 2005, primarily as a result of the following:



| |  |  | The peso appreciated against the U.S. dollar at a rate of 4.32% during 2005, as compared to a 0.26% depreciation of the peso against the U.S. dollar in 2004, which resulted in net
foreign exchange gains of Ps. 17.6 billion in 2005, as compared to net foreign exchange losses of Ps. 3.6 billion in 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The inflation rate decreased from 5.2% in 2004 to 3.33% in 2005, resulting in a net gain in monetary position of Ps. 16.3 billion, 19.3% lower than the net gain in monetary position
in 2004 of Ps. 20.2 billion.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | These decreases in comprehensive financing cost were partially offset by an increase in net interest expense of Ps. 14.5 billion, or 60.7%, from Ps. 23.9
billion in 2004 to Ps. 38.4 billion in 2005. In 2005,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | interest expense increased by Ps. 20.1 billion as compared to 2004, while interest income increased by Ps. 5.6 billion as compared to 2004. As of
July 1, 2005, interest from Pemex Finance, Ltd. is consolidated into our total debt for both U.S. and Mexican GAAP purposes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Duties and Taxes

Hydrocarbon extraction duties and other duties and taxes (including the IEPS tax) increased by 18.5%, from
Ps. 490.1 billion in 2004 to Ps. 580.6 billion in 2005, largely due to the 22.3% increase in our net sales revenues, excluding the IEPS tax. We paid Ps. 56.4 billion in excess gains revenue duty in 2005, which represents 39.2% of our revenues
resulting from the difference between the actual crude oil prices at which Pemex-Exploration and Production sold to PMI, which averaged U.S. $42.61 per barrel for the Mexican weighted crude oil mix, and the threshold crude oil price for 2005 of U.S.
$23.00 per barrel. We paid Ps. 35.5 billion in infrastructure duty in 2004.

The proceeds from the portion of the excess gains duty
generated in respect of revenues in excess of the U.S. $27.00 threshold price will be allocated as follows: 50% to investment expenditures, including exploration, production, refining, gas and petrochemicals, by PEMEX, and 50% to infrastructure
expenditures and equipment programs and projects, carried out by the Mexican states. Revenues allocable to Pemex during the first six months of 2005 were expended during 2005, while revenues generated during the second half of 2005 are to be used in
2006.

Cumulative Effect of Adoption of New Accounting Standards

In 2004, we adopted Bulletin C-15, Impairment of the Value of Long-Lived Assets and their Disposal, which resulted in a Ps. 2.1 billion
charge at January 1, 2004 attributable to the cumulative effect of recognition of the impairment of the carrying value of fixed assets, primarily those of Pemex-Exploration and Production. For further information, see Notes 2i. and 7d. to our
consolidated financial statements included herein. In 2004, we also adopted the amendments to Bulletin D-3, Labor Obligations, which resulted in the recognition of an initial liability related to prior service costs and a charge to
income for 2004 in the amount of Ps. 8.7 billion. For further information, see Notes 2l. and 12 to our consolidated financial statements included herein.

In January 2005, we adopted Bulletin C-10, Financial Instruments and Hedging Operations, which resulted in the recognition of an initial cumulative charge of Ps. 442.7 million. We defined the criteria for
the identification, valuation and registration of embedded derivatives, as a result of the fact that all contracts to be paid in currencies other than the functional currency of any of the parties to such contracts contain an embedded derivative
based on any differences in currency. These criteria were reviewed with our external auditors during the preparation of our 2005 audited financial statements. We concluded that there was no need to separate any identified embedded derivatives
because none of the contracts to which we are a party contain provisions obligating the parties to full payments of the generated future obligations derived from differences in currencies. We also recognized a charge of Ps. 1.3 billion related to
our adoption of amendments to Bulletin D-3, as discussed under Recently Issued Accounting Standards below.

The
cumulative effect of the adoption of new accounting standards decreased by Ps. 9.0 billion in 2005, from Ps. 10.8 billion in 2004 to Ps. 1.8 billion in 2005.

Income/(Loss)

In 2005, we reported a loss of Ps. 76.3 billion on Ps. 920.3 billion in total revenues
net of the IEPS tax, as compared with a loss of Ps. 26.3 billion on Ps. 754.4 billion in total revenues net of the IEPS tax in 2004. This 190.1% increase in losses from 2004 to 2005 resulted from the various factors described above.

Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary CompaniesFor the Year Ended December 31, 2004 Compared to
the Year Ended December 31, 2003

Sales

Total sales, net of the IEPS tax, were Ps. 742.8 billion in 2004, an increase of 28.6% from total sales in 2003, net of the IEPS tax, of Ps. 577.6 billion. The increase in total sales from 2003 to 2004 resulted
primarily



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from a 27.8% increase in domestic sales, net of the IEPS tax, from Ps. 318.7 billion in 2003 to Ps. 407.4 billion in 2004, due to increased unit
prices and higher sales volumes. In addition, total sales increased due to a 29.5% increase in export sales, from Ps. 258.9 billion in 2003 to Ps. 335.4 billion in 2004, due to an increase in crude oil export prices, a 1.4% increase in
crude oil sales volumes and the depreciation of the peso against the dollar (which increased the peso value of sales denominated in dollars).

Domestic Sales

Domestic sales, net of the IEPS tax, increased by 27.8% in 2004, from Ps. 318.7 billion in 2003 to
Ps. 407.4 billion in 2004, due to increases in prices and in the volume of domestic sales of certain products. Domestic sales of petroleum products other than natural gas increased by 26.9% in 2004, from Ps. 247.5 billion in 2003 to
Ps. 314.0 billion in 2004, primarily due to increases in the average sales prices and volumes of our principal petroleum products. The 5.9% increase in the sales volumes of gasoline, from 601.2 thousand barrels per day in 2003 to
636.7 thousand barrels per day in 2004, was primarily due to the effectiveness of the actions taken to reduce the illicit market in fuels (see Item 8Financial InformationLegal ProceedingsActions Against the Illicit
Market in Fuels in Mexico) and an increase in the number of vehicles in Mexico. Domestic petrochemical sales (including sales of certain by-products of the petrochemical production process) increased by 47.4%, from Ps. 13.5 billion in
2003 to Ps. 19.9 billion in 2004, due to an increase in the domestic prices of our principal petrochemical products, particularly polyethylenes, ethylene oxide and ammonia, and a change in commercial strategy to take advantage of the higher
profit margins of certain products. Sales of natural gas increased by 27.4% in 2004, from Ps. 57.7 billion in 2003 to Ps. 73.5 billion in 2004, as a result of an increase in average prices and a 5.4% increase in volumes of natural gas sold. The
higher demand for natural gas was primarily driven by an increase in demand in the electricity sector, while the industrial and distribution sectors maintained demand at levels consistent with the levels of demand in 2003.

Export Sales

In 2004, total
consolidated export sales increased by 29.5% in peso terms from Ps. 258.9 billion in 2003 to Ps. 335.4 billion in 2004. Excluding the trading activities of the PMI Group, export sales by the subsidiary entities to the PMI Group and third
parties increased by 27.2% in peso terms, from Ps. 220.8 billion in 2003 to Ps. 280.9 billion in 2004. In dollar terms, excluding the trading activities of the PMI Group, export sales (which are dollar-denominated) increased by 27.2% in
2004, from U.S. $18.4 billion in 2003 to U.S. $23.4 billion in 2004. This increase was a result of a 25.6% increase in crude oil export prices, and a 1.4% increase in crude oil sales volumes. The trading and export activities of the PMI
Group generated additional marginal revenues of Ps. 54.6 billion in 2004, 43.7% higher in peso terms than the Ps. 38.0 billion of additional revenues generated in 2003, mainly due to the increased price of crude oil that we exported and
the strengthening of the dollar against the peso. The weighted average price per barrel of crude oil that the PMI Group sold to third parties in 2004 was U.S. $31.05, 25.3% higher than the weighted average price of U.S. $24.78 in 2003.

Crude oil sales by Pemex-Exploration and Production to PMI for export accounted for 90.9% of export sales (excluding the trading
activities of the PMI Group) in 2004, as compared to 90.4% in 2003. These crude oil sales increased in peso terms by 27.9% in 2004, from Ps. 199.7 billion in 2003 to Ps. 255.1 billion in 2004, and increased in dollar terms by 28.3% in
2004, from U.S. $16.6 billion in 2003 to U.S. $21.3 billion in 2004. The weighted average price per barrel of crude oil that Pemex-Exploration and Production sold to PMI for export in 2004 was U.S. $31.02, 25.3% higher than the
weighted average price of U.S. $24.75 in 2003. The volume of crude oil exports increased by 1.4%, from 1,844 thousand barrels per day in 2003 to 1,870 thousand barrels per day in 2004, as a result of increased production of crude oil.

Export sales of petroleum products by Pemex-Refining and Pemex-Gas and Basic Petrochemicals to the PMI Group and third parties, including
natural gas liquids, decreased from 8.8% of export sales (excluding the trading activities of the PMI Group) in 2003 to 8.2% in 2004. Export sales of petroleum products, including natural gas liquids, increased by 19.1%, from Ps. 19.4 billion
in 2003 to Ps. 23.1 billion in 2004, primarily due to



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an increase in the export prices of naphthas. In dollar terms, export sales of petroleum products, including natural gas liquids, increased by 11.8%, from
U.S. $1.7 billion in 2003 to U.S. $1.9 billion in 2004.

Petrochemical products accounted for the remainder of export sales in
2003 and 2004. Export sales of petrochemical products (including certain by-products of the petrochemical process) increased by 44.4%, from Ps. 1.8 billion in 2003 to Ps. 2.6 billion in 2004, primarily due to a 64.1% increase in the volume
of ethylene exports. In dollar terms, export sales of petrochemical products (including certain by-products of the petrochemical process) increased by 47.0% in 2004, from U.S. $147.7 million in 2003 to U.S. $217.1 million in 2004.

Other Revenues and Expenses

Other revenues, net, increased by Ps. 8.3 billion, from Ps. 3.2 billion in 2003 to Ps. 11.5 billion in 2004, primarily due to an increase in the value of our investment in the Deer Park refinery, which is accounted for under
the equity method (see Note 8 to our consolidated financial statements included herein) and the recognition of a gain arising from the appreciation of the value of our shares in YPF, S.A. (Repsol) during 2004 (see Item
5Operating and Financial Review and ProspectsLiquidity and Capital Resources2004 Financing Activities and Item 11Quantitative and Qualitative Disclosure about Market RiskEquity Swap).

Costs and Operating Expenses

Costs
of sales, transportation, distribution expenses and administrative expenses increased by 17.4%, from Ps. 280.3 billion in 2003 to Ps. 329.0 billion in 2004. This increase was mainly due to an increase in maintenance expenses of
Ps. 16.4 billion in accordance with our maintenance program, an increase in product purchases of Ps. 17.5 billion due primarily to increased domestic demand for gasoline and natural gas, an increase in the cost of products purchased for
sale abroad by P.M.I. Trading Ltd. of Ps. 15.1 billion and an increase in costs associated with the labor reserve for pension obligations of Ps. 5.2 billion resulting from the increase in the number of employees and changes in actuarial
assumptions, which was partially offset by an increase in the value of crude oil and petroleum product inventories of Ps. 3.4 billion.

Comprehensive Financing Cost

Under Mexican GAAP, comprehensive financing cost reflects interest income (including gains and
losses on certain derivative instruments), interest expense, foreign exchange gain or loss and the gain or loss attributable to the effects of inflation on monetary liabilities and assets. A substantial portion of our indebtedness (84.3% at
December 31, 2004) is denominated in foreign currencies, so a depreciation of the peso results in foreign exchange loss and higher interest expense in peso terms.

In 2004, comprehensive financing cost decreased by Ps. 26.1 billion, or 78.1%, from Ps. 33.4 billion in 2003 to Ps. 7.3 billion in 2004, primarily as a result of the following:



| |  |  | The peso depreciated at a lower rate against the U.S. dollar during 2004 in comparison to 2003, which resulted in a Ps. 24.1 billion decrease in net foreign exchange losses,
from Ps. 27.7 billion in 2003 to Ps. 3.6 billion in 2004.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2003 and 2004, our average monetary liabilities exceeded our average monetary assets, resulting in a net gain in monetary position. The net gain in monetary position, which
amounted to Ps. 20.2 billion in 2004, was 61.6% higher than the net gain in monetary position in 2003 of Ps. 12.5 billion, due to an increase in the inflation rate (from 4.0% in 2003 to 5.2% in 2004). This gain decreased our comprehensive
financing cost.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | These decreases in comprehensive financing cost were partially offset by an increase in net interest expense of Ps. 5.7 billion, or 31.3%, from Ps. 18.2
billion in 2003 to Ps. 23.9 billion in 2004, as a result
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | of the increase in interest expense in connection with debt financing obtained for, but not yet committed to, PIDIREGAS, which is not capitalized, and the
financial costs generated by the appreciation of the Repsol shares underlying the exchangeable bonds issued by RepCon Lux, S.A. (gains or losses related to derivatives associated with borrowings are classified within interest expense).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Duties and Taxes

Hydrocarbon extraction duties and other duties and taxes (including the IEPS tax) increased by 17.9%, from Ps. 415.7 billion in 2003 to Ps. 490.1 billion in 2004, largely due to the 28.6% increase in our net
sales revenues, excluding the IEPS tax. We paid Ps. 35.5 billion in infrastructure duty in 2004, which represents 39.2% of our revenues resulting from the difference between the actual crude oil prices at which Pemex-Exploration and Production
sold to PMI, which averaged U.S. $31.02 per barrel for the Mexican weighted crude oil mix, and the threshold crude oil price for 2004 of U.S. $20.00 per barrel. We paid Ps. 20.4 billion in excess gains revenue duties in 2003.

Cumulative Effect of Adoption of New Accounting Standards

Beginning January 1, 2003, we adopted Bulletin C-9, Liabilities, Provisions, Contingent Assets and Liabilities and Commitments, issued by
the Mexican Institute of Public Accountants, which establishes rules relating to provisions for dismantlement and abandonment costs. The adoption of Bulletin C-9 resulted in the recognition of a benefit of Ps. 2.2 billion as of January 1,
2003 related to the provision for dismantlement and abandonment costs. For further information, see Note 2h. to our consolidated financial statements included herein.

In 2004, we adopted Bulletin C-15, Impairment of the Value of Long-Lived Assets and their Disposal, which resulted in a Ps. 2.1 billion charge at January 1, 2004 attributable to the cumulative
effect of recognition of the impairment of the carrying value of fixed assets, primarily those of Pemex-Exploration and Production. For further information, see Notes 2 (i) and 7 (d) to our consolidated financial statements included
herein. In 2004, we also adopted the amendments to Bulletin D-3, Labor Obligations, which resulted in the recognition of an initial liability related to prior service costs and a charge to income for 2004 in the amount of Ps. 8.7
billion. For further information, see Notes 2 (l) and 12 to our consolidated financial statements included herein.

Income/(Loss)

In 2004, we reported a loss of Ps. 26.3 billion on Ps. 754.4 billion in total revenues net of the IEPS tax, as compared with
a loss of Ps. 44.2 billion on Ps. 580.8 billion in total revenues net of the IEPS tax in 2003. This 40.5% decrease in losses from 2003 to 2004 resulted from the various factors described above.

Liquidity and Capital Resources

Equity Structure
and the Certificates of Contribution A

Our total equity as of December 31, 2005 was Ps. (26.9) billion, and our
total capitalization (long-term debt plus equity) amounted to Ps. 474.7 billion.

In March 1990, the Mexican Government exchanged
U.S. $7.58 billion worth of external debt of Petróleos Mexicanos with international commercial banks for 30-year Collateralized Fixed Rate Bonds Due 2019 and Collateralized Floating Rate Bonds Due 2019 (also called Brady Bonds) issued by
the Mexican Government. In exchange for the cancellation of this external debt, Petróleos Mexicanos indebtedness to the Mexican Government increased by an amount equal to U.S. $7.58 billion. The new indebtedness was denominated in
currencies other than pesos. In December 1990, the Mexican Government and Petróleos Mexicanos agreed to capitalize the indebtedness incurred in March 1990 into Petróleos Mexicanos equity as Certificates of



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Contribution A. As a condition to this capitalization, Petróleos Mexicanos agreed to pay a minimum guaranteed dividend to the Mexican
Government equal to the debt service on the capitalized debt at the exchange rates in effect at the date the payments are made. The total dividend on the Certificates of Contribution A is approved annually by the Board of Directors of
Petróleos Mexicanos after the close of each fiscal year. Each quarter, Petróleos Mexicanos makes advance payments to the Mexican Government that total a prorated portion of the minimum guaranteed dividend.

From 2001 to 2005, Petróleos Mexicanos made annual advance payments, which were declared as dividends to the Mexican Government, as follows.



|                                                                     |  |                                                         |       |      |     |        |  |      |        |      |     |        |  |     |       
|-------------------------------------------------------------------- |  | ------------------------------------------------------- | ----- | ---- | --- | ------ |  | ---- | ------ | ---- | --- | ------ |  | --- | ------
|                                                                     |  | Year Ended December 31,                                
|                                                                     |  | 2001                                                    |       | 2002 |     | 2003   |  | 2004 |        | 2005
|                                                                     |  | (in millions of constant pesos as of December 31, 2005)
|Total advance payments to the Mexican Government                     |  | Ps.                                                     | 2,572 |      | Ps. | 10,976 |  | Ps.  | 11,060 |      | Ps. | 10,734 |  | Ps. | 15,283
|Dividends declared in respect of Certificates of Contribution A(1) |  |                                                         | 6,812 |      |     | 2,523  |  |      | 10,850 |      |     | 10,734 |  |     | 10,635

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | In each of the five years ended December 31, 2005, the dividends were approved by the Board of Directors of Petróleos Mexicanos.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|Source: | PEMEXs financial statements.
|------- | -----------------------------

In December 1997,
Petróleos Mexicanos and the Mexican Government agreed to an equity reduction of the Certificates of Contribution A in exchange for a cash payment to the Mexican Government of Ps. 12.12 billion in nominal pesos (U.S. $1.5
billion). Further to that agreement, the Ministry of Finance and Public Credit, acting on behalf of the Mexican Government, agreed to a reduction in the minimum guaranteed dividends that it would receive from Petróleos Mexicanos from 1998
through 2006. Since 1999, Petróleos Mexicanos has been scheduled to make a total of U.S. $4.9 billion in advance payments to the Mexican Government in respect of the principal amount of the Certificates of Contribution A. In
1999 and 2000, Petróleos Mexicanos paid U.S. $250 million in principal and interest under that arrangement. No advance payments of principal were made in 2001. In each of 2002, 2003, 2004 and 2005, Petróleos Mexicanos paid
principal of U.S. $874 million to the Mexican Government. In addition, since 1999, Petróleos Mexicanos has paid minimum guaranteed dividends on the Certificates of Contribution A at the rate of the three-month London
Interbank Offered Rate (LIBOR) plus 13/16% per year on the outstanding balance of the principal amount of the debt capitalized in December 1990. The following table sets forth the remaining scheduled maturities on the original principal amount
of the capitalized debt, all of which are due in 2006.



|                                                                                                                                         |  |                               |     |       |       |    
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | --- | ----- | ----- | ---
|                                                                                                                                         |  | Year Ended December 31,      
|                                                                                                                                         |  | 2006                          |     | Total
|                                                                                                                                         |  | (in millions of U.S. dollars)
|Future advance payments of minimum guaranteed dividends to the Mexican Government in respect of principal amount of the capitalized
debt |  | U.S.$                         | 392 |       | U.S.$ | 392

---

Source: PEMEXs financial statements.

On various dates during 2004, the Mexican Government made payments to Petróleos Mexicanos for a total amount of Ps. 34.1
billion, as reimbursement for the infrastructure duty paid by PEMEX during 2004. On November 4, 2004, the Board of Directors of Petróleos Mexicanos approved the increase in the equity of the subsidiary entities for this amount. In
accordance with the Federal Annual Revenue Law for the Fiscal Year of 2004, these payments are to be allocated to infrastructure works in exploration, refining, gas and petrochemicals. Pursuant to a comisión mercantil (agency
agreement) entered into with Banco Santander Serfín, S.A., as the



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agent managing the funds, PEMEX transferred a total amount of Ps. 33.7 billion, which was recorded as an increase in the equity of the subsidiary entities.
In March 2005, after receiving the necessary approvals from the Ministry of Finance and Public Credit, our equity was increased by an additional Ps. 374 million to compensate for foreign exchange losses in 2004 in respect of the transfers made
by the Ministry of Finance and Public Credit for reimbursements arising from the infrastructure duty that we paid to the Mexican Government in 2004. For further information regarding the infrastructure duty, see Item 4Information on the
CompanyTaxes and DutiesExcess Gains Revenue Duty.

In accordance with the Federal Annual Revenue Law for the Fiscal Year
of 2005 and the Federal Disbursements Budget for the Fiscal Year of 2005, the Mexican Government made payments to Petróleos Mexicanos as reimbursement for taxes and duties paid in 2005, which increase the equity of the subsidiary entities as
shown in the table below:



|                                                                                                                  |  |                                |        |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | -
|                                                                                                                  |  | (in millions of nominal pesos) |       
|Infrastructure Duty reimbursements, in accordance with the Federal Annual Revenue Law for the Fiscal Year of 2004 |  | Ps.                            | 595    |  
|Excess Gains Duty, in accordance with the Federal Disbursements Budget for the Fiscal Year of 2005                |  |                                | 22,067 |  
|Other payments pursuant to the Federal Disbursements Budget for the Fiscal Year of 2005                           |  |                                | 22,163 |  
|Payment not made by the Mexican Government                                                                        |  |                                | (595   | )
|                                                                                                                  |  |                                |        |  
|Increase in equity                                                                                                |  | Ps.                            | 44,230 |  
|                                                                                                                  |  |                                |        |  

Cash Flow from Operating, Financing and Investing Activities

During 2005, net funds provided by operating activities were Ps. 59.0 billion, a 490% increase from Ps. 10.0 billion provided in 2004. Funds
from income (which was negative in 2004 and 2005) plus items that did not require cash outlays totaled Ps. 38.9 billion, as compared to Ps. 75.6 billion in 2004. New debt financings provided an additional Ps. 57.1 billion of funds in
2005, as compared to Ps. 78.2 billion in 2004. During 2005, we applied net funds of Ps. 83.0 billion for net investments at cost in fixed assets (Ps. 88.0 billion of new investments and capitalized interest, less Ps. 5.0 billion
in dispositions of fixed assets), as compared to Ps. 80.2 billion for net investments at cost in fixed assets (Ps. 81.4 billion of new investments and capitalized interest, less Ps. 1.2 billion in dispositions of fixed assets) in
2004.

At December 31, 2005, our cash and cash equivalents totaled Ps. 120.8 billion, as compared to Ps. 87.7 billion at
December 31, 2004. At that time, we did not have sufficient working capital generated exclusively from operations for our budgeted cash flow requirements for 2006. However, based on past experience, we expect to generate sufficient working
capital through:



| |  |  | cash flow generated from operations;
| | - |  | ------------------------------------



| |  |  | the issuance of certificados bursátiles (peso-denominated publicly-traded notes) in the domestic market;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | the issuance of other debt securities in the international capital markets;
| | - |  | ---------------------------------------------------------------------------



| |  |  | renewing existing and securing additional lines of credit from international and local commercial banks; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | other additional financing activities.
| | - |  | --------------------------------------

On June 30,
2004, we established a new syndicated revolving credit facility for an amount of U.S. $1,250 million. Loans under this facility will be borrowed with interest periods ranging from 1 month up to 6 months, and may be prepaid on any interest
payment date. On July 18, 2005, we amended the revolving syndicated credit facility established in June 2004, to reduce the interest rate margins over LIBOR payable and the commitment



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fee, and to increase by one additional year the maturity of the facility. The facility will mature in 2008 and 2010, and borrowings may be made by either the
Pemex Project Funding Master Trust or Petróleos Mexicanos. As of the date of this report, only Petróleos Mexicanos has made borrowings under this facility, in order to fund its working capital needs.

In August 2004, we established a program to issue up to Ps. 10 billion of certificados bursátiles de corto plazo (short-term
publicly-traded notes), denominated in pesos in the Mexican market. The program ended in August 2005 and Pemex is currently considering renewing it for an additional two years.

In March, 2006, we obtained a new U.S. $1,250 million syndicated credit facility under which borrowings may be made by either the Pemex Project Funding
Master Trust or Petróleos Mexicanos. The facility has a three year maturity. See also Commitments for Capital Expenditures and Sources of Funding below.

As of December 31, 2005, we had U.S. $1,250 million in committed lines of credit, all of which was unused. As of the date of this report, we
have used U.S. $2,500 million in committed lines of credit, which represents the totality of the committed lines of credit from our syndicated credits facilities.

We have met and expect to meet in the future our cash requirements for working capital, capital expenditures and investments with a combination of funds provided by operations and financing. See Financing
Activities below.

Commitments for Capital Expenditures and Sources of Funding

Our current aggregate commitments for capital expenditures, including both PIDIREGAS and non- PIDIREGAS expenditures, total approximately Ps. 119.1
billion for 2006. For general descriptions of our current commitments for capital expenditures, see Item 4Information on the CompanyHistory and DevelopmentCapital Expenditures and Investments.

In 2005, in nominal peso terms, Pemex-Exploration and Production invested Ps. 101.8 billion in 27 PIDIREGAS and Ps. 11.0 billion in other general
operating investments and strategic products, for a total of Ps. 112.9 billion in capital expenditures in exploration and production. In 2006, Pemex-Exploration and Production again has 27 PIDIREGAS in its budget, for which Ps. 91.7
billion was budgeted. In addition, Pemex-Exploration and Production has budgeted Ps. 6.0 billion for non-PIDIREGAS capital expenditures for 2006. For more detail on the expenditures for and purpose of these investments, see Item
4Information on the CompanyBusiness OverviewExploration and ProductionInvestment in Exploration and Production.

Pemex-Refining invested in one PIDIREGAS in 2005 and invested in other general operating projects, strategic planning, acquisition of equipment, research and development and complementary investments for a total of Ps. 9.0 billion in
capital expenditures in nominal peso terms. In 2006, Pemex-Refining expects to invest Ps. 12.8 billion in capital expenditures. Of this amount, Pemex-Refining has budgeted Ps. 7.4 billion for one PIDIREGAS and Ps. 5.4 billion for
other non-PIDIREGAS capital expenditures. For more detail on the expenditures for and purpose of Pemex-Refinings investments, see Item 4Information on the CompanyBusiness OverviewRefiningInvestments.

Pemex-Gas and Basic Petrochemicals invests in projects primarily related to natural gas and condensates processing, transportation and
storage. In 2006, Pemex-Gas and Basic Petrochemicals will invest Ps. 2.5 billion in capital expenditures for one PIDIREGAS at the modular cryogenic plants in Reynosa. The non-PIDIREGAS capital expenditures for Pemex-Gas and Basic Petrochemicals
are expected to total Ps. 3.1 billion in 2006. For more detail on the expenditures for and purpose of Pemex-Gas and Basic Petrochemicalss investments, see Item 4Information on the CompanyBusiness OverviewGas and
Basic PetrochemicalsInvestments.

In 2006, Pemex-Petrochemicals will invest Ps. 1.1 billion in capital expenditures for
one PIDIREGAS, the modernization and enlargement of Aromatics Train 1 at La Cangrejera. The non-PIDIREGAS capital



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expenditures for Pemex-Petrochemicals are expected to total Ps. 1.6 billion in 2006.For more detail on the expenditures for and purpose of
Pemex-Petrochemicalss investments, see Item 4Information on the CompanyBusiness OverviewPetrochemicalsInvestments.

Our current commitments for capital expenditures have increased in recent years as compared to previous years. We plan to fund these expenditures through the financing activities in which we have engaged in the past
as well as new sources. We have funded and we expect to continue to fund our commitments for PIDIREGAS capital expenditures primarily through the issuance of debt securities in capital markets transactions, commercial bank syndicated loans,
bilateral loans from commercial banks and guaranteed loans from export credit agencies. To a lesser extent, we may decide to use Pemex Finance, Ltd. to fund some PIDIREGAS if we consider it advisable in light of market conditions. The securities
that we or Pemex Finance, Ltd. issue vary in tenor, amount, currency and type of interest rate. We may issue debt securities in U.S. dollars, Japanese yen, euros, pounds sterling or pesos, among others; these securities may be issued with fixed or
floating rates and with maturities of one or more years including perpetual debt securities, depending on market conditions and funding requirements. Commercial bank syndicated loans may be established with single or multiple tranches with
maturities ranging between one and seven years. Bilateral loans vary in tenor and range between two and three or more years. See also Financing Activities below.

As described in Financing Activities below, we have thus far issued U.S. $1.5 billion in debt securities in the international
capital markets in 2006 through the Pemex Project Funding Master Trust, and we expect to issue additional securities over the rest of the year. In addition, we have thus far issued Ps. 10 billion of certificados bursátiles
(publicly-traded notes) to date in 2006 in the domestic market through Fideicomiso F/163. Prior to 2003, Petróleos Mexicanos had never issued debt securities in the domestic market. Because the domestic market has demonstrated significant
growth over the past few years, we believe that this market represents a good alternative source of PIDIREGAS funding, offering competitive conditions in terms of tenor, amount and type of interest rates, and as a result we plan to continue to issue
such securities in the Mexican domestic market. Additionally, we fund some PIDIREGAS through commercial bank loans denominated in pesos.

Non-PIDIREGAS investments are funded mainly through our operating revenues, and, to a lesser degree, financing activities. These financing activities consist primarily of loans from export credit agencies. These loans are usually structured
with maturities ranging between five and ten years.

In order to be able to carry out our planned capital expenditure program, we will need
to seek financing from a variety of sources, and we cannot guarantee that we will be able to obtain financing on terms that would be acceptable to us. Our inability to obtain additional financing could have an adverse effect on our planned capital
expenditure program and result in our being required to limit or defer this program.

Financing Activities

2006 Financing Activities. During the period from January 1 to May 31, 2006, Petróleos Mexicanos obtained U.S. $42.8 million in
nominal terms in loans from export credit agencies and the Pemex Project Funding Master Trust obtained U.S. $305.6 million in nominal terms in loans from financial institutions for use in financing PIDIREGAS. In addition, we participated in the
following financing activities:



| |  |  | On January 4, 2006, Petróleos Mexicanos borrowed U.S. $800,000,000 under its U.S. $1.25 billion syndicated revolving facility with a group of international financial
institutions; under this agreement, borrowings may be made by either the Pemex Project Funding Master Trust or Petróleos Mexicanos; the facility bears interest at a rate per annum of London Interbank Offered Rate (LIBOR) plus
0.275% and matures in 2009; this borrowing was made in two tranches, A and B, each in the amount of U.S. $400,000,000. Both tranches were paid on February 3, 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust issued U.S. $750,000,000 of its 5.75% Notes due in 2015 and U.S. $750,000,000 of its 6.625% Bonds due 2035 on
February 2, 2006. The notes and bonds were issued
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | under the Pemex Project Funding Master Trusts Medium-Term Note program, Series A, are guaranteed by Petróleos Mexicanos and were re-openings of
earlier issuances.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On February 13, 2006, the Pemex Project Funding Master Trust completed a second exchange of outstanding Petróleos Mexicanos debt securities for new securities issued by
the Pemex Project Funding Master Trust, pursuant to which the Pemex Project Funding Master Trust issued U.S. $29,334,000 of its 9.00% Guaranteed Notes due 2007, U.S. $34,289,000 of its 8.85% Guaranteed Notes due 2007, U.S. $54,011,000 of its 93/8% Guaranteed Notes due 2008, U.S. $16,207,000 of its 91/4% Guaranteed Bonds due 2018, U.S. $11,920,000 of its 8.625% Guaranteed Bonds due 2023, U.S. $21,773,000 of its 9.50% Guaranteed Bonds due 2027 and U.S.
$17,776,000 of its 9.50% Guaranteed Puttable or Mandatory Exchangeable Securities (POMESSM) due 2027, in
exchange for an equal principal amount of corresponding 9.00% Guaranteed Notes due 2007, 8.85% Global Guaranteed Notes due 2007, 93/8% Global Guaranteed Notes due 2008, 91/4% Global Guaranteed Bonds due 2018, 8.625%
Bonds due 2023, 9.50% Global Guaranteed Bonds due 2027 and 9.50% POMESSMdue 2027 (collectively, the old
securities) issued by Petróleos Mexicanos. The old securities were subsequently acquired by Petróleos Mexicanos from the Pemex Project Funding Master Trust.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust entered into a credit agreement in the amount of U.S. $4.25 billion on May 23, 2006 with a group of international financial institutions,
to refinance the syndicated facility dated March 22, 2005 with improved financial conditions; this agreement is guaranteed by Petróleos Mexicanos and consists of two separate tranches of U.S. $1.5 billion and U.S. $2.75 billion, which
become due in 2011 and 2013, respectively.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, Fideicomiso F/163 issued a total of Ps. 10 billion in nominal terms
of its certificados bursátiles (publicly-traded notes) in the Mexican domestic market on June 16, 2006, guaranteed by Petróleos Mexicanos.

2005 Financing Activities. During the period from January 1, 2005 to December 31, 2005, we participated in the following financing activities:



| |  |  | Petróleos Mexicanos obtained loans from export credit agencies totaling U.S. $59.9 million;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Petróleos Mexicanos issued, under its short-term peso-denominated publicly-traded notes program, a total of Ps. 16.0 billion in nominal terms of notes in the Mexican
domestic market, none of which was outstanding as of December 31, 2005;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On October 26, 2005, Petróleos Mexicanos utilized U.S. $800,000,000 from its U.S. $1.25 billion syndicated revolving facility; this utilization was made in two tranches,
A and B, each in the amount of U.S. $400,000,000; both tranches were rolled-over on November 25, 2005 and repaid on December 28, 2005;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust increased the size of its Medium-Term Note program, Series A, from U.S. $11 billion to U.S. $20 billion, and on February 24,
2005, it issued 1 billion of its 5.50% Notes due 2025, guaranteed by Petróleos Mexicanos, under the program;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust entered into a syndicated credit agreement in the amount of U.S. $4.25 billion on March 22, 2005 with a group of international
financial institutions to refinance outstanding amounts of certain syndicated facilities and for new PIDIREGAS financing; this agreement was guaranteed by Petróleos Mexicanos and consisted of two separate tranches, which become due in 2010
and 2012, respectively; this agreement was refinanced in May 2006, as discussed under 2006 Financing Activities above;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust issued U.S. $1,500,000,000 of notes on June 8, 2005, under its Medium-Term Note Program, Series A, in two tranches:
U.S. $1,000,000,000 of 5.75% Notes due in 2015 and U.S. $500,000,000 of 6.625% Bonds due 2035, both guaranteed by Petróleos Mexicanos;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust issued U.S. $175,000,000 of floating rate notes due 2008 on August 31, 2005, bearing interest at a rate per annum
equal to LIBOR for a period of one, two, three or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | six months (at the election of the Pemex Project Funding Master Trust), plus 42.5 basis points, and guaranteed by Petróleos Mexicanos;
| | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust issued U.S. $750,000,000 of floating rate notes due 2012 on December 1, 2005, under its Medium-Term Note Program, Series A,
guaranteed by Petróleos Mexicanos and bearing interest at a rate per annum equal to LIBOR plus 60 basis points;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 6 billion in nominal terms of its publicly-traded notes denominated in Unidades de Inversión (Units of Investment, or
UDIs) in the Mexican domestic market on February 1, 2005, which were guaranteed by Petróleos Mexicanos and were issued in a reopening of an earlier issuance. The value of UDIs are calculated daily by Banco de México
based on the National Consumer Price Index;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 15 billion in nominal terms of its publicly-traded notes in the Mexican domestic market on February 11, 2005, guaranteed by
Petróleos Mexicanos, consisting of two separate tranches:
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 7.5 billion of its publicly-traded notes due February 11, 2010, bearing interest at the 91-day Cetes (Treasury bill) rate plus 51 basis points; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 7.5 billion of its publicly-traded notes due February 11, 2013, bearing interest at the 182-day Cetes rate plus 57 basis points;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 10 billion in nominal terms of its publicly-traded notes in the Mexican domestic market on May 13, 2005, which were guaranteed by
Petróleos Mexicanos and were reopenings of previous issuances, consisting of two separate tranches:
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 5,012.6 million of its publicly-traded notes due February 4, 2010, bearing interest at the 91-day Cetes (Treasury bill) rate plus 51 basis points; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 4,987.4 million of its publicly-traded notes due January 31, 2013, bearing interest at the 182-day Cetes rate plus 57 basis points;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 5,000,000,000 in nominal terms of notes in the Mexican domestic market on July 29, 2005, guaranteed by Petróleos Mexicanos;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 4,500,000,000 in nominal terms of notes due July 16, 2015, guaranteed by Petróleos Mexicanos, in the Mexican domestic market
on October 21, 2005, through a reopening of an earlier issue; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 5,500,000,000 in nominal terms of notes, guaranteed by Petróleos Mexicanos, in the Mexican domestic market on October 21,
2005.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the period from January 1 to December 31, 2005, Petróleos Mexicanos net payments on
borrowings totaled U.S. $4.5 billion and were as follows:



| |  |  | U.S. $54.9 million in respect of direct loans;
| | - |  | ----------------------------------------------



| |  |  | U.S. $151.7 million in respect of credit lines from export credit agencies;
| | - |  | ---------------------------------------------------------------------------



| |  |  | U.S. $800.0 million in respect of revolving credits;
| | - |  | ----------------------------------------------------



| |  |  | U.S. $3.4 billion in respect of bond issues;
| | - |  | --------------------------------------------



| |  |  | U.S. $38.2 million in respect of restructured debt; and
| | - |  | -------------------------------------------------------



| |  |  | U.S. $42.0 million in respect of leases.
| | - |  | ----------------------------------------

In the
period from January 1 to December 31, 2005, the Pemex Project Funding Master Trusts net payments on borrowings totaled U.S. $5.5 billion and were as follows:



| |  |  | U.S. $2.3 billion in respect of foreign trade financing;
| | - |  | --------------------------------------------------------



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| |  |  | U.S. $660.0 million in respect of project financing;
| | - |  | ----------------------------------------------------



| |  |  | U.S. $500.0 million in respect of bond issues;
| | - |  | ----------------------------------------------



| |  |  | U.S. $1.9 billion in respect of financing from commercial banks; and
| | - |  | --------------------------------------------------------------------



| |  |  | U.S. $101.2 million in respect of the Convenio de Derivación de Fondos (Transfer of Funds Agreement) with the Mexican Government.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

In the period from January 1 to December 31, 2005, Fideicomiso F/163s net payments on borrowings totaled U.S. $131.8 million and
were in respect of direct loans.

At December 31, 2005, our total indebtedness, excluding accrued interest but including notes payable
to contractors, was approximately U.S. $49.8 billion. Of this amount, U.S. $46.5 billion consisted of long-term debt, which was composed of approximately U.S. $26.2 billion in instruments with fixed annual interest rates ranging from
0.505% to 14.5% with maturities ranging from 2007 to 2035, approximately U.S. $20.3 billion at variable interest rates, of which U.S. $10.9 billion in drawings under lines of credit was based on LIBOR and other variable rates with
maturities ranging from 2007 to 2017 and U.S. $9.4 billion in floating rate notes with maturities ranging from 2007 to 2019. Short-term debt totaled approximately U.S. $3.3 billion, which included approximately U.S. $2.6 billion in lines
of credit, consisting of U.S. $1.7 billion of variable interest rate borrowings under various lines of credit established under committed credit facilities with various international commercial banks and U.S. $0.9 billion of lines of
credit with fixed interest rates.

The portion of our total debt at December 31, 2005 corresponding to borrowings of the Pemex Project
Funding Master Trust and the Fideicomiso F/163 was U.S. $42.8 billion, of which U.S. $32.9 billion consisted of borrowings of the Pemex Project Funding Master Trust and U.S. $9.9 billion consisted of borrowings of the Fideicomiso
F/163. The U.S. $42.8 billion corresponding to the borrowings of the Pemex Project Funding Master Trust and the Fideicomiso F/163 consisted of U.S. $20.8 billion in long-term debt at fixed interest rates with maturities ranging from 2007
to 2035, U.S. $19.9 billion in long-term debt with variable interest rates with maturities ranging from 2007 to 2019, and U.S. $2.1 billion in short-term debt, of which U.S. $1.5 billion consisted of variable interest rate borrowings
under various lines of credit. The Pemex Project Funding Master Trust also has U.S. $2.2 billion in short-term and long-term debt consisting of an obligation to Pemex-Exploration and Production in respect of funds allocated to the Pemex Project
Funding Master Trust relating to the sale of accounts receivables by PMI to Pemex Finance, Ltd. This amount is not reflected in our consolidated financial statements due to the offsetting effects of the consolidation of the results of both
Pemex-Exploration and Production and the Pemex Project Funding Master Trust (i.e., the effects of intercompany indebtedness are eliminated).

2004 Financing Activities. During the period from January 1, 2004 to December 31, 2004, we participated in the following financing activities:



| |  |  | Petróleos Mexicanos obtained loans from export credit agencies totaling U.S. $93.7 million;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Petróleos Mexicanos obtained direct loans denominated in Japanese yen in an amount equivalent to U.S. $120.1 million;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | on August 16, 2004, the Comisión Nacional Bancaria y de Valores(the National Banking and Securities Commission) of Mexico authorized Petróleos Mexicanos
and Fideicomiso F/163s Ps. 10 billion short-term peso-denominated publicly-traded notes (certificados bursátiles de corto plazo) program in the Mexican market. Under the program no more than Ps. 10 billion can be
outstanding at any time. Petróleos Mexicanos issued a total of Ps. 9 billion in nominal terms of its notes in the Mexican domestic market in 18 tranches during 2004; these notes have matured;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust obtained U.S. $1.4 billion in credit lines from export credit agencies;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust obtained U.S. $25.0 million in commercial bank loans;
| | - |  | --------------------------------------------------------------------------------------------



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| |  |  | the Pemex Project Funding Master Trust issued U.S. $1.5 billion of its Guaranteed Floating Rate Notes due 2010 on June 15, 2004, guaranteed by Petróleos Mexicanos;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust issued 850,000,000 of its 6.375% Guaranteed Notes due 2016 on August 5, 2004, guaranteed by Petróleos Mexicanos;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust issued U.S. $1.75 billion of its 7.75% Guaranteed Perpetual Bonds on September 28, 2004, guaranteed by Petróleos Mexicanos;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Pemex Project Funding Master Trust completed an exchange offer on December 30, 2004, pursuant to which the Pemex Project Funding Master Trust issued U.S. $158,353,000
of its 9.00% Guaranteed Notes due 2007, U.S. $399,619,000 of its 8.85% Guaranteed Notes due 2007, U.S. $439,011,000 of its 93/8% Guaranteed Notes due 2008, U.S. $324,220,000 of its 91/4% Guaranteed Bonds due
2018, U.S. $228,735,000 of its 8.625% Guaranteed Bonds due 2023, U.S. $354,477,000 of its 9.50% Guaranteed Bonds due 2027 and U.S. $403,746,000 of its 9.50% Guaranteed Puttable or Mandatory Exchangeable Securities
(POMESSM) due 2027, in exchange for an equal principal amount of corresponding 9.00% Guaranteed Notes
due 2007, 8.85% Global Guaranteed Notes due 2007, 93/8% Global Guaranteed Notes due 2008, 91/4% Global Guaranteed Bonds due 2018, 8.625% Bonds due 2023, 9.50% Global Guaranteed Bonds due 2027 and 9.50%
POMESSMdue 2027 (collectively, the old securities) issued by Petróleos Mexicanos, and pursuant
to which the Pemex Project Funding Master Trust made early participation payments totaling U.S. $5,713,665. During the second quarter of 2005, the Pemex Project Funding Master Trust delivered to Petróleos Mexicanos a portion of the old
securities acquired by it in the exchange offers in exchange for cash payments, a portion of which will be made over time, equal to the market value of the relevant old securities at the time of such delivery;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | RepCon Lux S.A. issued approximately U.S. $1.37 billion of its 4.5 per cent. Guaranteed Exchangeable Bonds due 2011; these bonds are guaranteed by Petróleos
Mexicanos, and are exchangeable for shares of common stock of Repsol or, at the option of RepCon Lux S.A., the cash equivalent thereof;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 11.5 billion in nominal terms of its publicly-traded notes in the Mexican domestic market on January 30, 2004; the notes are
guaranteed by Petróleos Mexicanos and were reopenings of earlier issuances, consisting of three separate tranches:
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 4 billion in nominal terms of its publicly-traded notes due October 18, 2007, bearing interest at the 91-day Cetes (treasury bill) rate plus 67 basis points;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 5 billion in nominal terms of its publicly-traded notes due October 8, 2009, bearing interest at the 182-day Cetes rate plus 65 basis points; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 2.5 billion in nominal terms of its 8.38% publicly-traded notes due October 14, 2010;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 14,672,000,000 in nominal terms of its publicly-traded notes in the Mexican market on March 26, 2004; the notes are guaranteed by
Petróleos Mexicanos and were reopenings of earlier issuances, consisting of three separate tranches:
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 6,000,000,000 in nominal terms of its publicly-traded notes due October 18, 2007, bearing interest at the 91-day Cetes rate plus 67 basis points;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 6,000,000,000 in nominal terms of its publicly-traded notes due October 8, 2009, bearing interest at the 182-day Cetes rate plus 65 basis points; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ps. 2,672,000,000 in nominal terms of its 8.38% publicly-traded notes due October 14, 2010;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 entered into a loan agreement in the amount of Ps. 4 billion in nominal terms on March 30, 2004, guaranteed by Petróleos Mexicanos, with a Mexican
commercial bank for use in financing PIDIREGAS;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 entered into a loan agreement in the amount of Ps. 4 billion on November 4, 2004, guaranteed by Petróleos Mexicanos, with a Mexican commercial
bank for use in financing PIDIREGAS;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Fideicomiso F/163 entered into a loan agreement in the amount of Ps. 3 billion on November 23, 2004, guaranteed by Petróleos Mexicanos, with a Mexican commercial
bank for use in financing PIDIREGAS;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 entered into a loan agreement in the amount of Ps. 4 billion on December 20, 2004, guaranteed by Petróleos Mexicanos, with a Mexican commercial
bank for use in financing PIDIREGAS; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fideicomiso F/163 issued a total of Ps. 5 billion of certificados bursátiles (publicly-traded notes) due December 5, 2019, which are denominated in UDIs, on
December 23, 2004, guaranteed by Petróleos Mexicanos, in the Mexican market.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the period from January 1
to December 31, 2004, Petróleos Mexicanos net payments on borrowings totaled U.S. $2.2 billion and were as follows:



| |  |  | U.S. $369.2 million in respect of direct loans;
| | - |  | -----------------------------------------------



| |  |  | U.S. $125 million in respect of foreign trade lines;
| | - |  | ----------------------------------------------------



| |  |  | U.S. $540 million in respect of bankers acceptances;
| | - |  | -----------------------------------------------------



| |  |  | U.S. $341.2 million in respect of credit lines from export credit agencies;
| | - |  | ---------------------------------------------------------------------------



| |  |  | U.S. $432 million in respect of commercial paper;
| | - |  | -------------------------------------------------



| |  |  | U.S. $43.8 million in respect of the short-term peso-denominated notes (certificados bursátiles de corto plazo) program;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | U.S. $218.2 million in respect of bond issues;
| | - |  | ----------------------------------------------



| |  |  | U.S. $76.1 million in respect of restructured debt; and
| | - |  | -------------------------------------------------------



| |  |  | U.S. $57.3 million in respect of leases.
| | - |  | ----------------------------------------

In the
period from January 1 to December 31, 2004, the Pemex Project Funding Master Trusts net payments on borrowings totaled U.S. $2.9 billion and were as follows:



| |  |  | U.S. $789.2 million in respect of foreign trade financing;
| | - |  | ----------------------------------------------------------



| |  |  | U.S. $533.2 million in respect of project financing;
| | - |  | ----------------------------------------------------



| |  |  | U.S. $1.3 billion in respect of financing from commercial banks; and
| | - |  | --------------------------------------------------------------------



| |  |  | U.S. $267.2 million in respect of the Convenio de Derivación de Fondos (Transfer of Funds Agreement) with the Mexican Government.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

In the period from January 1 to December 31, 2004, Fideicomiso F/163s net payments on borrowings totaled U.S. $24.7 million and were
made in respect of direct loans.

At December 31, 2004, our total indebtedness, excluding accrued interest, was approximately
U.S. $40.2 billion. Of this amount, U.S. $35.0 billion consisted of long-term debt, which was composed of approximately U.S. $21.5 billion in instruments with fixed annual interest rates ranging from 2.0% to 14.5% with maturities
ranging from 2006 to 2027, approximately U.S. $13.5 billion at variable interest rates, of which U.S. $11.4 billion in drawings under lines of credit was based on LIBOR and other variable rates with maturities ranging from 2006 to 2019,
and U.S. $2.1 billion in floating rate notes with maturities ranging from 2008 to 2010. Short-term debt totaled approximately U.S. $3.9 billion, consisting of U.S. $2.6 billion of variable interest rate borrowings under various lines
of credit established under committed credit facilities with various international commercial banks and U.S. $1.3 billion of lines of credit with fixed interest rates.

The portion of our total debt at December 31, 2004 corresponding to borrowings of the Pemex Project Funding Master Trust and the Fideicomiso F/163
was U.S. $31.5 billion, of which U.S. $26.0 billion consisted of



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borrowings of the Pemex Project Funding Master Trust and U.S. $5.5 billion consisted of borrowings of the Fideicomiso F/163. The U.S. $31.5 billion
corresponding to the borrowings of the Pemex Project Funding Master Trust and the Fideicomiso F/163 consisted of U.S. $16.1 billion in long-term debt at fixed interest rates with maturities ranging from 2006 to 2023, U.S. $12.9 billion in
long-term debt with variable interest rates with maturities ranging from 2006 to 2019, and U.S. $2.5 billion in short-term debt, of which U.S. $2.3 billion consisted of variable interest rate borrowings under various lines of credit. The
Pemex Project Funding Master Trust also had U.S. $3.5 billion in short-term and long-term debt consisting of an obligation to Pemex-Exploration and Production in respect of funds allocated to the Pemex Project Funding Master Trust relating to
the sale of accounts receivables by PMI to Pemex Finance, Ltd. This amount is not reflected in our consolidated financial statements due to the off-setting effects of the consolidation of the results of both Pemex-Exploration and Production and the
Pemex Project Funding Master Trust (i.e., the effects of intercompany indebtedness are eliminated).

The table below sets forth our
total indebtedness as of December 31 for each of the five years from 2001 to 2005.

Total Indebtedness of PEMEX



|                                                 |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       
|------------------------------------------------ |  | -------------------------------- | ------ | ------- | ----- | ------- |  | ------- | ------ | ------- | ----- | ------ |  | ----- | ------
|                                                 |  | Year Ended December 31,(1)      
|                                                 |  | 2001(2)                          |        | 2002(2) |       | 2003(2) |  | 2004(2) |        | 2005(2)
|                                                 |  | (in millions of U.S. dollars)(3)
|Domestic Debt in Various Currencies(3)           |  | U.S.$                            | 749    |         | U.S.$ | 694     |  | U.S.$   | 2,900  |         | U.S.$ | 6,530  |  | U.S.$ | 10,416
|External Debt(4)                                 |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       
|MYRA(5)                                          |  | U.S.$                            | 292    |         | U.S.$ | 224     |  | U.S.$   | 153    |         | U.S.$ | 77     |  | U.S.$ | 38    
|Other direct bank loans                          |  |                                  | 2,148  |         |       | 3,674   |  |         | 2,769  |         |       | 1,789  |  |       | 1,186 
|Securities                                       |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       
|Bonds(6)                                         |  |                                  | 8,509  |         |       | 11,515  |  |         | 16,285 |         |       | 22,133 |  |       | 25,931
|Commercial paper                                 |  |                                  | 228    |         |       | 433     |  |         | 432    |         |       |       |  |       |      
|                                                 |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       
|Total securities                                 |  |                                  | 8,737  |         |       | 11,948  |  |         | 16,717 |         |       | 22,133 |  |       | 25,931
|Trade financing(7)                               |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       
|Acceptance lines                                 |  |                                  | 785    |         |       | 785     |  |         | 540    |         |       |       |  |       |      
|Advances from commercial banks(8)                |  |                                  | 1,490  |         |       | 2,150   |  |         | 3,323  |         |       | 2,409  |  |       | 4,370 
|                                                 |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       
|Total trade financing                            |  |                                  | 2,275  |         |       | 2,935   |  |         | 3,863  |         |       | 2,409  |  |       | 4,370 
|Purchasing loans(9)                              |  |                                  | 351    |         |       | 380     |  |         | 387    |         |       | 366    |  |       | 309   
|Financial leases                                 |  |                                  | 319    |         |       | 279     |  |         | 254    |         |       | 197    |  |       | 153   
|Export credit agency loans (project finance)(10) |  |                                  | 2,282  |         |       | 2,866   |  |         | 4,636  |         |       | 5,471  |  |       | 6,322 
|Notes payable to contractors                     |  |                                  | 1,452  |         |       | 1,330   |  |         | 1,195  |         |       | 1,186  |  |       | 1,068 
|                                                 |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       
|Total external debt                              |  | U.S.$                            | 17,856 |         | U.S.$ | 23,636  |  | U.S.$   | 29,974 |         | U.S.$ | 33,628 |  | U.S.$ | 39,377
|                                                 |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       
|Total Indebtedness(2)                            |  | U.S.$                            | 18,605 |         | U.S.$ | 24,330  |  | U.S.$   | 32,874 |         | U.S.$ | 40,158 |  | U.S.$ | 49,793
|                                                 |  |                                  |        |         |       |         |  |         |        |         |       |        |  |       |       

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Figures do not include accrued interest. Accrued interest was U.S. $284 million, U.S. $331 million, U.S. $459 million, U.S. $231 million and U.S. $95
million at December 31, 2001, 2002, 2003, 2004 and 2005, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes U.S. $7.5 billion, U.S. $14.1 billion, U.S. $22.5 billion, U.S. $26.0 billion and U.S. $32.9 billion of indebtedness of the Pemex Project Funding
Master Trust as of December 31, 2001, 2002, 2003, 2004 and 2005, respectively, and U.S. $1.4 billion, U.S. $5.5 billion and U.S. $9.9 billion of indebtedness of Fideicomiso F/163 as of December 31, 2003, 2004 and 2005,
respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Indebtedness payable in currencies other than U.S. dollars was first converted into pesos for accounting purposes at the exchange rates set by Banco de México and then
converted from pesos to U.S. dollars at the following exchange rates: Ps. 9.1423 = U.S. $1.00 for 2001, Ps. 10.3125 = U.S. $1.00 for 2002, Ps. 11.236 = U.S. $1.00 for 2003, Ps.11.2648
= U.S. $1.00 for 2004 and Ps. 10.7777 = U.S. $1.00 for 2005. See Notes 3 and 9 to our consolidated financial statements included herein.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Indebtedness payable other than in pesos and owed to persons or institutions having its head office or chief place of business outside Mexico, and payable outside the territory of
Mexico.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Multi-Year Restructuring Agreement.
|--- | -----------------------------------

|(6) | Includes, in 2004 and 2005, issuance by RepCon Lux S.A. of U.S. $1.37 billion of its 4.5% Guaranteed Exchangeable Bonds due 2011 and in 2005, U.S. $2.3 billion of bonds issued
by Pemex Finance, Ltd. See Item 5Operating and Financial Review and ProspectsLiquidity and Capital Resources2005 Financing Activities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | To finance external trade of crude oil and derivatives.
|--- | -------------------------------------------------------

|(8) | Includes indebtedness of the Pemex Project Funding Master Trust of U.S. $1.0 billion in trade financing advances from commercial banks as of December 31, 2001,
U.S. $1.9 billion as of December 31, 2002, U.S. $3.2 billion as of December 31, 2003, U.S. $2.4 billion as of December 31, 2004 and U.S. $4.4 billion as of December 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | To finance imports of equipment and spare parts.
|--- | ------------------------------------------------

|(10) | Includes U.S. $2,176 million, U.S. $2,771 million, U.S. $4,529 million, U.S. $5,428 million and U.S. $6,285 million of indebtedness of the Pemex Project
Funding Master Trust as of December 31, 2001, 2002, 2003, 2004 and 2005, respectively.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Petróleos Mexicanos.
|------- | --------------------

Financing Activities of
Pemex Finance, Ltd.

Commencing December 1, 1998, Petróleos Mexicanos, Pemex-Exploration and Production, PMI and P.M.I.
Services B.V. have entered into several agreements with Pemex Finance, Ltd., a limited liability company organized under the laws of the Cayman Islands. Under these contracts, Pemex Finance, Ltd. purchases certain existing PMI accounts receivable
for crude oil as well as certain accounts receivable to be generated in the future by PMI related to crude oil. The receivables sold are those generated by the sale of Maya crude oil to designated customers in the United States, Canada and Aruba.
The net proceeds obtained by Pemex-Exploration and Production from the sale of such receivables under the agreements are utilized for PIDIREGAS expenditures. Pemex Finance, Ltd. obtains resources for the acquisition of such accounts receivable
through the placement of debt instruments in the international markets.

On July 1, 2005, we entered into an option agreement with BNP
Paribas Private Bank and Trust Cayman Limited to acquire 100% of the shares of Pemex Finance, Ltd. As a result, the financial results of Pemex Finance, Ltd., under Mexican GAAP, are consolidated into the financial statements of Petróleos
Mexicanos. Consequently, sales of accounts receivable by Pemex Finance have been reclassified as debt. The option to purchase the shares of Pemex Finance can only be exercised once its remaining debt, which was approximately U.S. $2.3 billion as of
December 31, 2005, has been redeemed.

As of December 31, 2005, the outstanding debt of Pemex Finance, Ltd. was composed of
U.S. $2.3 billion aggregate principal amount of notes with maturities ranging from 2007 to 2018 and interest rates ranging between 8.02% and 10.61%, as well as two series of floating rate notes.

2006 Financing Activities.As of May 31, 2006, Pemex Finance, Ltd. made payments of U.S. $175 million in principal of its notes. Pemex
Finance, Ltd. has not incurred any additional indebtedness during 2006.



116



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2005 Financing Activities. On June 27, 2005, Pemex Finance, Ltd. redeemed the following
series of its outstanding notes at a redemption price equal to the principal amount thereof plus accrued interest thereon and a make-whole premium:



|                     |  |                              |               
|-------------------- |  | ---------------------------- | --------------
|Series               |  | Outstanding Principal Amount
|6.55% Notes due 2008 |  | U.S. $                       | 194,117,647.07
|6.30% Notes due 2010 |  | U.S. $                       | 400,000,000.00
|7.33% Notes due 2012 |  | U.S. $                       | 250,000,000.00
|7.80% Notes due 2013 |  | U.S. $                       | 150,000,000.00

During 2005, Pemex Finance, Ltd. made payments of U.S. $305 million in principal of its
notes. On June 28, 2005, Pemex Finance, Ltd. paid U.S. $550 million plus accrued interest to Petróleos Mexicanos in connection with certain subordinated debt obligations. Pemex Finance, Ltd. did not incur any additional indebtedness
during 2005.

2004 Financing Activities. During 2004, Pemex Finance, Ltd. made payments of U.S. $344.8 million in principal of
its notes. Pemex Finance, Ltd. did not incur any additional indebtedness during 2004.

Contractual Obligations and Off-balance Sheet
Arrangements

Information about our long-term contractual obligations and off-balance sheet arrangements outstanding at
December 31, 2005 is set forth below. This information is important in understanding our financial position. In considering the economic viability of investment opportunities, we view any source of financing, for example, operating leases or
sales of future accounts receivable, as being economically equivalent to consolidated debt.

Contractual Obligations as of
December 31, 2005(1)



|                                                             |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         
|------------------------------------------------------------ |  | ----------------------------- | --------- | --------------------- | ----- | --------- |  | --------- | -------- | ------------- | ----- | -------- |  | ----- | --------
|                                                             |  |                               |           | Payment due by period
|                                                             |  | Total                         |           | Less than 1year       |       | 1-3 years |  | 4-5 years |          | After 5 years
|                                                             |  | (in millions of U.S. dollars)
|Contractual obligations recognized in balance sheet:         |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         
|Debt(2)                                                      |  | U.S.$                         | 48,572.7  |                       | U.S.$ | 2,927.9   |  | U.S.$     | 9,841.9  |               | U.S.$ | 13,790.1 |  | U.S.$ | 22,012.8
|Notes payable to contractors(2)                              |  |                               | 1,068.3   |                       |       | 243.4     |  |           | 483.8    |               |       | 341.1    |  |       |        
|Capital lease obligations(3)                                 |  |                               | 152.6     |                       |       | 82.3      |  |           | 24.4     |               |       | 22.4     |  |       | 23.5    
|Other Long-Term Liabilities:                                 |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         
|Dismantlement and abandonment costs obligations(4)           |  |                               | 1,270.8   |                       |       | 46.7      |  |           | 153.0    |               |       | 90.9     |  |       | 980.2   
|Employee benefit plans(5)                                    |  |                               | 34,855.6  |                       | U.S.$ | 1,729.7   |  | U.S.$     | 3,442.3  |               | U.S.$ | 3,780.0  |  | U.S.$ | 25,903.6
|                                                             |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         
|Total contractual obligations recognized in balance sheet    |  | U.S.$                         | 85,920.0  |                       | U.S.$ | 5,030.0   |  | U.S.$     | 13,945.4 |               | U.S.$ | 18,024.5 |  | U.S.$ | 48,920.1
|                                                             |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         
|Other contractual obligations not recognized in liabilities: |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         
|PIDIREGAS commitments(6)                                     |  |                               | 21,042.7  |                       |       | 8,797.8   |  |           | 5,305.9  |               |       | 1,542.1  |  |       | 5,396.9 
|Nitrogen supply contract(7)                                  |  |                               | 1,404.9   |                       |       | 220.0     |  |           | 362.1    |               |       | 230.5    |  |       | 592.3   
|Minimum Guaranteed Dividends(8)                              |  |                               | 392.3     |                       |       | 392.3     |  |           |         |               |       |         |  |       |        
|                                                             |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         
|Total contractual obligations not recognized in liabilities  |  | U.S.$                         | 22,839.9  |                       | U.S.$ | 9,410.1   |  | U.S.$     | 5,668.0  |               | U.S.$ | 1,772.6  |  | U.S.$ | 5,989.2 
|                                                             |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         
|Total contractual obligations                                |  | U.S.$                         | 108,759.9 |                       | U.S.$ | 14,440.1  |  | U.S.$     | 19,613.4 |               | U.S.$ | 19,797.1 |  | U.S.$ | 54,909.3
|                                                             |  |                               |           |                       |       |           |  |           |          |               |       |          |  |       |         

---

|Note: | These figures do not include accrued interest.
|----- | ----------------------------------------------

|(1) | All amounts calculated in accordance with Mexican GAAP.
|--- | -------------------------------------------------------

|(2) | See Note 9 to our consolidated financial statements included herein.
|--- | --------------------------------------------------------------------

|(3) | See Notes 9 and 20 II g. to our consolidated financial statements included herein.
|--- | ----------------------------------------------------------------------------------



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|(4) | See Notes 2h., 2i. and 7 to our consolidated financial statements included herein.
|--- | ----------------------------------------------------------------------------------

|(5) | See Note 12 to our consolidated financial statements included herein.
|--- | ---------------------------------------------------------------------

|(6) | See Note 13f. to our consolidated financial statements included herein.
|--- | -----------------------------------------------------------------------

|(7) | See Note 13c. to our consolidated financial statements included herein.
|--- | -----------------------------------------------------------------------

|(8) | See Note 15 and 20 I l. to our consolidated financial statements included herein.
|--- | ---------------------------------------------------------------------------------

As of December 31, 2005, we did not have any off-balance sheet arrangements of the type that we are required to disclose under Item 5.E of Form 20-F.

The following tables set forth information regarding the fair value of our derivative contracts in connection with natural gas trading activities as of
December 31, 2005:

Fair Value of Natural Gas Derivative Contracts(1)



|                                                                   |  |                               |          |  
|------------------------------------------------------------------ |  | ----------------------------- | -------- | -
|                                                                   |  | (in thousandsof U.S. dollars) |         
|Fair value of contracts outstanding at the beginning of the period |  | $                             | (275,582 | )
|Contracts realized or otherwise settled during the period          |  |                               | (68,377  | )
|Fair value of new contracts when entered into during the period    |  |                               | (3,781   | )
|Other changes in fair values                                       |  |                               | (107,691 | )
|                                                                   |  |                               |          |  
|Fair value of contracts outstanding at the end of the period       |  | $                             | (455,431 | )
|                                                                   |  |                               |          |  

---

|(1) | As of December 31, 2005.
|--- | ------------------------

Fair Value of Natural
Gas Derivative Contracts at Period-End by Maturity(1)



|                                          |  |                                |          |   |                   |   |                   |  |                             |  |                 |  |   |          |  
|----------------------------------------- |  | ------------------------------ | -------- | - | ----------------- | - | ----------------- |  | --------------------------- |  | --------------- |  | - | -------- | -
|Source of Fair Value                      |  | Maturityless than1 year        |          |   | Maturity1-3 years |   | Maturity4-5 years |  | Maturity inexcess of 5years |  | Total fairvalue | 
|                                          |  | (in thousands of U.S. dollars) |         
|Prices actively quoted                    |  | $                              | 21       |   |                   |   | 0                 |  | 0                           |  | 0               |  | $ | 21       |  
|Prices provided by other external sources |  | $                              | (455,940 | ) |                   | $ | 488               |  | 0                           |  | 0               |  | $ | (455,451 | )

---

|(1) | As of December 31, 2005.
|--- | ------------------------



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##### Table of Contents

Results of Operations by Business Segment

This section presents results of our operations by business segment, including our central corporate operations and the operations of the consolidated
subsidiary companies.

Revenue by Business Segment

The following table sets forth our trade and intersegment net sales revenues by business segment for the five fiscal years ended December 31, 2005 as well as the percentage change in sales revenues for the years
2003 to 2005.



|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|----------------------------------- |  | ---------------------------------------------------- | -------- | - | ------------- | --- | -------- | ------------- |  | --- | -------- | - |  | ---- | -------- | - |  | --- | -------- | - |  | ----- | - |  | ----- | --
|                                    |  | Year Ended December 31,                              |          |   | 2004 vs. 2003 |     |          | 2005 vs. 2004 | 
|                                    |  | 2001                                                 |          |   | 2002          |     |          | 2003          |  |     | 2004     |   |  | 2005 |          |   | 
|                                    |  | (in millions of constant pesos at December 31, 2005) |          |   | (%)           |     |          | (%)           | 
|Exploration and Production          |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Trade sales(1)                      |  | Ps.                                                  | 0        |   |               | Ps. | 0        |               |  | Ps. | 0        |   |  | Ps.  | 0        |   |  | Ps. | 0        |   |  | 0     |   |  | 0     |   
|Intersegment sales                  |  |                                                      | 323,550  |   |               |     | 327,412  |               |  |     | 463,736  |   |  |      | 579,693  |   |  |     | 716,287  |   |  | 25.0  |   |  | 23.6  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Total net sales                     |  | Ps.                                                  | 323,550  |   |               | Ps. | 327,412  |               |  | Ps. | 463,736  |   |  | Ps.  | 579,693  |   |  | Ps. | 716,287  |   |  | 25.0  |   |  | 23.6  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Refining                            |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Trade sales(1) (2)                  |  | Ps.                                                  | 292,080  |   |               | Ps. | 290,734  |               |  | Ps. | 309,534  |   |  | Ps.  | 326,675  |   |  | Ps. | 353,222  |   |  | 5.5   |   |  | 8.1   |   
|Intersegment sales                  |  |                                                      | 10,729   |   |               |     | 16,330   |               |  |     | 25,479   |   |  |      | 27,922   |   |  |     | 38,260   |   |  | 9.6   |   |  | 37.0  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Total net sales                     |  | Ps.                                                  | 302,809  |   |               | Ps. | 307,064  |               |  | Ps. | 335,013  |   |  | Ps.  | 354,597  |   |  | Ps. | 391,482  |   |  | 5.8   |   |  | 10.4  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Gas and Basic Petrochemicals        |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Trade sales(1)                      |  | Ps.                                                  | 79,705   |   |               | Ps. | 66,541   |               |  | Ps. | 99,523   |   |  | Ps.  | 119,917  |   |  | Ps. | 134,291  |   |  | 20.5  |   |  | 12.0  |   
|Intersegment sales                  |  |                                                      | 33,596   |   |               |     | 30,127   |               |  |     | 55,223   |   |  |      | 69,426   |   |  |     | 82,592   |   |  | 25.7  |   |  | 19.0  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Total net sales                     |  | Ps.                                                  | 113,301  |   |               | Ps. | 96,668   |               |  | Ps. | 154,746  |   |  | Ps.  | 189,343  |   |  | Ps. | 216,883  |   |  | 22.4  |   |  | 14.5  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Petrochemicals                      |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Trade sales(1)                      |  | Ps.                                                  | 11,006   |   |               | Ps. | 8,440    |               |  | Ps. | 11,855   |   |  | Ps.  | 17,385   |   |  | Ps. | 20,217   |   |  | 46.6  |   |  | 16.3  |   
|Intersegment sales                  |  |                                                      | 3,412    |   |               |     | 4,556    |               |  |     | 6,587    |   |  |      | 7,611    |   |  |     | 8,816    |   |  | 15.5  |   |  | 15.8  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Total net sales                     |  | Ps.                                                  | 14,418   |   |               | Ps. | 12,996   |               |  | Ps. | 18,442   |   |  | Ps.  | 24,996   |   |  | Ps. | 29,033   |   |  | 35.5  |   |  | 16.2  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Corporate and Subsidiary Companies  |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Trade sales(1)                      |  | Ps.                                                  | 160,922  |   |               | Ps. | 193,908  |               |  | Ps. | 258,906  |   |  | Ps.  | 335,391  |   |  | Ps. | 420,912  |   |  | 29.5  |   |  | 25.5  |   
|Intersegment sales and eliminations |  |                                                      | (371,288 | ) |               |     | (378,425 | )             |  |     | (551,025 | ) |  |      | (684,652 | ) |  |     | (845,952 | ) |  | (24.3 | ) |  | (23.6 | ) 
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Total net sales                     |  | Ps.                                                  | (210,366 | ) |               | Ps. | (184,517 | )             |  | Ps. | (292,119 | ) |  | Ps.  | (349,261 | ) |  | Ps. | (425,042 | ) |  | (19.6 | ) |  | (21.  | 7)
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   
|Total Net Sales                     |  | Ps.                                                  | 543,712  |   |               | Ps. | 559,623  |               |  | Ps. | 679,818  |   |  | Ps.  | 799,368  |   |  | Ps. | 928,643  |   |  | 17.6  |   |  | 16.2  |   
|                                    |  |                                                      |          |   |               |     |          |               |  |     |          |   |  |      |          |   |  |     |          |   |  |       |   |  |       |   

---

|Notes: | Numbers may not total due to rounding.
|------ | --------------------------------------

|(1) | Sales to external customers.
|--- | ----------------------------

|(2) | Includes IEPS tax.
|--- | ------------------

|Source: | PEMEXs financial statements.
|------- | -----------------------------



119



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##### Table of Contents

Income by Business Segment

The following table sets forth our income (loss) by business segment for each year in the four-year period ended December 31, 2005, as well as the
percentage change in income for the years 2003 to 2005.



|                                      |  |                                                      |         |   |              |     |         |              |  |     |         |   |  |     |         |   |  |         |   |  |       |  
|------------------------------------- |  | ---------------------------------------------------- | ------- | - | ------------ | --- | ------- | ------------ |  | --- | ------- | - |  | --- | ------- | - |  | ------- | - |  | ----- | -
|                                      |  | Year Ended December 31,                              |         |   | 2004vs. 2003 |     |         | 2005vs. 2004 | 
|                                      |  | 2002                                                 |         |   | 2003         |     |         | 2004         |  |     | 2005    |   |  |     |         |   |  |        
|                                      |  | (in millions of constant pesos at December 31, 2005) |         |   | (%)          |     |         | (%)          | 
|Business Segment                      |  |                                                      |         |   |              |     |         |              |  |     |         |   |  |     |         |   |  |         |   |  |       |  
|Exploration and Production            |  | Ps.                                                  | 16,931  |   |              | Ps. | 1,219   |              |  | Ps. | (14,125 | ) |  | Ps. | (18,248 | ) |  | (1258.7 | ) |  | 29.2  |  
|Refining                              |  |                                                      | (38,748 | ) |              |     | (39,369 | )            |  |     | (22,795 | ) |  |     | (53,266 | ) |  | (42.1   | ) |  | 133.7 |  
|Gas and Basic Petrochemicals          |  |                                                      | 2,522   |   |              |     | 8,352   |              |  |     | 12,040  |   |  |     | 6,682   |   |  | 44.2    |   |  | (44.5 | )
|Petrochemicals                        |  |                                                      | (13,284 | ) |              |     | (15,890 | )            |  |     | (12,725 | ) |  |     | (16,535 | ) |  | (19.9   | ) |  | 29.9  |  
|Corporate and Subsidiary Companies(1) |  |                                                      | 5,868   |   |              |     | 1,509   |              |  |     | 11,260  |   |  |     | 5,085   |   |  | 646.2   |   |  | (54.8 | )
|                                      |  |                                                      |         |   |              |     |         |              |  |     |         |   |  |     |         |   |  |         |   |  |       |  
|Total Income/(loss)                   |  | Ps.                                                  | (26,711 | ) |              | Ps. | (44,179 | )            |  | Ps. | (26,345 | ) |  | Ps. | (76,282 | ) |  | 40.4    |   |  | 189.6 |  
|                                      |  |                                                      |         |   |              |     |         |              |  |     |         |   |  |     |         |   |  |         |   |  |       |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | Includes intersegment eliminations.
|--- | -----------------------------------

|Source: | PEMEXs financial statements.
|------- | -----------------------------

2005 Compared to 2004

Exploration and Production

In 2005, Pemex-Exploration and Productions sales of crude oil and natural gas to the PMI Group increased by 22.9% in peso terms and by 32.9% in U.S. dollar terms, mainly due to an increase in crude oil export prices. The weighted
average price of crude oil sold by Pemex-Exploration and Production to the PMI Group for export was U.S. $42.61 in 2005, as compared to U.S. $31.02 in 2004. Intersegment sales increased by 23.6%, principally as a result of the increase in
crude oil export prices. The loss related to exploration and production activities increased by 29.2%, or Ps. 4,122, from a loss of Ps. 14,125 million in 2004 to a loss of Ps. 18,248 million in 2005, primarily as a result of an
increase in taxes and duties, maintenance expenses and costs related to the labor reserve.

Refining

In 2005, trade sales related to refining activities increased by 8.1%, from Ps. 326,676 million in 2004 to Ps. 353,222 million in 2005, due to
an increase in the average sales prices and volumes of our principal petroleum products. Export sales related to refining activities increased by 66.7%, from Ps. 9,673 million in 2004 to Ps. 16,128 million in 2005, as a result of increases
in sales of virgin stock. Net of the IEPS tax, domestic sales related to refining activities increased by 23.1%, from Ps. 270,147 million in 2004 to Ps. 332,608 million in 2005, principally due to an increase in the average sales prices
and volumes of our principal petroleum products. Intersegment sales increased by 37.0%, to Ps. 38,260 million, largely due to an increase in the sales volumes of liquefied petroleum gas and diesel. In 2005, the total loss related to refining
activities was Ps. 53,266 million, 133.7% more than the loss of Ps. 22,795 million in 2004. The increased loss was primarily due to increases in the average prices of our petroleum products imports, which we were not able to pass on to our
retail customers for gasoline and diesel products due to price controls imposed by the Mexican Government. See Item 5Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary CompaniesFor the
Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004Costs and Operating Expenses.

Gas and
Basic Petrochemicals

In 2005, trade sales related to the natural gas and basic petrochemical business segment increased by 12.0%, from
Ps. 119,917 million in 2004 to Ps. 134,291 million in 2005. Liquefied petroleum gas sales increased by



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14.8%, from Ps. 42,208 million in 2004 to Ps. 48,451 million in 2005, principally due to an increase in liquefied petroleum gas prices. The volume
of domestic sales of basic petrochemicals increased by 10.1% in 2005, from 931 thousand tons per year in 2004 to 1,025 thousand tons per year in 2005. Natural gas sales increased by 11.0%, from Ps. 71,631 million in 2004 to
Ps. 79,546 million in 2005, mainly due to an increase in natural gas prices and volume. Income related to natural gas and basic petrochemicals decreased by 44.5%, to Ps. 6,682 million, mainly due to an increase in expenses incurred in
connection with natural gas hedging operations.

Petrochemicals

In 2005, trade sales related to the petrochemicals business segment increased by 16.3%, from Ps. 17,384 million in 2004 to Ps. 20,217 million in
2005. Prices and volumes for petrochemicals sold domestically increased for a majority of our petrochemical products. In 2005, the volume of petrochemical exports increased by 20.5%, from 308 thousand tons in 2004 to 371 thousand tons in
2005. Losses related to petrochemical activities increased by 29.9%, from Ps. 12,725 million in 2004 to Ps. 16,535 million in 2005, mainly due to an increase in the volume of imports of vinyl chloride, ammonia and xylene.

Corporate and Subsidiary Companies

In 2005, additional marginal trade sales revenues relating to PMIs exports of crude oil and petroleum products to third parties increased by 25.5% in peso terms, from Ps. 335,391 million in 2004 to Ps. 420,912 million in
2005, as a result of increased prices of the crude oil that we exported and the strengthening of the dollar against the peso. In 2005, the trade income related to corporate and subsidiary companies, which includes the international trading
activities of the PMI Group, decreased from Ps. 11,260 million in 2004 to Ps. 5,085 million in 2005, primarily due to an increase in costs of sales and operating expenses.

2004 Compared to 2003

Exploration and Production

In 2004, Pemex-Exploration and Productions sales of crude oil and natural gas to the PMI Group increased by 27.8% in peso terms and by 27.9% in U.S.
dollar terms, mainly due to an increase in crude oil export prices. The weighted average price of crude oil sold by Pemex-Exploration and Production to the PMI Group for export was U.S. $31.02 in 2004, as compared to U.S. $24.75 in 2003.
Intersegment sales increased by 25.0%, principally as a result of the increase in crude oil export prices. Income related to exploration and production activities decreased by 1,258.7% from income of Ps. 1,219 million in 2003 to a loss of
Ps. 14,125 million in 2004, primarily as a result of an increase in taxes and duties, maintenance expenses and costs related to the labor reserve.

Refining

In 2004, trade sales related to refining activities increased by 5.5%, from
Ps. 309,534 million in 2003 to Ps. 326,676 million in 2004, due to an increase in the average sales prices and volumes of our principal petroleum products. Export sales related to refining activities decreased by 9.3%, from Ps. 10,661
million in 2003 to Ps. 9,673 million in 2004, as a result of a decrease in sales of fuel oil, due to a decrease in its production. Net of the IEPS tax, domestic sales related to refining activities increased by 30.3%, from Ps. 207,276
million in 2003 to Ps. 270,148 million in 2004, principally due to an increase in the average sales prices and volumes of our principal petroleum products. Intersegment sales increased by 9.6%, to Ps. 27,922 million, largely due to an
increase in the sales volumes of liquefied petroleum gas and diesel. In 2004, the total loss related to refining activities was Ps. 22,795 million, 42.1% less than the loss of Ps. 39,369 million in 2003. The decreased loss was primarily
due to increases in the average sales prices of our principal petroleum products.

Gas and Basic Petrochemicals

In 2004, trade sales related to the natural gas and basic petrochemical business segment increased by 20.5%, from Ps. 99,523 million in 2003 to
Ps. 119,917 million in 2004. Liquefied petroleum gas sales increased by



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10.0%, from Ps. 39,636 million in 2003 to Ps. 43,615 million in 2004, principally due to an increase in liquefied petroleum gas prices. The volume
of domestic sales of basic petrochemicals increased by 17.3% in 2004, from 794 thousand tons per year in 2003 to 931 thousand tons per year in 2004. Natural gas sales increased by 27.0%, from Ps. 56,396 million in 2003 to
Ps. 71,631 million in 2004, mainly due to an increase in natural gas prices. Income related to natural gas and basic petrochemicals increased by 44.2%, to Ps. 12,040 million, mainly due to increases in the prices of our principal products.

Petrochemicals

In
2004, trade sales related to the petrochemicals business segment increased by 46.6%, from Ps. 11,855 million in 2003 to Ps. 17,385 million in 2004. Prices and volumes of petrochemicals sold domestically increased for a majority of our
petrochemical products. In 2004, the volume of petrochemical exports increased by 5.5%, from 292 thousand tons in 2003 to 308 thousand tons in 2004. Losses related to petrochemical activities decreased by 19.9%, from Ps. 15,890
million in 2003 to Ps. 12,725 million in 2004, mainly due to an increase in sales volumes of styrene and increases in the sales prices of the majority of our principal petrochemical products.

Corporate and Subsidiary Companies

In 2004, additional marginal trade sales revenues relating to PMIs exports of crude oil and petroleum products to third parties increased by 29.5% in peso terms, from Ps. 258,906 million in 2003 to Ps. 335,391 million in
2004, as a result of increased prices of the crude oil that we exported and the strengthening of the dollar against the peso. In 2004, the trade income related to corporate and subsidiary companies, which includes the international trading
activities of the PMI Group, increased from Ps. 1,509 million in 2003 to Ps. 11,260 million in 2004, primarily due an increase in sales volumes to third parties and an increase in sales prices.

U.S. GAAP Reconciliation

Net income (loss) under
U.S. GAAP differ from net income (loss) under Mexican GAAP due to several factors, which are differences in methods of accounting for exploration and drilling costs, pension, seniority premiums and post-retirement benefit obligations, accrued
vacation, capitalized interest, impairment of fixed assets, depreciation, derivatives, profit in inventory, deferred taxes, reclassification of PEMEX Finance, Ltd. net income to minority interest and our investment in Repsol shares. The amounts of
these adjustments vary each year. For further information regarding these and other differences between Mexican and U.S. GAAP as they relate to our operating results, see Note 20 to our consolidated financial statements included herein.

Income and Equity (Deficit) under U.S. GAAP

For the year ended December 31, 2005, our net loss under U.S. GAAP was approximately Ps. 73.9 billion, representing a Ps. 2.4 billion decrease from the net loss recorded under Mexican GAAP. For the year
ended December 31, 2004, our net loss under U.S. GAAP was approximately Ps. 13.4 billion, representing a Ps. 12.9 billion decrease from the net loss recorded under Mexican GAAP. For the year ended December 31, 2003, our net loss
under U.S. GAAP was approximately Ps. 72.1 billion, representing a Ps. 27.9 billion increase from the net loss recorded under Mexican GAAP. For further detail regarding the adjustments related to these amounts, see Note 20 to our consolidated
financial statements included herein.

Our equity deficit under U.S. GAAP was approximately Ps. 112.0 billion at December 31,
2005, as compared to an equity deficit of Ps. 50.5 billion at December 31, 2004. For further detail regarding the adjustments related to these amounts, see Note 20 to our consolidated financial statements included herein.

Exploration and Drilling Costs

As of
January 1, 2004, we changed our Mexican GAAP accounting policy to the successful efforts method of accounting. Under Mexican GAAP, through 2003, we charged exploration and drilling costs to the equity reserve for exploration and depletion of
oil fields. Exploration and drilling costs related to successful oil wells



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were credited to the equity reserve and recorded as fixed assets. Cost of sales was recognized by recording a charge for each barrel of crude oil extracted
in the statement of operations and recording a credit to the equity reserve. Under U.S. GAAP, we initially capitalized the costs of drilling exploratory wells and exploratory-type stratigraphic test wells, which were subsequently charged to expense
if proved reserves were not discovered. Development costs, including the costs of drilling development wells and development-type stratigraphic test wells, were capitalized.

Pensions and Post-retirement Benefits

Seniority premium and pension plan amounts under U.S. GAAP and Mexican GAAP differ because of the different implementation dates required by Bulletin D-3 and SFAS No. 87. Under Mexican GAAP, we account for supplemental payments under
its Bulletin D-3 calculations. However, through 2003, we accounted for other health services benefits on a pay-as-you-go basis. Effective January 1, 2004, we have adopted revised Bulletin D-3 and begun to recognize a liability for
post-retirement benefits. Under U.S. GAAP, we have historically followed the guidelines of SFAS No. 106, which uses the transitional recognition method in accounting for health service and other supplemental payments provided to retirees.

Fixed Asset Adjustments



| |  |  | Capitalization of interest. For Mexican GAAP purposes, we capitalize interest to property, plant and equipment based on the total interest cost incurred on loans allocated to
construction projects, regardless of whether or not the amounts borrowed have been spent on such projects. For purposes of the U.S. GAAP reconciliation, we capitalize interest pursuant to Statement of Financial Accounting Standards No. 34,
Capitalization of Interest.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Impairment. For Mexican GAAP purposes, effective as of January 1, 2004, we adopted Bulletin C-15, Impairment and Disposal of Long-Lived Assets, which provides
specific criteria for determining when there is impairment in the value of long-lived assets for both tangible and intangible assets. Bulletin C-15 establishes a methodology for calculating and recording losses arising from the impairment of assets
and their reversal, and provides guidance for accounting, presentation and disclosure for discontinued operations. Under U.S. GAAP, SFAS No. 144 requires that we evaluate our long-lived assets for impairment whenever events or circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS No. 144 requires us to write-down impaired assets to the fair value, if available, or the discounted present value of expected future cash flows on related assets. We
measure impairment of our oil and gas producing assets based on the undiscounted estimated future cash flows associated with estimated proved reserves on a field-by-field basis. See Item 5Operating and Financial Review and
ProspectsRecently Issued Accounting Standards, for a discussion of new impairment guidance under Mexican GAAP, which became effective as of January 1, 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Derivatives

For Mexican GAAP
purposes, effective January 1, 2005, we adopted the provisions of Bulletin C-10, Derivative Financial Instruments and Hedging Operations (which we refer to as Bulletin C-10), which provides an expanded guidance for the recognition,
valuation, accounting treatment and disclosures applicable to derivative financial instruments designated as hedges and embedded derivatives. Bulletin C-10 requires that all financial instruments, with the exception of held to maturity
investments, be recorded at fair value. Held to maturity investments are recorded at amortized cost subject to an impairment review. For U.S. GAAP purposes, we apply SFAS No. 133 (as amended by SFAS No. 137, SFAS No. 138 and SFAS
No. 149), which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the consolidated balance
sheet and measure those instruments at fair value. SFAS No. 133 prescribes requirements for designation and documentation of hedging relationships and ongoing assessments of effectiveness in order to qualify for hedge accounting.



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Profit in Inventory

Under Mexican GAAP, we value crude oil and derivatives for export at net realizable value with the difference between the net realizable value and cost recorded in earnings. By contrast, U.S. GAAP requires that
inventories be recorded at net realizable cost, but not to exceed cost. For U.S. GAAP purposes, we have eliminated the effect of recognizing a profit within the inventory balance.

Other Differences

In addition to
these differences between Mexican and U.S. GAAP, other significant differences that affect our net income relate to the accounting for accrued vacation, depreciation convention and our investment in Repsol shares. See Note 20 to our consolidated
financial statements included herein.

Recently Issued Accounting Standards

New Mexican GAAP Accounting Standards

Effective January 1, 2005, PEMEX adopted the amendments to Bulletin D-3, Labor Obligations, issued by the Mexican Institute of Public Accountants (MIPA), which establishes the rules for valuation and recording
of liabilities arising from other severance payments paid to employees upon dismissal. As of January 1, 2005, the adoption of these amendments resulted in a charge of Ps. 1,322.5 million.

Effective January 1, 2005, PEMEX adopted the provisions of Bulletin C-10, Derivative Financial Instruments and Hedging Operations,
issued by the MIPA, which establishes the criteria for valuation, recording and disclosure applicable to derivative financial instruments for hedging and to embedded derivatives. As of January 1, 2005, the adoption of these amendments resulted
in the recognition of an initial cumulative charge of Ps. 442.7 million.

As of May 31, 2004, MIPA formally transferred the
function of establishing and issuing financial reporting standards to the Mexican Board for Research and Development of Financial Reporting Standards, or CINIF, consistent with the international trend of requiring this function be performed by an
independent entity.

Accordingly, MIPAs task of issuing bulletins and circulars of Mexican GAAP was transferred to CINIF, which
subsequently renamed standards of Mexican GAAP as Normas de Información Financiera (Financial Reporting Standards, or NIFs), and determined that NIFs encompass (1) new bulletins established under the new function;
(2) any interpretations issued thereof; (3) any Mexican GAAP bulletins that have not been amended, replaced or revoked by the new NIFs; and (4) International Financial Reporting Standards, or IFRS, that are supplementary guidance to
be used when Mexican GAAP does not provide primary guidance.

One of the main objectives of CINIF is to attain greater concurrence with
IFRS. To this end, it started by reviewing the theoretical concepts contained in Mexican GAAP and establishing a Conceptual Framework to support the development of financial reporting standards and to serve as a reference in solving issues arising
in the accounting practice. The Conceptual Framework is formed by eight financial reporting standards, which comprise the NIF-A series. The NIF-A series, together with NIF B-1, were issued on October 31, 2005. Their provisions are effective for
years beginning January 1, 2006, superseding all existing Mexican GAAP series A bulletins.

The most significant changes established
by these standards are as follows:



| |  |  | In addition to the statement of changes in financial position, NIF A-3 includes the statement of cash flows, which should be issued when required by a particular standard.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | NIF A-5 includes a new classification for revenues and expenses: ordinary and extraordinary. Ordinary revenues and expenses are derived from transactions or events that are within
the normal course of business or that are inherent in the entitys activities, whether frequent or not; extraordinary revenues and expenses refer to unusual transactions and events, whether frequent or not.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | NIF A-7 requires the presentation of comparative financial statements for at least with the preceding period. Through December 31, 2004, the presentation of prior years
financial statements was optional. The financial statements must disclose the authorized date for their issuance, and the names of the officers or administrative bodies authorizing the related issuance.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | NIF B-1 establishes that changes in particular standards, reclassifications and correction of errors must be recognized retroactively. Consequently, basic financial statements
presented on a comparative basis with the current year that might be affected by the change, must be adjusted as of the beginning of the earliest period presented.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At the date of issuance of these financial statements, we have not fully assessed the effects of adopting these new standards on its financial
information.

New U.S. GAAP Accounting Standards

In November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151, Inventory Costsan Amendment of ARB No. 43 (SFAS No. 151). SFAS No. 151
requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be recognized as current-period charges. It also requires that allocation of fixed production overhead to the costs of conversion be based on the
normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. PEMEX is evaluating the impact that this standard may have on its
financial position and results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 153, Exchange of Non-monetary Assets and Amendment of APB No. 29 (SFAS No. 153). SFAS No. 153 eliminates the exception to fair value for exchanges of similar productive assets outlined in APB
No. 29 and replaces it with a general exception for exchange transactions that do not have commercial substancethat is, transactions that are not expected to result in significant changes in the cash flows of the reporting
entity. SFAS No. 153 is not expected to have any impact on PEMEXs financial position or results of operations.

In March
2005, the FASB published FASB Interpretation No. 47 Accounting for Conditional Asset Retirement Obligations (FIN 47). FIN 47 clarifies that the term conditional asset retirement obligation as used in SFAS No. 143
refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Accordingly, an entity is required to
recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. Uncertainty about the timing and/or method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation.
FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005, for calendar-year enterprises such as PEMEX). Retrospective application for interim financial information is permitted but is not
required. Early adoption of this interpretation is encouraged. The adoption of FIN 47 has not had a material impact on PEMEXs financial position and results of operation.

In April 2005, the FASB issued a FASB Staff Position No. FAS 19-1 Accounting for Suspended Well Costs (FSP 19-1). The FSP 19-1
addresses the issue related to the circumstances that would permit the continued capitalization of exploratory well costs beyond one year, other than when additional exploration wells are necessary to justify major capital expenditures and those
wells are under way or firmly planned for the near future; FSP 19-1 also provides guidance on the accounting and disclosures for exploratory well costs and amends the FASB Statement No. 19, Financial Accounting and Reporting by Oil and
Gas Producing Companies (SFAS No. 19). This guidance applies to enterprises that use the successful efforts method of accounting as described in SFAS No. 19. The FSP 19-1 became effective in the first reporting period
beginning after April 4,



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2005; however early application of this guidance is permitted in periods for which financial statements have not yet been issued. The adoption of FSP 19-1
has not had a material impact on PEMEXs financial position and results of operation.

In June 2005, the FASB published SFAS
No. 154, Accounting Changes and Error Corrections a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS No. 154), which changes the requirements for the accounting for and reporting of a
change in accounting principle and redefines restatement as the revising of previously issued financial statements to reflect the correction of an error. SFAS No. 154 requires retrospective application to prior periods financial
statements of changes in accounting principle, unless it is impracticable to determine the period-specific effects of the cumulative effect of the change. This Statement also carries forward without change the guidance contained in Opinion 20
for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. This Statement does not change the transition provisions of any existing accounting pronouncement. SFAS No. 154
will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. SFAS No. 154 is not expected to have any impact on PEMEXs financial position or results of operations.

On February 16, 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Instruments (SFAS 155), which
permits, but does not require, fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation in accordance with SFAS 133. The statement also establishes a requirement
to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. The statement is effective as of
January 1, 2007, with earlier adoption permitted. PEMEX is currently evaluating the impact of the adoption of SFAS 155 on its financial position and results of operations.



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|Item 6. | Directors, Senior Management and Employees
|------- | ------------------------------------------

An eleven-member Board of Directors governs
Petróleos Mexicanos. The President of Mexico appoints six members, including the Chairman of the Board of Directors. An amendment to the Organic Law requires that the members of the Board of Directors of Petróleos Mexicanos include the
Secretary of the SEMARNAT. The President of Mexico also appoints the Director General of Petróleos Mexicanos. The Sindicato de Trabajadores Petroleros de la República Mexicana (the Petroleum Workers Union, which we refer
to as the Union) selects the remaining five directors from among our employees. Alternate directors are authorized to serve on the Board of Directors in place of directors who are unable to attend meetings or otherwise participate in the activities
of the Board. The members of the Board of Directors are not appointed for a specific term. The members of the Board of Directors, except for those members selected by the Union, serve subject to the discretion of the President of Mexico.

An eight-member board of directors governs each subsidiary entity. Each of these boards consists of the Director General of Petróleos
Mexicanos, the Director General of each of the other three subsidiary entities and four additional directors, who are each appointed by the President of Mexico. The Director General of Petróleos Mexicanos serves as Chairman of the board of
each subsidiary entity. Neither the members of the boards of directors of the subsidiary entities nor the executive officers are appointed for a specific term. The members of the boards of directors and the Directors General serve subject to the
discretion of the President of Mexico.

On August 17, 2005, the Board of Directors of Petróleos Mexicanos approved the
designation of Mr. José Néstor García Reza as General Counsel and Head of the Legal Department of Petróleos Mexicanos. On September 28, 2005, Mr. Fernando Canales Clariond was appointed Secretary of Energy
and Chairman of the Board of Directors of Petróleos Mexicanos, replacing Mr. Fernando Elizondo Barragán. On April 25, 2006, President Fox appointed Mr. Miguel Tame Domínguez as Director General of Pemex-Refining,
Mr. Carlos A. Morales Gil as Director General of Pemex-Exploration and Production and Mr. Roberto Ramírez Soberón as Director General of Pemex-Gas and Basic Petrochemicals. These designations were informed to the Board
of Directors of Petróleos Mexicanos in its meeting held on June 1, 2006.

The following tables set forth certain information
with respect to directors and executive officers of Petróleos Mexicanos and each of the subsidiary entities as of June 13, 2006.

Petróleos MexicanosDirectors and Executive Officers



|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |              
|-------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                   |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | YearAppointed
|Mr. Fernando de Jesús Canales Clariond |  | Chairman of the Board of Directors of Petróleos Mexicanos and Secretary of Energy Born: 1946  Business experience: Secretary of Economy;
Governor of the State of Nuevo León; Federal Congressman of the LIstLegislature; and Joint Director General
and Vice President of Grupo IMSA, S.A. de C.V.  Other board memberships: Banco Nacional
de Comercio Exterior, S.N.C.; Federal Electricity Commission (Chairman); Comisión Nacional del Agua; Central Light and Power (Chairman); Fondo para la Micro, Pequeña y Mediana Empresa; Consejo Nacional de Ciencia y Tecnología
(Chairman); and Nacional Financiera S.N.C. |  | 2005         



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Petróleos MexicanosDirectors and Executive Officers



|                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |              
|------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                       |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | YearAppointed
|Mr. José Luis Luege Tamargo                |  | Board Member of Petróleos Mexicanos and Secretary of the Environment and Natural Resources Born: 1953  Business experience: Federal Attorney of Environmental Protection; President of the Regional Directive Committee of the National Action Party in the Federal District; and Executive Representative in Mexico for DragadosFCC,
Spain.  Other board memberships: Federal Electricity Commission.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 2005         
|                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Mr. Luis Ernesto Derbez Bautista           |  | Board Member of Petróleos Mexicanos and Secretary of Foreign Affairs Born: 1947  Business experience: Secretary of Economy;
Independent Consultant of World Bank and Inter-American Development Bank; Responsible for regional areas of international interest of the World Bank (Chile, west and central regions of Africa, India, etc.); and Professor of Instituto
Tecnológico de Estudios Superiores de Monterrey.  Other board memberships:
Comisión Nacional de Inversiones Extranjeras; Comisión Mixta de Promoción de las Exportaciones; Comisión Ejecutiva de Turismo; Banco Nacional de Comercio Exterior, S.N.C.; Consejo General de Población;
Comité de Promoción y Apoyo al Comercio Exterior; Fondo Sectorial de Investigación of the Ministry of Foreign AffairsConsejo Nacional de Ciencia y Tecnología (Chairman); Comité Evaluador del Premio Nacional
de Exportación; Fondo de Cultura Económica; Consejo de Promoción Turística; and Consejo General de Investigación Científica y Desarrollo Tecnológico. |  | 2001         
|                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Mr. Sergio Alejandro García de Alba Zepeda |  | Board Member of Petróleos Mexicanos and Secretary of Economy Born: 1955  Business experience: Undersecretary for
Small and Medium Companies of the Ministry of Economy; Partner and Director General of Recreación y Desarrollo Infantil de México, S.A. de C.V.; Regional Vice President of Axtel, S.A. de C.V. and Secretary of Economic Promotion of the
State of Jalisco.  Other board memberships: Aeropuertos y Servicios Auxiliares; Baja
Bulk Carriers; Banco Nacional de Comercio Exterior, S.N.C.; Caminos y Puentes Federales y Servicios Conexos; Centro Nacional de Metrología (Chairman); Federal Electricity Commission, Comisión Intersecretarial de
Desincorporación; Comisión                                                                                                                                                                                                                                                                                                                                  |  | 2005         



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Petróleos MexicanosDirectors and Executive Officers



|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              
|--------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                        |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | YearAppointed
|                            |  | Intersecretarial de Desarrollo Social; Comisión Intersecretarial de Gasto-Financiamiento; Comisión Intersecretarial de Política Industrial; Comisión Intersecretarial
de Precios y Tarifas de los Bienes y Servicios de la Administración Pública Federal; Comisión Intersecretarial para la Transparecia y el Combate a la Corrupción de la Administración Pública Federal;
Comisión Nacional de Inversiones Extranjeras (Chairman); Consejo General de Investigación Científica y Desarrollo Tecnológico; Fondo para la Micro, Pequeña y Mediana Empresa (Chairman); Fondo Sectorial de Ciencia y
Tecnología para el Desarrollo Económico; Nacional Financiera, S.N.C.; Servicio Geológico Mexicano (Chairman); Telecomunicaciones de Mexico; and Transportadora de Sal, S.A. de C.V. (Chairman). |  |              
|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. Pedro Cerisola y Weber  |  | Board Member of Petróleos Mexicanos and Secretary of Communications and Transportation Born: 1949  Business experience: Advisor of President Vicente Fox; General Coordinator for Vicente Foxs Presidential Campaign; Projects and Planning of Aeropuertos y Servicios Auxiliares; and Regional Director General and Planning Director of
Teléfonos de México, S.A. de C.V.  Other board memberships: Aeropuertos y
Servicios Auxiliares (Chairman); Caminos y Puentes Federales de Ingresos y Servicios Conexos (Chairman); Telecomunicaciones de México (Chairman); Servicio Postal Mexicano (Chairman); and Banco Nacional de Obras y Servicios Públicos,
S.N.C.                                                                                                                                |  | 2001         
|                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. José Francisco Gil Díaz |  | Board Member of Petróleos Mexicanos and Secretary of Finance and Public Credit Born: 1943  Business experience: Director General of
Avantel; Director General of Economic-Finance Studies of the Ministry of Finance and Public Credit; Manager of the Organization and Information Analysis Unit of Banco de México; Director General of Revenues Policy and Undersecretary of
Revenues of the Ministry of Finance and Public Credit.  Other board memberships: Banco
del Ahorro Nacional y Servicios Financieros, S.N.C. (Chairman); Banco Nacional de Comercio Exterior, S.N.C. (Chairman); Financiera Rural (Chairman); Banco Nacional de Obras y Servicios Públicos, S.N.C. (Chairman); Casa de Moneda de
México (Chairman); Nacional Financiera, S.N.C. (Chairman); Federal Electricity       |  | 2001         



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|                                   |  |                                                                                                                                                                                                                                                                                                                              |  |              
|---------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                               |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                            |  | YearAppointed
|                                   |  | Commission; Comisión Intersecretarial de Gasto Financiamiento (Chairman); Comisión Intersecretarial de Desincorporación (Chairman); Comisión Nacional Bancaria y de
Valores; Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros (Chairman); and Comisión Nacional de Seguros y Fianzas. |  |              
|                                   |  |                                                                                                                                                                                                                                                                                                                             
|Mr. Ramón Hernández Toledo         |  | Board Member of Petróleos Mexicanos and Union Representative Born: 1937  Business experience: Federal Congressman of
the LVIIthLegislature; Supervisor A of Auxiliary Services; Chief of Cauldrons Custody and other
positions in Petróleos Mexicanos.                                                                     |  | 1992         
|                                   |  |                                                                                                                                                                                                                                                                                                                             
|Mr. Pablo Pavón Vinales            |  | Board Member of Petróleos Mexicanos and Union Representative Born: 1945  Business experience: General Secretary of
Section 10 of the Union; Labor Secretary of Section 10 of the Union; and Chairman of the General Vigilance Board of the Union.                                                                            |  | 1992         
|                                   |  |                                                                                                                                                                                                                                                                                                                             
|Mr. Luis Ricardo Aldana Prieto     |  | Board Member of Petróleos Mexicanos; Union Representative Born: 1954  Business experience: Senator of the LIXthLegislature; Treasury Secretary of the General Executive Committee of the Union; and General Secretary of Section 40 of the
Union.                                                                            |  | 2001         
|                                   |  |                                                                                                                                                                                                                                                                                                                             
|Mr. Alejandro Sánchez Narváez      |  | Board Member of Petróleos Mexicanos and Union Representative Born: 1952  Business experience: Plant Supervisor and
other positions in Petróleos Mexicanos.                                                                                                                                                                   |  | 2001         
|                                   |  |                                                                                                                                                                                                                                                                                                                             
|Mr. Mario Martínez Aldana          |  | Board Member of Petróleos Mexicanos and Union Representative Born: 1952  Business experience: Technician of Railroad
Equipment; Geographic Information Uplifting, Treasury Secretary of the Union and other positions in Petróleos Mexicanos.                                                                                |  | 2001         
|                                   |  |                                                                                                                                                                                                                                                                                                                             
|Mr. Luis Ramírez Corzo y Hernández |  | Director General / Chief Executive Officer Born:
1948  Business experience: Director General of Pemex-Exploration and Production; and
Director General of Turbinas Solar, S.A. de C.V.                                                                                                                                       |  | 2004         



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|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |              
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                               |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | YearAppointed
|                                   |  | Other board memberships: Desarrollos Inmobiliarios CUGA, S.A. de C.V. (Chairman); Repsol; Federal Electricity Commission; and Instituto Mexicano del Petróleo (Chairman).                                                                                                                                                                                                                                                                                                                                                                                                     |  |              
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Mr. Juan José Suárez Coppel        |  | Chief Financial Officer Born: 1959  Business experience: Chief of Staff of the Secretary of Finance and Public Credit; Corporate
Treasurer of Grupo Televisa; and Director of Derivatives Trading Desk of Banco Nacional de México S.A.                                                                                                                                                                                                                                                                                                                                       |  | 2001         
|                                   |  | Other board memberships: I.I.I. Servicios, S.A. de C.V.; Instalaciones
Inmobiliarias para Industrias, S.A. de C.V.; Mexicana de Lubricantes, S.A. de C.V.; and Instituto Mexicano del Petróleo.                                                                                                                                                                                                                                                                                                                                                                               |  |              
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Ms. Martha Alicia Olvera Rodríguez |  | Deputy Director of Programming and Budget Born:
1954  Business experience: Associate Managing Director of Planning and Financial
Programming of Petróleos Mexicanos; Associate Managing Director of Budget Control of Petróleos Mexicanos; and Deputy Manager of Programs Integration of Petróleos Mexicanos.                                                                                                                                                                                                                                                                 |  | 2002         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Mr. Víctor Manuel Cámara Peón      |  | Deputy Director of Financial Information Systems Born:
1943  Business experience: Advisor of the Chief Financial Officer; Director of Control
and Operational Risk of Banco Nacional de México, S.A.; Director General of Human Resources of Banco Nacional de México, S.A.; and Administrative Director of Banco Nacional de México, S.A.  Other board memberships: Intermarítima Maya, S.A. de C.V.; Grupo Roche, S.A. de C.V.;
Comercial Salinera de Yucatán, S.A. de C.V.; Infraestructura Maya Peninsular, S.A. de C.V.; and Industria Salinera de Yucatán, S.A. de C.V. |  | 2003         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Mr. Rigoberto Ariel Yépez García   |  | Deputy Director of Economic Planning Born:
1965  Business experience: General Director of Revenue and Pricing Policies of the
Ministry of Finance and Public Credit; Business Development Manager of Pemex-Gas and Basic Petrochemicals; and Deputy General Director of Pricing Policies of the Ministry of Finance and Public Credit                                                                                                                                                                                                                                         |  | 2001         



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|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |              
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                               |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                                                                                   |  | YearAppointed
|Mr. Esteban Levín Balcells         |  | Deputy Director of Finance and Treasury Born:
1972  Business experience: Chief of Staff of the Corporate Financial Office of
Petróleos Mexicanos; Acting Deputy Director of the Financial Information Systems of Petróleos Mexicanos; and Associate Consultant and Engagement Manager of McKinsey & Co.                                                                                                                             |  | 2005         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. José Manuel Carrera Panizzo    |  | Deputy Director of Risk Management Born: 1969
 Business experience: Manager of Foreign Exchange, Metals, Coins and International Agreements of
Banco de México; Research Officer of Markets Analysis and Evaluation of Banco de México; and Foreign Exchange Analyst of Banco de México  Other board memberships: MGI Trading, Ltd. (Vice President); MGI Enterprises, Ltd. (Vice President); and MGI Supply Ltd. (Vice President). |  | 2001         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. Rosendo Villarreal Dávila      |  | Corporate Director of Management. Born: 1942
 Business experience: Head of the Internal Control Body of the SFP; Senator of the LVIthand LVIIthLegislature; and Mayor of Saltillo, State of Coahuila.  Other
board memberships: Transportes Villarreal Berlanga, S.A. de C.V.                                                                                                                                                       |  | 2005         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. Lamberto Alonso Calderón       |  | Deputy Director of Labor Relations Born: 1953
 Business experience: Advisor A of the Deputy Director of Finance and Management of
Pemex-Refining; Chief of Commercial Performance and Control Procedures Unit of Pemex-Refining; and Chief of Management Unit of Pemex Refining.                                                                                                                                                  |  | 2005         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. José Néstor García Reza        |  | General Counsel and Head of the Legal Department Born:
1965  Business experience: Head of Legal Advising Office of Pemex-Exploration and
Production; Chief of the Legal Unit of Pemex-Exploration and Production; and Legal Director of Banca Quadrum, S.A.                                                                                                                                                                         |  | 2005         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. José Salazar Ilarregui Ruffino |  | Deputy Director of Corporate Services Born:
1952  Business experience: Technical Director of Telecomunicaciones de México of
the Ministry of Communications and Transportation; Vice President of                                                                                                                                                                                                                                   |  | 2005         



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|                                    |  |                                                                                                                                                                                                                                                                                                                                                                       |  |              
|----------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                     |  | YearAppointed
|                                    |  | Technology and Information of Corporación Novavisión S. de R.L.; and Director of Technology of Cablevisión, S.A. de C.V.                                                                                                                                                                                                                                              |  |              
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                      
|Mr. Víctor Manuel Vázquez Zárate    |  | Deputy Director of Health Services (formerly named Deputy Director of Medical Services) Born: 1943  Business experience: Associate Managing
Director of Medical Services of Petróleos Mexicanos; Administrative Deputy Manager of Petróleos Mexicanos; and Director of Central Sur Hospital of Petróleos Mexicanos.                                                   |  | 2000         
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                      
|Mr. Marco Antonio Murillo Soberanis |  | Deputy Director of Human Resources Born: 1959
 Business experience: Corporate Manager of Human Resources of Petróleos Mexicanos; Chief of
Planning and Evaluation Unit of Petróleos Mexicanos and Project Leader of Petróleos Mexicanos.                                                                                                                              |  | 2005         
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                      
|Ms. Claudia Peralta Alday           |  | Acting Deputy Director of Supplies Born: 1959
 Business experience: Advisor of the Director General of Pemex-Gas and Basic Petrochemicals;
Associate Managing Director of Material Resourses of Pemex-Gas and Basic Petrochemicals; and Technical Coordinator of Projects of Pemex-Gas and Basic Petrochemicals.                                                      |  | 2006         
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                      
|Mr. Emilio del Bosque González      |  | Deputy Director of Patrimony Management Born:
1947  Business experience: Strategy and Negotiations Consultant; Corporate Director of
Supplying of Grupo Industrial Saltillo, S.A. de C.V.; and Director of Purchases of CIFUNSA, S.A. de C.V.  Other board memberships: Instalaciones Inmobiliarias para Industrias, S.A. de C.V.; and I.I.I. Servicios, S.A. de C.V. |  | 2005         
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                      
|Mr. Marcos Ramírez Silva            |  | Corporate Director of Operations Born: 1957
 Business experience: Director General of Pemex-Gas and Basic Petrochemicals; Deputy Director of
Liquefied Gas and Basic Petrochemicals of Pemex-Gas and Basic Petrochemicals; and Deputy Director of Planning and Operative Control of Pemex-Gas and Basic Petrochemicals.                                               |  | 2005         



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|                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |              
|--------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                              |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | YearAppointed
|Mr. Vicente Córdova Rayas         |  | Deputy Director of Business Process and Technological Infrastructure (formerly named Deputy Director of Investment Projects) Born: 1955  Business experience: Associate Managing Director of Competence Center of Petróleos Mexicanos; Head of Continuous Improvement of Pemex-Gas and Basic Petrochemicals; and Coordinator of Advisors of the Deputy Director of Natural Gas of
Pemex-Gas and Basic Petrochemicals.                                                                       |  | 2005         
|                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mr. Guillermo Ruiz Gutiérrez      |  | Deputy Director of Strategy and Operative Planning (formerly named Deputy Director of Operation Evaluation) Born: 1959  Business experience: Associate Managing Director; Manager; and Superintendent of Petróleos Mexicanos.                                                                                                                                                                                                                                                               |  | 2004         
|                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mr. Alejandro Martínez Sibaja     |  | Deputy Director of Operations and Strategy Execution (formerly named Deputy Director of Operations Coordination) Born: 1956  Business experience: Commercial Associate Managing Director of Transportation of Pemex-Gas and Basic Petrochemicals; Associate Managing Director of Programming and Analysis of Pemex-Gas and Basic Petrochemicals; and Associate Managing
Director of Operations of PMI.                                                                                      |  | 2005         
|                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mr. Constantino Fernández Cabrera |  | Deputy Director of Operative Discipline, Safety, Health and Environmental Protection (formerly named Deputy Director of Industrial Safety and
Environmental Protection) Born: 1938  Business experience: Executive Coordinator of the Director General of Pemex-Gas and Basic Petrochemicals; Associate Managing Director of Liquified Gas Trading of
Pemex-Gas and Basic Petrochemicals; and Associate Managing Director of Pipelines and Terminals of Pemex-Gas and Basic Petrochemicals. |  | 2005         
|                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mr. Mario Nieto Garza             |  | Acting Deputy Director of Pipeline Transportation System Coordination Born: 1955  Business experience: Associate Managing
Director of Daily Operation Tracking of Petróleos Mexicanos; Associate Managing Director of Maintenance of Pemex-Gas and Basic Petrochemicals; and General Superintendent of Pipelines in Monterrey of Pemex-Gas and Basic
Petrochemicals.                                                                                                                        |  | 2006         



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|                                     |  |                                                                                                                                                                                                                                                                                                                                                                           |  |              
|------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                 |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                         |  | YearAppointed
|Mr. Federico Alberto Martínez Salas  |  | Corporate Director of Engineering and Project Development Born: 1943  Business experience: Deputy Director of Engineering and Strategic
Works Development of Pemex-Exploration and Production; Executive Director of Cantarell Project; and Deputy Director of Primary Production Projects of Petróleos Mexicanos.                                                        |  | 2005         
|                                     |  |                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Ernesto Ríos Montero             |  | Deputy Director of Engineering Born: 1936  Business experience: Director of Consultoría Empresarial Ejecutiva, S.A. de C.V.; Executive
Vice President of Operations of Grupo Bufete Industrial, S.A.; Vice President of Engineering of Grupo Bufete Industrial, S.A.  Other board memberships: Instituto Mexicano del Petróleo (Alternate).                               |  | 2001         
|                                     |  |                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Pedro Ismael Hernández Delgado   |  | Acting Deputy Director of Maintenance Coordination Born:
1957  Business experience: Associate Managing Director of Tracking the Industrial Safety
and Environmental Protection System of Petróleos Mexicanos; Associate Managing Director of Refineries Maintenance of Pemex-Refining; and Associate Managing Director of Infrastructure Development of Pemex-Refining.   |  | 2006         
|                                     |  |                                                                                                                                                                                                                                                                                                                                                                          
|(Vacant)                             |  | Deputy Director of Planning, Evaluation and Control Coordination                                                                                                                                                                                                                                                                                                          |  |              
|                                     |  |                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Franciso Guillermo Iturbide Ruiz |  | Deputy Director of Contracts (formerly named Deputy Director of Contracting) Born: 1951  Business experience: Associate Managing
Director of Contracts of Pemex-Exploration and Production; Associate Managing Director of Management and Services of Pemex-Exploration and Production; and Deputy Manager of Biddings and Contracts of Pemex-Exploration and Production. |  | 2005         



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|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |              
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------
|Name                           |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | YearAppointed
|Mr. Genaro Ceballos Bravo      |  | Deputy Director of Industrial Plants Projects Born:
1956  Business experience: Associate Managing Director of Projects C of
Petróleos Mexicanos; Associate Managing Director of Projects and Construction of Pemex-Gas and Basic Petrochemicals and Vice President of Projects of P.M.I. Holdings North America, Inc.                                                                                                                                                              |  | 2005         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Mr. Gregorio Guerrero Pozas    |  | Head of the Internal Control Body Born: 1947
 Business experience: Head of the Internal Control Body of the Comisión Nacional Bancaria y
de Valores; General Auditor of the Federation; and General Treasurer of the Chamber of Deputies in the LVIIIthLegislature.                                                                                                                                                                                                                  |  | 2005         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Mr. Federico Domínguez Zuloaga |  | Head of Liabilities Area and Head of Complaints Area Born: 1959  Business experience: Deputy Manager of Coercive Collection of the
Ministry of Finance and Public Credit; Advisor of Political Parties of the Instituto Federal Electoral; and Chief of Loan Services for the Fondo para la Vivienda del Instituto de Seguridad y Servicios Sociales de los Trabajadores del
Estado.                                                                                                 |  | 2001         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Mr. Benjamín Hedding Galeana   |  | Head of Control and Evaluation Auditing and Support to Good Government (formerly named Head of Control and Evaluation Auditing) Born: 1945  Business experience: Head of Control and Evaluation Auditing and Support to Good Government of the Comisión Nacional Bancaria y de Valores; Coordinator of the Colonial Cities and Urban Centers Program of the Ministry of Tourism; and
Chief Executive Officer of Electric Transportation Services of the Federal District Department. |  | 2005         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Mr. Héctor Aguiñaga Pérez      |  | Head of the Internal Auditing Area (formerly named Head of the Auditing Area) Born: 1950  Business experience: National Director of
Management Assurance Services of KPMG Cárdenas Dosal, S.C.; General Auditor of Pan-American Beverages, Inc.; and General Auditor of Sears Roebuck, S.A. de C.V.                                                                                                                                                                                  |  | 2004         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(Vacant)                       |  | Coordinator of Advisors of the Director General                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |              



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|                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                              |  |              
|--------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------
|Name                              |  | Position with Petróleos Mexicanos                                                                                                                                                                                                                                                                                                                                                                            |  | YearAppointed
|Mr. Luis Kaím Gebara              |  | Executive Coordinator to the Director General Born:
1941  Business experience: General Coordinator of Social Communication of the State of
Hidalgo; General Coordinator of Social Communication of Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado; and Corporate Director of Broadcast and Computing of Liconsa, S.A. de C.V.                                                    |  | 2005         
|                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|Mr. Moisés Ithuriel Orozco García |  | Executive Advisor to the Director General Born:
1968  Business experience: Acting Executive Coordinator of the Director General Office
of Petróleos Mexicanos; Corporate Director of Management of Petróleos Mexicanos; Associate Managing Director of Strategic Planning of Petróleos Mexicanos; and Coordinator of Advisors of the Director General of
Pemex-Petrochemicals.                               |  | 2004         
|                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|Mr. Raoul Capdevielle Orozco      |  | Technical Secretary of the Director General Born:
1943  Business experience: Deputy Comptroller of Liabilities of Petróleos
Mexicanos; Legal Coordinator of Instalaciones Inmobiliarias para Industrias, S.A. and I.I.I. Servicios, S.A. de C.V.; and Legal Director of Concessions of Triturados Balsáticos y Derivados, S.A. de C.V. Other board memberships: Instituto Mexicano del Petróleo (Secretary). |  | 2001         

|                                                                  |  |                                                                                                |  |              
|----------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | -------------
|Pemex-Exploration and ProductionDirectors
and Executive Officers
|Name                                                              |  | Position with Pemex-Exploration and Production                                                 |  | YearAppointed
|Mr. Luis Ramírez Corzo y Hernández                                |  | Chairman of the Board of Pemex-Exploration and Production (refer to Petróleos Mexicanos)       |  | 2004         
|                                                                  |  |                                                                                               
|Mr. Miguel Tame Domínguez                                         |  | Board Member of Pemex-Exploration and Production (refer to Pemex-Refining)                     |  | 2006         
|                                                                  |  |                                                                                               
|Mr. Roberto Ramírez Soberón                                       |  | Board Member of Pemex-Exploration and Production (refer
to Pemex-Gas and Basic Petrochemicals) |  | 2006         
|                                                                  |  |                                                                                               
|Mr. Rafael Beverido Lomelín                                       |  | Board Member of Pemex-Exploration and Production (refer to Pemex-Petrochemicals)               |  | 2001         
|                                                                  |  |                                                                                               
|Mr. Juan José Suárez Coppel                                       |  | Board Member of Pemex-Exploration and Production (refer to Petróleos Mexicanos)                |  | 2002         



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|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |              
|---------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                         |  | Position with Pemex-Exploration and Production                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | YearAppointed
|Mr. Carlos Hurtado López     |  | Board Member of Pemex-Exploration and Production and Undersecretary of Disbursements of the Ministry of Finance and Public Credit Born: 1955  Business experience: Coordinator of Advisors for Political, Economic and Social Matters in the Presidency; Mexicos Representative to the Organization for Economic Cooperation and Development; General Coordinator of Fondo Nacional de
Apoyo a Empresas de Solidaridad; and Director General of Economic and Social Policy.  Other board memberships: Aeropuertos y Servicios Auxiliares; Ferrocarriles Nacionales de México; Federal Electricity Commission; and Central Light and Power.                                                                                                                    |  | 2001         
|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Mr. Héctor Moreira Rodríguez |  | Board Member of Pemex-Exploration and Production and Undersecretary of Hydrocarbons of the Ministry of Energy Born: 1946  Business experience: Undersecretary of Energy Planning and Technology Development of the Ministry of Energy; Vice President for Innovation and Development of Instituto Tecnológico de Estudios Superiores de Monterrey; and Head of the
Strategic Planning Unit of the Mexican Presidency.  Other board memberships:
Instalaciones Inmobiliarias para Industrias, S.A. de C.V.; Instituto Mexicano del Petróleo; Comisión Nacional para el Ahorro de Energía; Subcomité de Coberturas Petroleras of Instituto Mexicano de Transporte;
Comité Técnico del Fideicomiso Patrimonial; and Centro de Investigación y Docencia Económica. |  | 2004         
|                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Mr. Salvador Ortiz Vértiz    |  | Board Member of Pemex-Exploration and Production and General Coordinator of Mining of the Ministry of Economy Born: 1949  Business experience: Assistant Director and Deputy Director of Sectorial Studies for Grupo Financiero Banamex-Accival, S.A.; and Senior Advisor to the Energy Sector and Basic Industries of Grupo Financiero Banamex-Accival, S.A  Other board memberships: Servicio Geológico Mexicano (Alternate Chairman); Fideicomiso de
Fomento Minero (Alternate Chairman); Exportadora de Sal, S.A. de C.V. (Alternate Chairman); and Transportadora de Sal, S.A. de C.V. (Alternate Chairman).                                                                                                                                              |  | 2002         



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|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                             |  |              
|------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                           |  | Position with Pemex-Exploration and Production                                                                                                                                                                                                                                                                                                                                                                              |  | YearAppointed
|Mr. Carlos Arnoldo Morales Gil |  | Director General Born: 1954  Business experience: Deputy Director of Planning and Evaluation of Pemex-Exploration and Production;
Deputy Director (Southern region) of Pemex-Exploration and Production; and Associate Managing Director of Planning of Pemex-Exploration and Production.                                                                                                                                   |  | 2006         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mr. Sergio Aceves Borbolla     |  | Deputy Director of Engineering and Strategic Works Development Born: 1959  Business experience: Associate Managing Director of Projects
(Northeastern Marine region) of Petróleos Mexicanos; Associate Managing Director of Construction of Pemex-Exploration and Production; and Head of Transition Projects of Pemex-Exploration and Production.                                                                          |  | 2005         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mr. Vinicio Suro Pérez         |  | Deputy Director of Planning and Evaluation. Born:
1956  Business experience: Associate Managing Director of Hydrocarbon Reserves of
Pemex-Exploration and Production; member of the Planning Group of Pemex-Exploration and Production; and Chief of the Hydrocarbon Reserves Unit of Pemex-Exploration and Production.                                                                                                     |  | 2006         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mr. J. Javier Hinojosa Puebla  |  | Deputy Director (Northeastern Marine region) Born:
1958  Business experience: Coordinator of the Executive Commercial Operative
Coordination of Pemex-Exploration and Production; Associate Managing Director of Analysis and of Technical Operative Evaluation (Southern region) of Pemex-Exploration and Production; and Associate Managing Director of Production (Southern region) of
Pemex-Exploration and Production. |  | 2003         
|                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mr. Alfredo E. Guzmán Baldizán |  | Deputy Director (Northern region) Born: 1947
 Business experience: Executive Coordinator of Exploration Strategies; Associate Managing Director
of Planning (Northern region); and Associate Managing Director of Exploration (Northern region) of Pemex-Exploration and Production.                                                                                                                                        |  | 2003         



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|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                            |  |              
|--------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------
|Name                                    |  | Position with Pemex-Exploration and Production                                                                                                                                                                                                                                                                                                                                             |  | YearAppointed
|Mr. Jesús Hernández San Juan            |  | Deputy Director of Operations and Trading Born:
1955  Business experience: Associate Managing Director of Transport and Distribution of
Hydrocarbons of Pemex-Exploration and Production; Deputy Manager of Transport and Distribution of Gas and Condensates of Pemex-Exploration and Production; and Chief of the Compression Systems Department of Pemex-Exploration and
Production.    |  | 2006         
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|Mr. Rogelio Bartolomé Morando Sedas     |  | Deputy Director of Industrial Safety, Environmental Protection and Quality. Born: 1946  Business Experience: Advisor of the
Corporate Director of Industrial Safety and Environmental Protection of Petróleos Mexicanos; Director General of Industrias Tecnos S.A. de C.V.; and Plant Manager of Dupont S.A. de C.V.                                                                      |  | 2003         
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|Mr. Teódulo Gutiérrez Acosta            |  | Deputy Director (Southern region) Born: 1944
 Business Experience: Deputy Director of Human Resources, Competitiveness and Innovation of
Pemex-Exploration and Production; Associate Managing Director of Professional Development of Pemex-Exploration and Production; and Associate Managing Director of Technological Development of Production of Pemex-Exploration and
Production.    |  | 2005         
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|Mr. Manuel de Jesús Alegría Constantino |  | Deputy Director of Marine Services Coordination Born:
1951  Business experience: Associate Managing Director of Supply Strategies of
Pemex-Exploration and Production; Acting Associate Managing Director of Management and Finance (Northern region) of Pemex-Exploration and Production; and Deputy Manager of Material Resources (Northern region) of Pemex-Exploration and
Production. |  | 2006         
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|Mr. Jorge Collard de la Rocha           |  | Deputy Director of Management and Finance Born:
1951  Business experience: Acting Deputy Director of Supplies of Petróleos
Mexicanos; Chief Financial Officer of Banco Nacional de Obras y Servicios Públicos, S.N.C. and Director General of Programming and Budget of Energy and Infrastructure of the Ministry of Finance and Public Credit.                                            |  | 2005         
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|Mr. Ricardo Palomo Martínez             |  | Deputy Director of Drilling and Well Maintenance Unit Born: 1954  Business experience: Deputy Director (Southwestern Marine region)
of Pemex-Exploration and Production, Manager of Burgos Production Asset of Pemex-Exploration and Production; and Associate Managing Director of Integral
Project of Burgos basin.                                                                      |  | 2005         



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|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                 |  |              
|-------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                   |  | Position with Pemex-Exploration and Production                                                                                                                                                                                                                                                                                                                                  |  | YearAppointed
|Mr. Luis Sergio Guaso Montoya          |  | Deputy Director of New Models of Execution Born:
1963  Business Experience: Associate Managing Director of Economic Analysis of
Pemex-Exploration and Production; Associate Managing Director of Investment Resources of Pemex-Exploration and Production; Economic Advisor of P.M.I. Holdings North America, Inc.                                                              |  | 2003         
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                
|Mr. Francisco Javier Barraza Rodríguez |  | Deputy Director of Technology Information Coordination Born: 1943  Business experience: Technical Support on Documental Technology of
ImaxServ; Director of Administrative Systems of Scotiabank Inverlat, S.A.; and External Consultant on Administrative Systems of Banco Nacional de México, S.A.                                                                            |  | 2003         
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                
|Mr. Pedro Silva López                  |  | Deputy Director (Southwestern Marine region) Born:
1953  Business experience: Deputy Director of Operations Coordination of
Petróleos Mexicanos; Executive Director of Strategic Gas Program of Pemex-Exploration and Production; and Associate Managing Director of Strategic Planning of Pemex-Exploration and Production.                                                    |  | 2005         
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                
|Mr. Héber Cinco Ley                    |  | Deputy Director of Technical Coordination of Exploitation Born: 1946  Business Experience: Director General of Asesoría y
Servicios Petroleros S.A. de C.V.; Director General of Consultoría y Servicios en Ingeniería Petrolera, S.A. de C.V.; and Director General of Aspetrol Testing.                                                                                       |  | 2003         
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                
|Mr. Adán Ernesto Oviedo Pérez          |  | Deputy Director of Technical Coordination of Exploration Born: 1956  Business Experience: Associate Managing Director of Diagnosis and
Risk Analysis of Pemex-Exploration and Production; Manager of Salina del Istmo Exploration Asset; and Assistant Well Geologist of Pemex-Exploration and Production.                                                                      |  | 2003         
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                
|Mr. José Aurelio Loyo Fernández        |  | Deputy Director of Human Resources, Competitiveness and Innovation Born: 1951  Business experience: Associate Managing
Director of Operative Planning of Pemex-Exploration and Production; Associate Managing Director of Investment Evaluation in Exploration of Pemex-Exploration and Production; and Asset Manager of Muspac Production of Pemex-Exploration and
Production. |  | 2006         



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Pemex-Exploration and ProductionDirectors and Executive Officers



|                               |  |                                                                                                                                                                                                                                                              |  |              
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------
|Name                           |  | Position with Pemex-Exploration and Production                                                                                                                                                                                                               |  | YearAppointed
|Mr. Jorge Javier Ramos Negrete |  | Head of the Internal Control Body Born: 1949
 Business Experience: Head of the Internal Control Body at the Procuraduría Federal del
Consumidor; Treasurer of Ciudad Juárez, State of Chihuahua; and Partner and Director of Ramos Negrete y Asociados, S.C. |  | 2003         

|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |              
|----------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Pemex-RefiningDirectors and Executive
Officers
|Name                                            |  | Position with Pemex-Refining                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | YearAppointed
|Mr. Luis Ramírez Corzo y Hernández              |  | Chairman of the Board of Pemex-Refining (refer to Petróleos Mexicanos)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 2004         
|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Roberto Ramírez Soberón                     |  | Board Member of Pemex-Refining (refer to Pemex-Gas and Basic Petrochemicals)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 2006         
|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Carlos A. Morales Gil                       |  | Board Member of Pemex-Refining (refer to Pemex-Exploration and Production)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 2006         
|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Rafael Beverido Lomelín                     |  | Board Member of Pemex-Refining (refer to Pemex Petrochemicals)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 2001         
|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Carlos Hurtado López                        |  | Board Member of Pemex-Refining (refer to Pemex-Exploration and Production)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 2001         
|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Héctor Moreira Rodríguez                    |  | Board Member of Pemex-Refining (refer to Pemex-Exploration and Production)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 2004         
|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Mr. Federico Alberto Martínez Salas             |  | Board Member of Pemex-Refining (refer to Petróleos Mexicanos)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | 2005         
|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Ms. María del Rocío Ruiz Chávez                 |  | Board Member of Pemex-Refining and Undersecretary of Industry and Trade of the Ministry of Economy Born: 1943  Business experience: Director General of Foreign Trade of the Ministry of Economy; Director of Agrarian-Industrial Promotion of the Ministry of Economy; and Director of Export Programs of the Ministry of Economy.  Other board memberships: Comité Técnico del Fideicomiso del Premio Nacional de
Exportación (Alternate); Consejo Técnico de Apoyos y Servicios a la Comercialización; Comisión Intersecretarial de Desincorporación (Alternate); Comité Interinstitucional para la Aplicación del
Estímulo Fiscal y la Investigación y Desarollo de Tecnología; Instituto Nacional de las Mujeres (Alternate); BIRMEX (Laboratorios Biológicos y Reactivos de México); and Consejo Directivo del Sistema Integral
Tiendas y Farmacias del Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado. |  | 2006         



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|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                     |  |              
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                         |  | Position with Pemex-Refining                                                                                                                                                                                                                                                                                                                                                                        |  | YearAppointed
|Mr. Miguel Tame Domínguez                    |  | Director General Born: 1946  Business experience: Deputy Director of Production of Pemex-Refining; Associate Managing Director of
Refinería Miguel Hidalgo; and Associate Managing Director of Refinería Gral. Lázaro Cárdenas del Río.                                                                                                                                                             |  | 2006         
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. Carlos Pani Espinosa                     |  | Deputy Director of Trading Born: 1947  Business experience: Deputy Director of Trading of Pemex-Petrochemicals; Director General of C.P.
Estrategia y Servicios, S.A. de C.V.; and Director General of Dermet, S.A. de C.V.                                                                                                                                                                         |  | 2003         
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. Pedro Carlos Gómez Flores                |  | Deputy Director of Storage and Distribution Born:
1951  Business experience: Deputy Director of Organization Development of
Petróleos Mexicanos; Deputy Director of Sectorial Relations of Petróleos Mexicanos; and Deputy Director of Strategic Planning of Petróleos Mexicanos.                                                                                                                   |  | 2004         
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. José Antonio Gómez Urquiza de la Macorra |  | Deputy Director of Finance and Management Born:
1951  Business experience: Director General of Cámara de la Industria del Hierro
y del Acero; Deputy Delegate of Management of Delegación Benito Juárez; and Director General of Trichem de México, S.A. de C.V.                                                                                                                                    |  | 2003         
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. Manuel Betancourt García                 |  | Deputy Director of Planning, Coordination and Evaluation Born: 1947  Business experience: Director General of Industrial Development of
Hydrocarbons of the Ministry of Energy; Director General of Policy and Energy Development of the Ministry of Energy; Coordinator of Advisors of the General Administrative Officer of the Ministry of Commerce and Industrial
Development.                  |  | 2003         
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|Mr. Juan Daniel Gómez Bilbao                 |  | Deputy Director of Industrial Safety and Environmental Protection Auditing Born: 1948  Business experience: Associate Managing
Director of Evaluation of Petróleos Mexicanos; Deputy Director of Training and Technical Services of Instituto Mexicano del Petróleo; and Deputy Director of Research and Technological Development in Industrial Transformation of
Instituto Mexicano del Petróleo. |  | 2001         



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Pemex-RefiningDirectors and Executive Officers



|                                       |  |                                                                                                                                                                                                                                                                                                                           |  |              
|-------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                   |  | Position with Pemex-Refining                                                                                                                                                                                                                                                                                              |  | YearAppointed
|Mr. Francisco Gabriel Toscano Martínez |  | Deputy Director of Production Born: 1949  Business experience: Associate Managing Director of Francisco I. Madero Refinery of
Pemex-Refining; Associate Managing Director of Héctor R. Lara Sosa Refinery of Pemex-Refining; and Regional Associate Managing Director of Miguel Hidalgo Refinery of Pemex-Refining. |  | 2006         
|                                       |  |                                                                                                                                                                                                                                                                                                                          
|Mr. Enrique Quiroz Acosta              |  | Head of the Internal Control Body Born: 1962
 Business experience: Head of the Internal Control Body of PMI; Head of the Internal Control Body
of the Ministry of Social Development; and General Manager of the Federal Bureau of Justice.                                                                               |  | 2006         



|                                                                    |  |                                                                                                |  |              
|------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | -------------
|Pemex-Gas and Basic PetrochemicalsDirectors and Executive Officers
|Name                                                                |  | Position with Pemex-Gas and Basic Petrochemicals                                               |  | YearAppointed
|Mr. Luis Ramírez Corzo y Hernández                                  |  | Chairman of the Board of Pemex-Gas and Basic Petrochemicals (refer to Petróleos Mexicanos)     |  | 2004         
|                                                                    |  |                                                                                               
|Mr. Carlos A. Morales Gil                                           |  | Board Member of Pemex-Gas and Basic Petrochemicals (refer to Pemex-Exploration and Production) |  | 2006         
|                                                                    |  |                                                                                               
|Mr. Miguel Tame Domínguez                                           |  | Board Member of Pemex-Gas and Basic Petrochemicals (refer to Pemex-Refining)                   |  | 2006         
|                                                                    |  |                                                                                               
|Mr. Rafael Beverido Lomelín                                         |  | Board Member of Pemex-Gas and Basic Petrochemicals (refer to Pemex-Petrochemicals)             |  | 2001         
|                                                                    |  |                                                                                               
|Mr. Carlos Hurtado López                                            |  | Board Member of Pemex-Gas and Basic Petrochemicals (refer to Pemex-Exploration and Production) |  | 2001         
|                                                                    |  |                                                                                               
|Mr. Héctor Moreira Rodríguez                                        |  | Board Member of Pemex-Gas and Basic Petrochemicals (refer to Pemex-Exploration and Production) |  | 2004         
|                                                                    |  |                                                                                               
|Mr. Juan José Súarez Coppel                                         |  | Board Member of Pemex-Gas and Basic Petrochemicals (refer to Petróleos Mexicanos)              |  | 2002         



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Pemex-Gas and Basic PetrochemicalsDirectors and Executive Officers



|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |              
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                               |  | Position with Pemex-Gas and Basic Petrochemicals                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | YearAppointed
|Mr. Alejandro Dieck Assad          |  | Board Member of Pemex-Gas and Basic Petrochemicals and Undersecretary of Energetic Planning and Technological Development of the Ministry of
Energy Born: 1958  Business experience: Chief of Staff of the Secretary of Economy; President and Founder of Consultores Asociados, S.A. de C.V.; and Executive Vice President and Chief Economist of Grupo Financiero GBM, S.A.de
C.V.  Other board memberships: Comisión Estatal de Energía of Nuevo
León State; Comisión Nacional de Ciencia y Tecnología (Alternate); Comisión Asesora de la Junta de Gobierno del Consejo Nacional de Ciencia y Tecnología; Junta Directiva del Instituto de Investigaciones
Eléctricas (Alternate Chairman); Comisión Intersecretarial de Desarollo Social (Alternate) and Comité Técnico Sectorial de Estadística y de Información Geográfica of the Ministry of Energy
(Chairman). |  | 2005         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Mr. Roberto Ramírez Soberón        |  | Director General Born: 1950  Business experience: Deputy Director of Planning of Pemex-Gas and Basic Petrochemicals; Commercial
Associate Managing Director; and Associate Managing Director of Urban Distribution of Pemex-Gas and Basic Petrochemicals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | 2006         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Mr. Salvador García-Luna Rodríguez |  | Deputy Director of Planning Born: 1959  Business experience: Deputy Director of Liquefied Gas and Basic Petrochemicals of Pemex-Gas and Basic
Petrochemicals; Commercial Director of Crude Oil of PMI; and Commercial Associate Managing Director of Petroleum Products of PMI.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 2006         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Mr. Alberto Cervantes Velázquez    |  | Deputy Director of Liquified Gas and Basic Petrichemicals Born: 1947  Business experience: Associate Managing Director of Operations of
Pemex-Gas and Basic Petrochemicals; Associate Managing Director of Operations of PMI; Deputy Manager of Complaints and Loss Control of PMI.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 2006         
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Mr. Luis Felipe Luna Melo          |  | Deputy Director of Natural Gas Born: 1956  Business experience: Commercial Representative in Tokyo and Deputy Manager of Analysis of PMI; and
President of P.M.I. Norteamérica, S.A. de C.V.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 1996         



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Pemex-Gas and Basic PetrochemicalsDirectors and Executive Officers



|                                    |  |                                                                                                                                                                                                                                                                                                |  |              
|----------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|Name                                |  | Position with Pemex-Gas and Basic Petrochemicals                                                                                                                                                                                                                                               |  | YearAppointed
|Mr. Claudio Enrique Trulín Espinosa |  | Deputy Director of Management and Finance Born:
1945  Business experience: Associate Managing Director of Internal Management and
Corporate Support of Petróleos Mexicanos; and Technical Secretary of Industrial Safety and Environmental Protection Auditing of Petróleos Mexicanos.         |  | 2001         
|                                    |  |                                                                                                                                                                                                                                                                                               
|Mr. Armando R. Arenas Briones       |  | Deputy Director of Production Born: 1948  Business experience: Associate Managing Director; Superintendent; and General Coordinator of
Acquisitions Engineering of Petróleos Mexicanos.                                                                                                        |  | 1996         
|                                    |  |                                                                                                                                                                                                                                                                                               
|Mr. Claudio F. Urencio Castro       |  | Deputy Director of Pipelines Born: 1949  Business experience: Director General of Programming and Budget of the Federal District Department;
Director of Economic Research of Bancomer S.N.C.; and Director General of Economic Analysis of the Ministry of Commerce and Industrial Promotion. |  | 1996         
|                                    |  |                                                                                                                                                                                                                                                                                               
|Mr. René Paredes Corral             |  | Head of the Internal Control Body Born: 1966
 Business experience: Head of the Governmental Auditing Unit of SFP; Head of the Internal Control
Body of Federal Electricity Commission; and Chief Financial Officer of Toshiba America Consumer Electronics.                                    |  | 2003         

Pemex-PetrochemicalsDirectors and Executive Officers



|                                    |  |                                                                                   |  |              
|----------------------------------- |  | --------------------------------------------------------------------------------- |  | -------------
|Name                                |  | Position with Pemex-Petrochemicals                                                |  | YearAppointed
|Mr. Luis Ramírez Corzo y Hernández  |  | Chairman of the Board of Pemex-Petrochemicals (refer to Petróleos Mexicanos)      |  | 2004         
|                                    |  |                                                                                  
|Mr. Roberto Ramírez Soberón         |  | Board Member of Pemex-Petrochemicals refer to Pemex-Gas and Basic Petrochemicals) |  | 2006         
|                                    |  |                                                                                  
|Mr. Miguel Tame Domínguez           |  | Board Member of Pemex-Petrochemicals (refer to Pemex-Refining)                    |  | 2006         
|                                    |  |                                                                                  
|Mr. Carlos A. Morales Gil           |  | Board Member of Pemex-Petrochemicals (refer to Pemex-Exploration and Production)  |  | 2006         
|                                    |  |                                                                                  
|Mr. Carlos Hurtado López            |  | Board Member of Pemex-Petrochemicals (refer to Pemex-Exploration and Production)  |  | 2001         
|                                    |  |                                                                                  
|Mr. Héctor Moreira Rodríguez        |  | Board Member of Pemex-Petrochemicals (refer to Pemex-Exploration and Production)  |  | 2004         
|                                    |  |                                                                                  
|Ms. María del Rocío Ruiz Chávez     |  | Board Member of Pemex-Petrochemicals (refer to Pemex-Refining)                    |  | 2006         
|                                    |  |                                                                                  
|Mr. Federico Alberto Martínez Salas |  | Board Member of Pemex-Petrochemicals (refer to Petróleos Mexicanos)               |  | 2005         



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Pemex-PetrochemicalsDirectors and Executive Officers



|                                      |  |                                                                                                                                                                                                                                                                                                                                                                    |  |              
|------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------
|Name                                  |  | Position with Pemex-Petrochemicals                                                                                                                                                                                                                                                                                                                                 |  | YearAppointed
|Mr. Rafael Beverido Lomelín           |  | Director General Born: 1942  Business experience: Director General and other positions in Industrias Negromex, S.A. de C.V. and
Adviser to several companies of Grupo DESC.                                                                                                                                                                                        |  | 2001         
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                   
|Mr. Lorenzo Aldeco Ramírez            |  | Deputy Director of Trading Born: 1955  Business experience: Deputy Director of Operations of Pemex-Petrochemicals; Deputy Director of
Planning of Pemex-Petrochemicals; Operations Manager of Servicios de Operaciones de Nitrógeno, S.A. de C.V.; Plant Manager of Industrias Negromex, S.A. de C.V.; and Purchasing Manager of Industrias Negromex, S.A. de C.V. |  | 2005         
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                   
|Mr. Abraham Klip Moshinsky            |  | Deputy Director of Planning Born: 1956  Business Experience: Director General of Blindajes Automundo, S.A. de C.V.; Director General of
Carrocerías y Adaptaciones Automotrices, S.A. de C.V.; and Director of Operations of Industrias Negromex, S.A. de C.V.                                                                                                     |  | 2002         
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                   
|Mr. Mario Hugo González Petrikowsky   |  | Deputy Director of Management and Finance Born:
1937  Business experience: Associate Managing Director of Budgeting of Petróleos
Mexicanos; Advisor to the Deputy Direction of Programming and Budgeting of Petróleos Mexicanos; and Deputy Director of Planning of Pemex-Petrochemicals.                                                                          |  | 2001         
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                   
|Mr. Francisco Arturo Arellano Urbina  |  | Deputy Director of Operations Born: 1946  Business experience: Director of Petroquímica La Cangrejera, S.A. de C.V.; Director General of
Micosa División Construcciones, S.A. de C.V.; and Director General of RCR Ingenieros Asociados, S.A. de C.V.                                                                                                              |  | 2005         
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                   
|Mr. Felipe de Jesús Barragán Alvídrez |  | Head of the Internal Control Body Born: 1950
 Business experience: Head of the Internal Control Body of Petroquímica Morelos, S.A. de
C.V.; Head of the Internal Control Body of Petroquímica Escolín, S.A. de C.V.; and Deputy Comptroller of Auditing of Pemex-Petrochemicals.                                                                                   |  | 2002         



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Compensation of Directors and Officers

For the year ended December 31, 2005, the aggregate compensation of executive officers of Petróleos Mexicanos and the subsidiary entities (80
persons) paid or accrued in that year for services in all capacities was approximately Ps. 257.4 million. Members of the boards of directors of Petróleos Mexicanos and the subsidiary entities do not receive compensation for their
services.

Board Practices

Neither the
members of the boards of directors nor the executive officers are appointed for a specific term. The members of the boards of directors, except for those selected by the Union, and the Directors General of Petróleos Mexicanos and the
subsidiary entities serve subject to the discretion of the President of Mexico.

Audit Committee

As we currently do not have an audit committee of the Board of Directors, the entire Board of Directors of Petróleos Mexicanos is presently acting
as our audit committee within the meaning of Section 3(a)(58)(B) of the Exchange Act.

Employees

Excluding employees of the PMI Group and including those employed by us on a temporary basis, at December 31, 2005, Petróleos Mexicanos and
the subsidiary entities had 139,171 employees, as compared with 137,722 at December 31, 2004. During 2005, Petróleos Mexicanos and the subsidiary entities employed an average of 14,927 temporary employees. The following table sets forth
the number of employees of Petróleos Mexicanos, the subsidiary entities and the PMI Group at year-end for the past five years.



|                                   |  |                 |  |                |  |         |  |         |  |         |  |      
|---------------------------------- |  | --------------- |  | -------------- |  | ------- |  | ------- |  | ------- |  | -----
|                                   |  | At December 31, |  | 2005 % ofTotal
|                                   |  | 2001            |  | 2002           |  | 2003    |  | 2004    |  | 2005    | 
|Pemex-Refining                     |  | 47,710          |  | 47,341         |  | 46,692  |  | 44,899  |  | 45,335  |  | 32.6 
|Pemex-Exploration and Production   |  | 43,208          |  | 44,658         |  | 46,322  |  | 47,975  |  | 48,371  |  | 34.8 
|Pemex-Petrochemicals               |  | 14,578          |  | 14,360         |  | 14,203  |  | 13,895  |  | 13,939  |  | 10.0 
|Pemex-Gas and Basic Petrochemicals |  | 11,716          |  | 11,977         |  | 12,104  |  | 11,923  |  | 12,018  |  | 8.6  
|Petróleos Mexicanos                |  | 17,640          |  | 18,798         |  | 18,894  |  | 19,030  |  | 19,508  |  | 14.0 
|                                   |  |                 |  |                |  |         |  |         |  |         |  |      
|Total                              |  | 134,852         |  | 137,134        |  | 138,215 |  | 137,722 |  | 139,171 |  | 100.0
|                                   |  |                 |  |                |  |         |  |         |  |         |  |      
|PMI Group                          |  | 324             |  | 330            |  | 318     |  | 320     |  | 312     |  |     

---

Source: Petróleos Mexicanos.

The Union represents approximately 80.1% of the work force of Petróleos Mexicanos and the subsidiary entities. The members of
the Union are our employees and they elect their own leadership from among their ranks. Since the Unions official establishment in 1938, we have experienced no labor strikes, and although we have experienced work stoppages for short periods of
time, none of these stoppages has had a significant material adverse effect on our operations. However, there was an investigation and judicial proceeding relating to certain alleged improper diversions of federal monies by Union officials, which
resulted in an offer by the Union to pay to us, over a period of years, Ps. 1,580 million in nominal terms for the amounts allegedly diverted from us. See Item 8Financial InformationLegal ProceedingsMexican
Government Audits and Other Investigations.

Our relationship with our employees is regulated by the Ley Federal del Trabajo(Federal Labor Law) and a collective bargaining agreement between Petróleos Mexicanos and the Union. The collective bargaining



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agreement regulates extensively all aspects of the relationship of Petróleos Mexicanos and the subsidiary entities with their employees. The
collective bargaining agreement is subject to renegotiation every two years, although salaries are reviewed annually.

Petróleos
Mexicanos and the Union renewed the collective bargaining agreement effective August 1, 2003, which provided for a 4.3% increase in wages and several increases in benefits oriented to improve productivity. This renewed contract was set to
expire on July 31, 2005. Subsequently, on July 26, 2004, Petróleos Mexicanos and the Union entered into a side agreement, effective August 1, 2004, which provides for a 4% increase in wages and other benefits. On
August 17, 2005, the Board of Directors of Petróleos Mexicanos authorized Mr. Luis Ramírez Corzo to execute a settlement agreement that amended the side agreement executed in July 2004 with the Union, in order to make certain
adjustments required by applicable regulations and to establish a mechanism for the payment of benefits previously agreed upon in the side agreement executed in July 2004. This settlement agreement was executed on August 25, 2005.

On August 25, 2005, Petróleos Mexicanos and the Union also executed a new collective bargaining agreement that became effective
retroactively on August 1, 2005, in accordance with the terms of an extension granted during the negotiation process. By reaching an agreement before September 1, 2005, Petróleos Mexicanos and the Union averted a threatened labor
strike. The terms of the new agreement provide for a 4.1% increase in wages and a 1.9% increase in other benefits. By its terms, the new collective bargaining agreement is scheduled to expire on July 31, 2007.

In accordance with the collective bargaining agreement and the Federal Labor Law, Petróleos Mexicanos and the subsidiary entities are under an
obligation to pay seniority premiums to retiring employees and pension and death benefits to retired employees or their survivors. Retirees are entitled to receive increases in their pensions whenever salary increases are granted to current
employees. We also provide health and medical benefits to employees, retired employees and their families and, subject to our overall budgetary constraints, we provide an interest-rate subsidy on employees mortgage loans.

On November 5, 1997, the Ministry of Finance and Public Credit and the Board of Directors of Petróleos Mexicanos authorized the formation of
a trust called the Pemex Labor Fund. This fund is a vehicle to fund labor liabilities, current pension payments and seniority premiums. We have designed a contribution plan to increase the funds held in this trust and to continue to make payments on
outstanding labor and pension liabilities. Our contributions to the Pemex Labor Fund amounted to Ps. 18,561 million in 2003, Ps. 1,867 million in 2004 and Ps. 14,038 million in 2005.



|Item 7. | Major Shareholders and Related Party Transactions
|------- | -------------------------------------------------

Major
Shareholders

Petróleos Mexicanos and the subsidiary entities have no shareholders because they are decentralized public entities
of the Mexican Government. The Mexican Government closely regulates and supervises our operations; it incorporates the annual budget and financing programs of Petróleos Mexicanos and the subsidiary entities into its consolidated annual
budget, which it submits to the Mexican Congress for its approval.

The Mexican Government also directs many executive decisions at us.
Mexican Government secretaries hold a majority of the seats on the Board of Directors of Petróleos Mexicanos, and the Secretary of Energy is the Chairman of the Board of Petróleos Mexicanos. The SFP appoints our external auditors and
the Director General of Petróleos Mexicanos is a member of the President of Mexicos cabinet. See also Item 3Key InformationRisk FactorsRisk Factors Related to the Relationship between PEMEX and the Mexican
Government and Item 10Additional InformationShare Capital.

Related Party Transactions

Under Article 8, Section XI of the Ley Federal de Responsabilidades Administrativas de los Servidores Públicos (Federal Law of
Administrative Responsibilities of Public Officials), which is applicable to all of our



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employees, our employees are obligated to recuse themselves from intervening in any way in the attention to, processing or resolution of matters in
which they might have personal, family or business interest, including those where some benefit can result for themselves, their spouse, blood or affinity relatives up to the fourth degree, or civil relatives, or for third parties with which they
have professional, labor, or business relations, or for partners or partnerships where the public officials or the persons referred above are or have been members of.

As an employee benefit, we offer salary advances to all of our eligible Union and non-Union workers, including our executive officers, pursuant to the
programs set forth in the collective bargaining agreement and in the Reglamento de Trabajo del Personal de Confianza de Petróleos Mexicanos y Organismos Subsidiarios (Employment Regulation of White Collar Employees of Petróleos
Mexicanos and Subsidiary Entities), respectively. The salary advances, which are non-interest bearing, are offered to each eligible employee in an amount up to a maximum of four months salary and are repaid through salary deductions in equal
installments over a period of either one or two years, as elected by the employee. Most of our employees take advantage of this benefit. The largest amount of salary advances outstanding to executive officers during 2005 was Ps. 16.7 million.
As of June 30, 2006, the aggregate amount of salary advances outstanding to our executive officers was Ps. 15.4 million.



|Item 8. | Financial Information
|------- | ---------------------

Legal Proceedings

In the ordinary course of our business, we are named in a number of lawsuits of various types. We evaluate the merit of each claim and assess the likely
outcome, accruing a contingent liability when an unfavorable decision is probable and the amount is reasonably estimable. Other than as disclosed below, we do not believe a materially unfavorable outcome is probable for any known or pending lawsuits
or threatened litigation for which we have not made any accruals.

Labor-Related Proceedings

We are a party to various legal actions involving labor claims of former and present employees. These labor disputes relate to severance payments, life
insurance benefits, extensions of labor contracts, level of wages, improper termination and employee housing. We do not expect these lawsuits to have a material adverse effect on our financial condition or future results of operations.

For information on our negotiations with the Union and collective bargaining agreements, see Item 6Directors, Senior Management and
EmployeesEmployees.

Mexican Government Audits and Other Investigations

In 2001, the SFP conducted an audit of our operations in 2000 and previous years. In the audit, SFP identified a series of transactions between PEMEX and
the Union during 2000, which we believe involved illicit behavior. We describe the transactions, allegations and related proceedings below.

On January 21, 2002, SFP announced that it had submitted a criminal complaint to the Procuraduría General de la República (the Office of the Federal Attorney General) for the diversion of Ps. 1,580 million in
federal monies from us to the Union from March 2000 to October 2000. SFP has alleged that the payments were not properly made under applicable Mexican laws and government regulations.

In addition, the Office of the Federal Attorney General filed charges against certain of our former officers, charging them with exceeding the scope of
their corporate powers in executing the several transactions under investigation. On March 20, 2002, Petróleos Mexicanos filed three criminal complaints with the Office of the



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Federal Attorney General requesting prosecution principally of Rogelio Montemayor Seguy (former Director General), Carlos Juaristi Septién (former
Corporate Management Director) and Juan José Domene Berlanga (former Chief Financial Officer) for acting illegally, outside the scope of their corporate powers and without the consent of the Board of Directors of Petróleos Mexicanos,
our general counsel or the Mexican Government, to illegally divert to the Union and certain of its representatives a total of Ps. 1,660 million (which includes the Ps. 1,580 million previously identified by SFP in its complaint). On that
same date, the Office of the Federal Attorney General filed charges against Manuel Gómezperalta Damirón (also a former Corporate Management Director) for the alleged commission of the crime of embezzlement in connection with the
aforementioned diversion of funds to the Union. As of the date of this report, the evidentiary stage in the case against Mr. Gómezperalta is close to completion.

Mr. Montemayor resigned from PEMEX effective November 30, 2000, concurrent with President Foxs appointment of Raúl Muñoz
Leos as Director General. Messrs. Juaristi and Domene ended their affiliation with PEMEX in February 2001 as a result of the change in administration following the appointment of Mr. Muñoz Leos. In May 2002, a Mexican federal judge
issued arrest warrants against these and certain other former officers of Petróleos Mexicanos for embezzlement and unlawful use of their corporate powers and privileges. In 2002, Mr. Montemayor surrendered himself to U.S. federal
authorities in Texas instead of federal authorities in Mexico.

At a hearing on July 20, 2004, a U.S. federal judge authorized the
extradition of Rogelio Montemayor Seguy from the United States to Mexico. On August 5, 2004, Mr. Montemayors habeas corpus petition appealing the decision was denied, and on September 2, 2004, U.S. authorities turned him over to
officials in Mexico to face charges for the alleged commission of the crimes of embezzlement and wrongful use of powers.

On
September 10, 2002, the Office of the Federal Attorney General submitted a request to the Mexican Congress to remove the legislative immunity from prosecution of Senator Luis Ricardo Aldana Prieto, who is a member of the Board of Directors of
Petróleos Mexicanos as a representative of the Union, for his participation in the illegal diversion of our funds. Senator Luis Ricardo Aldana Prieto will complete his term in August 2006, and will continue to have legislative immunity until
then, unless the Mexican Congress removes such privilege. If the Mexican Congress strips him of his legislative immunity, the Office of the Federal Attorney General will be able to proceed with the criminal prosecution.

In July 2003, the Office of the Federal Attorney General closed its investigation against Messrs. Montemayor, Juaristi and Domene with regard to the
charges of money laundering and organized crime, on the grounds that it had insufficient proof to support these charges. The charges of electoral embezzlement, wrongful use of powers and, in the case of Messrs. Juaristi and Domene, improper exercise
of a public service, have been dismissed by the federal courts of Mexico for failure to provide sufficient proof to support these charges. Nevertheless, these former officers continue to be pursued by the federal authorities of Mexico for their
alleged commission of the crime of embezzlement. The criminal trial against Mr. Montemayor is in the evidentiary stages. On May 10, 2005, the SFP announced it had fined the former Director General of Petróleos Mexicanos and four
other former officers for a total of Ps. 2.8 billion and banned each of them plus a sixth former officer, who was not fined, from holding public office for varying periods of time.This decision has been appealed by some of these former
officers and final resolution of the matter is pending.

A Mexican judge issued two arrest warrants in September and October 2003 and
issued formal imprisonment writs in October 2003 against Carlos Romero Deschamps, General Secretary of the Union, in connection with the investigation, commencing the criminal trial against him. This criminal trial is in its evidentiary stages.

The Union has offered to pay, over a period of years, Ps. 1,580 million to us for the amounts allegedly diverted from us through the
transactions under investigation. This offer was accepted by the Board of Directors of Petróleos Mexicanos on September 1, 2003. The amounts that we have received as restitution have been appropriately recorded as a gain in the period in
which cash was received, in accordance with both Mexican and U.S. GAAP.



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Since learning from SFP about the illegal diversion of funds, we have been cooperating with SFP and the
Office of the Federal Attorney General to prosecute the responsible persons. In addition, a number of initiatives were announced and certain rules have been enacted in order to promote a culture of ethics and prevent corruption in our daily
operations. On July 31, 2002, a Código de Ética de los Servidores Públicos de la Administración Pública Federal (Code of Ethics for Public Servants of the Federal Public Administration) was published in
the Official Gazette of the Federation, containing rules to promote legality, honesty, integrity, loyalty, impartiality and efficiency in the performance of public work by public officers. On October 3, 2003, we announced a corporate code of
conduct for Petróleos Mexicanos and the subsidiary entities, el Código de Conducta de Petróleos Mexicanos y Organismos Subsidiarios(the Code of Conduct of Petróleos Mexicanos and the Subsidiary Entities) that
defines the code of conduct expected from all workers in Petróleos Mexicanos and its subsidiary entities in the daily performance of their duties, and which is designed to promote transparency and prevent abuses. In addition, on May 12,
2004, the Board of Directors of Petróleos Mexicanos adopted a Code of Ethics for our chief executive officer, chief financial officer, chief accounting officer and all other employees performing similar functions in Petróleos
Mexicanos, the subsidiary entities and the subsidiary companies. For more information on this Code of Ethics, see Item 16BCode of Ethics. We expect that these efforts will result in a more effective system of internal controls.

In October 2000, in accordance with Article 73 of the Acquisitions, Leasing and Public Sector Services Law, Pemex-Refining settled a legal
dispute with Productos Ecológicos S.A. de C.V. (Proesa) relating to the early termination of a long-term MTBE supply and services contract involving an MTBE plant that was never built before the International Court of Arbitration
of the International Chamber of Commerce (the ICA). Proesas initial claim against Pemex-Refining was for approximately U.S. $650 million. However, after discussion and negotiation in private arbitration proceedings,
Pemex-Refining agreed to settle the dispute for a total amount of approximately U.S. $146.5 million (U.S. $127 million plus taxes). The settlement was formalized by an agreement between Pemex-Refining and Proesa, dated October 16,
2000, and fully paid on the same date; the full payment was recorded as an expense in 2000. Pemex-Refining submitted a criminal complaint to the Office of the Federal Attorney General against former officers of Pemex-Refining in connection with this
matter.

The Office of the Federal Attorney General filed charges against these officers for unlawful use of their corporate powers and
privileges. A federal judge subsequently issued formal imprisonment writs against former officers Mr. Mario Willars Andrade (former Director General of Pemex-Refining), Mr. Luis Ricardo Bouchot Guerrero and Mr. Cuauhtémoc Arce
Herce. The evidentiary stage in the proceeding against Mr. Arce concluded and he was released on bail. In September 2004, Pemex-Refining filed an appeal that was denied. Pemex-Refining plans to file another appeal to review the denial of its
first appeal.

Actions Against the Illicit Market in Fuels in Mexico

In association with the Ministry of Finance and Public Credit and the Ministry of Energy, PEMEX has introduced a number of measures to combat the illegal
trade in fuels. This illegal trade is primarily the product of theft from our pipelines or our installations and the smuggling of products used to alter fuels. In connection with the implementation of these measures, the Federal Criminal Code was
modified on April 29, 2004 to include as a high crime the theft or exploitation of hydrocarbons or its derivatives without consent or authorization. We maintain oversight of our nationwide pipeline system and report any unlawful activity about
which we are aware to the appropriate local or federal authorities.

Pemex-Refining is implementing several measures to prevent and fight
the illicit market in fuels, including the installation of a system that allows us to detect and locate leaks from pipelines, the utilization of satellite monitoring of tankers and a system of 24 mobile laboratories to analyze the quality of fuels
in over 7,000 retail service stations in Mexico. During 2005, 134 illicit entries were detected. PEMEX has installed more accurate measurement instruments in the principal transfer locations among refineries, maritime terminals, storage facilities,
distributors, suppliers and customers in order to measure volumes and generate product balance reports. A Terminal Monitoring and Control System has been installed in 42 of the 77 storage and distribution terminals



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of PEMEX. The illicit market in fuels impacts our results of operations due to the loss of revenue that would have been generated by the sale of such
products, the production cost of which is already included in our cost of sales. The actions described above have resulted in a reduction of this illegal trade and an increase in our sales volumes.

Civil Actions

In March 1999, Zapata
Internacional, S.A. de C.V. (Zapata) filed a claim in a Mexican court against Pemex-Exploration and Production arguing that work under a construction agreement had been concluded but that it had not received payment on the contract.
Following a ruling in favor of Zapata, a judgment of approximately Ps. 9.2 million plus interest was entered against Pemex-Exploration and Production. In November 2003, Zapata filed a motion to execute this judgment, and in March 2004,
Pemex-Exploration and Production was ordered to pay Ps. 1.6 billion. Pemex-Exploration and Production filed an appeal to contest the monetary sum awarded, and the judge overturned the ruling awarding interest payments to Zapata. After filing an
appeal of the judges reversal, Zapata and Pemex-Exploration and Production agreed to an out-of-court settlement of this claim for a total of Ps. 60 million. On June 22, 2005, Zapata withdrew its appeal.

In March 2000, Construcciones Industriales del Golfo, S.A. de C.V. filed a claim in a Mexican court for U.S. $79 million plus interest against
Pemex-Refining and Petróleos Mexicanos, arguing that work under a construction agreement had been concluded but that it had not received payment on the contract. In February 2004, following a ruling in favor of Construcciones Industriales del
Golfo, S.A. de C.V., a judgment of approximately U.S. $4.5 million plus accrued interest was entered against Pemex-Refining; no judgment was entered against Petróleos Mexicanos. Petróleos Mexicanos has filed an appeal, because a
decision regarding expenses was not included in such judgment. In April 2005, Construcciones Industriales del Golfo, S.A. de C.V. filed a motion to determine the accrued interest to be paid by Pemex-Refining, which is currently pending resolution.
Pemex-Refining has paid to Construcciones Industriales del Golfo, S.A. de C.V. the principal amount and all accrued interest through May 2005. Payment of accrued interest from June through September is still pending.

In September 2001, CONPROCA, the construction company performing construction and maintenance services for Pemex-Refinings Cadereyta refinery,
filed a claim for arbitration before the ICA against Pemex-Refining and Petróleos Mexicanos related to expenses incurred by CONPROCA in providing those services. The claim filed by CONPROCA is for U.S. $632.1 million, and Pemex-Refining
and Petróleos Mexicanos filed a counterclaim in the amount of U.S. $907.7 million. In May 2005, the parties presented the evidence in support of these claims. On June 30, 2005 the parties each filed expert opinions, and on
September 30, 2005, both parties filed counter-reports to the other sides expert opinions. On March 28, 2006, the parties filed their allegations in connection with the first hearing. Based on the procedural schedule as agreed by the
parties and the ICA, expert opinions and witness testimonies must be delivered before September 15, 2006. The parties must file their respective rejoinders by November 15, 2006. The second hearing is scheduled for January 2007.

In April 2004, Construcciones Industriales del Golfo, S.A. de C.V. filed a claim in a Mexican court for breach of contract against Pemex-Exploration
and Production and Petróleos Mexicanos in connection with the removal of deposits in the Salamanca refinery. The claim seeks an award of approximately Ps. 15 million for works performed and not paid and approximately U.S. $219.6
million for damages. In May 2004, Pemex-Exploration and Production and Petróleos Mexicanos responded by arguing that the court did not have jurisdiction over the claim, which motion was denied. Pemex-Exploration and Production and
Petróleos Mexicanos answered the claim and the trial is in the evidentiary stage as of the date of this report.

Five claims have
been presented in connection with the Financed Public Works Contracts (FPWC) program (previously, the Multiple Service Contract program) (see Item 4Information on the Company Business OverviewPemex-Exploration and
ProductionFinanced Public Works Contracts), one by the Unión Nacional de Trabajadores de Confianza de la Industria Petrolera (the National Alliance of Non-Union



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Petroleum Industry Workers) and four by a group of Congressmen from the LIXthLegislature. These claims do not seek monetary damages as relief; rather the plaintiffs seek to prevent the performance of the FPWCs through a declaration
that the FPWCs are void. However, if any of the FPWCs is declared void, the contractor party to such FPWC may sue for damages.

In the
first case, a civil claim was presented by the National Alliance of Non-Union Petroleum Industry Workers in April 2004, alleging that the FPWC entered into between Pemex-Exploration and Production and Repsol Exploración México, S.A. de
C.V. was void because it violated Article 27 of the Political Constitution of the United Mexican States. Pemex-Exploration and Production denied the validity of this argument and responded by asserting all applicable legal defenses. In June 2004,
the judge issued a preliminary judgment declaring that the court did not have jurisdiction over the claim, and the claim was remitted to an administrative judge. In May 2005, the administrative judge also issued a preliminary judgment declaring that
the court did not have jurisdiction over the claim. This decision was not appealed by the plaintiffs and since plaintiffs did not file a claim with the relevant fiscal court, the case has been dismissed with prejudice.

In the second case, on May 6, 2004, prior to acknowledging receipt of the claim, the judge made a motion to require Pemex-Exploration and Production
to fulfill certain requirements in connection with the aforementioned FPWC. On July 27, 2004, Pemex-Exploration and Production provided the court with certain information that had been requested by the presiding judge, who subsequently
acknowledged receipt of the claim. Pemex-Exploration and Production filed a motion arguing that the court lacked jurisdiction, which was denied. Pemex-Exploration and Production also filed a motion arguing that the plaintiffs lacked standing, which
motion was granted on June 10, 2005. This decision was appealed by the plaintiffs, and such appeal was subsequently denied. The plaintiffs have filed an appeal for constitutional relief, referred to as anamparo, which is currently
pending resolution.

The third case is related to the FPWC entered into between Pemex-Exploration and Production and PTD Servicios
Múltiples, S. de R.L. de C.V. for the Cuervito natural gas production block. The Juzgado Noveno de Distrito en Materia Civil del Distrito Federal (Ninth District Civil Court in Mexico City) issued a judgment declaring that the
plaintiffs did not have standing. An appeal was filed by the plaintiffs, which was denied on April 3, 2006. Resolution of this matter is still pending as of the date of this report.

The fourth claim is related to the FPWC entered into between Pemex-Exploration and Production and PTD Servicios Múltiples, S. de R.L. de C.V. for
the Fronterizo natural gas production block. The Juzgado Octavo de Distrito en Materia Civil del Distrito Federal(Eighth District Civil Court in Mexico City) rejected the claim asserting that the plaintiffs lacked standing. Plaintiffs
appealed and the appeal was denied. Plaintiffs then filed an amparo, which was denied on June 23, 2005.

The fifth claim is
related to the FPWC entered into between Pemex-Exploration and Production and Servicios Múltiples de Burgos, S.A. de C.V. for the Misión natural gas production block. The Juzgado Sexto de Distrito en Materia Civil del Distrito
Federal (Sixth District Civil Court in Mexico City) rejected the claim asserting that the plaintiffs lacked standing. Plaintiffs appealed and the appeal was denied. Plaintiffs then filed an amparo, which was denied on September 8,
2005.

In December 2003, Unión de Sistemas Industriales, S.A. de C.V. filed a claim in the Juzgado Tercero de Distrito en Materia
Civil del Distrito Federal(Third District Civil Court in Mexico City) against Pemex-Refining seeking approximately U.S. $34 million for, among other things, works performed and not paid under a construction agreement. In January 2004,
Pemex-Refining filed a motion arguing that the court lacked jurisdiction, and on June 4, 2004, the judge granted the motion and remitted the claim to an administrative judge. Following a successful appeal by Unión de Sistemas
Industriales, S.A. de C.V., the judge pronounced that the claim had to be remitted again to the initial Mexican civil court. Pemex-Refining appealed this decision, which motion was denied. In October 2004, Pemex-Refining responded to this claim, and
the case is in the evidentiary stages as of the date of this report.



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In July 2000, Petroquímica Cosoleacaque S.A. de C.V. (PECOSA) filed a claim against
Afianzadora Insurgentes, S.A. de C.V. and Fianzas México Bital, S.A. The claim seeks an award of approximately U.S. $100 million for a surety bond granted in favor of Agronitrogenados, S.A. de C.V., an ammonia supplier of PECOSA. In June
2004, a judgment was entered in favor of PECOSA. In October 2004, Afianzadora Insurgentes, S.A. de C.V. and Fianza México Bital, S.A appealed this decision, which appeal is currently pending resolution.

In December 2004, Corporación Mexicana de Mantenimiento Integral S. de R.L. de C.V. (COMMISA) filed a claim before the ICA against
Pemex-Exploration and Production seeking approximately U.S. $300 million for, among other things, the breach of a construction agreement in connection with two platforms in the Cantarell complex. In December 2004, the judge acknowledged receipt
of the claim and Pemex-Exploration and Production designated its arbitrator. This designation was appealed by COMMISA. In February 2005, Pemex-Exploration and Production responded to the claim and filed a counterclaim against COMMISA. In March 2005,
COMMISA responded to the counterclaim. In April 2005, the court accepted the arbitrators proposed by the parties. On September 21, 2005, the ICA decided on the issues that will be the subject of the arbitration and set the arbitration schedule.
On September 30, 2005, Pemex-Exploration and Production filed with the ICA its comments to the issues, subject to the arbitration and the arbitration schedule. In March 2006, a hearing was held to determine the jurisdiction of the ICA, the
standing of the parties and the precautionary and provisional measures requested by COMMISA. Resolution regarding these issues is still pending. COMMISA filed an amparo before the Juzgado Décimocuarto de Distrito en Materia
Administrativa (Fourteenth District Administrative Court) against the rescission of the construction agreement described above. In August 2005, the amparo was denied and COMMISA appealed that decision. On May 17, 2006, the Sexto
Tribunal Colegiado en Materia Administrativa del Primer Circuito (Sixth Joint Administrative Court of the First Circuit) determined that Pemex-Exploration and Production should be considered an authority for purposes of the amparoand
that the Supreme Court of Justice has jurisdiction to hear the claim. Resolution of the matter is still pending as of the date of this report.

In January 2005, COMBISA S. de R.L. de C.V. (COMBISA) filed a claim before the ICA against Pemex-Exploration and Production seeking approximately U.S. $235 million plus interest for, among other things, the breach of a
construction agreement in connection with two platforms in the Cantarell complex. In April 2005, Pemex-Exploration and Production responded to the claim and filed a counterclaim against COMBISA. In May 2005, COMBISA responded to the counterclaim.
Arbitration proceedings began on September 1, 2005. On September 21, 2005, the ICA decided on the issues that will be the subject of the arbitration. On October 5, 2005 Pemex-Exploration and Production filed with the ICA its comments
to the issues subject to the arbitration. In February 2006, the ICA ruled that the exceptions filed by the parties would be resolved in the final judgment. In April 2006, the ICA requested that COMBISA correct its detailed petition of the claim
filed in March 2006, since it did not include the appropriate attachments. Pemex-Exploration and Production responded to this detailed petition on May 26, 2006 and COMBISA was scheduled to file its reply prior to June 26, 2006.

In February 2005, COMMISA filed a claim before the ICA against Pemex-Exploration and Production seeking approximately U.S. $147 million plus
damages for, among other things, the breach of a construction agreement in connection with pipelines in the Cantarell complex. In April 2005, the court accepted the arbitrators proposed by the parties and appointed the chairman of the arbitration
court. In May 2005, Pemex-Exploration and Production responded to the claim and filed a counterclaim against COMMISA. Arbitration proceedings began on June 2005. On September 6, 2005, a hearing was held in which the ICA decided on the issues
that would be the subject of the arbitration. In October 2005, Pemex-Exploration and Production filed a motion contesting the jurisdiction of the ICA. In January 2006, COMMISA filed a detailed motion of its claim. In March 2006, Pemex-Exploration
and Production filed its response to this detailed motion. On April 5, 2006 COMMISA filed its reply and Pemex-Exploration and Production filed its rejoinder on May 9, 2006. A hearing was held during the first week of June 2006 in which the
parties presented their cases before the ICA, including testimonial evidence. The ICA has granted the parties until August 11, 2006 to file their final allegations.

On March 31, 2006, Petroquímica Cangrejera, S.A. de C.V., Petroquímica Pajaritos, S.A. de C.V. and Petroquímica Morelos, S.A. de C.V. were notified by the Council of Coatzacoalcos, Veracruz,
alleging



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underpayment of certain real estate taxes, for a total amount of approximately U.S. $171 million. These subsidiary companies (which have since been merged
into Pemex-Petrochemicals) have filed claims objecting to these allegations before the Tribunal de lo Contencioso Administrativo del Poder Judicial del Estado de Veracruz (Contentious Administrative Court of the Judiciary Power in the State
of Veracruz). The Council of Coatzacoalcos, Veracruz has also filed for an attachment of the real estate in which these complexes are located. Resolution of these matters is still pending as of the date of this report.

In May 2005, Ech Offshore, S. de R.L. de C.V. filed a claim before the ICA against Pemex-Exploration and Production seeking approximately Ps.
106.8 million and U.S. $36.5 million for, among other things, the suspension of shipments due to the termination of a public works contract executed between the parties. The parties presented their cases before the ICA in a hearing held in
March 2006. On April 12, 2006, the parties filed their allegations with the ICA. On May 3, 2006, the ICA closed the proceedings and no additional writs, allegations or evidence may be filed by the parties without the authorization of the
ICA. A final judgment in the matter is still pending. Although we believe that we have sufficient evidence to support this claim, we have created a reserve of U.S. $23.2 million to cover any potentially unfavorable judgment against us.

Dividends

In March 1990, as a result of the
implementation of the 1989-92 Financing Package for Mexico, our commercial bank creditors exchanged U.S. $7.58 billion of Petróleos Mexicanos external indebtedness for Brady Bonds issued by the Mexican Government. At the same time,
Petróleos Mexicanos indebtedness to the Mexican Government was increased by the same amount; the new indebtedness was denominated in currencies other than pesos. In December 1990, the Mexican Government and Petróleos Mexicanos
agreed to capitalize this indebtedness, converting it into Certificates of Contribution A. As a condition of this capitalization, Petróleos Mexicanos agreed to pay a minimum guaranteed dividend to the Mexican Government equal to
the debt service on the capitalized debt. The Board of Directors of Petróleos Mexicanos approves the total dividend on the Certificates of Contribution A after the end of each fiscal year, although Petróleos Mexicanos pays
an amount equal to the minimum guaranteed dividend to the Mexican Government in monthly advance payments during the year. During 2001, 2002, 2003, 2004 and 2005, Petróleos Mexicanos made advance payments to the Mexican Government in the
aggregate of Ps. 2,572 million, Ps. 10,976 million, Ps. 11,060 million, Ps. 10,734 million and Ps. 15,283 million, respectively, towards the minimum guaranteed dividends for those years. See Item 5Operating and
Financial Review and ProspectsLiquidity and Capital ResourcesEquity Structure and the Certificates of Contribution A.



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|Item 9. | The Offer and Listing
|------- | ---------------------

Trading in the debt
securities issued by Petróleos Mexicanos and the Pemex Project Funding Master Trust takes place primarily in the over-the-counter market. All the debt securities issued by Petróleos Mexicanos and the Pemex Project Funding Master Trust
that are registered pursuant to the Securities Act are also listed on the Luxembourg Stock Exchange.



|Item 10. | Additional Information
|-------- | ----------------------

Memorandum and Articles of Association

The Mexican Congress established Petróleos Mexicanos by a decree dated June 7, 1938, effective July 20, 1938. None of
Petróleos Mexicanos or the subsidiary entities has bylaws or articles of association. On July 17, 1992, the Mexican Congress created the subsidiary entities out of operations that had previously been directly managed by Petróleos
Mexicanos. Petróleos Mexicanos and its four subsidiary entities, Pemex-Exploration and Production, Pemex-Refining, Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals, are decentralized public entities of the Mexican Government, and
each is a legal entity empowered to own property and carry on business in its own name. The activities of Petróleos Mexicanos and the subsidiary entities are regulated by the Political Constitution of the United Mexican States, the Regulatory
Law, the Organic Law, regulations issued pursuant to the Regulatory Law and other federal laws and regulations. See Item 4Information on the CompanyHistory and Development. Six members of the Board of Directors of
Petróleos Mexicanos, including the Chairman, are appointed by the President of Mexico. Our Union selects the remaining five directors from among employees of Petróleos Mexicanos and the subsidiary entities. An eight-member board of
directors governs each subsidiary entity. Each of these boards consists of the Director General of Petróleos Mexicanos, the Director General of each of the other three subsidiary entities and four additional directors, who are each appointed
by the President of Mexico. The members of the boards of directors of Petróleos Mexicanos and each of the subsidiary entities are not appointed for a specific term, and, except for those members selected by the Union, they serve subject to
the discretion of the President of Mexico. A new President of Mexico will be elected in July 2006 and will assume his office in December 2006.

Under the Federal Law of Administrative Responsibilities of Public Officials, our directors are obligated to abstain from voting on a proposal, arrangement or contract in which they have a personal, family or business interest. Our
directors do not receive compensation for their services as members of the boards of directors of Petróleos Mexicanos and the subsidiary entities, nor do they have the power to vote compensation to themselves or any other member of the board.
Under the Federal Law of Administrative Responsibilities of Public Officials, our directors have to perform their duties without obtaining or attempt to obtain additional benefits to those granted by law. Therefore, our directors do not have
borrowing powers exercisable by themselves. There is no requirement for early retirement for our directors.

Material Contracts

On November 10, 1998, Petróleos Mexicanos, The Bank of New York and The Bank of New York (Delaware) entered into a Trust Agreement, which
created the Pemex Project Funding Master Trust and designated The Bank of New York as Managing Trustee and The Bank of New York (Delaware) as Delaware Trustee. On the same date, Petróleos Mexicanos, the subsidiary entities and the Pemex
Project Funding Master Trust, acting through The Bank of New York, entered into an Assignment and Indemnity Agreement. This agreement provides for the assignment by the subsidiary entities to the Pemex Project Funding Master Trust of certain payment
obligations relating to PIDIREGAS, the arrangement by Petróleos Mexicanos of financing on behalf of the Pemex Project Funding Master Trust to meet such payment obligations, the payment by Petróleos Mexicanos and the subsidiary entities
to the Pemex Project Funding Master Trust of the amounts necessary to meet the Pemex Project Funding Master Trusts obligations under such financings and the indemnification of the Pemex Project Funding Master Trust by Petróleos
Mexicanos and the subsidiary entities. The Trust Agreement was amended on November 17, 2004 and December 22, 2004.



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On December 30, 2004, the Pemex Project Funding Master Trust and Petróleos Mexicanos entered
into an Indenture with Deutsche Bank Trust Company Americas (Deutsche Bank), as Trustee. This agreement provides for the issuance by the Pemex Project Funding Master Trust from time to time of unsecured debt securities. These issuances
are unconditionally guaranteed by Petróleos Mexicanos. Pursuant to a Guaranty Agreement, dated as of July 29, 1996, Petróleos Mexicanos obligations are jointly and severally guaranteed by Pemex-Exploration and Production,
Pemex-Refining and Pemex-Gas and Basic Petrochemicals.

On February 11, 2005, the Pemex Project Funding Master Trust increased the
aggregate amount of debt securities issuable under its Medium-Term Notes program to U.S. $20,000,000,000. Following the increase and pursuant to the December 2004 Indenture referred to above, the Pemex Project Funding Master Trust has issued various
new series of securities. See Item 5Operating and Financial Review and ProspectsLiquidity and Capital ResourcesFinancing Activities.

As of December 31, 2004 and 2005, we have entered into contracts with various contractors for an approximate amount of Ps. 155,239 million and Ps. 226,792 million, respectively. These contracts are for
the development of PIDIREGAS and are therefore subject to standards required in NIF-09-B, which is a Mexican accounting guideline that outlines specific accounting and budgetary treatment applicable to PIDIREGAS. For an explanation of NIF-09-B, see
Item 4Information on the CompanyHistory and DevelopmentCapital Expenditures and Investment and Note 2d. to our consolidated financial statements included herein.

Exchange Controls

Mexico has had a free market for
foreign exchange since 1991, and the government has allowed the peso to float freely against the U.S. dollar since December 1994. There can be no assurance that the government will maintain its current foreign exchange policies. See Item
3Key InformationExchange Rates and Item 3Key InformationRisk FactorsConsiderations Related to Mexico.

Taxation

The 1997 Securities, the 1998 Securities, the 1999 Securities, the 2001 Securities, the 2003 Securities, the
2004 Securities and the 2005 Securities

Pursuant to a registration statement on Form F-4 (File No. 333-7796), which was declared
effective by the SEC on October 17, 1997, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of 1933 up to U.S. $600,000,000 of
8.85% Global Guaranteed Notes due 2007 and up to U.S. $400,000,000 of 9.50% Global Guaranteed Bonds due 2027. These securities are collectively referred to as the 1997 Securities.

Pursuant to a registration statement on Form F-4 (File No. 333-9310), which was declared effective by the SEC on August 24, 1998,
Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of 1933 up to U.S. $350,000,000 of 83/8% Global Guaranteed Notes due 2005 and up to U.S. $350,000,000 of 91/4% Global Guaranteed Bonds due 2018. These securities are collectively referred to as the 1998 Securities.

Pursuant to a registration statement on Form F-4 (File No. 333-10906), which was declared effective by the SEC on October 1, 1999,
Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of 1933 up to U.S. $600,000,000 of 93/8% Notes due December 2, 2008, Puttable at Par on December 2, 2001 (the Puttable Notes). Pursuant to a registration statement on Form F-4 (File
No. 333-10706), which was declared effective by the SEC on October 1, 1999, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of
1933 up to U.S. $500,000,000 of 9.50% Puttable or



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Mandatorily Exchangeable Securities (POMESSM) due 2027. The securities registered in 1999 under these two registration statements are collectively referred to as the 1999 Securities.

Pursuant to a registration statement on Form F-4 (File No. 333-13812), which was declared effective by the SEC on August 29, 2001, the Pemex Project Funding Master Trust, Petróleos Mexicanos,
Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of 1933 up to U.S. $1,000,000,000 of 8.50% Notes due 2008 and up to U.S. $1,000,000,000 of 9.125% Notes due
2010. These securities are collectively referred to as the 2001 Securities.

Pursuant to a registration statement on Form F-4 (File
No. 333-102993) which was declared effective by the SEC on February 14, 2003, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basis Petrochemicals registered pursuant to the Securities Act of
1933 up to U.S. $600,000,000 of 6.50% Notes due February 1, 2005. Pursuant to a registration statement on Form F-4 (File No. 333-103197), which was declared effective by the SEC on February 24, 2003, the Pemex Project Funding
Master Trust, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of 1933 up to U.S. $750,000,000 of 8.00% Notes due 2011, up to
U.S. $1,000,000,000 of 7.875% Notes due 2009, up to U.S. $500,000,000 of 8.625% Bonds due 2022 and up to U.S. $1,000,000,000 of 7.375% Notes due 2014. Pursuant to a registration statement on Form F-4 (File No. 333-107905), which
was declared effective by the SEC on August 21, 2003, the Pemex Project Funding Master Trust, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the
Securities Act of 1933 up to U.S. $750,000,000 of 6.125% Notes due 2008, up to U.S. $510,154,000 of 8.625% Bonds due 2022 and up to U.S. $757,265,000 of 7.375% Notes due 2014. Pursuant to a registration statement on Form F-4 (File
No. 333-103197), which was declared effective by the SEC on August 21, 2003, the Pemex Project Funding Master Trust, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals
registered pursuant to the Securities Act of 1933 up to U.S. $36,977,000 of 8.00% Notes due 2011 and up to U.S. $24,692,000 of 7.875% Notes due 2009.Pursuant to a registration statement on Form F-4 (File No. 333-108257), which
was declared effective by the SEC on August 28, 2003, the Pemex Project Funding Master Trust, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the
Securities Act of 1933 up to U.S. $9,841,000 of 9.125% Notes due 2010. The securities registered in 2003 under these registration statements are collectively referred to as the 2003 Securities.

Pursuant to a registration statement on Form F-4 (File No. 333-118373), which was declared effective by the SEC on August 31, 2004, the Pemex
Project Funding Master Trust, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of 1933 up to U.S. $36,296,000 of 8.50% Notes due 2008,
U.S. $18,095,000 of 7.375% Notes due 2014 and up to U.S. $47,085,000 of 8.625% Bonds due 2022. The securities registered in 2004 under these registration statements are collectively referred to as the 2004 Securities.

Pursuant to a registration on Form F-4 (File No. 333-126941), which was declared effective by the SEC on January 13, 2006, the Pemex Project
Funding Master Trust, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of 1933 up to U.S. $158,353,000 of 9.00% Notes due 2007,
U.S. $399,619,000 of 8.85% Notes due 2007, U.S. $439,011,000 of 93/8% Notes due 2008,
U.S. $324,220,000 of 91/4% Bonds due 2018, U.S. $228,735,000 of 8.625% Bonds due 2023,
U.S. $354,477,000 of 9.50% Bonds due 2027, U.S. $403,746,000 of POMESSMdue 2027, U.S. $1,000,000,000
of 5.75% Notes due 2015 and U.S. $500,000,000 of 6.625% Guaranteed Bonds due 2035. Pursuant to a registration on Form F-4 (File No. 333-126948), which was declared effective by the SEC on January 13, 2006, the Pemex Project Funding
Master Trust, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act of 1933 up to U.S. $91,647,000 of 9.00% Notes due 2007,
U.S. $200,381,000 of 8.85% Notes due 2007, U.S. $159,229,000 of 93/8% Notes due 2008,
U.S. $25,780,000 of 91/4% Bonds due 2018, U.S. $21,265,000 of 8.625% Bonds due 2023,
U.S. $45,523,000 of 9.50% Bonds due 2027, U.S. $96,254,000 of POMESSMdue 2027.



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These securities are collectively referred to as the 2005 Securities, and together with the 1997 Securities, the 1998 Securities, the 1999 Securities, the
2001 Securities, the 2003 Securities and the 2004 Securities, are collectively referred as the Registered Securities).

Taxation Generally

The following summary contains a description of the principal Mexican and U.S. federal income tax
consequences of the ownership and disposition of the Registered Securities, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to invest in, or dispose of, the Registered
Securities.

This summary is based on the federal tax laws of Mexico and the United States in force on the date of this Form 20-F,
including the provisions of the income tax treaty between the United States and Mexico together with related protocols (the Tax Treaty) (which are subject to change), and does not describe any tax consequences arising under the laws of any state or
municipality in Mexico, the United States or any other jurisdiction, or the laws of any taxing jurisdiction other than the federal laws of Mexico and the United States.

Mexico has also entered into, or is negotiating, tax treaties with various countries that may have effects on holders of Registered Securities. This summary does not discuss the consequences (if any) of such treaties.

Each holder or beneficial owner of Registered Securities should consult its tax advisor as to the Mexican, United States or other tax
consequences of the ownership and disposition of those securities, including the effect of any foreign, state or municipal tax laws, and the consequences of the application of any tax treaty to which Mexico is a party.

Mexican Taxation

This summary of
certain Mexican federal tax considerations refers only to holders of Registered Securities that are not residents of Mexico for Mexican tax purposes and that will not hold the Registered Securities or a beneficial interest therein through a
permanent establishment for tax purposes (we refer to any such non-resident holder as a Foreign Holder). For purposes of Mexican taxation, an individual is a resident of Mexico if he/she has established his/her domicile in Mexico. When an individual
also has a place of residence in another country, that individual will be considered a resident of Mexico for tax purposes, if such individual has his/her center of vital interest in Mexico. An individual would be deemed to have his/her center of
vital interest in Mexico if, among other things, (a) more than 50% of his/her total income for the year derives from Mexican sources, or (b) his/her principal center of professional activities is located in Mexico.

A legal entity is a resident of Mexico if:



| |  |  | it has been incorporated under the laws of Mexico;
| | - |  | --------------------------------------------------



| |  |  | it maintains the principal administration of its business in Mexico; or
| | - |  | -----------------------------------------------------------------------



| |  |  | it has established its effective management in Mexico.
| | - |  | ------------------------------------------------------

A
Mexican national is presumed to be a resident of Mexico unless such person can demonstrate to the contrary. If a legal entity or individual has a permanent establishment in Mexico, such permanent establishment shall be required to pay taxes in
Mexico on income attributable to such permanent establishment in accordance with Mexican federal tax law.



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Taxation of Interest. Under the Mexican Income Tax Law and rules issued by the Ministry of Finance
and Public Credit applicable to PEMEX, payments of interest (which is deemed to include any amounts paid in excess of the original issue price of the securities), made by a Mexican issuer (including Petróleos Mexicanos and the Pemex Project
Funding Master Trust) in respect of notes or bonds and other debt securities to a Foreign Holder will generally be subject to a Mexican withholding tax assessed at a rate of 4.9%, if the following requirements are met:



| |  |  | the relevant notes or bonds are registered with the Special Section of the National Registry of Securities maintained by the National Banking and Securities Commission;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the notes or bonds are placed outside of Mexico through banks or brokerage houses in a country that has entered into a treaty to avoid double taxation with Mexico; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the issuer duly complies with the information requirements established in the general rules issued by the Ministry of Finance and Public Credit for such purposes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

If the effective beneficiaries, directly or indirectly, individually or jointly with related parties, receive more than 5%
of the interest paid on the notes or bonds and are holders, directly or indirectly, individually or jointly, with related parties of more than 10% of the voting stock of the issuer or entities 20% or more of whose stock is owned directly or
indirectly, individually or jointly, by parties related to the issuer, the withholding tax rate applicable to payment of interest on the notes or bonds may be significantly higher.

Payments of interest made by Petróleos Mexicanos, the Pemex Project Funding Master Trust (in the case of Registered Securities issued by it) or
Pemex-Exploration and Production, Pemex-Refining or Pemex-Gas and Basic Petrochemicals in respect of the Registered Securities to non-Mexican pension or retirement funds will be exempt from Mexican withholding taxes, provided that:



| |  |  | such fund is duly organized pursuant to the laws of its country of origin and is the effective beneficiary of the interest payment;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | the income from such interest payment is exempt from income tax in such country of residence; and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | such fund is registered with the Ministry of Finance and Public Credit for that purpose.
| | - |  | ----------------------------------------------------------------------------------------

Additional Amounts. Petróleos Mexicanos, the Pemex Project Funding Master Trust (in the case of Registered Securities issued by it), Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and
Basic Petrochemicals have agreed, subject to specified exceptions and limitations, to:



| |  |  | pay Additional Amounts (as defined in the Indenture dated September 18, 1997, between Petróleos Mexicanos and Deutsche Bank (the 1997 Indenture)) to the holders of the
1997 Securities in respect of the Mexican withholding taxes mentioned above;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay Additional Amounts (as defined in the Indenture dated August 7, 1998, between Petróleos Mexicanos and Deutsche Bank (the 1998 Indenture)) to the holders of the 1998
Securities in respect of the Mexican withholding taxes mentioned above;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay Additional Amounts (as defined in the Indenture dated as of July 31, 1999, between Petróleos Mexicanos and Deutsche Bank) to the holders of the Puttable Notes;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay Additional Amounts (as defined in the Indenture dated as of July 15, 1999, between Petróleos Mexicanos and Deutsche Bank) to the holders of the POMESSMin respect of the Mexican withholding taxes described above;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay Additional Amounts (as defined in the Indenture dated as of July 31, 2000, among the Pemex Project Funding Master Trust, Petróleos Mexicanos and Deutsche Bank) to
the holders of the 2001 Securities, the 2003 Securities and the 2004 Securities in respect of the Mexican withholding taxes described above; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | pay Additonal Amounts (as defined in the Indenture dated as of December 30, 2004, among the Pemex Project Funding Master Trust, Petróleos Mexicanos and Deutsche Bank) to
the holders of the 2005 Securities in respect of the Mexican withholding taxes described above.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If Petróleos
Mexicanos or the Pemex Project Funding Master Trust (in the case of Registered Securities issued by it) pays Additional Amounts in respect of such Mexican withholding taxes, any refunds received with respect to such Additional Amounts will be for
the account of Petróleos Mexicanos or the Pemex Project Funding Master Trust, as applicable.

Holders or beneficial owners of the
Registered Securities may be requested to provide certain information or documentation necessary to enable Petróleos Mexicanos, the Pemex Project Funding Master Trust (in the case of Registered Securities issued by it), Pemex-Exploration and
Production, Pemex-Refining or Pemex-Gas and Basic Petrochemicals to establish the appropriate Mexican withholding tax rate applicable to such holders or beneficial owners. In the event that the specified information or documentation concerning the
holder or beneficial owner, if requested, is not provided on a timely basis, the obligation of Petróleos Mexicanos, the Pemex Project Funding Master Trust (in the case of Registered Securities issued by it), Pemex-Exploration and Production,
Pemex-Refining or Pemex-Gas and Basic Petrochemicals to pay Additional Amounts may be limited.

Taxation of Dispositions. Capital
gains resulting from the sale or other disposition of the Registered Securities by a Foreign Holder will not be subject to Mexican income or withholding taxes.

Other Mexican Tax Considerations. Under the Income Tax Law, any discount received by a non-resident upon purchase of the notes or bonds from a Mexican resident or a non-resident with a permanent establishment
in Mexico, is deemed interest income, and therefore, subject to taxes in Mexico. Such interest income results from the difference between the face value (plus accrued interest not subject to withholding) and the purchase price of such notes or
bonds.

Transfer and Other Taxes. There are no Mexican stamp, registration, or similar taxes payable by a Foreign Holder in
connection with the purchase, ownership or disposition of the Registered Securities. A Foreign Holder of the Registered Securities will not be liable for Mexican estate, succession, gift, inheritance or similar tax with respect to such securities.

United States Taxation

This summary of certain U.S. federal income tax considerations deals principally with persons that will hold the Registered Securities as capital assets and whose functional currency is the United States dollar. As used in this section
Taxation, the term United States Holder means an individual who is a citizen or resident of the United States, a U.S. domestic corporation or any other person that is subject to U.S. federal income taxation on a net income
basis in respect of its investment in the Registered Securities.

This summary does not purport to be a comprehensive description of all
the tax considerations that may be relevant to any particular investor, including tax considerations that arise from rules of general application or that are assumed to be known to investors. This summary generally does not address the tax treatment
of holders that may be subject to special tax rules, such as banks, insurance companies, tax-exempt organizations, dealers in securities or currencies, certain short-term holders of Registered Securities, traders in securities electing to mark to
market, or persons that hedge their exposure in the Registered Securities or hold the Registered Securities as a position in a straddle for tax purposes or as part of a synthetic security or a conversion
transaction or other integrated investment comprised of such securities and one or more other investments, nor does it address the tax treatment of holders that do not acquire the Registered Securities at their issue price as part of the
initial distribution. Investors who purchase the Registered Securities at a price other than the issue price should consult their tax advisor as to the possible applicability to them of the amortizable bond premium or market discount rules. United
States Holders should be aware that the U.S. federal income tax consequences of holding the



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Registered Securities may be materially different for investors described in the prior sentence, including as a result of recent changes in law applicable to
investors with short holding periods or that engage in hedging transactions.

Taxation of Interest and Additional Amounts. A United
States Holder will treat the gross amount of interest and Additional Amounts (i.e., without reduction for Mexican withholding taxes) as ordinary interest income in respect of the Registered Securities. Mexican withholding taxes paid at the
appropriate rate applicable to the United States Holder will be treated as foreign income taxes eligible for credit against such United States Holders U.S. federal income tax liability, subject to generally applicable limitations and
conditions, or, at the election of such United States Holder, for deduction in computing such United States Holders taxable income. Interest and Additional Amounts will constitute income from sources without the United States and generally
will be treated separately along with other items of passive income for purposes of determining the credit for foreign income taxes allowed under the Code.

The calculation of foreign tax credits and, in the case of a United States Holder that elects to deduct foreign taxes, the availability of deductions, involves the application of rules that depend on a United States
Holders particular circumstances. United States Holders should consult their own tax advisors regarding the availability of foreign tax credits and the treatment of Additional Amounts.

Foreign tax credits may not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions in securities or in respect of
arrangements in which a United States Holders expected economic profits is insubstantial. United States Holders should consult their own advisors concerning the implications of these rules in light of their particular circumstances.

Taxation of Dispositions. Upon the sale, exchange or retirement of a Registered Security, a United States Holder will generally
recognize a gain or loss equal to the difference between the amount realized (less any amounts attributable to accrued and unpaid interest not previously includible in gross income, which will be taxable as ordinary income) and the holders tax
basis in such security. Gain or loss recognized by a United States Holder on the sale, redemption or other disposition of the Registered Securities generally will be long-term capital gain or loss if, at the time of disposition, the securities have
been held for more than one year. Long-term capital gain realized by an individual United States Holder is generally taxed at lower rates than short-term capital gains or ordinary income.

Non-United States Holders. Holders of the Registered Securities that are, with respect to the United States, non-resident aliens or foreign
corporations (Non-United States Holders) will not be subject to U.S. federal income taxes, including withholding taxes, on payments of interest on the securities so long as the requirements described under Backup Withholding and Information
Reporting are satisfied, unless such income is effectively connected with the conduct by the Non-United States Holder of a trade or business in the United States.

The gain realized on any sale or exchange of the Registered Securities by a Non-United States Holder will not be subject to U.S. federal income tax, including withholding tax, unless (1) such gain is effectively
connected with the conduct by the holder of a trade or business in the United States or (2) in the case of gain realized by an individual holder, the holder is present in the United States for 183 days or more in the taxable year of the sale
and either (A) such gain or income is attributable to an office or other fixed place of business maintained in the United States by such holder or (B) such holder has a tax home in the United States.

A Registered Security held by an individual holder who at the time of death is a non-resident alien will not be subject to United States federal estate
tax.

Backup Withholding and Information Reporting. The principal paying agent for each of the Registered Securities will be
required to file information returns with the Internal Revenue Service with respect to payments



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made to certain United States Holders of those securities. In addition, certain United States Holders may be subject to a backup withholding tax in respect
of such payments, unless they (1) provide their accurate taxpayer identification numbers to the principal paying agent and certify that they are not subject to backup withholding or (2) otherwise establish an exemption from the backup
withholding tax. Non-United States Holders may be required to comply with applicable certification procedures to establish that they are not United States Holders in order to avoid the application of such information reporting requirements and
backup withholding tax.

Documents on Display

We are subject to the information requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports, including annual reports on Form 20-F, and other information with the SEC. These
materials, including this annual report, and the exhibits thereto, may be inspected and copied at the SECs public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. In addition, any filings we make electronically with the SEC will be available to the public over the Internet at the SECs web site at http://www.sec.gov.



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|Item 11. | Quantitative and Qualitative Disclosures about Market Risk
|-------- | ----------------------------------------------------------

Risk
Management and Financial Instruments

We face significant market risks as part of our normal business operations as result of the
fluctuation of the prices of the commodities we produce and trade, of the value of the foreign currency in which some of our liabilities are denominated and of the interest rates of our debt obligations. Managing risk exposure is a high priority for
our senior management and risk management committee, which is composed of representatives of Petróleos Mexicanos and the subsidiary entities, Banco de México, the Ministry of Finance and Public Credit and PMI.

During 2001, the Board of Directors of Petróleos Mexicanos approved a restructuring of the risk management area and created the Risk Management
Deputy Direction. The objectives of this area are to create value by aligning the supply of internal and external capital with the demand for funds for operations and investment projects, to develop the financial and operational risk management
strategy for Petróleos Mexicanos and the subsidiary entities and to establish institutional regulations consistent with a consolidated risk management approach.

We also established a risk management corporate governance framework, by updating our Risk Management General Policies, modifying the operation rules of the Risk Management Committee and creating the Risk Management
General Guidelines, in accordance with an integrated and consolidated risk management approach aimed at managing the volatility inherent in these normal business exposures. In accordance with these policies, we enter into various transactions using
derivative financial and commodity instruments, including conventional exchange-traded derivative instruments such as futures and options, as well as over-the-counter instruments such as swaps, options and forward contracts.

Commodity Price Risk

Crude Oil

Our exports and domestic sales are related to international hydrocarbon prices, thus exposing us to fluctuations in international markets. We share this
risk with the Mexican Government through our current fiscal regime. In order to mitigate this risk, since 1998, the Mexican Government, along with PEMEX, has actively participated with the major international oil producers to improve international
oil prices by reducing crude oil exports volumes. See Item 5Operating and Financial Review and ProspectsExport Agreements.

Over the past few years, PMI entered into several long-term Maya crude oil supply agreements. Under these agreements, PMI provides purchasers with certain support mechanisms to protect, under certain adverse market conditions, the
investments the purchasers made in accordance with the agreements. Given the conditions of crude oil markets, placing additional volumes of crude oil in more refineries that are able to process the heavy crude oil that Pemex-Exploration and
Production produces supports the overall average price of crude oil exports. We perceive the risk under these agreements as manageable, without the need for hedging instruments, since in the worst-case market scenario the expected additional value
derived from crude oil exports should exceed the expected cost of the support mechanisms. Nonetheless, since December 2002, we implemented short-term oil price hedging strategies through the use of options to hedge against potential decreases in
short-term prices of crude oil. The applicable strategy is designed taking into account, among other things, financial requirements established by the Mexican Government, our financial condition and cash flow, the annual budget and international
market prices. In 2002, we hedged approximately 20% of our total crude oil production for the year 2003. In September 2004, we entered into a short-term oil price hedging strategy through the use of options for approximately 7% of our total crude
oil production for 2004; these options expired on December 31, 2004 and were not exercised. During February and March 2005, we entered into a new hedging strategy for approximately 7% of our total crude oil production for 2005; these options
expired on November 30, 2005 and were not exercised. We have not hedged any of our crude oil production in 2006.



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Petroleum Products

We balance our overall petroleum product supply and demand through P.M.I. Trading Ltd., managing only those exposures associated with our immediate operational program and P.M.I. Trading Ltd. third-party operations in
the international market. To this end, we use the full range of conventional oil price-related financial and commodity derivatives available in the oil markets. Our benchmark for petroleum product commercial activities is the prevailing market
price. As of December 31, 2005, the capital at risk as measured against the above-mentioned benchmark was U.S. $8.9 million.

Natural Gas

As described above under Item 4Information on the CompanyBusiness OverviewGas and Basic
PetrochemicalsHedging Operations we entered into a number of three-year agreements with Mexican industrial consumers to sell natural gas at a fixed reference price of U.S. $4.00 per million BTUs for 2001 through 2003. As part
of our risk management strategy at that moment, we also entered into a number of derivative instruments to hedge these fixed price sales under these agreements.

The risk management strategy used to hedge these fixed price sales left us with an exposure to basis risk arising from the difference between the index used to hedge the natural gas sales at a fixed price and the
index used as reference to mark to market these fixed-price contracts. This basis risk was treated as an inefficiency of the transaction and affected our earnings in a period other than the one during which the transaction was realized.

During the fourth quarter of 2003, the Ministry of Energy announced a new natural gas hedging program for 2004 through 2006. This program, which
represents approximately 20% of the total volume of natural gas sales to our industrial customers, was implemented in order to fix the price for the aforementioned period to the natural gas consumers. We decided to change our traditional risk
profile with respect to natural gas, in order to mitigate the volatility of the revenues derived from the sales of this product. This strategy does not leave us with an exposure to basis risk, due to the fact that the derivatives are priced using
the same market indices as the ones used to price the natural gas sales. For more information on this new program, see Item 4Information on the CompanyBusiness OverviewGas and Basic PetrochemicalsHedging
Operations.

Exchange Rate and Interest Rate Risks

A significant amount of our revenues is derived from exports of crude oil and petroleum products, which are priced and payable in U.S. dollars. Moreover,
our revenues net of the IEPS tax from domestic sales of petroleum products and petrochemicals are related to the international dollar-denominated prices of these products. By contrast, most of our costs of sales and other expenses, other than
hydrocarbon duties, are payable in pesos and are not linked to the U.S. dollar. As a result, the pesos depreciation against the U.S. dollar increases our income in peso terms. Appreciation of the peso relative to the U.S. dollar has the
opposite effect. We perceive this risk as manageable, without the need for hedging instruments, because most of our investments and debt issuances are made in U.S. dollars and, therefore, the impact of the fluctuation in the exchange rate between
the U.S. dollar and the peso on our revenues is offset by its impact on our obligations.

Most of our debt is denominated in U.S. dollars
or pesos. However, we borrow in currencies other than pesos or the U.S. dollar. Therefore, fluctuations in non-dollar currencies (other than pesos) can increase our costs of funding. Since 1991, Petróleos Mexicanos has entered into currency
swaps to hedge against movements in exchange rates when it borrows in currencies other than U.S. dollars. In 2002, 2003, 2004 and 2005, the Pemex Project Funding Master Trust entered into various cross-currency swaps to hedge currency risk arising
from debt obligations denominated in euros, pounds sterling and Japanese yen issued by the Pemex Project Funding Master Trust. As of December 31, 2005, the aggregate notional amount of the swaps entered into in 2003, 2004 and 2005 was
U.S. $2,039.5 million, U.S. $1,078.6 million and U.S. $1,322.8 million, respectively, for a total outstanding position on currency swaps at year-end 2005 of U.S. $7,235.6 million. During 2006, the Pemex Project Funding Master
Trust has entered into cross-currency swaps to hedge currency risk arising from debt obligations denominated in Japanese yen for a total notional amount of U.S. $95.8 million. As described above, most of our



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revenues are either in U.S. dollars or indexed to the U.S. dollar and our policy in terms of debt issuance is to either place debt in pesos or U.S. dollars
or swap other currencies back to U.S. dollar terms. As a result of this policy, we believe that our debt portfolio sensitivity to currencies other than the peso or U.S. dollar is negligible. In 2002, 2004 and 2005, the Pemex Project Funding Master
Trust entered into cross-currency swaps to hedge its exposure in Japanese yen and euro, with termination dates in 2023, 2016 and 2025. Given the long-term nature of these obligations, the swaps used to hedge these risks include an option linked to a
well-defined set of credit default events. In case such an event occurs, the swaps terminate without any payment obligation by either party. These swaps have a notional amount of U.S. $241.4 million, U.S. $1,028.5 million and
U.S. $1,322.8 million, respectively.

In November 2004, the Pemex Project Funding Master Trust and in March 2005, Petróleos
Mexicanos settled a portion of the cross-currency swap positions with a positive mark-to-market value, collecting U.S. $541.2 million and U.S. $303.8 million, respectively. Simultaneously, both the Pemex Project Funding Master Trust and
Petróleos Mexicanos entered into a number of new cross-currency swaps at the then prevailing market conditions.

Effective
January 1, 2003, due to the adoption of Bulletin B-10, we have ceased to capitalize our debt-related foreign exchange losses on our balance sheet. Prior to this date, we had capitalized our debt-related foreign exchange losses on our balance
sheet, but only up to the increase in the restated value of our fixed assets in the same period. We recorded total net foreign exchange losses of Ps. 27,724 million in 2003 and Ps. 3,586 million in 2004, and a total net foreign exchange
gain of Ps. 17,628 million in 2005.

Interest Rate Risk

We are exposed to fluctuations in interest rates on short and long-term floating rate instruments. We are predominantly exposed to U.S. dollar LIBOR
interest rates because our borrowings are primarily denominated in, or swapped into, U.S. dollars. We use derivative instruments as described below to achieve a desired mix of fixed and floating rate instruments in our debt portfolio. As of
December 31, 2005, approximately 40.2% of our total net debt outstanding consisted of floating rate debt.

Interest Rate Swaps

Under interest-rate swap agreements, we are obligated to make payments based on a fixed interest rate and are entitled to receive
payments based on either the floating six-month LIBOR or the Mexican Interbank Interest Rate (TIIE) for peso-denominated swaps. As of December 31, 2005, Petróleos Mexicanos was a party to interest-rate swap agreements with a notional
amount of U.S. $2,087.01 million, with an average fixed interest rate of approximately 4.94% in U.S. dollars and 10.70% in pesos and a weighted average term of approximately 5.21 years. In 2006, we have not entered into any peso-denominated
interest-rate swap agreements.

The market value of Petróleos Mexicanos foreign exchange and interest rate derivatives
position was positive Ps. 7,028.0 million as of December 31, 2004 and negative Ps. 5,703.1 million as of December 31, 2005. The latter figure does not reflect the amounts collected in November 2004 and March 2005.

The effects on the consolidated statements of income of entering into swap transactions designated as hedges are recorded as incurred and when the
precise settlement amounts are known. The effects on the consolidated statements of income of derivative instruments not designated as hedges are recognized in earnings according to changes in their fair value. Such amounts are included in the
consolidated statements of income within the Interest, net caption. See Note 10 to our consolidated financial statements included herein.

When derivative results are favorable to Petróleos Mexicanos, it faces the risk that counterparties will not pay their obligations. To minimize this risk, Petróleos Mexicanos monitors
counterparties creditworthiness and exposure to derivative instruments. Petróleos Mexicanos also deals exclusively with major financial institutions and maintains a diversified portfolio.



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Equity Swap

At December 31, 2003, Petróleos Mexicanos held two equity swaps with respect to shares of Repsol. In 1994, Petróleos Mexicanos entered into an equity swap, which was restructured in March 2000,
resulting in a swap with respect to 26,427,781 Repsol shares divided in three tranches, having one-, two- and three-year maturities. In addition, in January 2000, Petróleos Mexicanos entered into a second equity swap with respect to
13,679,704 Repsol shares maturing in three years. These swaps matured in January 2004 and they were not renewed.

Instruments Entered into for Trading
Purposes

Petróleos Mexicanos enters into derivative transactions with the sole purpose of hedging financial risks related to its
operations, assets or liabilities. Nonetheless, some of these transactions do not qualify for accounting treatment as hedges and are recorded in the financial statements as entered into for trading purposes, despite the fact that the profits or
losses are offset by the profits or losses of the positions to which they relate.

As part of our client-based approach, we offer natural
gas derivatives to our clients. As mentioned above, our benchmark is the market price; therefore, we enter into derivative transactions with the opposite position in order to offset the effect of the derivatives offered to our clients. Neither
Bulletin C-10 nor SFAS No. 133 allows derivative positions to serve as hedges for other derivatives. Therefore, these operations are treated for accounting purposes as entered into for trading purposes. However, given that they have offsetting
effects, we are only exposed to the basis risk arising from the difference between the index offered to clients and the underlying index related to the offsetting position.

The following tables set forth our portfolio of debt and derivative financial instruments as of December 31, 2005. It should be noted that:



| |  |  | for debt obligations, this table presents principal cash flows and related weighted average interest rates for fixed and variable rate debt;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | for interest-rate swaps and other derivatives, this table presents notional amounts and weighted average interest rates by expected (contractual) maturity dates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | weighted average variable rates are based on implied forward rates in the yield curve at the reporting date;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | fair values are obtained from market quotes received from market sources such as Reuters, Telerate and Bloomberg;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | where quotes are not available, fair value is calculated internally, discounting from the corresponding zero coupon yield curve in the original currency;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | for all instruments, the tables show the contract terms in order to determine future cash flows categorized by expected maturity dates;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the information is presented in equivalents of the peso, which is our reporting currency; and
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | each instruments actual cash flows are denominated in U.S. dollars or other foreign currencies as indicated in parentheses.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



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Quantitative Disclosure of Market Risk (Interest Rate Sensitivity) as of December 31, 2005(1)



|                             |  |                                 |  |            |  |            |  |            |  |            |  |             |  |                    |  |              |  
|---------------------------- |  | ------------------------------- |  | ---------- |  | ---------- |  | ---------- |  | ---------- |  | ----------- |  | ------------------ |  | ------------ | -
|                             |  | Year of Expected Maturity Date  | 
|                             |  | 2006                            |  | 2007       |  | 2008       |  | 2009       |  | 2010       |  | Thereafter  |  | TotalCarryingValue |  | Fair Value   |  
|                             |  | (in thousands of nominal pesos) |  |            | 
|Liabilities                  |  |                                 |  |            |  |            |  |            |  |            |  |             |  |                    |  |              |  
|Outstanding debt             |  |                                 |  |            |  |            |  |            |  |            |  |             |  |                    |  |              |  
|Fixed rate (U.S. dollars)    |  | 13,963,320                      |  | 16,785,194 |  | 33,419,210 |  | 17,343,238 |  | 15,250,692 |  | 106,812,189 |  | 203,573,843        |  | (230,923,796 | )
|Average Interest Rate (%)    |  |                                 |  |            |  |            |  |            |  |            |  |             |  | 7.8                |  |              |  
|Fixed rate (Japanese yen)    |  | 1,791,038                       |  | 1,814,816  |  | 1,838,593  |  | 1,838,593  |  | 980,433    |  | 4,524,050   |  | 12,787,523         |  | (14,020,663  | )
|Average Interest Rate (%)    |  |                                 |  |            |  |            |  |            |  |            |  |             |  | 2.6                |  |              |  
|Fixed rate (British pounds)  |  | 926,235                         |  |           |  |           |  |           |  |           |  | 7,409,880   |  | 8,336,115          |  | (9,485,522   | )
|Average Interest Rate (%)    |  |                                 |  |            |  |            |  |            |  |            |  |             |  | 8.3                |  |              |  
|Fixed rate (Pesos)           |  |                                |  | 1,027,500  |  | 1,027,500  |  |           |  | 6,172,000  |  | 13,500,000  |  | 21,727,000         |  | (23,387,586  | )
|Average Interest Rate (%)    |  |                                 |  |            |  |            |  |            |  |            |  |             |  | 9.5                |  |              |  
|Fixed rate (Euro)            |  | 673                             |  | 11,277,023 |  | 673        |  | 673        |  | 9,531,673  |  | 29,866,220  |  | 50,676,935         |  | (58,759,748  | )
|Average Interest Rate (%)    |  |                                 |  |            |  |            |  |            |  |            |  |             |  | 6.5                |  |              |  
|Total fixed rate debt        |  | 16,681,266                      |  | 30,904,533 |  | 36,285,976 |  | 19,182,504 |  | 31,934,798 |  | 162,112,339 |  | 297,101,416        |  | (336,577,315 | )
|                             |  |                                 |  |            |  |            |  |            |  |            |  |             |  |                    |  |              |  
|Variable rate (U.S. dollars) |  | 14,427,523                      |  | 10,756,637 |  | 11,456,477 |  | 19,912,045 |  | 53,655,615 |  | 40,801,219  |  | 151,009,516        |  | (155,303,602 | )
|Variable rate (Swiss francs) |  | 933                             |  |           |  |           |  |           |  |           |  |            |  | 933                |  | (942         | )
|Variable rate (Euro)         |  | 12,313                          |  |           |  | 1,312,627  |  |           |  |           |  |            |  | 1,324,940          |  | (1,442,916   | )
|Variable rate (pesos)        |  | 3,944,444                       |  | 16,916,944 |  | 3,916,944  |  | 13,944,444 |  | 13,912,600 |  | 34,587,400  |  | 87,222,776         |  | (99,283,491  | )
|Total variable rate debt     |  | 18,385,213                      |  | 27,673,581 |  | 16,686,048 |  | 33,856,489 |  | 67,568,215 |  | 75,388,619  |  | 239,558,165        |  | (256,030,951 | )
|                             |  |                                 |  |            |  |            |  |            |  |            |  |             |  |                    |  |              |  
|Total Debt                   |  | 35,066,479                      |  | 58,578,114 |  | 52,972,024 |  | 53,038,993 |  | 99,503,013 |  | 237,500,958 |  | 536,659,581        |  | (592,608,266 | )
|                             |  |                                 |  |            |  |            |  |            |  |            |  |             |  |                    |  |              |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | The information in this table has been calculated using exchange rates at December 31, 2005 of Ps. 10.7777 = U.S. $1.00; Ps. 0.0914 = 1.00 Japanese
yen; Ps. 18.5247 = 1.00 British pound; Ps. 12.7080 = 1.00 Euro; and Ps. 8.1779 = 1.00 Swiss franc.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Source: | Petróleos Mexicanos.
|------- | --------------------



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Quantitative Disclosure of Market Risk (Interest Rate and Currency Risk) as of December 31,
2005(1)

Derivative financial instruments held or issued for purposes other than trading:



|                                        |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|--------------------------------------- |  | ------------------------------- |  | ---------- |  | --------- |  | --------- |  | ---------- |  | ---------- |  | ------------------- |  | ---------- | -
|                                        |  | Year of Expected Maturity Date  | 
|                                        |  | 2006                            |  | 2007       |  | 2008      |  | 2009      |  | 2010       |  | Thereafter |  | TotalNotionalAmount |  | FairValue  |  
|                                        |  | (in thousands of nominal pesos) |  |            | 
|Hedging Instruments                     |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|Interest Rate Swaps (U.S. Dollar)       |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|Variable to Fixed                       |  | 409,633                         |  | 409,633    |  | 409,633   |  | 409,633   |  | 409,633    |  |           |  | 2,048,163           |  | (11,180    | )
|Average pay rate                        |  | 4.94                            |  | 4.94       |  | 4.94      |  | 4.94      |  | 4.94       |  |           |  |                    |  |           |  
|Average receive rate                    |  | 4.45                            |  | 4.78       |  | 4.72      |  | 4.79      |  | 4.84       |  |           |  |                    |  |           |  
|Interest Rate Swaps (Mexican Pesos)     |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|Variable to Fixed                       |  |                                |  | 2,472,500  |  | 2,472,500 |  | 5,000,000 |  | 600,000    |  | 9,900,000  |  | 20,445,000          |  | (1,613,718 | )
|Average pay rate                        |  | 10.52                           |  | 10.52      |  | 10.62     |  | 10.83     |  | 10.95      |  | 11.13      |  |                    |  |           |  
|Average receive rate                    |  | 8.45                            |  | 8.36       |  | 8.59      |  | 8.86      |  | 9.23       |  | 9.59       |  |                    |  |           |  
|Cross Currency Swaps                    |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|Receive Euro/Pay U.S. dollars           |  |                                |  | 12,638,344 |  | 1,488,958 |  |          |  | 10,540,591 |  | 32,336,333 |  | 57,004,225          |  | (3,476,905 | )
|Receive Japanese Yen/Pay U.S. dollars   |  | 1,721,042                       |  | 1,721,042  |  | 1,721,042 |  | 1,721,042 |  | 901,672    |  | 4,799,247  |  | 12,585,088          |  | (869,740   | )
|Receive British pounds/Pay U.S. dollars |  | 1,037,084                       |  |           |  |          |  |          |  |           |  | 7,356,750  |  | 8,393,834           |  | 268,489    |  
|Non-Hedging Instruments                 |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|Interest Rate Swaps                     |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|Variable to fixed                       |  |                                |  |           |  |          |  |          |  |           |  |           |  |                    |  |           |  
|Average pay rate (%)                    |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|Average receive rate (%)                |  |                                 |  |            |  |           |  |           |  |            |  |            |  |                     |  |            |  
|Total                                   |  |                                |  |           |  |          |  |          |  |           |  |           |  |                    |  |           |  

---

|Note: | Numbers may not total due to rounding.
|----- | --------------------------------------

|(1) | The information in this table has been calculated using exchange rates at December 31, 2005 of Ps. 10.7777 = U.S. $1.00.
|--- | ------------------------------------------------------------------------------------------------------------------------



|Item 12. | Description of Securities Other than Equity Securities
|-------- | ------------------------------------------------------

Not applicable.



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PART II



|Item 13. | Defaults, Dividend Arrearages and Delinquencies
|-------- | -----------------------------------------------

Not applicable.



|Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds
|-------- | ----------------------------------------------------------------------------

Not applicable.



|Item 15. | Controls and Procedures
|-------- | -----------------------

We carried out an
evaluation under the supervision and with the participation of our management, including our Director General and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December
31, 2005. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even
effective disclosures controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based upon our
evaluation, our Director General and our Chief Financial Officer concluded that our disclosure controls and procedures as of December 31, 2005 were not effective, as a result of Petróleos Mexicanos identification and correction of
certain amounts that had been previously reported under Mexican GAAP in the condensed consolidating financial information for the three years ended December 31, 2004, 2003 and 2002, as presented in Notes 20 and 21 to our consolidated financial
statements for those years included in our annual report on Form 20-F for the year ended December 31, 2004. None of these corrections, which were included in Amendment No. 2 to our annual report on Form 20-F/A for the 2004 fiscal year, had an impact
on the consolidated financial information presented in our consolidated financial statements. However, we recognize that these inadvertent errors represented a material weakness in our internal control over financial reporting, as defined under the
Public Company Accounting Oversight Boards Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statement.

We therefore performed additional analysis and other post-closing procedures to ensure that our consolidated financial statements are prepared in
accordance with Mexican GAAP. Accordingly, PEMEXs management believes that the financial statements included in this report fairly present in all material respects our financial position, results of operations and cash flows for the periods
presented. In addition, we are implementing the necessary controls and procedures to obtain, validate, verify and approve the figures included in our condensed consolidating information. These revised procedures are based on our new consolidation
system, which began operating during 2005 and includes parameters that allow the verification and validation of figures before final consolidated information is released and also provides for the supervision of personnel involved in the computation
of financial information.

We believe that the measures described above, undertaken to ensure the quality of the information, and
modifications to our internal control processes, including upgrading our information technologies through automation of our consolidation system, will improve our ability to prepare the Mexican GAAP financial information presented in Note 21 to our
consolidated financial statements. Although we are still at the first stage of improving and strengthening our controls and procedures in order to eliminate all inadvertent errors, deficiencies and deviations that can appear in the normal course of
business, with the additional objective of achieving full compliance with Section 404 of the Sarbanes-Oxley Act of 2002, PEMEXs management believes that the controls and procedures implemented to date have already enhanced the reliability of
the financial information produced by PEMEX.

Except as described above, there have been no changes in our internal control over financial
reporting during 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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Except as described above, there have been no changes in our internal control over financial reporting
during 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



|Item 16A. | Audit Committee Financial Expert
|--------- | --------------------------------

We do not
currently have an audit committee of our Board of Directors. Thus, the entire Board of Directors of Pétroleos Mexicanos is presently acting as our audit committee as specified by Section 3(a)(58)(B) of the Exchange Act. We believe that
the members of our Board of Directors have sufficient financial and other experience to perform their acting responsibilities as members of the audit committee. Notwithstanding the board members financial and other experience, the audit
committee does not include a financial expert as that term is strictly defined in the rules promulgated under the Sarbanes-Oxley Act. Further, we do not have the power to appoint a financial expert to our board as the members of the
boards of directors, except for those selected by the Union, serve subject to the discretion of the President of Mexico. See Item 6Directors, Senior Management and Employees. Because we do not have securities listed or quoted on a
U.S. exchange, we are not required to comply with the independence requirements established by Rule 10A-3 of the Exchange Act. However, we are voluntarily considering the establishment of an independent audit committee as part of our efforts to
implement best practices in corporate governance.



|Item 16B. | Code of Ethics
|--------- | --------------

We have adopted a code of ethics,
as defined in Item 16B of Form 20-F under the Exchange Act. Our Code of Ethics applies to our chief executive officer, chief financial officer, chief accounting officer and all other employees of Pétroleos Mexicanos, the subsidiary
entities and the subsidiary companies. Our Code of Ethics is available on our website at http://www.pemex.com. If we amend the provisions of our Code of Ethics that apply to our chief executive officer, chief financial officer, chief accounting
officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address.

In addition, all of our employees are currently also subject to the Código de Etica de los Servidores Públicos de la
Administración Pública Federal (the Code of Ethics for Federal Public Officials of the Federal Public Administration), which was issued by SFP in July 2002 pursuant to the requirements of the Ley Federal de Responsabilidades
Administrativas de los Servidores Públicos(Federal Law of Administrative Responsibilities of Public Officials) in order to establish clear rules to promote and enforce legal and ethical standards of conduct and to prevent corruption and
corporate abuses by Mexican public officials. See Item 8Financial InformationLegal ProceedingsMexican Government Audits and Other Investigations for more information.



|Item 16C. | Principal Accountant Fees and Services
|--------- | --------------------------------------

Audit and Non-Audit Fees

The following table sets forth the fees billed to us by our independent auditors, PricewaterhouseCoopers, S.C. during the fiscal years
ended December 31, 2004 and 2005:



|                   |  |                                 |        |      |     |       
|------------------ |  | ------------------------------- | ------ | ---- | --- | ------
|                   |  | Year ended December 31,        
|                   |  | 2004                            |        | 2005
|                   |  | (in thousands of nominal pesos)
|Audit fees         |  | Ps.                             | 25,231 |      | Ps. | 31,468
|Audit-related fees |  |                                 | 670    |      |     | 813   
|Tax fees           |  |                                 | 1,528  |      |     | 2,086 
|Other fees         |  |                                 | 3,443  |      |     | 0     
|                   |  |                                 |        |      |     |       
|Total fees         |  | Ps.                             | 30,872 |      | Ps. | 34,367
|                   |  |                                 |        |      |     |       



172



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Audit fees in the above table are the aggregate fees billed by PricewaterhouseCoopers, S.C. in connection
with the audit of our annual financial statements, the review of our interim financial statements, services provided in connection with statutory and regulatory filings, comfort letters, statutory audits and consents.

Audit-related fees in the above table are the aggregate fees billed by PricewaterhouseCoopers, S.C. for special purpose audits performed in accordance
with the instructions of the SFP, which were performed pursuant to agreed upon procedures.

Tax fees in the above table are fees billed by
PricewaterhouseCoopers, S.C. for tax compliance services, which generally involved the review of original and amended tax returns and claims for tax refunds.

Other fees in the above table are fees billed by PricewaterhouseCoopers, S.C. primarily related to the review of the information technology services for safety, health and the environment.

Audit Committee Approval Policies and Procedures

The
SFP appoints the external auditors of Petróleos Mexicanos and the subsidiary entities through a competitive bidding process on an annual basis to audit our financial statements in accordance with the Mexican Financial Reporting Standards
applicable to Mexican public sector entities. The auditors selected by the SFP to audit these financial statements subsequently audit financial statements in accordance with Mexican GAAP and reconcile them to U.S. GAAP. The Board of Directors of
Petróleos Mexicanos reviews and ratifies the engagement of the external auditors by the SFP.



|Item 16D. | Exemptions from the Listing Standards for Audit Committees.
|--------- | -----------------------------------------------------------

Not applicable.



|Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
|--------- | -----------------------------------------------------------------------

Not applicable.



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PART III



|Item 17. | Financial Statements.
|-------- | ---------------------

Not applicable.



|Item 18. | Financial Statements.
|-------- | ---------------------

See pages F-1 through F-93,
incorporated herein by reference.



|Item 19. | Exhibits.
|-------- | ---------

Documents filed as exhibits to this Form
20-F:



|1.1 | Ley Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (the Organic Law of Petróleos Mexicanos and Subsidiary Entities), as amended effective
January 1, 1994 (previously filed as Exhibit 3.1 to Petróleos Mexicanos Registration Statement on Form F-1 (File No. 33-86304) on November 14, 1994 and incorporated by reference herein).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.2 | Reglamento de la Ley Orgánica de Petróleos Mexicanos(Regulations to the Organic Law of Petróleos Mexicanos), together with an English translation
(previously filed as Exhibit 3.2 to Petróleos Mexicanos Registration Statement on Form F-1 (File No. 33-86304) on November 14, 1994 and incorporated by reference herein).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.3 | Reglamento de Gas Natural (Natural Gas Regulation), effective November 9, 1995 together with an English translation (previously filed as Exhibit 1 to Petróleos
Mexicanos annual report on Form 20-F (File No. 0-99) on June 28, 1996 and incorporated by reference herein).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.4 | Decreto por el que se Reforma la Ley Reglamentaria del Artículo 27 Constitucional en el Ramo del Petróleo (Decree that Amends the Regulatory Law to Article 27
of the Political Constitution of the United Mexican States Concerning Petroleum Affairs), effective November 14, 1996 (previously filed as Exhibit 1 to Petróleos Mexicanos annual report on Form 20-F (File No. 0-99) on June 30,
1997 and incorporated by reference herein).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.5 | Decreto por el que se adiciona el Reglamento de la Ley Orgánica de Petróleos Mexicanos(Decree that adds to the Regulations to the Organic Law of
Petróleos Mexicanos), together with an English translation, effective April 30, 2001 (previously filed as Exhibit 1.5 to Petróleos Mexicanos annual report on Form 20-F (File No. 0-99) on June 28, 2001 and incorporated
by reference herein).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.6 | Ley Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (the Organic Law of Petróleos Mexicanos and Subsidiary Entities), as amended effective
January 16, 2002 (English translation) (previously filed as Exhibit 1.6 to Amendment No. 1 to Petróleos Mexicanos annual report on Form 20-F/A (File No. 0-99) on November 15, 2002 and incorporated by reference herein).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.7 | Decreto por el que se adicionan dos párrafos al artículo 6o. de la Ley Reglamentaria del artículo 27 Constitucional en el Ramo del Petróleo y se
reforma el tercer párrafo y adiciona un último párrafo al artículo 3o de la Ley Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (Decree that adds two paragraphs to Article 6 of the
Regulatory Law to Article 27 of the Political Constitution of the United Mexican States Concerning Petroleum Affairs and amends the third paragraph and adds a last paragraph to Article 3 of the Organic Law of Petróleos Mexicanos and
Subsidiary Entities) together with an English translation, effective January 13, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.1 | Indenture, dated as of September 18, 1997, between Petróleos Mexicanos and Bankers Trust Company (previously filed as Exhibit 4.1 to Petróleos Mexicanos
Registration Statement on Form F-4 (File No. 333-7796) on October 17, 1997 and incorporated by reference herein).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.2 | Indenture, dated August 7, 1998, between Petróleos Mexicanos and Bankers Trust Company (previously filed as Exhibit 4.1 to Petróleos Mexicanos Registration
Statement on Form F-4 on August 11, 1998 and incorporated by reference herein).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|2.3 | Indenture, dated July 15, 1999, between Petróleos Mexicanos and Bankers Trust Company (previously filed as Exhibit 4.1 to Petróleos Mexicanos Registration
Statement on Form F-4 (File No. 333-10706) on August 23, 1999 and incorporated by reference herein).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.4 | Indenture, dated July 31, 1999, between Petróleos Mexicanos and Bankers Trust Company (previously filed as Exhibit 4.1 to Petróleos Mexicanos Registration
Statement on Form F-4 (File No. 333-10706) on September 29, 1999 and incorporated by reference herein).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.5 | Indenture, dated as of July 31, 2000, among Pemex Project Funding Master Trust, Petróleos Mexicanos and Bankers Trust (previously filed as Exhibit 2.5 to
Petróleos Mexicanos annual report on Form 20-F (File No. 0-99) on June 28, 2001 and incorporated by reference herein).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.6 | Indenture, dated as of February 3, 2003, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas (previously filed as Exhibit 4.7 to Petróleos
Mexicanos Registration Statement on Form F-4 (File No. 333-102993) on February 12, 2003 and incorporated by reference herein).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.7 | Indenture, dated as of December 30, 2004 among Pemex Project Funding Master Trust, Petróleos Mexicanos and Deutsche Bank Trust Company Americas (previously filed as
Exhibit 2.7 to Petróleos Mexicanos Annual Report on Form 20-F on June 30, 2005 and incorporated by reference herein).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.8 | Fiscal Agency Agreement between Petróleos Mexicanos and Bankers Trust, dated as of June 16, 1993, and amended and restated as of February 26, 1998 (previously filed
as Exhibit 3.1 to Petróleos Mexicanos annual report on Form 20-F (File No. 0-99) on June 29, 2000 and incorporated by reference herein).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.9 | Trust Agreement, dated as of November 10, 1998, among The Bank of New York, The Bank of New York (Delaware) and Petróleos Mexicanos (previously filed as Exhibit 3.1 to
Petróleos Mexicanos annual report on Form 20-F (File No. 0-99) on June 30, 1999 and incorporated by reference herein).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.10 | Amendment No. 1, dated as of November 17, 2004, to the Trust Agreement among The Bank of New York, The Bank of New York (Delaware) and Petróleos Mexicanos
(previously filed as Exhibit 2.10 to Petróleos Mexicanos Annual Report on Form 20-F on June 30, 2005 and incorporated by reference herein).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.11 | Amendment No. 2, dated as of December 22, 2004 to the Trust Agreement among The Bank of New York, The Bank of New York (Delaware) and Petróleos Mexicanos
(previously filed as Exhibit 2.11 to Petróleos Mexicanos Annual Report on Form 20-F on June 30, 2005 and incorporated by reference herein).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.12 | Assignment and Indemnity Agreement, dated as of November 10, 1998, among Petróleos Mexicanos, Pemex-Exploración y Producción, Pemex-Refinación,
Pemex-Gas y Petroquímica Básica and Pemex Project Funding Master Trust, (previously filed as Exhibit 3.2 to Petróleos Mexicanos annual report on Form 20-F (File No. 0-99) on June 30, 1999 and incorporated by reference
herein).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.13 | Guaranty Agreement, dated July 29, 1996, among Petróleos Mexicanos, Pemex-Exploración y Producción, Pemex-Refinación and Pemex-Gas y
Petroquímica Básica (previously filed as Exhibit 4.4 to Petróleos Mexicanos Registration Statement on Form F-4 (File No. 333-7796) on October 17, 1997 and incorporated by reference herein).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The registrant agrees to furnish to the Securities and Exchange Commission, upon request, copies of any instruments that define the rights of
holders of long-term debt of the registrant that are not filed as exhibits to this annual report.



|4.1 | Agreement for the Financial Strengthening of Petróleos Mexicanos between the Federal Government of Mexico and Petróleos Mexicanos, together with a summary in English
(previously filed as Exhibit 10.1 to Petróleos Mexicanos Registration Statement on Form F-1 (File No. 33-86304) on November 14, 1994 and incorporated by reference herein).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.2 | Amendment to the Agreement for the Financial Strengthening of Petróleos Mexicanos between the Federal Government of Mexico and Petróleos Mexicanos,
dated December 18, 1997, together with an English
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



175



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##### Table of Contents

| | translation (previously filed as Exhibit 10.1 to Amendment No. 1 to Petróleos Mexicanos annual report on Form 20-F/A (File No. 0-99) on
July 20, 1998 and incorporated by reference herein).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.3 | Receivables Purchase Agreement, dated as of December 1, 1998, by and among Pemex Finance, Ltd., P.M.I. Comercio Internacional, S.A. de C.V., P.M.I. Services, B.V. and
Pemex-Exploración y Producción. (previously filed as Exhibit 3.3 to Petróleos Mexicanos annual report on Form 20-F (File No. 0-99) on June 30, 1999 and incorporated by reference herein).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.4 | Transfer of Funds Agreement, dated as of November 24, 2000, among Pemex Project Funding Master Trust, Petróleos Mexicanos and the Federal Government (English
translation) (previously filed as Exhibit 4.4 to Amendment No. 1 to Petróleos Mexicanos annual report on Form 20-F/A (File No. 0-99) on November 15, 2002 and incorporated by reference herein).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|7.1 | Computation of Ratio of Earnings to Fixed Charges.
|--- | --------------------------------------------------



|8.1 | For a list of subsidiaries, their jurisdiction of incorporation and the names under which they do business, see Consolidated Structure of PEMEX on page 3.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



|10.1 | Consent letter of Ryder Scott Company, L.P.
|---- | -------------------------------------------



|10.2 | Consent letters of Netherland, Sewell International, S. de R.L. de C.V.
|---- | -----------------------------------------------------------------------



|10.3 | Consent letter of DeGolyer and MacNaughton.
|---- | -------------------------------------------



|12.1 | CEO Certification pursuant to Rule 13a-14(a)/15d-14(a).
|---- | -------------------------------------------------------



|12.2 | CFO Certification pursuant to Rule 13a-14(a)/15d-14(a).
|---- | -------------------------------------------------------



|13.1 | Certification pursuant to Rule 13a-14(b)/15d-14(b) and 18 U.S.C. § 1350.
|---- | ------------------------------------------------------------------------



176



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SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and
authorized the undersigned to sign this annual report on its behalf.



PETRÓLEOS MEXICANOSBy:

/s/    JUAN JOSÉ SUÁREZ
COPPELName:

Juan José Suárez CoppelTitle:

Chief Financial Officer


Date: June 30, 2006



177



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##### Table of Contents



PETRÓLEOS MEXICANOS,
SUBSIDIARY ENTITIES

AND SUBSIDIARY COMPANIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES

AND SUBSIDIARY COMPANIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005, 2004 AND 2003

INDEX



|                                                                    |  |            
|------------------------------------------------------------------- |  | -----------
|Contents                                                            |  | Page       
|Report of PricewaterhouseCoopers, Registered Public Accounting Firm |  | F-1 and F-2
|                                                                    | 
|Consolidated financial statements                                   |  |            
|                                                                    | 
|Consolidated balance sheets                                         |  | F-3        
|                                                                    | 
|Consolidated statements of operations                               |  | F-4        
|                                                                    | 
|Consolidated statements of changes in equity                        |  | F-5        
|                                                                    | 
|Consolidated statements of changes in financial position            |  | F-6        
|                                                                    | 
|Notes to the consolidated financial statements                      |  | F-7 to F-93



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Mexico City, Mexico, June 29,
2006

To the General Comptrollers Office

and the Board of Directors of

Petróleos Mexicanos:

We have audited the accompanying consolidated balance sheets of
Petróleos Mexicanos, Subsidiary Entities and Subsidiary Companies (collectively, PEMEX) as of December 31, 2005 and 2004, and the related consolidated statements of operations, changes in equity and changes in financial
position for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the management of PEMEX. Our responsibility is to express an opinion on these financial statements based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted in México and with the Standards of the
Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and have been
prepared on the basis of generally accepted accounting principles. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures contained in the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 2l. to the consolidated financial statements, effective January 1, 2005, PEMEX adopted the amendments to Bulletin D-3,
Labor Obligations, issued by the Mexican Institute of Public Accountants (MIPA), which establishes the rules for valuation and recording of liabilities arising from other severance payments paid to employees upon dismissal.
As of January 1, 2005, the adoption of these amendments resulted in a charge of Ps. 1,322,540,000, which is presented in the consolidated statement of operations as a cumulative effect of adoption of new accounting standards.

As described in Note 2t. to the consolidated financial statements, effective January 1, 2005, PEMEX adopted the provisions of Bulletin C-10,
Derivative Financial Instruments and Hedging Operations, issued by the MIPA, which establishes the criteria for valuation, recording and disclosure applicable to derivative financial instruments for hedging and to embedded derivatives.
As of January 1, 2005, the adoption of these amendments resulted in the recognition of an initial cumulative charge of Ps. 442,730,000, recognized in the consolidated statement of operations as a cumulative effect of adoption of new accounting
standards.

As described in Note 21. to the consolidated financial statements, effective January 1, 2004, PEMEX adopted the amendments
to Bulletin D-3, Labor Obligations, issued by the MIPA. These amendments set forth additional valuation and disclosure requirements for the recognition of post-retirement obligations. As of January 1, 2004, the adoption of these
amendments resulted in the recognition of an initial liability related to prior service costs and a charge to income for 2004, in the amount of Ps. 8,726,434,000, which is presented in the consolidated statement of operations as a cumulative effect
of adoption of new accounting standards.

As described in Note 2e. to the consolidated financial statements, effective January 1,
2004, the Board of Directors of PEMEX approved a change in the accounting policy for recognition of well exploration and drilling expenses to the successful efforts method of accounting. As a result, the oil-field exploration and depletion reserve
was discontinued. The change in the accounting policy for recognizing exploration and drilling costs had no effect on the consolidated financial statements upon adoption, since at December 31, 2003, the specific oil-field exploration and
depletion reserve had been entirely utilized.



F-1



---

##### Table of Contents

As described in Note 2i. to the consolidated financial statements, Bulletin C-15, Impairment of the
Value of Long-Lived Assets and their Disposal, issued by the MIPA, became effective January 1, 2004. PEMEX calculated an impairment of the value of long-lived assets at January 1 and December 31, 2004, and determined a
cumulative effect of Ps. 2,091,590,000 and an impairment charge for the year of Ps. 1,707,645,000, respectively. The initial effect is presented in the consolidated statement of operations as a cumulative effect of adoption of new accounting
standards and the impairment charge for the year is presented in the consolidated statements of operations under costs and operating expenses.

As discussed in Note 2h. to the consolidated financial statements, effective January 1, 2003, PEMEX adopted the guidelines of Bulletin C-9, Liabilities, Provisions, Contingent Assets and Liabilities and Commitments, issued
by MIPA. As a result, an initial cumulative benefit totaling Ps. 2,187,823,000 was recognized in earnings in the consolidated statements of operations as a cumulative effect of adoption of new accounting standards.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of
PEMEX, at December 31, 2005 and 2004, and the consolidated results of their operations, the changes in equity and changes in financial position for each of the three years in the period ended December 31, 2005, in conformity with
accounting principles generally accepted in Mexico.

Accounting principles generally accepted in Mexico vary in certain significant
respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of said differences is presented in Note 20 to the consolidated financial statements.

PricewaterhouseCoopers

/s/ Francisco J. Hernández
Franco

Francisco J. Hernández Franco

Public Accountant



F-2



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Notes 1, 2 and 3)

(In thousands of Mexican pesos as of December 31, 2005 purchasing power)



|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|-------------------------------------------------------------------------------------------- |  | ----------- | ----------- | - | ---- | --- | ------------- | ---- |  | --- | ------------ | -
|                                                                                             |  | 2005        |             |   | 2005 |     |               | 2004 | 
|                                                                                             |  | (Unaudited) |             |   |      |     |               |      | 
|ASSETS:                                                                                      |  |             |             |   |      |     |               |      |  |     |              |  
|Current assets:                                                                              |  |             |             |   |      |     |               |      |  |     |              |  
|Cash and cash equivalents (Note 4)                                                           |  | U.S.$       | 11,210,795  |   |      | Ps. | 120,826,589   |      |  | Ps. | 87,700,768   |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Accounts, notes receivable and otherNet (Note 5)                                            |  |             | 10,937,430  |   |      |     | 117,880,340   |      |  |     | 127,078,170  |  
|InventoriesNet (Note 6)                                                                     |  |             | 4,693,238   |   |      |     | 50,582,308    |      |  |     | 36,955,626   |  
|Derivative financial instruments (Note 11)                                                   |  |             | 322,294     |   |      |     | 3,473,583     |      |  |     |             |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|                                                                                             |  |             | 15,952,962  |   |      |     | 171,936,231   |      |  |     | 164,033,796  |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Total current assets                                                                         |  |             | 27,163,757  |   |      |     | 292,762,820   |      |  |     | 251,734,564  |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Investments in shares (Note 8)                                                               |  |             | 2,464,834   |   |      |     | 26,565,240    |      |  |     | 26,760,089   |  
|Properties, plant and equipmentNet (Note 7)                                                 |  |             | 59,682,080  |   |      |     | 643,235,556   |      |  |     | 614,384,124  |  
|Intangible asset derived from the actuarial computation of labor obligations (Note 12)       |  |             | 7,113,232   |   |      |     | 76,664,285    |      |  |     | 78,986,307   |  
|Other assetsNet                                                                             |  |             | 309,155     |   |      |     | 3,331,974     |      |  |     | 7,240,497    |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Total assets                                                                                 |  | U.S.$       | 96,733,058  |   |      | Ps. | 1,042,559,875 |      |  | Ps. | 979,105,581  |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|LIABILITIES:                                                                                 |  |             |             |   |      |     |               |      |  |     |              |  
|Current liabilities:                                                                         |  |             |             |   |      |     |               |      |  |     |              |  
|Current portion of long-term debt (Note 9)                                                   |  | U.S.$       | 3,349,046   |   |      | Ps. | 36,095,017    |      |  | Ps. | 50,779,425   |  
|Suppliers                                                                                    |  |             | 2,872,649   |   |      |     | 30,960,550    |      |  |     | 25,133,230   |  
|Accounts and accrued expenses payable                                                        |  |             | 963,333     |   |      |     | 10,382,503    |      |  |     | 23,643,958   |  
|Taxes payable                                                                                |  |             | 6,309,815   |   |      |     | 68,005,297    |      |  |     | 45,607,752   |  
|Derivative financial instruments (Note 11)                                                   |  |             | 1,765,933   |   |      |     | 19,032,691    |      |  |     |             |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Total current liabilities                                                                    |  |             | 15,260,776  |   |      |     | 164,476,058   |      |  |     | 145,164,365  |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Long-term liabilities:                                                                       |  |             |             |   |      |     |               |      |  |     |              |  
|Long-term debt (Note 9)                                                                      |  |             | 46,539,857  |   |      |     | 501,592,619   |      |  |     | 419,359,651  |  
|Sale of future accounts receivable (Note 10)                                                 |  |             |            |   |      |     |              |      |  |     | 37,856,647   |  
|Reserve for dismantlement and abandonment activities, sundry creditors and others (Note 2j.) |  |             | 2,386,390   |   |      |     | 25,719,784    |      |  |     | 26,834,783   |  
|Reserve for retirement payments, pensions and seniority premiums (Note 12)                   |  |             | 34,855,620  |   |      |     | 375,663,417   |      |  |     | 315,435,998  |  
|Deferred taxes (Note 2z.)                                                                    |  |             | 183,502     |   |      |     | 1,977,728     |      |  |     |             |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Total long-term liabilities                                                                  |  |             | 83,965,369  |   |      |     | 904,953,548   |      |  |     | 799,487,079  |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Total liabilities                                                                            |  |             | 99,226,145  |   |      |     | 1,069,429,606 |      |  |     | 944,651,444  |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Commitments and contingencies (Notes 13 and 14)                                              |  |             |             |   |      |     |               |      |  |     |              |  
|                                                                                             |  |             |            
|EQUITY (Note 15):                                                                            |  |             |             |   |      |     |               |      |  |     |              |  
|Certificates of Contribution A                                                             |  |             | 8,332,511   |   |      |     | 89,805,303    |      |  |     | 89,805,303   |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Mexican Government increase in equity of Subsidiary Entities                                 |  |             | 7,267,799   |   |      |     | 78,330,159    |      |  |     | 33,725,238   |  
|Surplus in restatement of equity                                                             |  |             | 13,391,827  |   |      |     | 144,333,099   |      |  |     | 136,752,575  |  
|Effect on equity from labor obligations                                                      |  |             | (2,531,330  | ) |      |     | (27,281,912   | )    |  |     | (7,208,067   | )
|Derivative financial instruments                                                             |  |             | (604,707    | ) |      |     | (6,517,352    | )    |  |     |             |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Accumulated losses:                                                                          |  |             |             |   |      |     |               |      |  |     |              |  
|From prior years                                                                             |  |             | (21,271,392 | ) |      |     | (229,256,678  | )    |  |     | (192,275,610 | )
|Net loss for the year                                                                        |  |             | (7,077,795  | ) |      |     | (76,282,350   | )    |  |     | (26,345,302  | )
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|                                                                                             |  |             | (28,349,187 | ) |      |     | (305,539,028  | )    |  |     | (218,620,912 | )
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Total equity                                                                                 |  |             | (2,493,087  | ) |      |     | (26,869,731   | )    |  |     | 34,454,137   |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  
|Total liabilities and equity                                                                 |  | U.S.$       | 96,733,058  |   |      | Ps. | 1,042,559,875 |      |  | Ps. | 979,105,581  |  
|                                                                                             |  |             |             |   |      |     |               |      |  |     |              |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

(Notes 1, 2 and 3)

(In thousands of Mexican pesos as of December 31, 2005 purchasing power)



|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | - |  | -------------- | - |  | -------------- | - |  | -------------- | -
|                                                                                                                                                                                   |  | 2005            |   |  | 2005           |   |  | 2004           |   |  | 2003           |  
|                                                                                                                                                                                   |  | (Unaudited)     |   |  |                |   |  |                |   |  |                |  
|Net sales:                                                                                                                                                                         |  |                 |   |  |                |   |  |                |   |  |                |  
|Domestic                                                                                                                                                                           |  | U.S.$46,866,139 |   |  | Ps.505,109,185 |   |  | Ps.463,976,988 |   |  | Ps.420,912,591 |  
|Export                                                                                                                                                                             |  | 39,297,233      |   |  | 423,533,791    |   |  | 335,391,475    |   |  | 258,906,427    |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|                                                                                                                                                                                   |  | 86,163,372      |   |  | 928,642,976    |   |  | 799,368,463    |   |  | 679,819,018    |  
|Other revenuesNet                                                                                                                                                                 |  | 1,098,294       |   |  | 11,837,084     |   |  | 11,526,119     |   |  | 3,218,515      |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|Total revenues                                                                                                                                                                     |  | 87,261,666      |   |  | 940,480,060    |   |  | 810,894,582    |   |  | 683,037,533    |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|Costs of sales and operating expenses:                                                                                                                                             |  |                 |   |  |                |   |  |                |   |  |                |  
|Cost of sales                                                                                                                                                                      |  | 33,511,542      |   |  | 361,177,339    |   |  | 272,907,331    |   |  | 225,130,065    |  
|Transportation and distribution expenses                                                                                                                                           |  | 2,032,974       |   |  | 21,910,789     |   |  | 18,160,007     |   |  | 16,901,185     |  
|Administrative expenses                                                                                                                                                            |  | 4,342,336       |   |  | 46,800,391     |   |  | 37,929,336     |   |  | 38,255,589     |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|Total cost and operating expenses                                                                                                                                                  |  | 39,886,852      |   |  | 429,888,519    |   |  | 328,996,674    |   |  | 280,286,839    |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|Comprehensive financing cost:                                                                                                                                                      |  |                 |   |  |                |   |  |                |   |  |                |  
|Exchange gain (loss)Net                                                                                                                                                           |  | 1,635,563       |   |  | 17,627,605     |   |  | (3,586,417     | ) |  | (27,724,518    | )
|InterestNet                                                                                                                                                                       |  | (3,566,566      | ) |  | (38,439,382    | ) |  | (23,894,309    | ) |  | (18,185,365    | )
|Gain on monetary position                                                                                                                                                          |  | 1,515,393       |   |  | 16,332,449     |   |  | 20,197,679     |   |  | 12,493,956     |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|                                                                                                                                                                                   |  | (415,610        | ) |  | (4,479,328     | ) |  | (7,283,047     | ) |  | (33,415,927    | )
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|Income before hydrocarbon extraction duties and other, special tax on production and services, deferred income taxes and cumulative effect of
adoption of new accounting standards |  | 46,959,204      |   |  | 506,112,213    |   |  | 474,614,861    |   |  | 369,334,767    |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|Hydrocarbon extraction duties and other                                                                                                                                            |  | 51,814,162      |   |  | 558,437,488    |   |  | 433,614,143    |   |  | 313,443,951    |  
|Special tax on production and services (IEPS Tax)                                                                                                                                  |  | 1,875,546       |   |  | 20,214,077     |   |  | 56,527,996     |   |  | 102,257,637    |  
|Deferred taxes                                                                                                                                                                     |  | 183,502         |   |  | 1,977,728      |   |  |               |   |  |               |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|                                                                                                                                                                                   |  | 53,873,210      |   |  | 580,629,293    |   |  | 490,142,139    |   |  | 415,701,588    |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|Cumulative effect of adoption of new accounting standards (Notes 2h., 2i., 2l. and 2t.)                                                                                            |  | (163,789        | ) |  | (1,765,270     | ) |  | (10,818,024    | ) |  | 2,187,823      |  
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  
|Net loss for the year                                                                                                                                                              |  | (U.S.$7,077,795 | ) |  | (Ps.76,282,350 | ) |  | (Ps.26,345,302 | ) |  | (Ps.44,178,998 | )
|                                                                                                                                                                                   |  |                 |   |  |                |   |  |                |   |  |                |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Notes 1, 2 and 15)

(In thousands of Mexican pesos as of December 31, 2005 purchasing power)



|                                                                                                               |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  |                  |   |  |                 |   |  |     |                 |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | ---------------------------------------------------- | ----- | ----------- | -------------------------------- |  | ----- | -------------------------------------------------------- | - | ----------------------------- | ----- | ---------- | --------------------------------------- | --- | ------------- | ------------------ |  | --- | --------------- | - |  | ---------------- | - |  | --------------- | - |  | --- | --------------- | -
|                                                                                                               |  | Certificates of Contribution A |            | Specific oil-field exploration
and depletion reserve |       |             | Surplus in restatement of
equity |  |       | MexicanGovernmentincrease
in equity ofSubsidiaryEntities |   | Derivativefinancialinstrument |       |            | Effect on equity from labor obligations |     |               | Accumulated losses |  |     | Total           |  
|                                                                                                               |  |                                  |            |                                                      |       |             | From prior years                 |  |       | Net loss for the year                                    |   |                              
|Balances at December 31, 2002                                                                                  |  | Ps.                              | 89,805,303 |                                                      | Ps.   | 14,189,051  |                                  |  | Ps.   | 135,459,919                                              |   |                               | Ps.   |           |                                         | Ps. |              |                    |  | Ps. |                |   |  | (Ps.99,801,356   | ) |  | (Ps.26,711,121  | ) |  | Ps. | 112,941,796     |  
|Transfer to prior years accumulated losses                                                                    |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  | (26,711,121      | ) |  | 26,711,121      |   |  |     |                 |  
|Minimum guaranteed dividends paid to the Mexican Government approved by the Board of Directors on May 28, 2003 |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  | (10,850,100      | ) |  |                 |   |  |     | (10,850,100     | )
|Comprehensive loss for the year (Note 16)                                                                      |  |                                  |            |                                                      |       | (14,189,051 | )                                |  |       | 6,125,448                                                |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  |                  |   |  | (44,178,998     | ) |  |     | (52,242,601     | )
|                                                                                                               |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  |                  |   |  |                 |   |  |     |                 |  
|Balances at December 31, 2003                                                                                  |  |                                  | 89,805,303 |                                                      |       |            |                                  |  |       | 141,585,367                                              |   |                               |       |           |                                         |     |              |                    |  |     |                |   |  | (137,362,577     | ) |  | (44,178,998     | ) |  |     | 49,849,095      |  
|Transfer to prior years accumulated losses                                                                    |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  | (44,178,998      | ) |  | 44,178,998      |   |  |     |                 |  
|Minimum guaranteed dividends paid to the Mexican Government approved by the Board of Directors on May 12, 2004 |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  | (10,734,035      | ) |  |                 |   |  |     | (10,734,035     | )
|Increase in equity of the Subsidiary Entities made by the Federal Government (Note 15)                         |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       | 33,725,238 |                                         |     |               |                    |  |     |                 |   |  |                  |   |  |                 |   |  |     | 33,725,238      |  
|Comprehensive loss for the year (Note 16)                                                                      |  |                                  |            |                                                      |       |             |                                  |  |       | (4,832,792                                               | ) |                               |       |            |                                         |     |               |                    |  |     | (7,208,067      | ) |  |                  |   |  | (26,345,302     | ) |  |     | (38,386,161     | )
|                                                                                                               |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  |                  |   |  |                 |   |  |     |                 |  
|Balances at December 31, 2004                                                                                  |  |                                  | 89,805,303 |                                                      |       |            |                                  |  |       | 136,752,575                                              |   |                               |       | 33,725,238 |                                         |     |              |                    |  |     | (7,208,067      | ) |  | (192,275,610     | ) |  | (26,345,302     | ) |  |     | 34,454,137      |  
|Transfer to prior years accumulated losses                                                                    |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  | (26,345,302      | ) |  | 26,345,302      |   |  |     |                 |  
|Minimum guaranteed dividends paid to the Mexican Government approved by the Board of Directors on May 18 2005  |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  | (10,635,766      | ) |  |                 |   |  |     | (10,635,766     | )
|Increase in equity of the Subsidiary Entities made by the Federal Government (Note 15)                         |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       | 44,604,921 |                                         |     |               |                    |  |     |                 |   |  |                  |   |  |                 |   |  |     | 44,604,921      |  
|Comprehensive loss for the year (Note 16)                                                                      |  |                                  |            |                                                      |       |             |                                  |  |       | 7,580,524                                                |   |                               |       |            |                                         |     | (6,517,352    | )                  |  |     | (20,073,845     | ) |  |                  |   |  | (76,282,350     | ) |  |     | (95,293,023     | )
|                                                                                                               |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  |                  |   |  |                 |   |  |     |                 |  
|Balances at December 31, 2005                                                                                  |  | Ps.                              | 89,805,303 |                                                      | Ps.   |            |                                  |  | Ps.   | 144,333,099                                              |   |                               | Ps.   | 78,330,159 |                                         |     | (Ps.6,517,352 | )                  |  |     | (Ps. 27,281,912 | ) |  | (Ps. 229,256,678 | ) |  | (Ps. 76,282,350 | ) |  |     | (Ps. 26,869,731 | )
|                                                                                                               |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  |                  |   |  |                 |   |  |     |                 |  
|Unaudited                                                                                                      |  | U.S.$                            | 8,332,511  |                                                      | U.S.$ |            |                                  |  | U.S.$ | 13,391,827                                               |   |                               | U.S.$ | 7,267,799  |                                         |     | (U.S.$604,707 | )                  |  |     | (U.S.$2,531,330 | ) |  | (U.S.$21,271,392 | ) |  | (U.S.$7,077,795 | ) |  |     | (U.S.$2,493,087 | )
|                                                                                                               |  |                                  |            |                                                      |       |             |                                  |  |       |                                                          |   |                               |       |            |                                         |     |               |                    |  |     |                 |   |  |                  |   |  |                 |   |  |     |                 |  

The accompanying notes are an integral part of these consolidated financial statements.



F-5



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CHANGES
IN FINANCIAL POSITION

(Notes 1 and 2)

(In thousands of Mexican pesos as of December 31, 2005 purchasing power)



|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|---------------------------------------------------------------------------------------------------------- |  | --------------- | - |  | -------------- | - |  | -------------- | - |  | -------------- | -
|                                                                                                           |  | 2005            |   |  | 2005           |   |  | 2004           |   |  | 2003           |  
|                                                                                                           |  | (Unaudited)     |   |  |                |   |  |                |   |  |                |  
|Operating activities:                                                                                      |  |                 |   |  |                |   |  |                |   |  |                |  
|Net loss for the year                                                                                      |  | (U.S.$7,077,795 | ) |  | (Ps.76,282,350 | ) |  | (Ps.26,345,302 | ) |  | (Ps.44,178,998 | )
|Charges to operations not requiring the use of funds:                                                      |  |                 |   |  |                |   |  |                |   |  |                |  
|Depreciation and amortization                                                                              |  | 4,898,146       |   |  | 52,790,751     |   |  | 43,296,481     |   |  | 44,070,114     |  
|Reserve for retirement payments, pensions and indemnities                                                  |  | 5,481,869       |   |  | 59,081,939     |   |  | 54,820,524     |   |  | 42,326,154     |  
|Specific oil-field exploration and depletion reserve                                                       |  |                |   |  |               |   |  |               |   |  | 9,655,753      |  
|Deferred taxes                                                                                             |  | 183,502         |   |  | 1,977,728      |   |  |               |   |  |               |  
|Impairment                                                                                                 |  | 123,125         |   |  | 1,327,000      |   |  | 3,799,230      |   |  | 7,739,616      |  
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|                                                                                                           |  | 3,608,847       |   |  | 38,895,068     |   |  | 75,570,933     |   |  | 59,612,639     |  
|Variances in:                                                                                              |  |                 |   |  |                |   |  |                |   |  |                |  
|Accounts, notes receivable and other                                                                       |  | 853,413         |   |  | 9,197,830      |   |  | (50,759,285    | ) |  | (13,737,774    | )
|Inventories                                                                                                |  | (560,988        | ) |  | (6,046,158     | ) |  | (7,088,379     | ) |  | (2,255,958     | )
|Intangible asset derived from the actuarial computation of labor obligations and other assets              |  | 702,457         |   |  | 7,570,874      |   |  | 33,998,517     |   |  | 431,503        |  
|Suppliers                                                                                                  |  | 540,683         |   |  | 5,827,320      |   |  | (11,324,918    | ) |  | 3,376,841      |  
|Accounts payable and accrued expenses                                                                      |  | (1,230,453      | ) |  | (13,261,455    | ) |  | 15,665,705     |   |  | 369,380        |  
|Taxes payable                                                                                              |  | 2,078,138       |   |  | 22,397,545     |   |  | 5,777,014      |   |  | 9,636,740      |  
|Reserve for dismantlement and abandonment activities, sundry creditors and others                          |  | (103,454        | ) |  | (1,114,999     | ) |  | 5,404,215      |   |  | 12,741,348     |  
|Effect on equity from labor obligations                                                                    |  | (1,862,535      | ) |  | (20,073,845    | ) |  | (7,208,067     | ) |  |               |  
|Reserve for retirement payments, pensions and indemnities and others                                       |  |                |   |  |               |   |  | (50,005,927    | ) |  | (19,947,262    | )
|Exploration and well-drilling expenses charged to the specific oil-field exploration and depletion reserve |  |                |   |  |               |   |  |               |   |  | (23,844,801    | )
|Derivative financial instruments                                                                           |  | 1,443,639       |   |  | 15,559,108     |   |  |               |   |  |               |  
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|Funds provided by operating activities                                                                     |  | 5,469,747       |   |  | 58,951,288     |   |  | 10,029,808     |   |  | 26,382,656     |  
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|Financing activities:                                                                                      |  |                 |   |  |                |   |  |                |   |  |                |  
|Minimum guaranteed dividends paid to the Mexican Government                                                |  | (986,831        | ) |  | (10,635,766    | ) |  | (10,734,035    | ) |  | (10,850,100    | )
|DebtNet                                                                                                   |  | 5,662,730       |   |  | 61,031,208     |   |  | 61,284,491     |   |  | 104,221,625    |  
|Increase in equity of Subsidiary Entities                                                                  |  | 4,138,631       |   |  | 44,604,921     |   |  | 33,725,238     |   |  |               |  
|Sale of future accounts receivable                                                                         |  | (3,512,498      | ) |  | (37,856,647    | ) |  | (6,118,775     | ) |  | (5,118,690     | )
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|Funds provided by financing activities                                                                     |  | 5,302,032       |   |  | 57,143,716     |   |  | 78,156,919     |   |  | 88,252,835     |  
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|Investing activities:                                                                                      |  |                 |   |  |                |   |  |                |   |  |                |  
|Increase in fixed assetsNet                                                                               |  | (7,698,227      | ) |  | (82,969,183    | ) |  | (80,200,052    | ) |  | (84,510,035    | )
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|Funds used in investing activities                                                                         |  | (7,698,227      | ) |  | (82,969,183    | ) |  | (80,200,052    | ) |  | (84,510,035    | )
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|Net increase in cash and cash equivalents                                                                  |  | 3,073,552       |   |  | 33,125,821     |   |  | 7,986,675      |   |  | 30,125,456     |  
|Cash and cash equivalents at beginning of the year                                                         |  | 8,137,243       |   |  | 87,700,768     |   |  | 79,714,093     |   |  | 49,588,637     |  
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  
|Cash and cash equivalents at end of the year                                                               |  | U.S.$11,210,795 |   |  | Ps.120,826,589 |   |  | Ps. 87,700,768 |   |  | Ps. 79,714,093 |  
|                                                                                                           |  |                 |   |  |                |   |  |                |   |  |                |  

The accompanying notes are an integral part of these consolidated financial statements.



F-6



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)

NOTE 1STRUCTURE AND BUSINESS OPERATIONS OF PETRóLEOS MEXICANOS,
SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES:

Following the nationalization of the foreign-owned oil companies then operating in the
United Mexican States (Mexico), Petróleos Mexicanos was created by a decree of the Mexican Congress dated June 7, 1938 and effective July 20, 1938. Petróleos Mexicanos and its four Subsidiary Entities (as defined
below) are decentralized public entities of the Federal Government of Mexico (the Mexican Government) and together comprise the Mexican state oil and gas company.

The operations of Petróleos Mexicanos and Subsidiary Entities are regulated by the Constitución Politica de los Estados Unidos
Mexicanos (Political Constitution of the United Mexican States, or the Mexican Constitution), the Ley Reglamentaria del Artículo 27 Constitucional en el Ramo del Petróleo (Regulation Law to Article 27 of the
Political Constitution of the United Mexican States concerning Petroleum affairs, or the Regulatory Law), effective November 30, 1958, as amended effective May 12, 1995, November 14, 1996 and January 13, 2006,
and the Ley Orgánica de Petróleos Mexicanos y Organismos Subsidiarios(the Organic Law of Petróleos Mexicanos and Subsidiary Entities, or the Organic Law), effective July 17, 1992, as amended effective
January 1, 1994, January 16, 2002 and January 13, 2006. Under the Organic Law and related regulations, Petróleos Mexicanos is entrusted with the central planning activities and the strategic management of Mexicos
petroleum industry. For purposes of these financial statements, capitalized words carry the meanings attributed to them herein or the meanings as defined in the Mexican Constitution or the Organic Law.

The Organic Law establishes a structure that consists of decentralized legal entities of a technical, industrial and commercial nature, with their own
corporate identity and equity and with the legal authority to own property and conduct business in their own names. The Subsidiary Entities are controlled by and have characteristics of subsidiaries of Petróleos Mexicanos. The Subsidiary
Entities are:

Pemex-Exploración y Producción (Pemex-Exploration and Production);

Pemex-Refinación (Pemex-Refining);

Pemex-Gas y Petroquímica Básica (Pemex-Gas and Basic Petrochemicals); and

Pemex-Petroquímica
(Pemex-Petrochemicals).

The strategic activities entrusted to Petróleos Mexicanos and Subsidiary Entities by the Organic Law, other
than those entrusted to Pemex-Petrochemicals, can be performed only by Petróleos Mexicanos and Subsidiary Entities and cannot be delegated or subcontracted. Pemex-Petrochemicals is an exception and may delegate and/or subcontract certain
work.

The principal objectives of the Subsidiary Entities are as follows:



| | I. | Pemex-Exploration and Production explores for and produces crude oil and natural gas; additionally, this entity transports, stores and markets such products;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | II. | Pemex-Refining refines petroleum products and derivatives thereof that may be used as basic industrial raw materials; additionally, this entity stores, transports, distributes and
markets such products and derivatives;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | III. | Pemex-Gas and Basic Petrochemicals processes natural gas, natural gas liquids and derivatives thereof that may be used as basic industrial raw materials, and stores, transports,
distributes and markets such products; additionally, this entity stores, transports, distributes and markets Basic Petrochemicals; and
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | IV. | Pemex-Petrochemicals engages in industrial petrochemical processing and stores, distributes and markets Secondary Petrochemicals.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



At its formation, Petróleos Mexicanos assigned to the Subsidiary Entities all the assets and
liabilities needed to carry out these activities; these assets and liabilities were incorporated into the Subsidiary Entities initial capital contribution. Additionally, Petróleos Mexicanos assigned to the Subsidiary Entities all the
personnel needed for their operations, and the Subsidiary Entities assumed all the related labor liabilities. There was no change in the carrying value of assets and liabilities upon their contribution by Petróleos Mexicanos to the Subsidiary
Entities.

The principal distinction between the Subsidiary Entities and the Subsidiary Companies (as defined below) is that the Subsidiary
Entities are decentralized public entities created by Article 3 of the Organic Law, whereas the Subsidiary Companies are companies that have been formed in accordance with the general corporations law of each of the respective jurisdictions in which
they are incorporated, and are managed as any other private corporations subject to the general corporations law, in their respective jurisdictions.

As used herein, Subsidiary Companies include those companies listed in Note 2c. below, which are defined as (a) those companies which are not Subsidiary Entities but in which Petróleos
Mexicanos has more than a 50% ownership investment, (b) the Pemex Project Funding Master Trust (the Master Trust), a Delaware statutory trust, (c) Fideicomiso Irrevocable de Administración No. F/163 (Fideicomiso
F/163), a Mexican statutory trust incorporated in 2003 in Mexico (both the Master Trust and Fideicomiso F/163 are controlled by Petróleos Mexicanos) and (d) RepCon Lux, S.A., a Luxembourg finance vehicle whose debt in guaranteed by
Petróleos Mexicanos (RepCon Lux). Petróleos Mexicanos also guarantees the debt of the Master Trust.

This
guarantee, when taken together with the Indenture pursuant to which the Master Trust issues debt securities, the Trust Agreement constituting the Master Trust, and Petróleos Mexicanos obligations to pay all fees and expenses of the
Master Trust, constitutes a full and unconditional guarantee by Petróleos Mexicanos of the Master Trusts obligations under those securities. Non-consolidated subsidiary companies, as used herein, are defined as those
companies (a) which are not Subsidiary Entities or Subsidiary Companies and (b) in which Petróleos Mexicanos has less than a 50% ownership interest. Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies
are referred to as PEMEX.

NOTE 2SIGNIFICANT ACCOUNTING POLICIES:

The principal accounting policies followed by PEMEX in the preparation of these consolidated financial statements, including the concepts, methods and
criteria pertaining to the effects of inflation on the financial information, are summarized below:



|a. | Accounting basis for the preparation of financial information
|-- | -------------------------------------------------------------

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in Mexico (Mexican GAAP) as issued by the Instituto Mexicano de
Contadores Públicos (Mexican Institute of Public Accountants, or MIPA).



|b. | Effects of inflation on the financial information
|-- | -------------------------------------------------

PEMEX recognizes the effects of inflation in accordance with Financial Reporting Standard (NIF) 06-BIS A Section C, which establishes the obligation for PEMEX to adopt Bulletin B-10 of Mexican GAAP,
Recognition of the Effects of Inflation on Financial Information (Bulletin B-10). All periods presented herein are presented in accordance with Bulletin B-10.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The recognition of the effects of inflation in accordance with Bulletin B-10 consists of, among other
things, the restatement of non-monetary assets using inflation factors based on the Mexican National Consumer Price Index (NCPI) (including the restatement of fixed assets with consideration of value in use), the recognition in the
consolidated statement of operations of comprehensive financing cost (including the determination of gains or losses in monetary position), the restatement of the equity accounts and the presentation of the financial statements for all periods in
constant pesos with purchasing power at the latest balance sheet date. Consequently, the amounts shown in the accompanying financial statements and these notes are expressed in thousands of constant Mexican pesos as of December 31, 2005. The
December 31, 2005 restatement factors applied to the consolidated financial statements at December 31, 2004 and 2003 were 3.33% and 8.70%, which correspond to inflation from January 1, 2005 and 2004 through December 31, 2005,
respectively, based on the NCPI.



|c. | Consolidation
|-- | -------------

The consolidated financial
statements include the accounts of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies. All significant intercompany transactions have been eliminated in the consolidation.

The consolidated Subsidiary Companies are as follows: P.M.I. Comercio Internacional, S.A. de C.V. (PMI); P.M.I. Trading Ltd. (PMI
Trading); P.M.I. Holdings North America, Inc.; P.M.I. Holdings N.V.; P.M.I. Holdings B.V.; P.M.I. Norteamérica, S.A. de C.V. (PMI NASA); Kot Insurance Company AG; Integrated Trade Systems, Inc.; P.M.I. Marine Limited; P.M.I.
Services, B.V.; Pemex Internacional España, S.A.; Pemex Services Europe Ltd.; P.M.I. Services North America, Inc.; Mex Gas International, Ltd.; the Master Trust; Fideicomiso F/163; RepCon Lux and, effective July 1, 2005, Pemex Finance,
Ltd. (Pemex Finance).

Effective July 1, 2005, Petróleos Mexicanos entered into an option agreement with BNP
Paribas Private Bank and Trust Cayman Limited to acquire 100% of the shares of Pemex Finance. As a result, the financial results of Pemex Finance have been consolidated into these financial statements of Petróleos Mexicanos since that date.
Consequently, sales of accounts receivable by Pemex Finance have been reclassified as documented debt (see Note 10). The consolidation of Pemex Finance has not had a material effect on the consolidated financial statements of PEMEX as at
December 31, 2005. The debt issued by Pemex Finance is included in PEMEXs debt as of December 31, 2005, while at December 31, 2004, the balances between PEMEX and Pemex Finance were presented with the line item Sale of
future accounts receivable.

Through December 31, 2003, certain investments in Subsidiary Companies and other non-consolidated
subsidiary companies, due to their immateriality in relation to PEMEXs total assets and revenues, are accounted for under the cost method. Effective January 1, 2004, these investments are accounted for under the equity method; however,
the effect of this change was not material for the consolidated financial statements.



|d. | Long-term productive infrastructure projects (PIDIREGAS)
|-- | --------------------------------------------------------

The investment in long-term productive infrastructure projects (PIDIREGAS) and related liabilities are initially recorded in accordance with NIF-09-B, applicable to Entidades Paraestatales de la Administración
Pública Federal(State-owned Entities of the Federal Public Administration), which provides for recording only liabilities maturing in less than two years.

For the purposes of these consolidated financial statements and in accordance with Mexican GAAP, all the accounts related to PIDIREGAS were incorporated into the consolidated financial statements for the years ended
December 31, 2005, 2004 and 2003. All effects of NIF-09-B are excluded.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The main objective of the Master Trust and of Fideicomiso F/163 is to administer financial resources
related to PIDIREGAS, such financial resources having been designated by PEMEX for that purpose.



|e. | Exploration and drilling costs and specific oil-field exploration and depletion reserve
|-- | ---------------------------------------------------------------------------------------

Effective January 1, 2004, the Board of Directors of PEMEX approved a change in the accounting policy for the recognition of well exploration and
drilling expenses to the successful-efforts method of accounting. As a result, the oil-field exploration and depletion reserve will be discontinued. The change in accounting policy for recording well exploration and drilling expenses had no effect
on the consolidated financial statements, since at December 31, 2003, the specific oil-field exploration and depletion reserve had been entirely utilized.

Under the successful efforts method of accounting for oil and gas exploration costs, exploration costs are charged to income when incurred, except that exploratory drilling costs are included in fixed assets, pending
determination of proven reserves. Exploration wells more than 12 months old are expensed unless (a) (i) they are in an area requiring major capital expenditure before production can begin, (ii) commercially productive quantities of
reserves have been found, and (iii) they are subject to further exploration or appraisal activity in that either drilling of additional exploratory wells is under way or firmly planned for the near future, or (b) proved reserves are
recorded within 12 months following the completion of exploratory drilling. Expenses pertaining to the drilling of development wells are capitalized whether or not successful.

Management makes annual assessments of the amounts included within fixed assets to determine whether capitalization is initially appropriate and can
continue. Exploration wells capitalized beyond 12 months are subject to additional judgment as to whether the facts and circumstances have changed and therefore whether the conditions described in clauses (a) and (b) of the preceding
paragraph no longer apply. PEMEX management believes that this new methodology reflects the best practice for recognizing the capitalization of expenses related to the exploration and drilling of wells.

Through December 31, 2003, a specific capital reserve was established to cover current and future exploration and drilling costs. As oil and gas was
extracted from existing wells, the equity reserve was increased, and an amount equal to the increase was charged to cost of sales based upon a calculated quota of exploration and drilling cost per barrel. Accumulated drilling costs pertaining to
successful wells were reclassified from that reserve and charged as an investment in fixed assets.



|f. | Marketable securities
|-- | ---------------------

Marketable securities
include investments in debt and equity securities and have been classified on the basis of their intended use at the date of acquisition as debt instruments to be held to maturity, financial instruments for trading and financial instruments
available for sale. These financial instruments are initially recorded at acquisition cost, and are subsequently valued as follows (see Note 11):



| | i. | Debt instruments to be held to maturity are valued at acquisition cost and are subsequently reduced by the amortization of any premiums or increased by the amortization of any
discounts over the term of the debt instrument, in proportion to the outstanding balance. Any loss in value is recognized in statement of operations at the end of each period.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | Financial instruments held for trading and available for sale are valued at fair value, which is similar to market value. The fair value is the value at which a financial asset can
be exchanged or a financial liability can be liquidated between interested and willing parties in an arms-length transaction. The effect of the valuation of financial instruments is recorded in income for the year.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|g. | Inventory valuation
|-- | -------------------

Inventories are valued as
follows:



| | I. | Crude oil and derivatives thereof for export: at net realizable value, determined on the basis of average export prices at December 31, 2005 and 2004, less a provision for
distribution expenses and shrinkage.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | II. | Crude oil and derivatives thereof for domestic sales: at cost, as calculated based on net realizable international market prices.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



| | III. | Materials, spare parts and supplies: at the last purchase price.
| | ---- | ----------------------------------------------------------------



| | IV. | Materials in transit: at acquisition cost.
| | --- | ------------------------------------------



|h. | Properties, plant and equipment
|-- | -------------------------------

PEMEXs
assets are initially recorded at acquisition or construction cost. Interest pertaining to fixed assets in the construction or installation phase are capitalized as part of the asset cost. As of December 31, 2005 and 2004, these assets are
expressed at their inflation restated value, determined by applying factors computed from the NCPI.

Depreciation is calculated using the
straight-line method based on the expected useful lives of the assets, based on calculations from independent appraisals. Depreciation rates are applied to the inflation restated value of the assets. Asset depreciation begins the month after the
asset is placed into service. The depreciation rates used by PEMEX are as follows:



|                              |  |         |  |        
|----------------------------- |  | ------- |  | -------
|                              |  | %       |  | Years  
|Buildings                     |  | 3       |  | 33     
|Plants and drilling equipment |  | 3  5   |  | 20  33
|Furniture and fixtures        |  | 10      |  | 10     
|Offshore platforms            |  | 4       |  | 25     
|Transportation equipment      |  | 4  20  |  | 5  25 
|Pipelines                     |  | 4       |  | 25     
|Software/computers            |  | 10  25 |  | 4  10 

Related gains or losses from the sale or disposal of fixed assets are recognized in income for the
period in which they are incurred. PEMEX amortizes its well assets using the units-of-production (UOP) method. The amount to be recognized as amortization expense is calculated based upon the number of equivalent barrels of crude oil
extracted from each specific field as compared to the fields total proved reserves.

The Reglamento de Trabajos Petroleros
(Petroleum Works Law) provides that once a well turns out to be dry, invaded with salt water, abandoned due to mechanical failure or when the wells production has been depleted such that abandonment is necessary due to economic
unfeasibility of production, it must be plugged to ensure the maintenance of sanitary and safe conditions and to prevent the seepage of hydrocarbons to the surface. All activities required for plugging a well are undertaken for the purpose of
properly and definitively isolating the cross formations in the perforation that contains oil, gas or water, in order to ensure that hydrocarbons do not seep to the surface. This law also requires that PEMEX obtain approval from the Ministry of
Energy for the dismantlement of hydrocarbon installations, either for the purpose of replacing them with new installations or for permanent retirement.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Effective January 1, 2003, PEMEX adopted Bulletin C-9, Liabilities, Provisions, Contingent
Assets and Liabilities and Commitments issued by the MIPA (Bulletin C-9), which establishes general rules for the valuation, presentation and disclosure of liabilities, provisions and contingent assets and liabilities, as well as
for the disclosure of commitments entered into by a company as a part of its normal operations. As a result, PEMEX changed the method of accruing the costs related to wells subject to abandonment and dismantlement. The present values of these
costs are recorded as liabilities on a discounted basis when incurred, which is typically at the time the wells are put into service. The amounts recorded for these obligations are initially recorded by capitalizing the respective costs. Over time
the liabilities will be accreted by the change in their present value during each period and the initial capitalized costs will be depreciated over the useful lives of the related assets based on the UOP method. In the case of the non-producing
wells subject to abandonment and dismantlement, the full dismantlement and abandonment cost will be recognized at the end of each period.

The adoption of Bulletin C-9 resulted in the recognition of a benefit of Ps. 2,187,823 related to the provision for dismantlement and abandonment, as of January 1, 2003.

The carrying value of these long-lived assets is subject to an annual impairment assessment (see Notes 2i. and 7.



|i. | Impairment of the value of long-lived assets
|-- | --------------------------------------------

Effective January 1, 2004, PEMEX adopted Bulletin C-15, Impairment of the Value of Long-Lived Assets and their Disposal, issued by the MIPA (Bulletin C-15). PEMEX recognized impairment in the value of long-lived
assets as of January 1, 2004 and for the year ended December 31, 2004 with an initial effect of adoption and a subsequent impairment charge for the year of Ps. 2,091,590 and Ps. 1,707,645, respectively. The initial adoption effect was
presented in the consolidated statement of operations of 2004 as a cumulative effect of adoption of a new accounting standard, and the impairment of 2005 is also presented in the consolidated statement of operations within costs and operating
expenses (see Note 7).

PEMEX evaluates the impairment of long-lived assets whenever there are events or circumstances indicating that the
book value of a given asset may not be recoverable. In order to analyze impairment, PEMEX makes a comparison, for each of the cash-generating units, of the book value of the long-lived assets and the estimated future value (discounted) of cash flows
generated by such long-lived assets. If the book value of the long-lived assets exceeds the estimated recoverable value, a charge is made to income for the period for an impairment loss. This calculation is made at the end of each period, and in
accordance with Bulletin C-15, the impairment recorded can be reversed in subsequent periods if the subsequent impairment analysis does not indicate a loss in such future periods.



|j. | Liabilities, provisions, contingent assets and liabilities and commitments
|-- | --------------------------------------------------------------------------

PEMEXs liabilities represent present obligations and the liability provisions recognized in the balance sheet represent present obligations whose settlement will probably require the use of an estimate of
economic resources. These provisions have been recorded, based on managements best estimate of the amount needed to settle present liability; however, actual results could differ from the provisions recognized.



|k. | Foreign currency balances and transactions
|-- | ------------------------------------------

Transactions denominated in foreign currency are recorded at the respective exchange rates prevailing on the day that the transactions are entered into. Monetary assets and liabilities in foreign currencies are stated in



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



pesos at the rates in effect at the balance sheet date and published by the Secretaría de Hacienda y Crédito Público (Ministry of
Finance and Public Credit, or SHCP). Foreign exchange losses and gains are charged and credited, respectively, to income. This resulted in net exchange gains (losses) credited (charged) to income of Ps. 17,627,605,
Ps. (3,586,417) and Ps. (27,724,518) in 2005, 2004 and 2003, respectively.



|l. | Retirement benefits, pensions and seniority premiums
|-- | ----------------------------------------------------

In accordance with the Ley Federal del Trabajo (Federal Labor Law) and pursuant to collective bargaining agreements, seniority premium benefits to which every employee is entitled upon termination of employment, and the
pension obligations arising from the employee retirement plans, to which employees do not contribute, are recorded at the cost of years in which employees rendered services in accordance with actuarial valuations that use the projected unit-credit
method. PEMEX includes the effect of its labor obligations in these consolidated financial statements in accordance with the standards established by Bulletin D-3 Labor Obligations (Obligaciones Laborales) of Mexican
GAAP issued by the MIPA (Bulletin D-3).

Beginning on January 1, 2005, PEMEX adopted the amendments of Bulletin D-3,
Labor Obligations, which provides additional valuation and disclosure requirements for recognizing severance payments paid to employees upon dismissal. The adoption of these provisions resulted in the recognition of an initial liability
related to prior service costs for an amount of Ps. 1,322,540 and a charge to income upon adoption for the same amount, which is presented in the consolidated statement of operations as part of the cumulative effect of adoption of new
accounting standards.

Effective January 1, 2004, PEMEX adopted the amendments to Bulletin D-3, specifically related to valuation,
presentation and recording for the recognition of remuneration for other post-retirement benefits. The adoption of these provisions resulted in the recognition of an initial cumulative effect for the recognition of prior services remuneration for
other post-retirement benefits as of January 1, 2004, in an amount equal to Ps. 8,726,434, which was recorded as a charge to income and presented in the consolidated statement of operations as part of the cumulative effect of adoption of new
accounting standards.

The plan for other post-retirement benefits includes support given in the form of cash to retired personnel and
their dependents for gas, gasoline and basic supplies, as well as medical services (see Note 12).



|m. | Equity
|-- | ------

Certificates of Contribution A,
the Mexican Government increase in equity of Petróleos Mexicanos and the Subsidiary Entities, accumulated losses and other equity accounts represent the value of these items stated in terms of purchasing power at the most recent balance sheet
date, and are determined by applying factors derived from the NCPI to the historical amounts.



|n. | Surplus in the restatement of equity
|-- | ------------------------------------

The surplus
in the restatement of equity at December 31, 2005 and 2004 is composed of cumulative results from the initial net monetary position and of results from holding non-monetary assets (mainly inventories and properties and equipment), restated in
Mexican pesos of purchasing power as of the most recent balance sheet date.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|o. | Result on monetary position
|-- | ---------------------------

The result on monetary
position represents the gain or loss, measured in terms of the NCPI, on net monthly monetary assets and liabilities for the year, expressed in Mexican pesos of purchasing power as of the most recent balance sheet date. The inflation rates were
3.33%, 5.19% and 3.98%, in 2005, 2004 and 2003, respectively.



|p. | Cost of sales
|-- | -------------

Cost of sales is determined by
adding to inventories at the beginning of the year the operating cost of oil fields, refineries and plants (including internally-consumed products), the purchase cost of refined and other products, and deducting the value of inventories at the end
of the year. The amount thus determined is restated to period end purchasing power based on NCPI factors. Cost of sales also includes the depreciation and amortization expense associated with assets used in operations as well as the expense
associated with the reserve for future dismantlement and abandonment costs.

Through December 31, 2003, cost of sales also included
the increase in the specific oil-field exploration and depletion reserve for the year (a fixed charge per barrel extracted).



|q. | Taxes and federal duties
|-- | ------------------------

Petróleos
Mexicanos and the Subsidiary Entities are subject to special tax laws, which are based upon petroleum revenues and do not generate temporary differences or deferred income taxes. Petróleos Mexicanos and the Subsidiary Entities are not subject
to the Ley del Impuesto Sobre la Renta (Income Tax Law) or the Ley del Impuesto al Activo (Asset Tax Law). Some of the Subsidiary Companies are subject to the Income Tax Law and Asset Tax Law; however, such
Subsidiary Companies do not generate significant deferred income taxes.

Petróleos Mexicanos and the Subsidiary Entities are subject
to the following duties and taxes: Hydrocarbon Extraction Duties, Hydrocarbon Income Tax, Excess Gains Duty and the Special Tax on Production and Services (IEPS Tax). Petróleos Mexicanos and the Subsidiary Entities are also
subject to the Impuesto al Valor Agregado(Value Added Tax, or VAT).

Hydrocarbon extraction duties are calculated at a
rate of 52.3% on the net cash flow difference between crude oil sales and extraction costs and expenses. Extraordinary and additional hydrocarbon extraction duties are calculated at a rate of 25.5% and 1.1%, respectively, on the same basis. The
hydrocarbon income tax is equivalent to the regular income tax applied to all Mexican corporations, a tax to which Petróleos Mexicanos and the Subsidiary Entities are not subject; the rate of this tax was 35% for all periods presented.

The sum of the above duties and taxes must equal 60.8% of Petróleos Mexicanos and the Subsidiary Entities annual sales
revenues to third parties. In addition, PEMEX pays a 39.2% duty on excess gains revenues, i.e., the portion of revenues in respect of crude oil sales at prices in excess of a threshold price set by the Mexican Government annually of 23.00, 20.00 and
18.35 U.S. dollars per barrel for 2005, 2004 and 2003, respectively. Therefore, to the extent that the sum of hydrocarbon extraction duties is less than 60.8% of sales to third parties, additional taxes are paid to reach that level.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|r. | Special Tax on Production and Services (IEPS Tax)
|-- | -------------------------------------------------

The IEPS Tax charged to customers is a tax on the domestic sales of gasoline and diesel. The applicable rates depend on, among other factors, the product, producers price, freight costs, commissions and the region in which the
respective product is sold. For financial statement purposes, the IEPS Tax collected from customers is presented as part of Net domestic sales, and the payment to the Government is deducted after Income before hydrocarbon
extraction duties and other, special tax on production and services, and cumulative effect of adoption of new accounting standards.



|s. | Revenue recognition
|-- | -------------------

For all export products, risk
of loss and ownership title is transferred upon shipment, and thus PEMEX records sales revenue upon shipment to customers abroad. In the case of certain domestic sales in which the customer takes product delivery at a PEMEX facility, sales revenues
are recorded at the time delivery is taken. For domestic sales in which PEMEX is responsible for product delivery, risk of loss and ownership is transferred at the delivery point, and PEMEX records sales revenue upon delivery.



|t. | Derivative financial instruments and hedging operations
|-- | -------------------------------------------------------

Effective on January 1, 2005, PEMEX adopted the provisions of Bulletin C-10, Derivative Financial Instruments and Hedging Operations (Bulletin C-10) issued by the MIPA, which provide expanded guidance for the
recognition, valuation and disclosure applicable to derivative financial instruments, including instruments designed as hedges and embedded derivatives. The adoption of these provisions resulted in the recognition of an initial cumulative effect of
a charge to comprehensive loss in the equity of Ps. 6,558,945 and a charge to income for the year of Ps. 442,730, which is presented in the consolidated statement of operations as part of the cumulative effect of adoption of new accounting
standards.

As of December 31, 2005, derivative financial instruments shown in the balance sheet are valued at fair value, in
accordance with the rules established by Bulletin C-10 (see Note 11).



|u. | Financial instruments with characteristics of liability, equity or both
|-- | -----------------------------------------------------------------------

Financial instruments issued by PEMEX with characteristics of equity, liabilities or of both, are recorded at the time of issuance as a liability, equity or as both, depending on the components involved. Initial costs
incurred in the issuance of those instruments are assigned to liabilities and equity in the same proportion as the amounts of their components. Gains or losses pertaining to the components of financial instruments classified as liabilities are
recorded as part of comprehensive financing cost. The distribution of profits to the owners of the components of financial instruments classified as equity is charged directly to an equity account. As of December 31, 2005, PEMEX did not have any
financial instruments issued with characteristics of both equity and liabilities.



|v. | Use of estimates
|-- | ----------------

The preparation of the financial
statements in accordance with Mexican GAAP requires the use of estimates. PEMEX management makes estimates and assumptions that affect the amounts and the disclosures presented as of the date of the consolidated financial statements. Actual results
could differ from those estimates.



|w. | Comprehensive income (loss)
|-- | ---------------------------

Comprehensive income
(loss) is represented by the net loss for the period plus the effect of restatement, the net increase or decrease in the specific oil-field exploration and depletion reserve (through 2003), and items required by specific accounting standards to be
reflected in equity but which do not constitute equity contributions, reductions or distributions, and is restated on the basis of NCPI factors (see Note 16).



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|x. | Comprehensive financing cost
|-- | ----------------------------

Comprehensive
financing cost includes all types of financial gains or losses resulting from the real cost of financing in an inflationary environment, such as net interest income and expense, net foreign exchange gains or losses, the effects of valuation on
financial instruments, and net gains or losses on monetary positions.



|y. | Reclassifications
|-- | -----------------

Certain reclassifications have
been made to 2004 and 2003 amounts presented in the consolidated financial statements and related notes to conform such amounts and disclosures to the current year presentation.



|z. | Deferred taxes
|-- | --------------

Deferred taxes are recorded based
on the assets and liabilities method with comprehensive focus, which consists of the recognition of deferred taxes for operating loss and credit carryforwards and the temporary differences between accounting and tax basis of assets and liabilities.
Based on the new fiscal regime enacted in 2005, Petróleos Mexicanos and Subsidiary Entities, effective January 1, 2006, a Subsidiary Entity established a deferred tax liability for Ps. 1,977,728, as the result mainly of temporary
differences related to customer advance payments, liability provisions and fixed assets.



|aa. | Convenience translation
|--- | -----------------------

United States dollar
(U.S. dollar) amounts shown in the balance sheets, the statements of operations, the statements of changes in equity and statements of changes in financial position have been included solely for the convenience of the reader. Such
amounts are translated from pesos, as a matter of arithmetic computation only, at an exchange rate for the settlement of obligations in foreign currencies provided by Banco de México and the SHCP at December 31, 2005. Translations
herein should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollars at the foregoing rate or any other rate.

NOTE 3FOREIGN CURRENCY POSITION:

At December 31, 2005 and 2004, the consolidated financial statements of PEMEX
include the following assets and liabilities denominated in foreign currencies (which are translated into Mexican pesos at the 2005 and 2004 year-end exchange rates listed below):



|                                                                    |  |                                        |  |              |                       |  |                           |   |  |         |  |                 |  
|------------------------------------------------------------------- |  | -------------------------------------- |  | ------------ | --------------------- |  | ------------------------- | - |  | ------- |  | --------------- | -
|                                                                    |  | Amounts in foreign currency(Thousands) |  |              | Year-endExchange rate |  | Amounts in pesos          |  
|                                                                    |  | Assets                                 |  | Liabilities  |                       |  | Asset (liability)position |   |  |        
|2005:                                                               |  |                                        |  |              |                       |  |                           |   |  |         |  |                 |  
|U.S. dollars                                                        |  | 14,621,145                             |  | (37,879,912  | )                     |  | (23,258,767               | ) |  | 10.7777 |  | (Ps.250,676,014 | )
|Japanese yen                                                        |  |                                       |  | (144,171,281 | )                     |  | (144,171,281              | ) |  | 0.0914  |  | (13,177,255     | )
|Pounds sterling                                                     |  | 262                                    |  | (453,455     | )                     |  | (453,193                  | ) |  | 18.5247 |  | (8,395,272      | )
|Euros                                                               |  | 4,732                                  |  | (4,240,207   | )                     |  | (4,235,475                | ) |  | 12.7080 |  | (53,824,414     | )
|Austrian shillings                                                  |  |                                       |  | (86          | )                     |  | (86                       | ) |  | 8.1744  |  | (703            | )
|Swiss Francs                                                        |  |                                       |  | (41          | )                     |  | (41                       | ) |  | 8.1779  |  | (335            | )
|Canadian dollar                                                     |  | 2                                      |  |             |                       |  | 2                         |   |  | 9.2330  |  | 17              |  
|                                                                    |  |                                        |  |              |                       |  |                           |   |  |         |  |                 |  
|Total liability position, before foreign currency hedging (Note 11) |  |                                        |  |              |                       |  |                           |   |  |         |  | (Ps.326,073,976 | )
|                                                                    |  |                                        |  |              |                       |  |                           |   |  |         |  |                 |  



F-16



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|                                                                    |  |                                        |  |              |                       |  |                           |   |  |         |  |                 |  
|------------------------------------------------------------------- |  | -------------------------------------- |  | ------------ | --------------------- |  | ------------------------- | - |  | ------- |  | --------------- | -
|                                                                    |  | Amounts in foreign currency(Thousands) |  |              | Year-endExchange rate |  | Amounts in pesos          |  
|                                                                    |  | Assets                                 |  | Liabilities  |                       |  | Asset (liability)position |   |  |        
|                                                                    |  |                                        |  |              |                      
|2004:                                                               |  |                                        |  |              |                       |  |                           |   |  |         |  |                 |  
|U.S. dollars                                                        |  | 9,322,376                              |  | (40,570,870  | )                     |  | (31,248,494               | ) |  | 11.2648 |  | (Ps.352,008,035 | )
|Japanese yen                                                        |  | 90,415                                 |  | (163,009,706 | )                     |  | (162,919,291              | ) |  | 0.1101  |  | (17,937,414     | )
|Pounds sterling                                                     |  | 814                                    |  | (452,498     | )                     |  | (451,684                  | ) |  | 21.6532 |  | (9,780,404      | )
|Euros                                                               |  | 14,393                                 |  | (3,280,525   | )                     |  | (3,266,132                | ) |  | 15.3201 |  | (50,037,469     | )
|                                                                    |  |                                        |  |              |                       |  |                           |   |  |         |  |                 |  
|Total liability position, before foreign currency hedging (Note 11) |  |                                        |  |              |                       |  |                           |   |  |         |  | (Ps.429,763,322 | )
|                                                                    |  |                                        |  |              |                       |  |                           |   |  |         |  |                 |  

NOTE 4CASH AND CASH EQUIVALENTS:

At December 31, cash and cash equivalents are as follows:



|                          |  |      |             |      |     |           
|------------------------- |  | ---- | ----------- | ---- | --- | ----------
|                          |  | 2005 |             | 2004
|Cash on hand and in banks |  | Ps.  | 44,573,707  |      | Ps. | 23,798,276
|Marketable securities     |  |      | 76,252,882  |      |     | 63,902,492
|                          |  |      |             |      |     |           
|                          |  | Ps.  | 120,826,589 |      | Ps. | 87,700,768
|                          |  |      |             |      |     |           

NOTE 5ACCOUNTS, NOTES RECEIVABLE AND OTHER:

At December 31, accounts, notes receivable and other receivables are as follows:



|                                                                              |  |      |             |   |      |     |             |  
|----------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | --- | ----------- | -
|                                                                              |  | 2005 |             |   | 2004 |    
|Sales-domestic                                                                |  | Ps.  | 35,036,762  |   |      | Ps. | 31,656,433  |  
|Sales-export                                                                  |  |      | 12,898,443  |   |      |     | 9,561,989   |  
|Pemex Finance, Ltd.                                                           |  |      |            |   |      |     | 8,319,848   |  
|Mexican Government advance payments on minimum guaranteed dividends (Note 15) |  |      | 15,283,418  |   |      |     | 10,734,035  |  
|Specific fundsTrade Commission (Note 15)                                     |  |      | 26,851,269  |   |      |     | 33,795,613  |  
|Employees and officers                                                        |  |      | 2,726,278   |   |      |     | 2,532,442   |  
|Other accounts receivable                                                     |  |      | 27,593,749  |   |      |     | 32,461,745  |  
|                                                                              |  |      |             |   |      |     |             |  
|                                                                              |  |      | 120,389,919 |   |      |     | 129,062,105 |  
|Less allowance for doubtful accounts                                          |  |      | (2,509,579  | ) |      |     | (1,983,935  | )
|                                                                              |  |      |             |   |      |     |             |  
|                                                                              |  | Ps.  | 117,880,340 |   |      | Ps. | 127,078,170 |  
|                                                                              |  |      |             |   |      |     |             |  



F-17



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



NOTE 6INVENTORIES:

At December 31, inventories are as follows:



|                                                                    |  |               |   |  |               |  
|------------------------------------------------------------------- |  | ------------- | - |  | ------------- | -
|                                                                    |  | 2005          |   |  | 2004          |  
|Crude oil, refined products, derivatives and petrochemical products |  | Ps.44,097,526 |   |  | Ps.31,610,266 |  
|Materials and supplies in stock                                     |  | 5,527,051     |   |  | 4,384,363     |  
|Materials and products in transit                                   |  | 2,650,818     |   |  | 2,674,109     |  
|                                                                    |  |               |   |  |               |  
|                                                                    |  | 52,275,395    |   |  | 38,668,738    |  
|Less allowance for slow-moving and obsolete inventory               |  | (1,693,087    | ) |  | (1,713,112    | )
|                                                                    |  |               |   |  |               |  
|                                                                    |  | Ps.50,582,308 |   |  | Ps.36,955,626 |  
|                                                                    |  |               |   |  |               |  

NOTE 7PROPERTIES, FURNITURE AND EQUIPMENT:

At December 31, components of properties and equipment are as follows:



|                                          |  |                |   |  |                |  
|----------------------------------------- |  | -------------- | - |  | -------------- | -
|                                          |  | 2005           |   |  | 2004           |  
|Plants                                    |  | Ps.319,382,549 |   |  | Ps.312,232,252 |  
|Pipelines                                 |  | 242,724,338    |   |  | 235,926,238    |  
|Wells                                     |  | 336,370,213    |   |  | 272,011,517    |  
|Drilling equipment                        |  | 21,089,597     |   |  | 20,608,841     |  
|Buildings                                 |  | 38,876,413     |   |  | 38,918,653     |  
|Offshore platforms                        |  | 114,736,613    |   |  | 100,300,550    |  
|Furniture and equipment                   |  | 31,114,875     |   |  | 28,076,713     |  
|Transportation equipment                  |  | 13,039,055     |   |  | 13,206,742     |  
|                                          |  |                |   |  |                |  
|                                          |  | 1,117,333,653  |   |  | 1,021,281,506  |  
|Less:                                     |  |                |   |  |                |  
|Accumulated depreciation and amortization |  | (584,994,136   | ) |  | (532,897,658   | )
|                                          |  |                |   |  |                |  
|                                          |  | 532,339,517    |   |  | 488,383,848    |  
|Land                                      |  | 39,627,318     |   |  | 39,314,560     |  
|Construction in progress                  |  | 70,607,772     |   |  | 85,323,704     |  
|Fixed assets to be disposed of            |  | 660,949        |   |  | 1,362,012      |  
|                                          |  |                |   |  |                |  
|Total                                     |  | Ps.643,235,556 |   |  | Ps.614,384,124 |  
|                                          |  |                |   |  |                |  



|a) | For the years ended December 31, 2005, 2004 and 2003, interest costs associated with fixed assets in the construction or installation phase that were capitalized as part of
those assets totaled Ps. 5,132,219, Ps. 4,484,570 and Ps. 7,876,482, respectively.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | Depreciation of assets and amortization of wells for the periods ended December 31, 2005, 2004 and 2003 recorded in operating costs and expenses were Ps. 52,790,751, Ps.
43,296,481 and Ps. 44,070,114, respectively, which included Ps. 1,269,610, Ps. 324,751 and Ps. 495,579, respectively, related to dismantlement and abandonment costs.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | As of December 31, 2005 and 2004, the provision related to dismantlement and abandonment costs, determined based on the present value (discounted) of the projected cost, was
Ps. 13,696,270 and Ps. 14,102,811, respectively.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|d) | As of December 31, 2005 and 2004, PEMEX has recognized cumulative impairment charges in the value of the long-lived assets amounting to Ps. 12,865,846 and Ps. 11,538,846,
respectively. The impairment recorded through December 31, 2003 was determined using the value-in-use concept in accordance with Bulletin B-10.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 8INVESTMENT IN SHARES:

The investments in affiliated and other companies shares, which are unconsolidated,
are as follows:



|                                                             |  |                         |  |                                |            |  |     |           
|------------------------------------------------------------ |  | ----------------------- |  | ------------------------------ | ---------- |  | --- | ----------
|                                                             |  | Percentage ofInvestment |  | Carrying value at December 31,
|                                                             |  | 2005                    |  | 2004                          
|Repsol YPF, S.A.(1)                                          |  | 5.00                    |  | Ps.                            | 18,567,473 |  | Ps. | 17,798,537
|Deer Park Refining Limited(2)                                |  | 50.00                   |  |                                | 5,350,035  |  |     | 5,355,432 
|Instalaciones Inmobiliarias para Industrias, S.A. de C.V.(2) |  | 100.00                  |  |                                | 1,022,682  |  |     | 1,088,442 
|Nacional Financiera, commercial paper(1)                     |  |                        |  |                                |           |  |     | 1,080,531 
|Servicios Aéreos Especializados Mexicanos, S.A. de C.V.(2)   |  | 49.00                   |  |                                | 19,548     |  |     | 33,616    
|OtherNet                                                    |  |                         |  |                                | 1,605,502  |  |     | 1,403,531 
|                                                             |  |                         |  |                                |            |  |     |           
|Total investments                                            |  |                         |  | Ps.                            | 26,565,240 |  | Ps. | 26,760,089
|                                                             |  |                         |  |                                |            |  |     |           

---

|(1) | Available for sale securities.
|--- | ------------------------------

|(2) | Valued using equity method.
|--- | ---------------------------

PEMEX owns 58,956,005 and
58,679,800 shares of Repsol YPF, S.A. at December 31, 2005 and 2004, respectively, which are valued at market price.

PMI NASA has a
50% joint venture with Shell Oil Company, in which it owns a 50% interest in a petroleum refinery located in Deer Park, Texas. The investment is accounted for under the equity method. During 2005, 2004 and 2003, PEMEX recorded Ps. 5,561,262, Ps.
3,339,789 and Ps. 967,101 of profits, respectively, related to its interest in the joint venture, which has been recorded in the line item Other revenues in the statements of operations. In 2005, 2004 and 2003, PEMEX paid the joint
venture Ps. 9,950,113, Ps. 7,893,026 and Ps. 5,066,867, respectively, for the processing of crude oil.

NOTE 9DEBT:

In 2005, significant financing activities were as follows:



| | a. | Petróleos Mexicanos obtained U.S. $59,882 (Ps. 645,390) in purchasing loans and project financing, granted by export credit agencies. These loans bear interest at fixed and
variable rates with various maturity dates through 2013.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Petróleos Mexicanos issued short-term certificates totaling Ps. 16,000,000 (in nominal terms). All of these short-term certificates, as well as the balance as of
December 31, 2004, of Ps. 2,000,000, were repaid during 2005.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Petróleos Mexicanos executed a draw down of U.S. $800,000 from its syndicated revolving facility of U.S. $1,250,000, on October 26, 2005 in two tranches, each in the
amount of U.S. $400,000; these funds were repaid on December 28, 2005.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-19



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



During 2005, the Master Trust undertook the following financing activities for PIDIREGAS:



| | a. | The Master Trust obtained credit lines from export credit agencies totaling U.S. $1,617,500 (Ps. 17,432,930) and U.S. $4,250,000 (Ps. 45,805,225) from a syndicated loan.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | On February 24, 2005, the Master Trust issued 1,000,000 (Ps. 12,708,000) of 5.50% Notes due 2025, guaranteed by Petróleos Mexicanos, under its Medium-Term Notes
Program, Series A;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | On June 8, 2005, the Master Trust issued U.S.$ 1,500,000 (Ps. 16,166,550) under its Medium-Term Note Program, Series A, in two tranches: U.S.$ 1,000,000 (Ps. 10,777,700) of
5.75% Notes due in 2015 and U.S.$ 500,000 (Ps. 5,388,850) of 6.625% Notes due in 2035, both of which are guaranteed by Petróleos Mexicanos.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | On August 31, 2005, the Master Trust issued U.S. $175,000 (Ps. 1,886,098) of Floating Rate Notes due 2008, which bear interest at a rate per annum equal to LIBOR for a period
of one, two, three or six months (at the election of the Master Trust), plus 42.5 basis points, and are guaranteed by Petróleos Mexicanos.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | On December 1, 2005, the Master Trust issued U.S. $750,000 (Ps. 8,083,275) of Floating Rate Notes due 2012 under its Medium-Term Note Program, Series A, at a rate of three
month LIBOR plus 60 basis points, and are guaranteed by Petróleos Mexicanos.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the following financing
activities were undertaken during 2005:



| | a. | During 2005, the Master Trust delivered to Petróleos Mexicanos certain of the debt securities of Petróleos Mexicanos in exchange for cash payments, a portion of which
will be made over time, equal to the market value of the relevant debt securities at the time of such delivery. The Master Trust had acquired these debt securities in its November 2004 exchange offer. The cash payments made by Petróleos
Mexicanos at the time of acquisition of the debt securities was equal to the par value of such debt securities, plus accrued interest. Set forth below is the date of acquisition of the debt securities, as well as the cash payments made on such date:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                    |  |                             |          
|------------------- |  | --------------------------- | ---------
|Date of acquisition |  | Par value of debtsecurities
|April 29, 2005      |  | U.S.$                       | 803,365  
|May 20, 2005        |  |                             | 678,697  
|July 6, 2005        |  |                             | 826,099  
|                    |  |                             |          
|Total               |  | U.S.$                       | 2,308,161
|                    |  |                             |          

The portion of the cash payments to be made over time is equal to the difference between the
market value of the debt securities and the par value (such amount, the Premium) and is payable in five equal annual installments. Interest on the unpaid amount of the Premium accrues from the date of purchase at a rate per annum equal
to three-month U.S. dollar LIBOR plus 0.35% and is payable quarterly in arrears. The total amount of interest paid by Petróleos Mexicanos on the Premium in 2005 is equal to U.S.$7,224.



| | b. | In March 2005, the Master Trust obtained a syndicated loan in the amount of U.S. $4,250,000. U.S. $2,020,800 related to new indebtedness, and the remaining U.S. $2,229,200
was used to refinance other syndicated credits.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-20



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



| | c. | Of the U.S. $1,500,000 issued by the Master Trust on June 8, 2005, only U.S. $529,800 is considered new indebtedness, as the remaining U.S. $970,200 was used to refinance the
prepaid amount from the Funds Derivative Agreement between Pemex Exploration and Production and the Master Trust.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During
2005, the Fideicomiso F/163 undertook the following financing activities:



| | a. | On February 1, 2005, Fideicomiso F/163 issued, under its expanded Ps. 70,000,000 peso-denominated publicly-traded notes (certificados bursatiles) program, approved by
the Comisión Nacional Bancaria y de Valores (the Banking and Securities National Commission or the CNBV), a denominated in Unidades de Inversión (Units of Investment, or UDIs) in the amount
of UDIs 1,697.6 million (Ps. 6,000,000) (in nominal terms) in the Mexican domestic market, with maturity in 2019 guaranteed by Petróleos Mexicanos.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | On February 11, 2005, Fideicomiso F/163 issued, under its expanded Ps. 70,000,000 peso-denominated publicly-traded notes (certificados bursatiles) program, approved by
the CNBV, a total of Ps. 15,000,000 of notes in the Mexican domestic market, guaranteed by Petróleos Mexicanos, consisting of two tranches: one of Ps. 7,500,000 of its notes due February 11, 2010, bearing interest at the 91-day
Certificados de la Tesorería de la Federación (Mexican Government Treasury Bonds CETES) rate plus 51 basis points; and the other one of Ps. 7,500,000 of its notes due February 11, 2013, bearing interest at
the 182-day CETES rate plus 57 basis points.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | On May 13, 2005, Fideicomiso F/163 issued, under its expanded Ps. 110,000,000 peso-denominated publicly-traded notes (certificados bursatiles) program, approved by the
CNBV, a total of Ps. 10,000,000 of notes in the Mexican domestic market, guaranteed by Petróleos Mexicanos, consisting of two tranches: one of Ps. 5,012,600 of its notes due February 4, 2010, bearing interest at the 91-day
CETES rate plus 51 basis points; and the other one of Ps. 4,987,400 of its notes due January 31, 2013, bearing interest at the 182-day CETES rate plus 57 basis points.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | On July 29, 2005, Fideicomiso F/163 issued, under its Ps. 110,000,000 peso-denominated publicly-traded notes (certificados bursatiles) program, approved by the CNBV, a
total of Ps. 5,000,000 of notes due 2015 in the Mexican domestic market, guaranteed by Petróleos Mexicanos, bearing interest at a fixed rate of 9.91%.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | On October 21, 2005, Fideicomiso F/163 issued, under its Ps. 110,000,000 Publicly Traded Notes Program, approved by CNBV, a total of Ps. 4,500,000 of notes due 2015 in the
Mexican domestic market, guaranteed by Petróleos Mexicanos, bearing interest at a fixed rate of 9.91%.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | On October 21, 2005, Fideicomiso F/163 issued, under its Ps. 110,000,000 Publicly Traded Notes Program, approved by CNBV, a total of Ps. 5,500,000 of notes due 2011 in the
Mexican domestic market, guaranteed by Petróleos Mexicanos, bearing interest at the 91-day CETES rate plus 35 basis points.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2004, significant financing activities were as follows:



| | a. | Petróleos Mexicanos issued short-term certificates totaling Ps. 9,000,000 (in nominal terms), bearing fixed interest rates ranging from 8.43% to 8.79%. Of that amount, Ps.
7,000,000 was repaid in 2004 and Ps. 2,000,000 is repayable in 2005.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Petróleos Mexicanos obtained direct loans denominated in Japanese yen (¥) of ¥ 13,229,411 equivalent to U.S. $129,302 or Ps. 1,505,101, bearing interest at a
fixed rate of 4.2%. Of this amount, ¥ 1,202,674 was paid in December 2004, and the remainder is payable on different dates up to 2009.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-21



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



| | c. | Petróleos Mexicanos obtained U.S. $93,666 (Ps. 1,090,293) for purchasing loans and project financing, granted by export credit agencies. These loans bear interest at LIBOR
plus 0.0625% to 0.5% with various maturity dates through 2014.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2004, the Master Trust undertook the following financing
activities:



| | a. | The Master Trust obtained credit lines from export credit agencies totaling U.S. $1,399,069 (Ps. 16,285,473) to finance foreign trade operations. These loans are repayable on
various maturity dates through 2007 and are subject to interest at LIBOR plus 0.6% and 1.125%.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | On June 15, 2004, the Master Trust issued U.S. $1,500,000 (Ps. 17,460,333) of Guaranteed Floating Rate Notes due 2010. These notes, which bear interest at the LIBOR plus 1.3%,
mature in 2010 and are guaranteed by Petróleos Mexicanos.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | On August 5, 2004, the Master Trust issued  850,000 (Ps. 13,456,072) of 6.375% Guaranteed Notes due 2016. The notes are guaranteed by Petróleos Mexicanos.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | On September 28, 2004, the Master Trust issued perpetual bonds with no fixed maturity date totaling U.S. $1,750,000 (Ps. 20,370,388), which bear a fixed interest rate of 7.75%.
The bonds are guaranteed by Petróleos Mexicanos and may be redeemed at any time on or after the fifth anniversary from the date of issuance at the option of the issuer.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | On December 30, 2004, the Master Trust completed an exchange offer pursuant to which the Master Trust issued seven tranches of notes with a principal amount totaling U.S.
$2,308,161 (Ps. 26,867,506) in exchange for an equal principal amount of notes previously issued by Petróleos Mexicanos. This amount represented 78.4% of the total principal amount of notes subject to the offer.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | At various dates in 2004, the Master Trust obtained bank loans to finance PIDIREGAS projects, which totaled U.S. $25,000 (Ps. 291,006), subject to an interest rate of LIBOR plus
0.55% to 0.7%. Such loans are due in 2006 and 2007.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2004, Fideicomiso F/163 undertook the following financing activities:



| | a. | On January 30, 2004, under its Ps. 20,000,000 peso-denominated publicly-traded notes (certificados bursátiles) program, approved by the CNBV, the Fideicomiso
F/163, issued Ps. 11,500,000 (in nominal terms) of notes in the Mexican domestic market, which corresponded to a reopening of an earlier issuance and involved three separate tranches: Ps. 4,000,000 at a variable 91-day interest rate CETES
plus 0.65% maturing in 2007; Ps. 5,000,000 at the 182-day CETES rate plus 0.67%, maturing in 2009; and Ps. 2,500,000 at a fixed rate of 8.38%, maturing in 2010.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | On March 26, 2004, under its peso-denominated publicly-traded notes (certificados bursátiles) program (which was increased to Ps. 40,000,000), approved by the
CNBV, the Fideicomiso F/163 issued Ps. 14,672,000 (in nominal terms) of the foregoing notes in a further reopening, also in three tranches, of Ps. 6,00,000 at the CETES rate plus 0.65%, maturing in 2007; Ps. 6,000,000 at the CETES rate plus
0.67% maturing in 2009; and Ps. 2,672,000 at a fixed rate of 8.38%, maturing in 2010.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | On March 30, 2004, Fideicomiso F/163 obtained a bank loan for Ps. 4,000,000 (in nominal terms), which is subject to a variable interest at the Tasa de Interés
Interbancaria deEquilibrio (Inter-banking interest rate, or TIIE) plus 0.40% and is repayable from 2005 to 2009.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | On November 4, 2004, Fideicomiso F/163 obtained a bank loan of Ps. 4,000,000 (in nominal terms), which is subject to interest at a fixed rate of 11% and matures in 2011 and
2012.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



| | e. | On November 23, 2004, Fideicomiso F/163 obtained a bank loan of Ps. 3,000,000 (in nominal terms), which is subject to interest at TIIE plus 0.48% and is with maturities in 2010
and 2012.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | On December 23, 2004, Fideicomiso F/163 issued zero coupon notes denominated in UDI in an amount of UDI 1,415,800 (equivalent to Ps. 5,000,000 (in nominal terms)) with a
maturity of 15 years.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | On December 20, 2004, Fideicomiso F/163 obtained a loan for Ps. 4,000,000 (in nominal terms) subject to an interest rate equal to the TIIE rate plus 0.425%, which was
subsequently changed to a fixed rate of 10.55% and will mature from 2010 to 2012.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additionally, in 2004 the following
financing activities were also undertaken:



| | a. | On January 26, 2004, RepCon Lux issued U.S. $1,373,738 (Ps. 15,990,615) of 4.5% guaranteed exchangeable bonds due 2011, bearing interest at the fixed rate of 4.5% (the
Exchangeable Bonds). The Exchangeable Bonds are guaranteed by Petróleos Mexicanos and are exchangeable for shares of common stock of Repsol YPF, S.A. or the cash equivalent thereof (see Note 2).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | As of December 31, 2004, PMI Trading had signed a number of agreements with foreign banks pertaining to credit lines intended to support commercial transactions, totaling
U.S. $60,000. At December 31, 2004, these credit lines remain unused. Additionally, PMI Trading obtained a bank loan of U.S. $25,000 (Ps. 291,006) at a fixed interest rate of 3.45%, payable in 2005.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 1983, 1985, 1987, and 1990, Petróleos Mexicanos, together with the Mexican Government, entered into various covenants with the international
banking community for restructuring its debt. As a result of the final agreement, the remaining balance of the restructured Mexican Government debt retained principally the same interest conditions as had been negotiated in 1987. The agreed-upon
periods of amortization included a provision for division of the debt into two main portions with amortization over 52 and 48 quarters, respectively. The first amortization period began in 1994 and the second began in 1995, with both scheduled to
end in December 2006.

Each year, the Ministry of Finance and Public Credit approves Petróleos Mexicanos and Subsidiary
Entities annual budget and its annual financing program. The Mexican Government incorporates Petróleos Mexicanos and Subsidiary Entities annual budget and annual financing program into the budget of the Mexican Government, which
the Mexican Congress must approve each year. PEMEXs debt is not an obligation of, and is not guaranteed by, the Mexican Government. However, under the Ley General de Deuda Pública (the General Law of Public Debt),
Petróleos Mexicanos and Subsidiary Entities foreign debt obligations must be approved by and registered with the SHCP and are considered Mexican external public debt. Although Petróleos Mexicanos debt is not guaranteed by
the Mexican Government, Petróleos Mexicanos external debt has received pari passu treatment in previous debt restructurings.

Various credit facilities require compliance with various operating covenants which, among other things, place restrictions on the following types of transactions:



| |  |  | The sale of substantial assets essential for the continued operations of the business;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | Liens against its assets; and
| | - |  | -----------------------------



| |  |  | Transfers, sales or assignments of rights to payment under contracts for the sale of crude oil or gas not yet earned, accounts receivable or other negotiable instruments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-23



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##### Table of Contents

As of December 31, 2005 and 2004, long-term debt was as follows:



|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|----------------------------------------------- |  | --------------------------------------------------------- |  | --------------- |  | ----------------- | ----------- | -------------------------- | ----------- | ---------------- | --- | -------------------------- |  | -----------
|                                                |  |                                                           |  |                 |  | December 31, 2005 |             | December 31, 2004         
|                                                |  | Rate of Interest(3)                                       |  | Maturity        |  | Pesos(thousands)  |             | Foreigncurrency(thousands) |             | Pesos(thousands) |     | Foreigncurrency(thousands)
|U.S. dollars:                                   |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Unsecured loans                                 |  | Variable and LIBOR plus 0.8125%                           |  | 2006            |  | Ps.               | 1,154,973   |                            | 107,163     |                  | Ps. | 2,852,141                  |  | 245,025    
|Unsecured loans                                 |  | Variable and LIBOR plus 0.8125%                           |  | 2006            |  |                   | 365,176     |                            | 33,883      |                  |     | 788,800                    |  | 67,765     
|Bonds                                           |  | Fixed from 4.5% to 10.61% and LIBOR plus 0.425% to 8.875% |  | Various to 2035 |  |                   | 216,415,572 |                            | 20,079,940  |                  |     | 195,229,547                |  | 16,771,978 
|Financing assigned to PIDIREGAS                 |  | Fixed from 3.23% to 7.69% and LIBOR plus 0.03% to 2.25%   |  | Various to 2017 |  |                   | 61,513,370  |                            | 5,707,467   |                  |     | 53,846,435                 |  | 4,625,894  
|Purchasing loans and project financing          |  | Fixed from 3.32% to 7.28% and LIBOR plus 0.0625% to 2%    |  | Various to 2014 |  |                   | 3,722,971   |                            | 345,433     |                  |     | 4,755,681                  |  | 408,556    
|Leasing contracts                               |  | Fixed from 8.05% to 9.91%                                 |  | Various to 2012 |  |                   | 1,644,183   |                            | 152,554     |                  |     | 2,293,458                  |  | 197,029    
|External trade loans                            |  | LIBOR plus 0.5% to 0.9%                                   |  | Various to 2012 |  |                   | 47,098,549  |                            | 4,370,000   |                  |     | 28,043,235                 |  | 2,409,167  
|Bank loans                                      |  | Fixed from 5.44% to 5.58% LIBOR plus 0.55% to 1.9%        |  | Various to 2018 |  |                   | 11,154,920  |                            | 1,035,000   |                  |     | 17,460,333                 |  | 1,500,000  
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Total financing in U.S. dollars                 |  |                                                           |  |                 |  |                   | 343,069,714 |                            | 31,831,440  |                  |     | 305,269,630                |  | 26,225,414 
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Euros:                                          |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Bonds                                           |  | Fixed from 5.5% to 7.75%, and floating of 9.1045%         |  | Various to 2025 |  |                   | 51,983,778  |                            | 4,090,634   |                  |     | 48,926,817                 |  | 3,090,634  
|Unsecured loans, banks and project financing    |  | Fixed from 2% LIBOR plus 0.8125%                          |  | 2006 and 2014   |  |                   | 18,096      |                            | 1,424       |                  |     | 41,644                     |  | 2,631      
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Total financing in Euros                        |  |                                                           |  |                 |  |                   | 52,001,874  |                            | 4,092,058   |                  |     | 48,968,461                 |  | 3,093,265  
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Pesos:                                          |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Certificates                                    |  | Fixed from 8.38% to 9.91% and CETES plus 0.35% to 0.67%   |  | Various to 2019 |  |                   | 83,672,000  |                            |             |                  |     | 40,994,149                 |  |            
|Project financing and syndicated bank loans     |  | Fixed from 8.4% to 11%, TIIE plus 0.2% to 0.48%           |  | Various to 2012 |  |                   | 25,277,778  |                            |             |                  |     | 30,196,111                 |  |            
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Total financing in pesos                        |  |                                                           |  |                 |  |                   | 108,949,778 |                            |             |                  |     | 71,190,260                 |  |            
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Japanese yen:                                   |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Direct loans                                    |  | Fixed from 4.2%                                           |  | 2009            |  |                   | 879,395     |                            | 9,621,390   |                  |     | 1,368,275                  |  | 12,016,738 
|Bonds                                           |  | Fixed from 3.5%                                           |  | 2023            |  |                   | 2,742,000   |                            | 30,000,000  |                  |     | 3,413,079                  |  | 30,000,000 
|Project financing                               |  | Fixed from 2.9% to 2.9081% and PRIME in yen               |  | Various to 2017 |  |                   | 9,166,128   |                            | 100,285,864 |                  |     | 13,360,217                 |  | 129,502,885
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Total financing in Yen                          |  |                                                           |  |                 |  |                   | 12,787,523  |                            | 139,907,254 |                  |     | 18,141,571                 |  | 171,519,623
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Other currencies(1)                             |  | Fixed rate from 7.5% to 14.5% and LIBOR plus 0.8125%      |  | Various to 2013 |  |                   | 8,337,048   |                            | Various     |                  |     | 10,071,015                 |  | Various    
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Total principal in pesos(2)                     |  |                                                           |  |                 |  |                   | 525,145,937 |                            |             |                  |     | 453,640,937                |  |            
|Plus: Accrued interest                          |  |                                                           |  |                 |  |                   | 1,028,055   |                            |             |                  |     | 2,691,164                  |  |            
|Notes payable to contractors                    |  |                                                           |  |                 |  |                   | 11,513,644  |                            |             |                  |     | 13,806,975                 |  |            
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Total principal and interest                    |  |                                                           |  |                 |  |                   | 537,687,636 |                            |             |                  |     | 470,139,076                |  |            
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Less: Short-term maturities                     |  |                                                           |  |                 |  |                   | 33,470,716  |                            |             |                  |     | 48,633,627                 |  |            
|Current portion of notes payable to contractors |  |                                                           |  |                 |  |                   | 2,624,301   |                            |             |                  |     | 2,145,798                  |  |            
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Total short-term debt                           |  |                                                           |  |                 |  |                   | 36,095,017  |                            |             |                  |     | 50,779,425                 |  |            
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            
|Long-term debt                                  |  |                                                           |  |                 |  | Ps.               | 501,592,619 |                            |             |                  | Ps. | 419,359,651                |  |            
|                                                |  |                                                           |  |                 |  |                   |             |                            |             |                  |     |                            |  |            



F-24



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|                          |  |      |            |      |     |            |  |      |            |      |     |                    |  |       |            |  |     |             |  |     |            
|------------------------- |  | ---- | ---------- | ---- | --- | ---------- |  | ---- | ---------- | ---- | --- | ------------------ |  | ----- | ---------- |  | --- | ----------- |  | --- | -----------
|                          |  | 2006 |            | 2007 |     | 2008       |  | 2009 |            | 2010 |     | 2011 andthereafter |  | Total
|Maturity of the principal |  | Ps.  | 35,066,479 |      | Ps. | 58,578,114 |  | Ps.  | 52,972,024 |      | Ps. | 53,038,993         |  | Ps.   | 99,503,013 |  | Ps. | 237,500,958 |  | Ps. | 536,659,581
|                          |  |      |            |      |     |            |  |      |            |      |     |                    |  |       |            |  |     |             |  |     |            

---

Notes to table:

|(1) | Balance includes debt denominated in Pounds sterling and Swiss francs, carrying different interest rates.
|--- | ---------------------------------------------------------------------------------------------------------

|(2) | Includes financing from foreign banks for Ps. 377,935,400 and Ps. 349,697,339 as of December 31, 2005 and 2004, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(3) | As of December 31, 2005 and 2004 the rates were as follows: LIBOR, 4.70% and 2.78%, respectively; the Prime rate in Japanese yen, 1.375% and 1.375%, respectively; the rate for
bank acceptances was 0.75%; the CETES 8.81% for 91 days and 8.66% for 182 days and 6.17% for 91 days and 6.74% for 182 days, respectively; TIIE 8.95% and 6.2889%, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Beginning in 2005, the notes payable to contractors are included within long-term debt. The total amounts payable to contractors at December 31,
2005 and December 31, 2004 are set forth below:



|                                                      |  |      |            |   |      |     |            |  
|----------------------------------------------------- |  | ---- | ---------- | - | ---- | --- | ---------- | -
|                                                      |  | 2005 |            |   | 2004 |    
|Total notes payable to contractors(a)(b)(c)           |  | Ps.  | 11,513,644 |   |      | Ps. | 13,806,975 |  
|Less: Current portion of notes payable to contractors |  |      | (2,624,301 | ) |      |     | (2,145,798 | )
|                                                      |  |      |            |   |      |     |            |  
|Notes payable to contractors (long-term)              |  | Ps.  | 8,889,343  |   |      | Ps. | 11,661,177 |  
|                                                      |  |      |            |   |      |     |            |  

---

|(a) | On November 26, 1997, Petróleos Mexicanos and Pemex-Refining entered into a financed public works contract and a unit-price public works contract with Consorcio Proyecto
Cadereyta Conproca, S.A. de C.V. The related contracts are for the reconfiguration and modernization of the Ing. Héctor R. Lara Sosa refinery in Cadereyta, N.L.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The original amount of the financed public works contract was U.S. $1,618,352 (Ps. 17,442,112), plus a financing cost of U.S. $805,648 (Ps.
8,683,032), due in twenty semi-annual payments of U.S. $121,200 (Ps. 1,306,257). The original amount of the unit-price public works contract was U.S. $80,000 (Ps. 862,216), including a financing cost of U.S. $47,600 (Ps. 513,019)
payable monthly based on the percentage of completion. At December 31, 2005 and 2004, the outstanding balances of the respective contracts were Ps. 9,662,755 and Ps. 12,226,964, respectively.



|(b) | On June 25, 1997, PEMEX entered into a 10-year service agreement, with a contractor for a daily fee of U.S. $82.50 for the storage and loading of stabilized petroleum by means
of a floating system (FSO). At December 31, 2005 and 2004, the outstanding balances were Ps. 736,589 and Ps. 1,008,984, respectively
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | PEMEX has Multiple Services Contracts (MSCs) pursuant to which the hydrocarbons and construction in progress are property of PEMEX. Pursuant to the MSCs, the contractors manage the
work-in progress, which are classified as development, infrastructure and maintenance. As of December 31, 2005 and 2004, PEMEX has an outstanding payable amount of Ps. 1,114,300 and Ps. 571,027, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 10SALE OF FUTURE ACCOUNTS RECEIVABLE:

On
December 1, 1998, Petróleos Mexicanos, Pemex-Exploration and Production, PMI and P.M.I. Services B.V. entered into several agreements with Pemex Finance, Ltd. (Pemex Finance), a limited liability company which was organized
under the laws of the Cayman Islands. Under these agreements, Pemex Finance purchases certain existing accounts receivable for crude oil from Pemex-Exploration and Production and PMI, either already existing or to arise in the future. The current
and future accounts receivable sold are those generated from the sale of Maya crude oil to designated customers in the United States, Canada, and Aruba. The net resources obtained by Pemex-Exploration and Production from the sale of such receivables
under the agreements are utilized for PIDIREGAS (see Note 2d.). For the year ended December 31, 2005, 2004 and 2003, the sales under these agreements were Ps. 182,777,061, Ps. 171,688,689 and Ps. 132,617,158, respectively.



F-25



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Although the agreements between Petróleos Mexicanos, Pemex-Exploration and Production, PMI,
P.M.I. Services, B.V. and Pemex Finance establish short-term payment obligations, it is not expected that current receivables will have to be used in the short term to cover those obligations, because those receivables are constantly being
regenerated. Additionally, Pemex Finance has a proven continuous ability to contract debt in the international market sufficient to sustain the acquisition of accounts receivable from PEMEX.

Until 2004, the amount of the sale of future accounts receivable was shown as a long-term liability in the consolidated financial statements
(see Note 2c).

NOTE 11FINANCIAL INSTRUMENTS:

During the normal course of business, PEMEX is exposed to foreign currency risk, interest rate risk, hydrocarbon price risk and credit risk. These risks create volatility in earnings, equity, and cash flows from
period to period. PEMEX uses derivative instruments to eliminate or limit many of these risks.

PEMEX has established general risk
management guidelines for the use of derivative instruments.

Each Subsidiary Entity using derivative instruments has also adopted specific
guidelines and policies to manage their respective risk. The guidelines established by the Subsidiary Entities operate within the PEMEX risk management structure.

The Risk Management Committee of PEMEX, comprised of representatives of PEMEX, the Central Bank of Mexico, the Ministry of Finance and Public Credit, and PMI, authorizes PEMEXs hedging strategies and submits the
risk management policies for the approval of the Board of Directors of Petróleos Mexicanos (the Board of Directors).

In
2001, the Board of Directors approved a restructuring of the risk management area and created the Risk Management Deputy Direction, whose objective is to develop the financial and catastrophic operational risk management strategy for PEMEX and to
establish institutional regulations consistent with a consolidated risk management approach.



| | (i) | Credit risk
| | --- | -----------

PEMEX is subject to credit risk through trade
receivables. The bulk of operations is carried out with domestic customers whose operations are industry related, although PEMEX also has customers located abroad (primarily in the United States). To monitor this risk, PEMEX has established an
internal credit committee to monitor credit policies and procedures. However, PEMEX closely monitors extensions of credit and has never experienced significant credit losses.

PEMEX invests excess cash in low-risk, liquid instruments, which are placed with a wide array of institutions.



| | (ii) | Counterparty risk from the use of derivative financial instruments
| | ---- | ------------------------------------------------------------------

PEMEX is exposed to credit (or default) risk through the use of derivative instruments. When the fair value of the derivate is positive, PEMEX is exposed to the credit risk of the counterparty, i.e., the risk that the counterparty fails to
fulfill its performance obligations under the derivative contract. When the fair value of a derivative contract is negative, this indicates that PEMEX owes the counterparty, which means that it does not assume a credit risk.



F-26



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



In order to minimize the credit risk in derivative financial instruments, PEMEX enters into
transactions with high quality counterparties, which include financial institutions and commodities exchanges that satisfy PEMEXs established credit approval criteria. Normally, these counterparties have a higher credit rating than that of
PEMEX.

Derivative transactions are generally executed on the basis of standard agreements. In general, collateral for debt-related
financial derivative transactions is neither provided nor received.



| | (iii) | Interest rate risk management
| | ----- | -----------------------------

PEMEXs interest rate
risk hedging strategy reduces the volatility of PEMEXs operating cash flows for long-term debt commitments. Interest rate derivatives allow PEMEX to have an adequate mix of fixed and variable rates in its debt portfolio.

PEMEXs financial derivative operations consist mainly of fixed interest rate swaps under which PEMEX is entitled to receive payments based on LIBOR
and Mexican interest rates.



| | (iv) | Exchange rate risk management
| | ---- | -----------------------------

As a currency exchange rate
risk hedging policy, PEMEX utilizes cross-currency swaps to hedge against adverse changes in currency exchange rates for loans issued in currencies other than the U.S. dollar or Mexican Peso. Since a significant amount of PEMEXs revenues is
denominated in U.S. dollars, PEMEX generally obtains loans in U.S. dollars. However, PEMEX also carries debt in currencies other than the U.S. dollar to take advantage of the financing terms available in these foreign currencies.

PEMEX has traditionally contracted currency swaps as a hedging strategy against exchange fluctuations of the debt issued in currencies other than the
U.S. dollar. These foreign currency financial derivatives have been established to translate the amounts of various bonds issued in other currencies into U.S. dollars.



| | (v) | Commodity price risk management
| | --- | -------------------------------

Petroleum products:

PEMEX balances its overall petroleum product supply and demand through PMI Trading Ltd., managing only those
exposures associated with the immediate operational program. To this end, PEMEX uses the full range of conventional oil price-related financial and commodity derivatives available in the oil markets. PEMEXs benchmark for petroleum product
commercial activities is the prevailing market price.

Natural gas:

Pemex-Gas and Basic Petrochemicals offers its customers financial instruments as a value added service and PEMEX provides various hedging contracts to its
customers in order to give them the option of protecting against fluctuations in the price of its products.

As part of the policies of the
Federal Government for promoting economic growth, during the fourth quarter of 2003, the Ministry of Energy announced a new program for hedging natural gas prices that PEMEX could offer to domestic customers for the years 2004 through 2006. Sales
under this program represent approximately 20% of all of PEMEXs domestic industrial natural gas sales.



F-27



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



PEMEX decided to modify its traditional risk profile for natural gas in order to mitigate the
volatility of income arising from natural gas sales. This strategy represents approximately 10% of overall natural gas sales and does not leave PEMEX with basis risk exposure, because the derivative is valued using the same market reference price
used to price natural gas sales.

Crude oil:

PEMEX does not generally enter into any long-term hedges against fluctuations in crude oil prices due to the fiscal regime, through which it transfers, via taxes and duties, most of the risk in the price of this
commodity to the federal government. However, during 2005, PEMEX entered into a short-term oil price hedging strategy by purchasing options that would guarantee a minimum price for approximately 7% of the total crude oil production for that year.
These instruments were acquired in February and March. These options expired on December 31, 2005, and were not exercised due to the high price of crude oil.



| | (vi) | Investment portfolio risk management
| | ---- | ------------------------------------

At December 31,
2003, PEMEX held two equity swaps in respect of a total of 40,107,485 shares of Repsol whose market value at that date was 19.47 U.S. dollars per share. Those swaps matured in January of 2004 and were not renewed.



| | (vii) | Fair value of derivative financial instruments
| | ----- | ----------------------------------------------

The fair
value of derivative instruments is sensitive to movements in the underlying market rates and variables. PEMEX monitors the fair value of derivative financial instruments on a periodic basis. Fair values are calculated for each derivative financial
instrument, which is the price at which one party would assume the rights and duties of another party. Fair values of financial derivatives have been calculated using common market valuation methods with reference to available market data as of the
balance sheet date.

The following is a summary of the methods and assumptions for the valuation of the derivative financial instruments
that PEMEX utilizes:



| |  |  | The fair value for interest rate, exchange rate and hydrocarbon derivative instruments is determined by discounting future cash flows at fair value as of the balance sheet date,
using market quotations for the instruments remaining life.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Prices for options are calculated using standard option-pricing models commonly used in the international financial market.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | Exchange-traded energy futures contracts are valued individually at daily settlement prices quoted on the futures markets.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| | (viii) | Embedded derivatives
| | ------ | --------------------

With respect to the Exchangeable
Bonds issued by RepCon Lux, S.A., PEMEX has determined that the option holders right to request to exchange their Exchangeable Bonds for shares of Repsol YPF, S.A., was an embedded derivative. Accordingly, this embedded derivative had to be
separated from the underlying debt instrument, recorded at fair value and accounted for separately within the balance sheet.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



| | (ix) | Operations with derivative financial instruments
| | ---- | ------------------------------------------------

PEMEX
enters into derivative transactions with the sole purpose of hedging financial risks related to its operations, assets, or liabilities. Nonetheless, some of these transactions do not qualify for hedge accounting and therefore are recorded in the
financial statements as entered into for trading purposes, despite the fact that their profits or losses are offset by the profits or losses of the positions to which they relate.

As part of Pemexs client-based approach, it offers natural gas derivatives to its clients. As mentioned above, its benchmark is the market price;
therefore, Pemex enters into derivative transactions with the opposite position in order to offset the effect of the derivatives offered to its clients. Bulletin C-10 does not allow derivative positions to serve as hedges for other derivatives.
Therefore, these operations are treated for accounting purposes as entered into for trading purposes. However, given that they have offsetting effects, PEMEX is only exposed to the basis risk arising from the difference between the index offered to
clients and the underlying index related to the offsetting position.

As of December 31, 2005, the fair value of the derivative
instruments was Ps. (15,559,108). This amount includes the derivative instruments designated as cash flow hedges and their fair value of Ps. (6,517,352) was recorded under comprehensive loss.

The following table shows the fair value and the notional value of the amounts of the over-the-counter derivative instruments, outstanding as of
December 31, 2005, which are designated as cash flow hedges:



|                             |  |          |            |            |      |           |  
|---------------------------- |  | -------- | ---------- | ---------- | ---- | --------- | -
|                             |  | Notional |            | Fair Value |     
|Interest rate swaps:         |  |          |            |            |      |           |  
|Pay fixed / receive variable |  | Ps.      | 17,493,163 |            | (Ps. | 1,428,493 | )
|                             |  |          |            |            |      |           |  
|Natural gas swaps:           |  |          |            |            |      |           |  
|Pay variable / receive fixed |  | Ps.      | 4,455,088  |            | (Ps. | 4,916,858 | )
|                             |  |          |            |            |      |           |  

Derivative instruments designated as cash flow hedges having the same critical characteristics as
the item being hedged are considered to be fully effective.

In light of the foregoing, these instruments do not have an impact in earnings
due to hedge inefficiency, and their fair value is recognized in its entirety as part of equity through other comprehensive income. The fair value of these instruments is reclassified into earnings at the same time as the hedged item cash flow
affect earnings.

When the derivative instruments designated as cash flow hedges do not present the same critical characteristics as the
hedged item, the inefficient portion of the fair value is recognized in earnings, and the efficient portion is recognized as part of equity through other comprehensive income.

When a cash flow hedge is no longer effective, the accumulated gains or losses that were recorded in other comprehensive income have to remain in this
account and be reclassified into earnings at the same time as the hedge item cash flows affect earnings; however, from that date forward the derivative instrument will lose the hedge accounting treatment.

On December 31, 2005, only an interest-rate swap designated as a cash flow hedge had lost the hedge accounting treatment.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



During 2005, a net loss of Ps. 3,778,772 was reclassified from other comprehensive income into
earnings and it is estimated that in 2006, a net loss of Ps. 5,480,522 will be reclassified from other comprehensive income into earnings.

The following table shows the fair value of the notional amounts of the exchange-traded derivative instruments as of December 31, 2005, treated for accounting purposes as entered into for trading purposes:



|                     |  |               |     |           |     |    
|-------------------- |  | ------------- | --- | --------- | --- | ---
|                     |  | NotionalValue |     | FairValue
|Natural gas futures: |  |               |     |           |     |    
|Purchase             |  | Ps.           | 608 |           | Ps. | 37 
|Sale                 |  |               | 630 |           |     | 184
|                     |  |               |     |           |     |    

The following table shows the fair value and the notional amounts of the over-the-counter
derivative instruments as of December 31, 2005, treated for accounting purposes as entered into for trading purposes:



|                                          |  |                |            |            |     |            |  
|----------------------------------------- |  | -------------- | ---------- | ---------- | --- | ---------- | -
|                                          |  | NotionalAmount |            | Fair Value |    
|Cross-currency swaps:                     |  |                |            |            |     |            |  
|Pay U.S. Dollar / Receive Pounds sterling |  | Ps.            | 8,393,834  |            | Ps. | 268,489    |  
|Pay U.S. Dollar / Receive Japanese Yen    |  |                | 12,585,088 |            |     | (869,740   | )
|Pay U.S. Dollar / Receive Euros           |  |                | 57,004,225 |            |     | (3,476,905 | )
|                                          |  |                |            |            |     |            |  
|                                          |  |               
|Natural gas swaps:                        |  |                |            |            |     |            |  
|Pay fixed / receive variable              |  | Ps.            | 8,079,264  |            | Ps. | 984,065    |  
|Pay variable / receive fixed              |  |                | 5,281,234  |            |     | (915,135   | )
|Pay variable / receive variable           |  |                | 2,240,019  |            |     | (68,093    | )
|                                          |  |                |            |            |     |            |  
|                                          |  |               
|Natural gas options:                      |  |                |            |            |     |            |  
|Pay fixed / receive variable              |  |                |            |            | Ps. | (2,272     | )
|Pay variable / receive fixed              |  |                |            |            |     | 891        |  
|Pay variable / receive variable           |  |                |            |            |     | 8,684      |  
|                                          |  |                |            |            |     |            |  

---

|Note: | The exchange rate is equal to Ps. 10.7777 per Dollar.
|----- | -----------------------------------------------------

During 2005, PEMEX recognized a net loss of Ps. 5,195,270 in comprehensive financing cost and a decrease in the cost of sales of Ps. 65,202, related to the operations with derivative instruments treated for accounting purposes as entered
into for trading purposes.

The following table shows the interest rate swaps notional amount and fair value at December 31,
2004:



|                    |  |                |            |            |     |          |  
|------------------- |  | -------------- | ---------- | ---------- | --- | -------- | -
|                    |  | 2004           |           
|                    |  | NotionalAmount |            | Fair Value |    
|Interest rate swaps |  | Ps.            | 12,513,876 |            | Ps. | (131,693 | )
|                    |  |                |            |            |     |          |  



F-30



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The following table shows the notional amounts of cross-currency swaps and their respective fair
values at December 31, 2004:



|                                |  |                |            |            |     |          
|------------------------------- |  | -------------- | ---------- | ---------- | --- | ---------
|                                |  | 2004          
|                                |  | NotionalAmount |            | Fair Value
|Pounds sterling to U.S. dollars |  | Ps.            | 8,497,208  |            | Ps. | 1,289,069
|Japanese yen to U.S. dollars    |  |                | 13,405,145 |            |     | 2,292,394
|Euros to U.S. dollars           |  |                | 43,154,825 |            |     | 4,651,255
|                                |  |                |            |            |     |          

The following table indicates the natural gas derivative instrument, and their fair value at
December 31, 2004:



|        |  |                |           |  
|------- |  | -------------- | --------- | -
|        |  | 2004Fair Value |          
|Swaps   |  | (Ps.           | 3,122,776 | )
|Options |  |                | 4,839     |  
|Futures |  |                | 62,193    |  
|        |  |                |           |  

The estimated fair value of financial instruments other than derivatives for which it is
practicable to estimate their value, as of December 31, 2005 and 2004, in nominal terms, is as follows:



|                                          |  |                |             |            |     |                |  |            |             |  |     |            
|----------------------------------------- |  | -------------- | ----------- | ---------- | --- | -------------- |  | ---------- | ----------- |  | --- | -----------
|                                          |  | 2005           |             | 2004      
|                                          |  | Carrying value |             | Fair value |     | Carrying value |  | Fair value
|Assets:                                   |  |                |             |            |     |                |  |            |             |  |     |            
|Cash and cash equivalents                 |  | Ps.            | 120,826,589 |            | Ps. | 120,826,589    |  | Ps.        | 84,872,231  |  | Ps. | 84,872,231 
|Accounts receivable, notes and other      |  |                | 117,880,340 |            |     | 117,880,340    |  |            | 90,273,995  |  |     | 90,273,995 
|Financial instruments                     |  |                | 3,473,583   |            |     | 3,473,583      |  |            |             |  |     |            
|                                          |  |                |             |           
|Liabilities:                              |  |                |             |            |     |                |  |            |             |  |     |            
|Suppliers                                 |  |                | 30,960,550  |            |     | 30,960,550     |  |            | 24,322,630  |  |     | 24,322,630 
|Accounts and accumulated expenses payable |  |                | 10,382,503  |            |     | 10,382,503     |  |            | 22,881,389  |  |     | 22,881,389 
|Sale of future accounts receivable        |  |                |            |            |     |               |  |            | 36,685,689  |  |     | 36,685,689 
|Taxes payable                             |  |                | 68,005,297  |            |     | 68,005,297     |  |            | 44,136,805  |  |     | 44,136,805 
|Derivative financial instruments          |  |                | 19,032,691  |            |     | 19,032,691     |  |            |             |  |     |            
|Current portion of long-term debt         |  |                | 36,095,017  |            |     | 36,095,017     |  |            | 49,141,680  |  |     | 49,141,680 
|Long-term debt                            |  |                | 501,592,619 |            |     | 556,513,249    |  |            | 405,834,318 |  |     | 439,292,228
|                                          |  |                |             |            |     |                |  |            |             |  |     |            

The nominal value of financial instruments such as cash equivalents, accounts receivable and
payable, taxes payable and current portion of long-term debt approximate fair value because of their short maturities.

The fair value of
long-term debt is determined by reference to market quotes, and, where quotes are not available, is based on discounted cash flow analyses. Because assumptions significantly affect the derived fair value and they are inherently subjective in nature,
the estimated fair values may not necessarily be realized in a sale or settlement of the instrument.



F-31



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



NOTE 12LABOR OBLIGATIONS:

PEMEX has established employee non-contributory retirement plans in accordance with the Ley Federal del Trabajo (Federal Labor Law) and under collective bargaining agreements. Benefits are
determined depending on years of service and final salary at retirement. Liabilities and costs of such plans, including those related to the seniority premium benefit, to which every employee is entitled upon termination of employment, are recorded
in accordance with an actuarial valuation performed by independent actuaries.

PEMEX has also established plans for other post retirement
benefit obligations whose actuarial amounts are determined by independent actuaries.

Beginning January 1, 2005, PEMEX adopted the
revised Bulletin D-3 and now recognizes its obligations related to severance payments paid to employees upon dismissal.

For the years
ended December 31, 2005 and 2004, PEMEX contributed Ps. 14,038,276 and Ps. 1,866,856, respectively, to the pension plan, seniority premium plan and other post retirement benefits plan.

The 2005 pension plan and seniority premium liabilities are as follows:



|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|-------------------------------------------------------- |  | ----------------- | ------------ | - | ---------------- | --- | ----------- | --------- |  | --- | ---------- | - |  | --- | ------------ | -
|                                                         |  | December 31, 2005 |             
|                                                         |  | Pension           |              |   | Senioritypremium |     |             | Indemnity |  |     | Total      |  
|Vested benefit obligation                                |  | Ps.               | 145,084,985  |   |                  | Ps. | 13,102,013  |           |  | Ps. | 1,201,840  |   |  | Ps. | 159,388,838  |  
|Nonvested benefit obligation                             |  |                   | 107,526,530  |   |                  |     | 54,044      |           |  |     | 17,817     |   |  |     | 107,598,391  |  
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Current benefit obligation                               |  |                   | 252,611,515  |   |                  |     | 13,156,057  |           |  |     | 1,219,657  |   |  |     | 266,987,229  |  
|Less: Plan assets                                        |  |                   | (1,397,806   | ) |                  |     | (16,266     | )         |  |     |           |   |  |     | (1,414,072   | )
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Net current liability                                    |  |                   | 251,213,709  |   |                  |     | 13,139,791  |           |  |     | 1,219,657  |   |  |     | 265,573,157  |  
|Net projected liability                                  |  |                   | (147,354,600 | ) |                  |     | (16,015,924 | )         |  |     | (1,518,327 | ) |  |     | (164,888,851 | )
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Additional liability                                     |  | Ps.               | 103,859,109  |   |                  | Ps. | 67,937      |           |  | Ps. | 17,817     |   |  | Ps. | 103,944,863  |  
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Projected benefit obligation                             |  | Ps.               | 256,535,529  |   |                  | Ps. | 13,552,494  |           |  | Ps. | 1,235,593  |   |  | Ps. | 271,323,616  |  
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Less: Plan assets                                        |  |                   | (1,397,806   | ) |                  |     | (16,266     | )         |  |     |           |   |  |     | (1,414,072   | )
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Items to be amortized over the next 13 and 14 years:     |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Transition obligations                                   |  |                   | (69,812,839  | ) |                  |     | (3,497,599  | )         |  |     | (17,818    | ) |  |     | (73,328,256  | )
|Prior service costs and plan amendments                  |  |                   | (6,895,338   | ) |                  |     | (270,452    | )         |  |     |           |   |  |     | (7,165,790   | )
|Variations in assumptions and adjustments for experience |  |                   | (31,074,946  | ) |                  |     | 6,247,747   |           |  |     | 300,552    |   |  |     | (24,526,647  | )
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Total of unamortized items                               |  |                   | (107,783,123 | ) |                  |     | 2,479,696   |           |  |     | 282,734    |   |  |     | (105,020,693 | )
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  
|Net projected liability                                  |  | Ps.               | 147,354,600  |   |                  | Ps. | 16,015,924  |           |  | Ps. | 1,518,327  |   |  | Ps. | 164,888,851  |  
|                                                         |  |                   |              |   |                  |     |             |           |  |     |            |   |  |     |              |  



F-32



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|                                                                             |  |                   |            |   |                  |     |           |           |  |       |           |  |     |            |  
|---------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ---------------- | --- | --------- | --------- |  | ----- | --------- |  | --- | ---------- | -
|                                                                             |  | December 31, 2005 |           
|                                                                             |  | Pension           |            |   | Senioritypremium |     |           | Indemnity |  | Total |          
|Net cost for the period for seniority premium, pension plan and indemnities: |  |                   |            |   |                  |     |           |           |  |       |           |  |     |            |  
|Service cost                                                                 |  | Ps.               | 5,183,958  |   |                  | Ps. | 745,332   |           |  | Ps.   | 103,804   |  | Ps. | 6,033,094  |  
|Financial cost                                                               |  |                   | 18,265,810 |   |                  |     | 1,061,056 |           |  |       | 109,078   |  |     | 19,435,944 |  
|Return on plan assets                                                        |  |                   | (171,618   | ) |                  |     | (651      | )         |  |       |          |  |     | (172,269   | )
|Transition obligation                                                        |  |                   | 5,335,518  |   |                  |     | 366,502   |           |  |       | 1,277     |  |     | 5,703,297  |  
|Prior services and plan amendments                                           |  |                   | 302,997    |   |                  |     | 34,631    |           |  |       |          |  |     | 337,628    |  
|Variations in assumptions and adjustments for experience                     |  |                   | 175,084    |   |                  |     | (331,205  | )         |  |       |          |  |     | (156,121   | )
|Inflation adjustment                                                         |  |                   | 967,020    |   |                  |     | 62,150    |           |  |       | 7,030     |  |     | 1,036,200  |  
|                                                                             |  |                   |            |   |                  |     |           |           |  |       |           |  |     |            |  
|Total net cost for the year                                                  |  |                   | 30,058,769 |   |                  |     | 1,937,815 |           |  |       | 221,189   |  |     | 32,217,773 |  
|Recognition of severance payments                                            |  |                   |           |   |                  |     |          |           |  |       | 1,298,705 |  |     | 1,298,705  |  
|                                                                             |  |                   |            |   |                  |     |           |           |  |       |           |  |     |            |  
|Net cost of the period and recognition of severance payments                 |  | Ps.               | 30,058,769 |   |                  | Ps. | 1,937,815 |           |  | Ps.   | 1,519,894 |  | Ps. | 33,516,478 |  
|                                                                             |  |                   |            |   |                  |     |           |           |  |       |           |  |     |            |  

2004 and 2003 liabilities are as follows:



|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|-------------------------------------------------------- |  | ----------------- | ------------ | - | ----------------- | --- | ----------- | ----- |  | --- | ------------ | - |  | --- | ------------ | -
|                                                         |  | December 31, 2004 |              |   | December 31, 2003 |    
|                                                         |  | Pension           |              |   | Senioritypremium  |     |             | Total |  |     | Total        |  
|Vested benefit obligation                                |  | Ps.               | 131,659,246  |   |                   | Ps. | 2,734,925   |       |  | Ps. | 134,394,171  |   |  | Ps. | 119,509,593  |  
|Nonvested benefit obligation                             |  |                   | 88,590,162   |   |                   |     | 9,167,395   |       |  |     | 97,757,557   |   |  |     | 104,295,844  |  
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Current benefit obligation                               |  |                   | 220,249,408  |   |                   |     | 11,902,320  |       |  |     | 232,151,728  |   |  |     | 223,805,437  |  
|Less: Plan assets                                        |  |                   | (2,567,683   | ) |                   |     | (10,827     | )     |  |     | (2,578,510   | ) |  |     | (14,292,130  | )
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Net current liability                                    |  |                   | 217,681,725  |   |                   |     | 11,891,493  |       |  |     | 229,573,218  |   |  |     | 209,513,307  |  
|Less: Net projected liability                            |  |                   | (131,487,350 | ) |                   |     | (14,218,992 | )     |  |     | (145,706,342 | ) |  |     | (118,131,995 | )
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Additional liability                                     |  | Ps.               | 86,194,375   |   |                   | Ps. |            |       |  | Ps. | 86,194,375   |   |  | Ps. | 129,684,938  |  
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Projected benefit obligation                             |  | Ps.               | 226,830,068  |   |                   | Ps. | 12,776,647  |       |  | Ps. | 239,606,715  |   |  | Ps. | 238,152,008  |  
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Less: Plan assets                                        |  |                   | (2,567,683   | ) |                   |     | (10,827     | )     |  |     | (2,578,510   | ) |  |     | (14,292,130  | )
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Items to be amortized over the next 14 and 15 years:     |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Transition obligations                                   |  |                   | (75,324,750  | ) |                   |     | (3,876,164  | )     |  |     | (79,200,914  | ) |  |     | (88,138,493  | )
|Prior service costs and plan amendments                  |  |                   | (4,272,154   | ) |                   |     | (301,379    | )     |  |     | (4,573,533   | ) |  |     | (3,613,349   | )
|Variations in assumptions and adjustments for experience |  |                   | (13,178,131  | ) |                   |     | 5,630,715   |       |  |     | (7,547,416   | ) |  |     | (13,976,041  | )
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Total of unamortized items                               |  |                   | (92,775,035  | ) |                   |     | 1,453,172   |       |  |     | (91,321,863  | ) |  |     | (105,727,883 | )
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  
|Net projected liability                                  |  | Ps.               | 131,487,350  |   |                   | Ps. | 14,218,992  |       |  | Ps. | 145,706,342  |   |  | Ps. | 118,131,995  |  
|                                                         |  |                   |              |   |                   |     |             |       |  |     |              |   |  |     |              |  



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|                                                                |  |                   |            |   |                   |     |           |       |  |     |            |   |  |     |            |  
|--------------------------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | --- | --------- | ----- |  | --- | ---------- | - |  | --- | ---------- | -
|                                                                |  | December 31, 2004 |            |   | December 31, 2003 |    
|                                                                |  | Pension           |            |   | Senioritypremium  |     |           | Total |  |     | Total      |  
|Net cost for the period for seniority premium and pension plan: |  |                   |            |   |                   |     |           |       |  |     |            |   |  |     |            |  
|Service cost                                                    |  | Ps.               | 5,753,573  |   |                   | Ps. | 821,168   |       |  | Ps. | 6,574,741  |   |  | Ps. | 5,851,977  |  
|Financial cost                                                  |  |                   | 17,350,478 |   |                   |     | 1,152,254 |       |  |     | 18,502,732 |   |  |     | 17,113,232 |  
|Return on plan assets                                           |  |                   | (645,768   | ) |                   |     |           |       |  |     | (645,768   | ) |  |     | (1,119,063 | )
|Transition obligation                                           |  |                   | 5,238,983  |   |                   |     | 356,839   |       |  |     | 5,595,822  |   |  |     | 5,655,032  |  
|Prior services and plan amendments                              |  |                   | 249,010    |   |                   |     | 29,314    |       |  |     | 278,324    |   |  |     | 155,566    |  
|Variations in assumptions and adjustments for experience        |  |                   | 183,798    |   |                   |     | (46,818   | )     |  |     | 136,980    |   |  |     | 55,447     |  
|Inflation adjustment                                            |  |                   | 1,454,995  |   |                   |     | 120,050   |       |  |     | 1,575,045  |   |  |     | 1,099,559  |  
|                                                                |  |                   |            |   |                   |     |           |       |  |     |            |   |  |     |            |  
|Total net cost for the year                                     |  | Ps.               | 29,585,069 |   |                   | Ps. | 2,432,807 |       |  | Ps. | 32,017,876 |   |  | Ps. | 28,811,750 |  
|                                                                |  |                   |            |   |                   |     |           |       |  |     |            |   |  |     |            |  

Rates used in calculating benefit obligations and plan benefits:



|                                                            |  |              |   |  |      |   |  |      |  
|----------------------------------------------------------- |  | ------------ | - |  | ---- | - |  | ---- | -
|                                                            |  | December 31, |  
|                                                            |  | 2005         |   |  | 2004 |   |  | 2003 |  
|Discount rate                                               |  | 4.50         | % |  | 4.59 | % |  | 4.59 | %
|Rate of increase in compensation levels                     |  | 0.50         | % |  | 0.92 | % |  | 0.92 | %
|Rate of increase in costs of other post-retirement benefits |  | 0.50         | % |  | 0.92 | % |  | 0.92 | %
|Expected long term rate of the return on plan assets        |  | 5.00         | % |  | 5.50 | % |  | 5.50 | %
|                                                            |  |              |   |  |      |   |  |      |  



|                                                         |  |              |             |   |      |     |             |      |  |     |             |  
|-------------------------------------------------------- |  | ------------ | ----------- | - | ---- | --- | ----------- | ---- |  | --- | ----------- | -
|                                                         |  | December 31, |            
|                                                         |  | 2005         |             |   | 2004 |     |             | 2003 | 
|Other post-retirement benefit plans:                     |  |              |             |   |      |     |             |      |  |     |             |  
|Obligations for other post-retirement benefits           |  | Ps.          | 200,973,749 |   |      | Ps. | 173,439,732 |      |  | Ps. | 102,461,642 |  
|Less:                                                    |  |              |             |   |      |     |             |      |  |     |             |  
|Pending items of amortization relative to those benefits |  |              | (94,144,046 | ) |      |     | (89,904,451 | )    |  |     | (39,657,173 | )
|                                                         |  |              |             |   |      |     |             |      |  |     |             |  
|Net liability for other post-retirement benefits         |  | Ps.          | 106,829,703 |   |      | Ps. | 83,535,281  |      |  | Ps. | 62,804,469  |  
|                                                         |  |              |             |   |      |     |             |      |  |     |             |  



|                                                         |  |              |            |   |      |     |            |      |  |     |            |  
|-------------------------------------------------------- |  | ------------ | ---------- | - | ---- | --- | ---------- | ---- |  | --- | ---------- | -
|                                                         |  | December 31, |           
|                                                         |  | 2005         |            |   | 2004 |     |            | 2003 | 
|Net cost for other post-retirement benefits:             |  |              |            |   |      |     |            |      |  |     |            |  
|Service cost                                             |  | Ps.          | 3,856,677  |   |      | Ps. | 3,642,338  |      |  | Ps. | 2,293,719  |  
|Financial cost                                           |  |              | 14,337,228 |   |      |     | 12,113,374 |      |  |     | 7,951,267  |  
|Transition obligation                                    |  |              | 5,929,869  |   |      |     | 5,820,593  |      |  |     | 2,648,425  |  
|Prior services and plan amendments cost                  |  |              | 4,147,944  |   |      |     | 209,655    |      |  |     | 219,325    |  
|Variations in assumptions and adjustments for experience |  |              | (3,530,489 | ) |      |     | (108,553   | )    |  |     | (115,178   | )
|Inflation adjustment                                     |  |              | 824,232    |   |      |     | 1,125,241  |      |  |     | 516,846    |  
|                                                         |  |              |            |   |      |     |            |      |  |     |            |  
|Total net cost for the year                              |  | Ps.          | 25,565,461 |   |      | Ps. | 22,802,648 |      |  | Ps. | 13,514,404 |  
|                                                         |  |              |            |   |      |     |            |      |  |     |            |  



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|                                                                                                                                                                                   |  |              |             |      |     |            
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | ---- | --- | -----------
|                                                                                                                                                                                   |  | December 31,
|                                                                                                                                                                                   |  | 2005         |             | 2004
|Expected obligations for other post-retirement benefits related to retired employees and active employees that have become
vested                                                  |  | Ps.          | 120,154,237 |      | Ps. | 107,307,357
|Portion of the post-retirement benefits for other employees based on years of service                                                                                              |  |              | 80,819,512  |      |     | 66,132,375 
|                                                                                                                                                                                   |  |              |             |      |     |            
|Total accumulated obligation for other post-retirement benefits                                                                                                                    |  | Ps.          | 200,973,749 |      | Ps. | 173,439,732
|                                                                                                                                                                                   |  |              |             |      |     |            
|The effect of increasing by one percent the rate used in estimating the increase in the cost of other post-retirement benefits, with no change
in other assumptions, is a follows: |  |              |             |      |     |            
|                                                                                                                                                                                   |  |             
|Total labor cost and financial cost                                                                                                                                                |  | Ps.          | 17,953,025  |      | Ps. | 5,487,463  
|                                                                                                                                                                                   |  |              |             |      |     |            
|Accumulated post-retirement benefit obligation                                                                                                                                     |  | Ps.          | 243,780,967 |      | Ps. | 50,768,634 
|                                                                                                                                                                                   |  |              |             |      |     |            

Since 1995, PEMEX has recognized the liability and cost for supplemental payments for gas,
gasoline and basic food supplies, in accordance with guidelines of Bulletin D-3, Labor Obligations, in effect at that date. However, beginning in 2004, these liabilities were recalculated to include medical service liabilities in
accordance with guidelines of revised Bulletin D-3. In addition, the actuarial calculations and disclosures related to pension plan, seniority premium and post-retirement benefits were separated. Therefore, the additional liability decreased as
compared as 2003 due to the guidelines of the revised Bulletin D-3 which do not require that an additional liability be established for other post-retirement benefits.

NOTE 13COMMITMENTS:



|a. | Petróleos Mexicanos is jointly responsible for all the liabilities that the Master Trust (constituted November 10, 1998 with The Bank of New York and The Bank of New
York (Delaware) contracts. The principal propose of the Master Trust is the administration of financial resources to finance projects designated by Petróleos Mexicanos. The unpaid balance of the liabilities of the Master Trust, which are
guaranteed by Petróleos Mexicanos, derive from the resources that it obtains for the development of the PIDIREGAS projects, on December 31, 2005, is Ps. 378,929,073 (U.S.$ 35,158,621), which is allocated as follows: resources obtained
under the protection of the agreement of derivation of funds is equal to Ps. 24,217,486 (U.S.$ 2,246,999) and resources obtained from financial institutions is equal to Ps. 354,711,587 (U.S.$ 32,911,622). The outstanding balance on
December 31, 2004, was equal to Ps. 370,720,009 (U.S.$ 31,848,191), which is allocated as follows: the resources obtained under the protection of the agreement of derivation of funds Ps. 40,917,207 (U.S.$ 3,515,157), and the resources
obtained of financial institutions Ps. 329,802,802 (U.S.$ 28,333,034).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b. | Petróleos Mexicanos is jointly responsible as guarantor for all the liabilities of the Fideicomiso F/163 (constituted on October 17, 2003 and administered until
July 31, 2004, by Bank Boston S.A. and from August 1, 2004 until the date of issuance of these financial statements by JP Morgan Bank), which issues certificados bursatiles (publicly-traded notes) and enters into other financings,
in accordance with instructions provided by Petróleos Mexicanos. The resources that are obtained from these financings are destined to cover peso-denominated payment obligations incurred by PIDIREGAS projects. The outstanding balance of the
Fideicomiso F/163 on December 31, 2005 and 2004, is Ps. 106,449,777 and Ps. 63,956,971, respectively.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|c. | PEMEX has entered into a nitrogen supply contract for the pressure maintenance program at the Cantarell field that expires in 2015. At December 31, 2005 and 2004, the value of
the nitrogen to be supplied during the term of the contract is approximately Ps. 15,141,829 and Ps. 19,096,059, respectively. In the event of the annulment of the contract and depending on the circumstances, PEMEX would be required to purchase
the nitrogen production plant in accordance with the terms of the contract.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The future payments in connection with this
contract are estimated as follows:



|                    |  |     |           
|------------------- |  | --- | ----------
|2006                |  | Ps. | 2,371,373 
|2007                |  |     | 2,310,159 
|2008                |  |     | 1,592,950 
|2009                |  |     | 1,242,335 
|2010                |  |     | 1,242,335 
|2011 and thereafter |  |     | 6,382,677 
|                    |  |     |           
|Total               |  | Ps. | 15,141,829
|                    |  |     |           



|d. | During 2005 and 2004, PEMEX, has implemented MSCs. In connection with these contracts the contractor, on his own cost, has to administer and support the execution of the works of
the MSCs, which are grouped in the categories of development, infrastructure and maintenance. The estimated value of the MSCs, on December 31 is as follows:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                    |  |                   |  |       |           |      |       |          
|------------------- |  | ----------------- |  | ----- | --------- | ---- | ----- | ---------
|Date of contracting |  | Block             |  | 2005  |           | 2004
|February 9, 2004    |  | Olmos             |  | U.S.$ | 343,574   |      | U.S.$ | 343,574  
|November 21, 2003   |  | Cuervito          |  |       | 260,072   |      |       | 260,072  
|November 28, 2003   |  | Misión            |  |       | 1,035,580 |      |       | 1,035,580
|November 14, 2003   |  | Reynosa-Monterrey |  |       | 2,437,196 |      |       | 2,437,196
|December 8, 2003    |  | Fronterizo        |  |       | 264,977   |      |       | 264,977  
|December 9, 2004    |  | Pandura-Anáhuac   |  |       | 900,392   |      |       |         
|March 23, 2005      |  | Pirineo           |  |       | 645,295   |      |       |         
|                    |  |                   |  |       |           |      |       |          
|Total               |  |                   |  | U.S.$ | 5,887,086 |      | U.S.$ | 4,341,399
|                    |  |                   |  |       |           |      |       |          



|e. | PEMEX, through its subsidiaries PMI and PMI-NASA, has executed several long-term purchase and sale contracts for crude oil with foreign companies in international markets for
approximately 792,000 barrels per day. The terms and conditions of these contracts are particular for each customer. These contracts contain minimum mandatory periods. Current expiration of these contracts is between one and three years and there is
one of them which expires in 2023 for 170,000 barrels per day.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|f. | At December 31, 2005 and 2004, PEMEX had entered into contracts with various contractors for an approximate amount of Ps. 226,792,349 and Ps. 155,239,285. These contracts are
for the development of PIDIREGAS over the next 18 years.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 14CONTINGENCIES:



|a. | In the normal course of business, PEMEX is named in a number of lawsuits of various types. PEMEX evaluates the merit of each claim and assesses the likely outcome, accruing a
contingent liability when an unfavorable decision is probable and the amount is reasonably estimable. Unless specifically mentioned in this Note, PEMEX does not believe a materially unfavorable outcome is probable for any known or pending lawsuits
or threatened litigation for which PEMEX has not made any accruals.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|b. | PEMEX is subject to the Ley General de Equilibrio Ecológico y Protección al Ambiente (the General Law on Ecological Equilibrium and Protection of the
Environment, or the Environmental Law). To comply with this law, PEMEX has contracted environmental audits for its larger operating, storage and transportation facilities. Following the completion of such audits, PEMEX signed various
agreements with the Procuraduría Federal de Protección al Ambiente (the Federal Attorney of Environmental Protection, or PROFEPA) to implement environmental remediation and improvement plans. Such plans contemplate
remediation for environmental damages, as well as related investments for the improvement of equipment, maintenance, labor and materials.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PEMEX has recorded a reserve for environmental remediation as of December 31, 2005 and 2004 of Ps. 1,418,714 and Ps. 1,594,677, respectively. That reserve is included in long-term liabilities in the balance
sheet.



|c. | At December 31, 2005, PEMEX is involved in various civil, tax, criminal administrative and labor lawsuits for a total amount of Ps. 13,767,793, which is similar to the amounts
as of December 31, 2004. At December 31, 2005 and 2004, PEMEX has accrued a reserve of Ps. 1,578,659 and Ps. 1,631,271, respectively, related to those contingencies, although final resolutions are still pending.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d. | PEMEX is currently involved in an arbitration with Conproca, S.A. de C.V. (Conproca) arising out of public works contracts. Based on the latest filings made before the
International Arbitration Court, the claim filed by Conproca is for U.S. $623,801 and the counterclaim filed by PEMEX is for the amount of U.S. $907,600.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Currently, the arbitration is in its evidentiary stages. The first liability hearing was held during the first week of February 2006. Pursuant to the
procedural schedule the next steps of the arbitration are: 1) the filing of allegation writs related to the first liability hearing have to be made by the parties; 2) the International Arbitration Court will issue an opinion with its conclusions of
the first liability hearing: and 3) a final liability hearing will be held in January 2007.



|e. | The Comisión Federal de Competencia (Federal Competition Commission) issued a resolution against PEMEX for alleged monopolistic practices in connection with
exclusivity clauses contained in various agreements related to the sale of lubricants and automotive oil. The resolution requires the following measures to be taken:
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | amend the joint venture agreements, trademark license agreements, supply franchise agreements and any documents with an exclusivity clause;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | execute amendments with the franchised retail services stations to adjust franchise and supply contracts; and
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | inform the legal representatives of retail service stations of the resolution issued by the Federal Competition Commission.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

As of this date, PEMEX has filed two appeals for constitutional relief, referred to as an amparo, against this resolution. One appeal was granted
favorably in the first instance, but was challenged through an appeal for review and a resolution is still pending. PEMEX has not accrued any reserve for this claim.



|f. | Mecánica de la Peña, S.A. de C.V. and Mecapeña, S.A. de C. V has filed several claims related to certain contracts entered into with a
Subsidiary Entity. As of this date, no judgment has been pronounced against the Subsidiary Entity in connection with such claims. Although a final judgment has not been pronounced,
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



| | several resolutions have been pronounced in favor of the Subsidiary Entity in connection with the claims filed by the Subsidary Entity against
Mecánica de la Peña, S.A. de C.V., Afianzadora Sofimex, S.A. and the Mexican Petroleum Institute. As of this date, the resolution of an amparo filed by the Subsidiary Entity is still pending. The amounts of U.S. $2,240 and U.S.
$2,550, the object of two claims, have not been recovered by the Subsidiary Entity.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|g. | The Federal Commission of Competition has implemented certain administrative procedures against a Subsidiary Entity. As of this date, two resolutions have been issued under the
administrative procedures (No. IO-62-97, dated July 10, 2003 and IO-14-99 dated November 27, 2003). An amparo against such resolutions filed by Impulsora Jalisciense, S.A. de C.V. was denied. Consequently, we are waiting for a
notification from the Federal Commission of Competition notifying the Subsidiary Entity that the six-month term to comply with these resolutions has been renewed. A fine for an amount of 1,500 times the prevailing minimum wage (Salario
Mínimo Vigente) in the Federal District for every day elapsed without compliance with these resolutions has not been ordered.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|h. | Combustibles de Oriente, S.A. de C.V. filed a commercial claim (No. 75/99) against a Subsidiary Entity. On August 16, 2004, a resolution was issued in which the Subsidiary
Entity was ordered to pay Ps. 221,158 to this distributor, and the distributor was ordered to pay Ps. 31,143 for unpaid invoices. After the amounts were compensated, PEMEX paid Ps. 190,015 to the distributor on January 28, 2005, and
the total amount was liquidated. The distributor filed a new motion for expenses, court costs and interest in the amount of Ps. 21,267 and Ps. 44,677, respectively. As of this date, a resolution is still pending.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|i. | Construcciones Industriales del Golfo, S.A. de C. V. filed a commercial claim (No. 30/2000) against Petróleos Mexicanos and a Subsidiary Entity in connection with public work
contract no. STI-CEPE-06/92. The Subsidiary Entity was ordered to pay U.S.$4,358,730 for additional works performed and not paid and U.S.$ 229,950 for financial expenses plus 6% in interest. These amounts were ordered by the Third District Civil
Court in the Federal District on August 25, 2005. The final judgment is still pending due to an amparo filed by the contractor.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 15EQUITY:

On December 31, 1990, certain debt owed by Petróleos Mexicanos to the Mexican Government
was capitalized as equity. This capitalization amounted to Ps. 22,334,195 in nominal terms (U.S. $7,577,000) and was authorized by the Board of Directors. The capitalization agreement between Petróleos Mexicanos and the Mexican Government
stipulates that the Certificates of Contribution A constitute permanent capital.

In December 1997, the Board of Directors and
the Mexican Government agreed to an equity reduction of the Certificates of Contribution A in exchange for a cash payment to the Mexican Government of Ps. 12,118,050 in nominal terms (U.S. $1,500,000). Petróleos Mexicanos and the
Ministry of Finance and Public Credit agreed upon a corresponding reduction in the future payments of the minimum guaranteed dividend.

As
a result, the Certificates of Contribution A are as follows:



|                                                                                        |  |        |           
|--------------------------------------------------------------------------------------- |  | ------ | ----------
|                                                                                        |  | Amount
|Certificates of Contribution A (nominal value)                                        |  | Ps.    | 10,222,463
|                                                                                        | 
|Inflation restatement increase                                                          |  |        | 79,582,840
|                                                                                        |  |        |           
|Certificates of Contribution A in Mexican pesos of December 31, 2005 purchasing power |  | Ps.    | 89,805,303
|                                                                                        |  |        |           



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



As a condition of this capitalization, Petróleos Mexicanos agreed to pay a minimum guaranteed
dividend to the Mexican Government equal to the debt service for the capitalized debt on December 1990. The minimum guaranteed dividend consists of the payment of principal and interest in the same terms and conditions as those originally agreed
upon with international creditors until the year 2006, at the exchange rates in effect as of the date payments are made. Such payments must be approved annually by the Board of Directors.

During 2005 and 2004, Petróleos Mexicanos paid Ps. 15,283,418 and Ps. 10,734,035, respectively, to the Mexican Government in advance on account of
the minimum guaranteed dividend. These payments will be applied to the final amount that the Board of Directors approves as the total annual dividend, which is usually in the following fiscal year.

The balance in favor of the Mexican Government, on December 31, 2005, was U.S$ 873,647 (Ps. 9,418,069).

On various dates during 2004, the Mexican Government transferred amounts to Petróleos Mexicanos totaling Ps. 34,099,791 in respect of the duty for
infrastructure paid by PEMEX during the year. On November 4, 2004, the Board of Directors of Petróleos Mexicanos approved the increase in equity of the Subsidiary Entities in that amount. According to the Ley de Ingresos de la
Federación (Federal Income Law), these amounts are to be utilized for infrastructure works in exploration, refining, gas and petrochemicals. Pursuant to an agency agreement (comisión mercantil) signed with Banco
Santander Serfín, S.A., as agent, PEMEX transferred cash totaling Ps. 33,725,238, which was reflected as an increase to the equity of the Subsidiary Entities.

On March 2, 2005, the Board of Directors of Petróleos Mexicanos approved the transfer by Petróleos Mexicanos to the agency agreement of Ps. 374,550 for infrastructure works, which increased
Pemex-Exploration and Productions equity. The remaining amount in the agency agreement is Ps. 1,122,091.

According to the Federal
Income Law for the fiscal year ended December 31, 2004, and to the Federal Budget of Expenses Decree for 2005, the Mexican Government transferred amounts to Petróleos Mexicanos for infrastructure that increased the Subsidiary
Entities equity as follows:



|                                                                                                                                 |  |     |            |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | --- | ---------- | -
|Aprovechamiento para Obras de Infraestructura (Infrastructure duty) (AOI), in accordance with Federal Income
Law for 2004(1) |  | Ps. | 594,987    |  
|                                                                                                                                 | 
|Aprovechamiento sobre Rendimientos Excedentes (Excess Gain Duty) (ARE), Federal Budget of Expenses Decree for
2005           |  |     | 22,067,471 |  
|                                                                                                                                 | 
|Federal Budget of Expenses Decree for 2005                                                                                       |  |     | 22,162,900 |  
|                                                                                                                                 |  |     |            |  
|                                                                                                                                 |  |     | 44,825,358 |  
|Not paid                                                                                                                         |  |     | (594,987   | )
|                                                                                                                                 |  |     |            |  
|Total                                                                                                                            |  | Ps. | 44,230,371 |  
|                                                                                                                                 |  |     |            |  

---

|(1) | Funds for Ps. 594,987 received for the AOI will be capitalized in the Subsidiary Entities in 2006.
|--- | --------------------------------------------------------------------------------------------------

Funds received for the ARE and those received in accordance with the Federal Budget of Expenses Decree were capitalized in the Subsidiary Entities and in
Petróleos Mexicanos in 2005.

As of December 31, 2005, PEMEX has negative equity; however, it has not stopped complying with
its contractual obligations.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



NOTE 16COMPREHENSIVE LOSS:

Comprehensive loss for the years ended December 31, 2005, 2004 and 2003 is as follows:



|                                                                                    |  |                |   |  |                |   |  |                |  
|----------------------------------------------------------------------------------- |  | -------------- | - |  | -------------- | - |  | -------------- | -
|                                                                                    |  | 2005           |   |  | 2004           |   |  | 2003           |  
|Net loss for the year                                                               |  | (Ps.76,282,350 | ) |  | (Ps.26,345,302 | ) |  | (Ps.44,178,998 | )
|Effect of restatement of the year, net                                              |  | 7,580,524      |   |  | (4,832,792     | ) |  | 6,125,448      |  
|(Application) increase in specific oil-field exploration and depletion reserve, net |  |               |   |  |               |   |  | (14,189,051    | )
|Other                                                                               |  | (26,591,197    | ) |  | (7,208,067     | ) |  |               |  
|                                                                                    |  |                |   |  |                |   |  |                |  
|Comprehensive loss for the year                                                     |  | (Ps.95,293,023 | ) |  | (Ps.38,386,161 | ) |  | (Ps.52,242,601 | )
|                                                                                    |  |                |   |  |                |   |  |                |  

NOTE 17SEGMENT FINANCIAL INFORMATION:

PEMEXs primary business is the exploration for and production of crude oil and natural gas and the refining and marketing of petroleum products,
conducted through four business segments: Pemex-Exploration and Production, Pemex-Refining, Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals. Management makes decisions related to the operations of the consolidated business along these
four strategic lines.

The primary sources of revenue for the segments are as described below:



| |  |  | Pemex-Exploration and Production earns revenues from domestic crude oil sales, as well as, from the export of crude oil, through PMI, to international markets. Export sales are made
through PMI to approximately 25 major customers in various foreign markets. Less than half (approximately 45%) of PEMEX crude is sold domestically; however, these amounts are in large part sufficient to satisfy Mexican domestic demand.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pemex-Refining earns revenues from sales of refined petroleum products and derivatives. Most of Refinings sales are to third parties and occur within the domestic market. The
entity supplies the Comisión Federal de Electricidad (CFE) with a significant portion of its fuel oil production. Pemex-Refinings most profitable products are the different types of gasoline.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pemex-Gas and Basic Petrochemicals earns revenues primarily from domestic sources. Pemex-Gas and Basic Petrochemicals also consumes high levels of its own natural gas production.
Most revenues for the entity are obtained through the sale of ethane and butane gas.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pemex-Petrochemicals engages in the sale of petrochemical products to the domestic market. Pemex-Petrochemicals offers a wide range of products, with the higher revenue generating
products being methane derivatives, ethane derivatives and aromatics and derivatives.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In making performance analyses for the
entities, PEMEXs management focuses on sales volumes and gross revenues as the primary indicators.

Income (loss) and identifiable
assets for each segment have been determined after intersegment adjustments. Sales between segments are made at internal transfer prices established by PEMEX which reflect international market prices.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Following is the condensed financial information of these segments:



|                              |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|----------------------------- |  | ------------------------ | ----------- | - | -------- | --- | ----------- | --------------------------- |  | --- | -------------- | - |  | ------------------------------- | ----------- | - | ------------------------ | --- | ------------- | ----- |  | --- | -------------- | - |  | --- | ------------- | -
|                              |  | ExplorationandProduction |             |   | Refining |     |             | Gas and BasicPetrochemicals |  |     | Petrochemicals |   |  | CorporateandSubsidiaryCompanies |             |   | IntersegmentEliminations |     |               | Total | 
|Year ended December 31, 2005: |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|Sales                        |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|Trade                         |  | Ps.                      |            |   |          | Ps. | 353,222,406 |                             |  | Ps. | 134,291,465    |   |  | Ps.                             | 20,216,707  |   |                          | Ps. | 420,912,398   |       |  | Ps. |               |   |  | Ps. | 928,642,976   |  
|Intersegment                  |  |                          | 716,286,862 |   |          |     | 38,260,366  |                             |  |     | 82,592,212     |   |  |                                 | 8,816,253   |   |                          |     | 122,259,517   |       |  |     | (968,215,210   | ) |  |     |              |  
|Total net sales               |  |                          | 716,286,862 |   |          |     | 391,482,772 |                             |  |     | 216,883,677    |   |  |                                 | 29,032,960  |   |                          |     | 543,171,915   |       |  |     | (968,215,210   | ) |  |     | 928,642,976   |  
|Operating income (loss)       |  |                          | 525,687,650 |   |          |     | (26,770,098 | )                           |  |     | 9,890,873      |   |  |                                 | (9,060,006  | ) |                          |     | (20,415,278   | )     |  |     | 19,421,316     |   |  |     | 498,754,457   |  
|Comprehensive financing cost  |  |                          | (8,042,610  | ) |          |     | 3,574,708   |                             |  |     | (2,407,000     | ) |  |                                 | 3,288,447   |   |                          |     | 12,175,880    |       |  |     | (4,110,097     | ) |  |     | 4,479,328     |  
|Net income (loss)             |  |                          | (18,248,376 | ) |          |     | (53,266,423 | )                           |  |     | 6,681,722      |   |  |                                 | (16,534,719 | ) |                          |     | (70,887,572   | )     |  |     | 75,973,018     |   |  |     | (76,282,350   | )
|Depreciation and amortization |  |                          | 39,502,470  |   |          |     | 8,023,845   |                             |  |     | 3,573,360      |   |  |                                 | 995,737     |   |                          |     | 695,339       |       |  |     |               |   |  |     | 52,790,751    |  
|Acquisition of fixed assets   |  |                          | 27,322,470  |   |          |     | 6,055,512   |                             |  |     | 1,793,872      |   |  |                                 | 2,326,415   |   |                          |     | 40,596,326    |       |  |     |               |   |  |     | 78,094,595    |  
|Total assets                  |  |                          | 843,574,596 |   |          |     | 296,781,530 |                             |  |     | 96,996,258     |   |  |                                 | 51,723,397  |   |                          |     | 1,504,877,998 |       |  |     | (1,751,393,904 | ) |  |     | 1,042,559,875 |  
|                              |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|Year ended December 31, 2004: |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|Sales                        |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|Trade                         |  | Ps.                      |            |   |          | Ps. | 326,675,570 |                             |  | Ps. | 119,916,880    |   |  | Ps.                             | 17,384,538  |   |                          | Ps. | 335,391,475   |       |  | Ps. |               |   |  | Ps. | 799,368,463   |  
|Intersegment                  |  |                          | 579,693,486 |   |          |     | 27,921,845  |                             |  |     | 69,426,501     |   |  |                                 | 7,611,461   |   |                          |     | 96,172,451    |       |  |     | (780,825,744   | ) |  |     |              |  
|Total net sales               |  |                          | 579,693,486 |   |          |     | 354,597,415 |                             |  |     | 189,343,381    |   |  |                                 | 24,995,999  |   |                          |     | 431,563,926   |       |  |     | (780,825,744   | ) |  |     | 799,368,463   |  
|Operating income (loss)       |  |                          | 426,167,164 |   |          |     | 41,206,810  |                             |  |     | 13,741,342     |   |  |                                 | (8,168,863  | ) |                          |     | (649,581      | )     |  |     | (1,925,083     | ) |  |     | 470,371,789   |  
|Comprehensive financing cost  |  |                          | 7,842,819   |   |          |     | 5,473,295   |                             |  |     | (162,081       | ) |  |                                 | 1,393,069   |   |                          |     | 3,344,345     |       |  |     | (10,608,400    | ) |  |     | 7,283,047     |  
|Net income (loss)             |  |                          | (14,125,507 | ) |          |     | (22,795,672 | )                           |  |     | 12,040,606     |   |  |                                 | (12,725,525 | ) |                          |     | (22,754,270   | )     |  |     | 34,015,066     |   |  |     | (26,345,302   | )
|Depreciation and amortization |  |                          | 29,865,992  |   |          |     | 7,750,718   |                             |  |     | 3,514,142      |   |  |                                 | 1,332,077   |   |                          |     | 833,552       |       |  |     |               |   |  |     | 43,296,481    |  
|Acquisition of fixed assets   |  |                          | 69,077,201  |   |          |     | 4,808,231   |                             |  |     | 1,690,885      |   |  |                                 | 1,645,756   |   |                          |     | 342,000       |       |  |     |               |   |  |     | 77,564,073    |  
|Total assets                  |  |                          | 751,292,856 |   |          |     | 283,849,068 |                             |  |     | 107,654,194    |   |  |                                 | 89,311,307  |   |                          |     | 1,064,099,594 |       |  |     | (1,317,101,438 | ) |  |     | 979,105,581   |  
|                              |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|Year ended December 31, 2003: |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|Sales                        |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  
|Trade                         |  | Ps.                      |            |   |          | Ps. | 309,534,588 |                             |  | Ps. | 99,522,640     |   |  | Ps.                             | 11,855,353  |   |                          | Ps. | 258,906,437   |       |  | Ps. |               |   |  | Ps. | 679,819,018   |  
|Intersegment                  |  |                          | 463,735,986 |   |          |     | 25,478,801  |                             |  |     | 55,223,506     |   |  |                                 | 6,587,592   |   |                          |     | 72,190,733    |       |  |     | (623,216,618   | ) |  |     |              |  
|Total net sales               |  |                          | 463,735,986 |   |          |     | 335,013,389 |                             |  |     | 154,746,146    |   |  |                                 | 18,442,945  |   |                          |     | 331,097,170   |       |  |     | (623,216,618   | ) |  |     | 679,819,018   |  
|Operating income (loss)       |  |                          | 330,641,698 |   |          |     | 77,448,345  |                             |  |     | 4,315,934      |   |  |                                 | (10,637,472 | ) |                          |     | (22,076,414   | )     |  |     | 19,840,088     |   |  |     | 399,532,179   |  
|Comprehensive financing cost  |  |                          | 23,133,311  |   |          |     | 13,363,208  |                             |  |     | (719,452       | ) |  |                                 | 1,118,276   |   |                          |     | 12,198,284    |       |  |     | (15,677,700    | ) |  |     | 33,415,927    |  
|Net income (loss)             |  |                          | 1,219,825   |   |          |     | (39,368,450 | )                           |  |     | 8,351,781      |   |  |                                 | (15,890,827 | ) |                          |     | (40,297,239   | )     |  |     | 41,805,912     |   |  |     | (44,178,998   | )
|Depreciation and amortization |  |                          | 30,149,783  |   |          |     | 8,276,742   |                             |  |     | 3,630,639      |   |  |                                 | 1,091,913   |   |                          |     | 921,037       |       |  |     |               |   |  |     | 44,070,114    |  
|Acquisition of fixed assets   |  |                          | 53,322,244  |   |          |     | 14,252,231  |                             |  |     | 3,840,131      |   |  |                                 | 1,767,844   |   |                          |     | 583,457       |       |  |     |               |   |  |     | 73,765,907    |  
|Total assets                  |  |                          | 640,256,509 |   |          |     | 223,574,767 |                             |  |     | 91,913,694     |   |  |                                 | 64,662,197  |   |                          |     | 877,972,914   |       |  |     | (979,381,873   | ) |  |     | 918,998,208   |  
|                              |  |                          |             |   |          |     |             |                             |  |     |                |   |  |                                 |             |   |                          |     |               |       |  |     |                |   |  |     |               |  



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



NOTE 18NEW FISCAL REGIME:

The Mexican Congress approved a new fiscal regime for Petróleos Mexicanos and its Subsidiary Entities, effective January 1, 2006. The new fiscal regime contemplates a gradual transition over four years
from the prior fiscal regime to a less onerous regime under which PEMEX will be able to operate as an efficient oil and gas company and deduct costs of oil and gas exploration from the payment of taxes, which will have the effect of promoting
greater exploration and production activities.

PEMEX believes that the new fiscal regime will contribute to an improvement of its
financial position since the debt incurred for financing investment projects will decrease at a similar level as the savings in taxes between the new and old regime.

The new fiscal regime consists of the following taxes:

The Ordinary Hydrocarbons Duty is applied to the
annual value of extracted production of crude oil and natural gas minus certain permitted deductions; for the first four years, the rate will depend upon the observed price and the year. After this transition period, the applicable rate will be 79%.

The Extraordinary Duty on Crude Oil Exports applies a rate of 13.1% to the price differential between the annual weighted average price of
the Mexican barrel of crude oil and the price established by the Income Law multiplied by the exported volume. This duty is to be deducted from the Hydrocarbon Duty for the Oil Revenues Stabilization Fund. The proceeds from this duty will be
destined to the states through the Oil Revenues Stabilization Fund.

In addition, with the new tax regime Petróleos Mexicanos and
the industrial Subsidiary Entities (Pemex Refining, Pemex-Gas and Basic Petrochemicals and Pemex Petrochemicals) will pay the Hydrocarbon Income Tax on the difference between revenues, costs and expenses. This tax treatment is equivalent to the
regular income tax applied to all Mexican Corporations.

As a result of the new fiscal regime to be effective as of January 1, 2006,
PEMEX will generate deferred taxes.

NOTE 19NEW ACCOUNTING PRONOUNCEMENTS:

As of May 31, 2004, MIPA formally transferred the function of establishing and issuing financial reporting standards to the Mexican Board for
Research and Development of Financial Reporting Standards, or CINIF, consistent with the international trend of requiring this function be performed by an independent entity.

Accordingly, MIPAs task of issuing bulletins and circulars of Mexican GAAP was transferred to CINIF, which subsequently renamed standards of
Mexican GAAP as Normas de Información Financiera (Financial Reporting Standards, or NIFs), and determined that NIFs encompass (1) new bulletins established under the new function; (2) any interpretations issued
thereof; (3) any Mexican GAAP bulletins that have not been amended, replaced or revoked by the new NIFs; and (4) International Financial Reporting Standards, or IFRS, that are supplementary guidance to be used when Mexican GAAP does not
provide primary guidance.

One of the main objectives of CINIF is to attain greater concurrence with IFRS. To this end, it started by
reviewing the theoretical concepts contained in Mexican GAAP and establishing a Conceptual Framework to



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



support the development of financial reporting standards and to serve as a reference in solving issues arising in the accounting practice. The Conceptual
Framework is formed by eight financial reporting standards, which comprise the NIF-A series. The NIF-A series, together with NIF B-1, were issued on October 31, 2005. Their provisions are effective for years beginning January 1, 2006,
superseding all existing Mexican GAAP series A bulletins.

The most significant changes established by these standards are as follows:



| |  |  | In addition to the statement of changes in financial position, NIF A-3 includes the statement of cash flows, which should be issued when required by a particular standard.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | NIF A-5 includes a new classification for revenues and expenses: ordinary and extraordinary. Ordinary revenues and expenses are derived from transactions or events that are within
the normal course of business or that are inherent in the entitys activities, whether frequent or not; extraordinary revenues and expenses refer to unusual transactions and events, whether frequent or not.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | NIF A-7 requires the presentation of comparative financial statements for at least with the preceding period. Through December 31, 2004, the presentation of prior years
financial statements was optional. The financial statements must disclose the authorized date for their issuance, and the names of the officers or administrative bodies authorizing the related issuance.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | NIF B-1 establishes that changes in particular standards, reclassifications and correction of errors must be recognized retroactively. Consequently, basic financial statements
presented on a comparative basis with the current year that might be affected by the change, must be adjusted as of the beginning of the earliest period presented.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At the date of issuance of these financial statements, we have not fully assessed the effects of adopting these new standards on its financial
information.

NOTE 20DIFFERENCES BETWEEN MEXICAN GAAP AND U.S. GAAP

PEMEXs consolidated financial statements are prepared in accordance with Mexican GAAP, which differs in certain significant respects from accounting
principles generally accepted in the United States (U.S. GAAP). In accordance with Bulletin B-10, as discussed in Note 2b. to the financial statements, all of the related U.S. GAAP adjustments have also been restated to reflect the
effects of inflation. The application of B-10 represents a comprehensive measure of the effects of price level changes and is considered to result in a more meaningful presentation than historical cost-based financial reporting in an environment
such as Mexico. None of the adjustments to the financial statements for the effects of inflation required under Mexican GAAP have been eliminated in the U.S. GAAP reconciliation.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The differences between Mexican GAAP and U.S. GAAP, as they relate to PEMEX, are presented below
together with explanations of certain adjustments that affect net income and shareholders equity as of and for the years ended December 31:

I.    Differences in measurement methods:

As discussed in Note 18, during 2005, a new fiscal
regime, which is applicable only for PEMEX and its subsidiary entities, was enacted. The new fiscal regime becomes effective January 1, 2006 and PEMEX, therefore began recognizing the impact of deferred taxes in 2005. As such, the 2005 U.S.
GAAP adjustments include the impact of the adjustments on deferred taxes relating to this new regime. For the years ended December 2004 and 2003, the loss represents pre-tax loss under the previous tax regime. Loss for the years ended in
December 31, is reconciled as follows:



|                                                                        |  |                 |   |  |                 |   |  |                 |  
|----------------------------------------------------------------------- |  | --------------- | - |  | --------------- | - |  | --------------- | -
|                                                                        |  | 2005            |   |  | 2004            |   |  | 2003            |  
|Net loss for the year under Mexican GAAP                                |  | (Ps. 76,282,350 | ) |  | (Ps. 26,345,302 | ) |  | (Ps. 44,178,998 | )
|                                                                        |  |                 |   |  |                 |   |  |                 |  
|U.S. GAAP adjustments:                                                  |  |                 |   |  |                 |   |  |                 |  
|Exploration and drilling costs, net (a)                                 |  | (1,435,487      | ) |  | (1,466,765      | ) |  | (20,960,667     | )
|Pensions and seniority premiums (b)                                     |  | 937,767         |   |  | 773,071         |   |  | 604,413         |  
|Post-retirement benefits (c)                                            |  | 3,126,227       |   |  | (2,746,990      | ) |  | (9,395,443      | )
|Accrued vacation (d)                                                    |  | (15,480         | ) |  | 131,112         |   |  | (28,127         | )
|Fixed asset adjustments:                                                |  |                 |   |  |                 |   |  |                 |  
|Capitalized gains (losses) of derivative financial instruments, net (e) |  | (7,822,926      | ) |  | 855,385         |   |  | (469,370        | )
|Capitalization of interest, net (f)                                     |  | 1,786,021       |   |  | 2,014,849       |   |  | 1,869,606       |  
|Impairment, net (g)                                                     |  | 5,786,140       |   |  | 9,462,828       |   |  | (2,847,460      | )
|Depreciation convention (h)                                             |  | 725,371         |   |  | 725,371         |   |  | 725,371         |  
|Derivative financial instruments (i)                                    |  | 954,824         |   |  | 5,977,780       |   |  | 2,256,287       |  
|Sales of shares of Repsol (j)                                           |  |                |   |  | 698,833         |   |  | (604,741        | )
|Profit in inventory (k)                                                 |  | (2,571,322      | ) |  | 1,073,994       |   |  | (112,958        | )
|Available-for-sale investment securities (m)                            |  | (768,936        | ) |  | (5,196,749      | ) |  |                |  
|Effects of inflation accounting on U.S. GAAP adjustments (o)            |  | 191,618         |   |  | 597,777         |   |  | 1,066,106       |  
|Deferred taxes (p)                                                      |  | 410,012         |   |  |                |   |  |                |  
|Reclassification of Pemex Finance net income to minority interest (q)   |  | 1,073,715       |   |  |                |   |  |                |  
|                                                                        |  |                 |   |  |                 |   |  |                 |  
|Total U.S. GAAP adjustments, net                                        |  | 2,377,544       |   |  | 12,900,496      |   |  | (27,896,983     | )
|                                                                        |  |                 |   |  |                 |   |  |                 |  
|Net loss for the year under U.S. GAAP                                   |  | (Ps. 73,904,806 | ) |  | (Ps. 13,444,806 | ) |  | (Ps. 72,075,981 | )
|                                                                        |  |                 |   |  |                 |   |  |                 |  
|Components of U.S. GAAP net loss:                                       |  |                 |   |  |                 |   |  |                 |  
|Loss from continuing operations                                         |  | (Ps. 73,904,806 | ) |  | (Ps. 13,444,806 | ) |  | (Ps. 74,263,804 | )
|Cumulative effect of adoption of new accounting standard (n)            |  |                |   |  |                |   |  | 2,187,823       |  
|                                                                        |  |                 |   |  |                 |   |  |                 |  
|Net loss for the year                                                   |  | (Ps. 73,904,806 | ) |  | (Ps. 13,444,806 | ) |  | (Ps. 72,075,981 | )
|                                                                        |  |                 |   |  |                 |   |  |                 |  
|Comprehensive loss under U.S. GAAP:                                     |  |                 |   |  |                 |   |  |                 |  
|Net loss for the year under U.S. GAAP                                   |  | (Ps. 73,904,806 | ) |  | (13,444,806     | ) |  | (72,075,981     | )
|Other comprehensive income (loss):                                      |  |                 |   |  |                 |   |  |                 |  
|Additional minimum pension liability (b)                                |  | (18,239,810     | ) |  | (2,682,023      | ) |  |                |  
|Derivative financial instruments (i)                                    |  | (4,567,056      | ) |  | (7,826,598      | ) |  | 5,459,641       |  
|Unrealized gains on available-for-sale investment securities (m)        |  | 768,936         |   |  | 3,830,084       |   |  | 4,929,451       |  
|(Deficit) surplus in restatement of equity                              |  | 5,160,524       |   |  | (4,832,794      | ) |  | 6,125,447       |  
|                                                                        |  |                 |   |  |                 |   |  |                 |  
|Comprehensive loss                                                      |  | (Ps. 90,782,212 | ) |  | (Ps. 24,956,137 | ) |  | (Ps. 55,561,442 | )
|                                                                        |  |                 |   |  |                 |   |  |                 |  



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



|                                                                     |  |      |             |   |      |      |             |  
|-------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | ---- | ----------- | -
|                                                                     |  | 2005 |             |   | 2004 |     
|Components of accumulated other comprehensive income at December 31: |  |      |             |   |      |      |             |  
|Derivative financial instruments (i)                                 |  | (Ps. | 6,517,352   | ) |      | (Ps. | 1,950,296   | )
|Additional minimum pension liability (b)                             |  |      | (20,921,832 | ) |      |      | (2,682,023  | )
|Unrealized gains on available-for-sale investment securities (m)     |  |      | 9,232,349   |   |      |      | 8,463,413   |  
|Surplus in restatement of equity                                     |  |      | 141,913,098 |   |      |      | 136,752,573 |  
|                                                                     |  |      |             |   |      |      |             |  
|Accumulated other comprehensive income                               |  | Ps.  | 123,706,263 |   |      | Ps.  | 140,583,667 |  
|                                                                     |  |      |             |   |      |      |             |  
|                                                                     |  |      |             |   |      |      |             |  



|                                                                     |  |      |             |   |      |      |             |  
|-------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | ---- | ----------- | -
|                                                                     |  | 2005 |             |   | 2004 |     
|Equity is reconciled as follows:                                     |  |      |             |   |      |      |             |  
|Equity (deficit) under Mexican GAAP                                  |  | (Ps. | 26,869,731  | ) |      | Ps.  | 34,454,137  |  
|                                                                     |  |      |             |   |      |      |             |  
|U.S. GAAP adjustments:                                               |  |      |             |   |      |      |             |  
|Exploration and drilling costs (a)                                   |  |      | 14,252,898  |   |      |      | 15,688,385  |  
|Pensions and seniority premiums:                                     |  |      |             |   |      |      |             |  
|Pensions and seniority premiums (b)                                  |  |      | (9,091,032  | ) |      |      | (10,028,799 | )
|Additional minimum pension liability (b)                             |  |      | 6,360,080   |   |      |      | 4,526,045   |  
|Post-retirement benefits (c)                                         |  |      | (40,064,463 | ) |      |      | (43,190,690 | )
|Accrued vacation (d)                                                 |  |      | (549,093    | ) |      |      | (551,398    | )
|Fixed asset adjustments:                                             |  |      |             |   |      |      |             |  
|Capitalized gains (losses) of hedging financial instruments, net (e) |  |      | (803,151    | ) |      |      | 7,019,775   |  
|Capitalization of interest, net (f)                                  |  |      | (10,269,066 | ) |      |      | (12,055,087 | )
|Impairment, net (g)                                                  |  |      | (31,387,426 | ) |      |      | (37,173,566 | )
|Depreciation convention (h)                                          |  |      | (1,450,739  | ) |      |      | (2,176,110  | )
|Derivative financial instruments (i)                                 |  |      | 7,479,330   |   |      |      | 4,574,210   |  
|Profit in inventory (k)                                              |  |      | (3,408,466  | ) |      |      | (837,144    | )
|Advanced payments on minimum guaranteed dividend (l)                 |  |      | (15,283,418 | ) |      |      | (10,734,035 | )
|Deferred taxes (p)                                                   |  |      | 410,012     |   |      |      |            |  
|Reclassification of Pemex Finance equity to minority interest (q)    |  |      | (1,346,286  | ) |      |      |            |  
|                                                                     |  |      |             |   |      |      |             |  
|Total U.S. GAAP adjustments, net                                     |  |      | (85,150,820 | ) |      |      | (84,938,414 | )
|                                                                     |  |      |             |   |      |      |             |  
|(Deficit) under U.S. GAAP                                            |  | (Ps. | 112,020,551 | ) |      | (Ps. | 50,484,277  | )
|                                                                     |  |      |             |   |      |      |             |  



|                                                             |  |      |             |   |      |      |             |  
|------------------------------------------------------------ |  | ---- | ----------- | - | ---- | ---- | ----------- | -
|                                                             |  | 2005 |             |   | 2004 |     
|Changes in U.S. GAAP equity for the year ended December 31:  |  |      |             |   |      |      |             |  
|(Deficit) at January 1                                       |  |      | (50,484,277 | ) |      |      | (48,282,856 | )
|Net loss for the period                                      |  | (Ps. | 73,904,806  | ) |      | (Ps. | 13,444,806  | )
|Mexican Government increase in equity of Subsidiary Entities |  |      | 44,604,921  |   |      |      | 33,725,241  |  
|Minimum guaranteed dividends                                 |  |      | (15,358,983 | ) |      |      | (10,970,525 | )
|Other comprehensive income:                                  |  |      |             |   |      |      |             |  
|Additional minimum pension liability (b)                     |  |      | (18,239,810 | ) |      |      | (2,682,023  | )
|Derivative financial instruments                             |  |      | (4,567,056  | ) |      |      | (7,826,598  | )
|Unrealized gains on available-for-sale investment securities |  |      | 768,936     |   |      |      | 3,830,084   |  
|(Deficit) surplus in restatement of equity                   |  |      | 5,160,524   |   |      |      | (4,832,794  | )
|                                                             |  |      |             |   |      |      |             |  
|(Deficit) equity at December 31                              |  | (Ps. | 112,020,551 | ) |      | (Ps. | 50,484,277  | )
|                                                             |  |      |             |   |      |      |             |  



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Explanation of reconciling items:

(a)    Exploration and drilling costs

As discussed in Note 2e., effective
January 1, 2004, for Mexican GAAP purposes, PEMEX approved a change in the accounting policy for the recognition of well exploration and drilling costs to the successful-efforts method of accounting.

Through December 31, 2003, under Mexican GAAP, a specific equity account reserve was established to cover current and future exploration and
drilling costs. As oil and gas was extracted from existing wells, the equity reserve was increased, and an amount equal to the increase was charged to cost of sales based upon a calculated quota of exploration and drilling cost per barrel.
Accumulated drilling costs pertaining to successful wells were reclassified from that reserve and charged as an investment in fixed assets.

Under U.S. GAAP, costs of drilling exploratory wells and exploratory-type stratigraphic test wells are initially capitalized and are later charged to expenses if proved reserves are not discovered. Such capitalized costs are amortized on a
UOP basis over proved developed reserves. Development costs, including the costs of drilling development wells and development-type stratigraphic test wells, are capitalized. The capitalized costs of wells and related equipment are amortized on a
UOP basis over proved developed reserves, as the related oil and gas reserves are extracted. Therefore, through December 31, 2003, PEMEX adjusted the results of operations and equity to reflect the impact of U.S. GAAP on exploration and
drilling costs; i.e., the Mexican GAAP operations charge related to the cost per barrel has been reversed, the equity account related to the specific oil field exploration and drilling reserve has been reversed to zero, and costs related to
properties in the exploration and development phase have been capitalized in accordance with U.S. GAAP. No such adjustment was required for the years ended December 31, 2004 and December 31, 2005 due to the adoption of the successful
efforts method of accounting for Mexican GAAP purposes.

At December 31, 2005, the U.S. GAAP equity adjustment represents the
cumulative costs of capitalized unsuccessful wells on proven areas under U.S. GAAP, not capitalized under Mexican GAAP through December 31, 2003, net of the amortization of such capitalized amounts. The 2005 and 2004 U.S. GAAP net income
adjustment reflects the amortization of such capitalized costs on a UOP basis.

In April 2005, the Financial Accounting Standards Board
(FASB) issued a FASB Staff Position No. FAS 19-1 Accounting for Suspended Well Costs (FSP 19-1). FSP 19-1 addresses the circumstances that would permit the continued capitalization of exploratory well costs beyond
one year, other than when additional exploration wells are necessary to justify major capital expenditures and those wells are under way or firmly planned for the near future. Under the provision of FSP 19-1, exploration costs would continue to be
capitalized after the completion of drilling when (a) the well has found a sufficient quantity of reserves to justify completion as a producing well and (b) the enterprise is making sufficient progress assessing the reserves and the
economic and operating viability of the project. If either condition is not met or if an enterprise obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well would be assumed
to be impaired, and its costs, net of any salvage value, would be charged to expenses. FSP 19-1 provides a number of indicators that need to be present to demonstrate sufficient progress has been made in assessing the reserves and the economic
viability of the project.

PEMEXs policy is to determine whether or not exploratory well costs are capitalized or expensed shortly
after completion of drilling. As such, PEMEX does not have significant suspended well costs for the three years



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



ended December 31, 2005. No capitalized exploratory well costs were charged to expense upon the adoption of FSP 19-1.

(b)    Pensions and seniority premiums

Under Mexican GAAP, PEMEX follows the guidance in Bulletin D-3, which establishes the procedures for measuring the expenses and liabilities for pension plans, seniority premiums and severance payments. The primary differences between
PEMEXs application of Bulletin D-3 and the U.S. GAAP guidance provided in Statement of Financial Accounting Standards (SFAS) No. 87, Employer Accounting for Pensions (SFAS No. 87), are the
implementation dates.

In accordance with Bulletin D-3 and SFAS No. 87, PEMEX recognizes an additional minimum pension liability,
which under SFAS No. 87 is equal to the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liabilities (see Note 1 and Note 20 IIe.).

(c)    Post-retirement benefits

As described in Note 12, under Mexican GAAP, through December 31, 2003, PEMEX accounted for health service benefits on a pay-as-you-go basis. Effective January 1, 2004, PEMEX adopted the amendments to Bulletin D-3 that set forth
additional valuation and disclosure requirements for the recognition of post-retirement obligations.

Under U.S. GAAP, PEMEX follows the
guidelines of SFAS No. 106, Employers Accounting for Post-Retirement Benefits Other Than Pensions, (SFAS No. 106) in accounting for health service and other supplemental payments provided to retirees and other
eligible family members. SFAS No. 106 requires the accrual of the expected cost of providing such benefits during the years that the employees render service.

After giving effect to the amendments to Bulletin D-3 on PEMEXs Mexican GAAP financial statements in 2004, the U.S. GAAP adjustment represents the difference of the unrecognized prior service costs and
transition obligation amounts under Mexican GAAP and U.S. GAAP due to the different adoption dates of the applicable Mexican and U.S. GAAP standards.

(d)    Accrued vacation

Under Mexican GAAP, vacation expense is recognized when the vacation is
utilized by the employee. Under U.S. GAAP, vacation expense is accrued based on when it is earned by the employee.

(e)    Fixed
assetsCapitalized gains and losses of derivative financial instruments

Under Mexican GAAP, certain realized gains and losses
arising from derivative financial instruments designated as cash flow hedges and from derivative financial instruments not designated as hedges are capitalized as part of capitalized interest. In addition, as further discussed in Note 20i., certain
embedded foreign currency contracts are not bifurcated for Mexican GAAP purposes, whereas such contracts are bifurcated for U.S. GAAP purposes, thereby creating a basis difference in fixed assets. Under U.S. GAAP, realized gains and losses arising
from financial instruments designated as cash flow hedges and not designated as hedges cannot be capitalized as part of the qualifying assets, but are recognized into earnings immediately. For the years ended December 31, 2005, 2004 and 2003,
under Mexican GAAP, PEMEX capitalized a gain (loss) of Ps. (7,521,695), Ps. 1,111,109 and Ps. (199,689), respectively, arising from hedging instruments.

The 2005, 2004 and 2003, net income adjustments include a reversal of depreciation of Ps. (301,231), Ps. (255,724) and Ps. (269,681), respectively, related to amounts previously capitalized.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



(f)    Fixed assetsCapitalization of interest

Under Mexican GAAP, interest is capitalized to property, plant and equipment based upon total interest cost incurred on loans allocated to construction
projects, regardless of whether or not the amounts borrowed have been spent on such projects.

Under U.S. GAAP, interest is capitalized by
applying an average interest rate to the construction-in-progress balance without exceeding total interest expense. PEMEX has accordingly adjusted its results of operations and equity to reflect the U.S. GAAP requirements for capitalizing interest.
The net income adjustment for capitalized interest presented herein also includes the reversal of depreciation of Ps. 1,062,654, Ps. 1,096,942, and Ps. 1,120,416 for the years ended December 31, 2005, 2004 and 2003, respectively,
related to the cumulative difference in amounts previously capitalized for such assets.

Interest costs for the years ended
December 31, 2005, 2004 and 2003, for Mexican GAAP and U.S. GAAP purposes were allocated as follows:



|                                                                     |  |      |            |      |     |            |  |     |           
|-------------------------------------------------------------------- |  | ---- | ---------- | ---- | --- | ---------- |  | --- | ----------
|                                                                     |  | 2005 |            | 2004 |     | 2003      
|Under Mexican GAAP:                                                  |  |      |            |      |     |            |  |     |           
|Interest capitalized                                                 |  | Ps.  | 5,132,219  |      | Ps. | 4,484,570  |  | Ps. | 7,876,482 
|Interest in the specific oil field exploration and depletion reserve |  |      |           |      |     |           |  |     | 20,697    
|Interest expense                                                     |  |      | 52,930,496 |      |     | 32,823,197 |  |     | 25,529,698
|                                                                     |  |      |            |      |     |            |  |     |           
|Total interest cost                                                  |  | Ps.  | 58,062,715 |      | Ps. | 37,307,767 |  | Ps. | 33,426,877
|                                                                     |  |      |            |      |     |            |  |     |           
|Under U.S. GAAP:                                                     |  |      |            |      |     |            |  |     |           
|Interest capitalized                                                 |  | Ps.  | 5,855,586  |      | Ps. | 5,402,477  |  | Ps. | 8,646,369 
|Interest expense                                                     |  |      | 52,207,129 |      |     | 31,905,290 |  |     | 24,780,508
|                                                                     |  |      |            |      |     |            |  |     |           
|Total interest cost                                                  |  | Ps.  | 58,062,715 |      | Ps. | 37,307,767 |  | Ps. | 33,426,877
|                                                                     |  |      |            |      |     |            |  |     |           

(g)    Fixed assetsImpairment

For Mexican GAAP purposes, as described in Note 2i., effective January 1, 2004, PEMEX adopted Bulletin C-15, under which it evaluates the impairment
of long-lived assets whenever there are events or circumstances indicating that the book value of a given asset may not be recoverable.

For each of the cash-generating units, if the book value of the long-lived assets exceeds the estimated future value (discounted) of cash flows recoverable by such long-lived assets, a charge is made to income for the period for an
impairment loss. PEMEX performs this calculation at least annually and, in accordance with Bulletin C-15, the impairment recorded can be reversed in subsequent periods if the subsequent impairment analysis does not indicate a loss in such future
periods. In 2004, under Mexican GAAP, PEMEX recognized an impairment of Ps. 1,487,842 relating to Pemex-Exploration and Production assets. As the impairment had already been recognized for U.S. GAAP purposes, this impairment was reversed. In 2005,
this impairment was reversed under Mexican GAAP. U.S. GAAP does not permit the reversal of impairments recognized. Therefore, the U.S. GAAP adjustment in 2005 includes a reversal of this adjustment.

In determining the estimated future cash flows for impairment purposes for all periods presented, hydrocarbon duties based on sales to third parties have
not been included in the net cash flow calculation.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Management believes that the hydrocarbon duties paid are similar in nature to income taxes or dividend distributions payable to its parent, and therefore are
properly excluded from the net cash flow calculation.

Through December 31, 2003, under Mexican GAAP, PEMEX evaluated the recovery of
its long-lived assets utilizing the value-in-use criteria of Bulletin B-10.

For U.S. GAAP purposes, an evaluation of
impairment is undertaken whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable, as is the case under Mexican GAAP. However, under U.S. GAAP, the impairment criteria are met when the carrying value of
assets exceeds the sum of expected future cash flows (undiscounted and without financing charges) of the related assets. The asset is written down to fair value as determined by using the present value of expected future cash flows. PEMEX measures
impairment of its oil and gas producing assets based on the undiscounted estimated future cash flows associated with estimated proved reserves on a field-by-field basis.

In 2005, under U.S. GAAP, PEMEX did not record an impairment charge. However, PEMEX recognized an impairment charge under Mexican GAAP of Ps. 3,444,798 relating to Pemex-Petrochemicals assets. As these assets had
already been impaired under U.S. GAAP, this impairment has been reversed for U.S. GAAP purposes. The 2005 U.S. GAAP net income reconciliation also includes a credit of Ps. 3,829,184 for depreciation due to the difference in carrying values of
long-lived assets between Mexican GAAP and U.S. GAAP for the cumulative impairment charge differences and a reversal of the credit under Mexican GAAP in respect of the reversal of Ps. 1,487,842 in impairment charges relating to Pemex-Exploration and
Production assets discussed above.

In 2004, under U.S. GAAP, PEMEX did not record any impairment charge. The 2004 U.S. GAAP net income
reconciliation includes a credit of Ps. 5,663,593 for depreciation due to the difference in carrying values of long-lived assets between Mexican GAAP and U.S. GAAP for the cumulative impairment charge differences, as well as the reversal of the
2004 impairment charge of Ps. 3,799,235 recorded under Mexican GAAP primarily related to petrochemical plants and certain oil and gas producing wells which were previously impaired under U.S. GAAP in prior years.

In 2003, under U.S. GAAP, PEMEX recorded an impairment charge of Ps. 5,077,018, which reflects an adjustment relating to certain oil and gas
producing fields as well as certain refining assets. The 2003 U.S. GAAP net income reconciliation also includes a credit of Ps. 2,229,558 for depreciation due to the difference in carrying values of long-lived assets between Mexican GAAP and
U.S. GAAP for the cumulative impairment charge differences and the reversal of write-off charges recorded under Mexican GAAP for assets previously impaired under U.S. GAAP, primarily in petrochemical plants.

(h)    Fixed assetsDepreciation convention

Until 2002, under Mexican GAAP, PEMEX would begin to depreciate assets the year after which they were placed in service. For U.S. GAAP purposes, assets were depreciated from the date placed in service. Beginning in
2003, PEMEX prospectively changed its accounting under Mexican GAAP to require depreciation from the month after the asset was placed into service, therefore eliminating any new differences between Mexican GAAP and U.S. GAAP for assets placed in
service in 2003 and later years. Nevertheless, the 2005, 2004 and 2003 U.S. GAAP adjustments reflect a credit to income of Ps. 725,371 for the reversal of the depreciation expense previously recorded under U.S. GAAP.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



(i)    Accounting for derivative financial instruments

For U.S. GAAP purposes, PEMEX applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS
No. 133), which requires that all derivative instruments (including certain derivative instruments embedded in other contracts) should be recognized in the balance sheet as assets or liabilities at their fair values and that changes to
fair values be recognized immediately in earnings, unless the derivative qualifies as a hedge (as defined in SFAS No. 133), for which certain special accounting treatment is permitted.

In accordance with U.S. GAAP, hedge effectiveness is assessed consistently with the method and risk management strategy documented for each hedging
relationship. PEMEX assesses the effectiveness of each hedging relationship retrospectively and prospectively to ensure that hedge accounting was appropriate for the prior period and continues to be appropriate for future periods. PEMEX
considers hedge accounting to be appropriate if the assessment of hedge effectiveness indicates that the change in fair value of the designated hedging instrument is highly effective at offsetting the change in fair value due to the hedged risk of
the hedged item or transaction.

If a derivative instrument qualifies as a fair value hedge, the change in the fair value of the derivative
and the change in the fair value of the hedged item that is due to the hedged risks is recorded in earnings based on the income classification of the item being hedged. These hedges also adjust the book values of the derivatives and hedged
item. If a derivative instrument qualifies as a cash flow hedge, the effective portion of the hedging instruments gain or loss is reported in stockholders equity (as a component of accumulated other comprehensive income) and is
reclassified into earnings in the period during which the transaction being hedged affects earnings. Gains or losses reclassified from stockholders equity to earnings are classified in accordance with the earnings treatment of the hedged
transaction. The ineffective portion of a hedging derivatives fair value change, where that derivative is used in a cash flow hedge, is recorded in current earnings. Classification in the statement of operations of the ineffective
portion of the hedging instruments gain or loss is based on the income statement classification of the transaction being hedged. If a derivative instrument does not qualify as a hedge under the applicable guidance, the change in the fair
value of the derivative is immediately recognized in the statement of operations.

PEMEX has entered into contracts for the purchase and/or
sale of oil and gas. While some of these contracts meet the definition of a derivative under SFAS No. 133, PEMEX has determined that the normal purchase or normal sale exception applies to such contracts. Accordingly, such contracts are not
accounted for as derivatives pursuant to SFAS No. 133.

PEMEX also evaluates contracts for embedded derivatives, and
considers whether any embedded derivatives have to be bifurcated, or separated, from the host contracts in accordance with SFAS No. 133 requirements. Embedded derivatives may have terms that are not clearly and closely related to the terms
of the host contract in which they are included. If embedded derivatives exist and are not clearly and closely related to the host contract, they are accounted for separately from the host contract as derivatives, with changes in their fair
value recorded in current earnings, to the extent that the hybrid instrument is not already accounted at fair value.

When hedge accounting
is discontinued due to PEMEXs determination that the derivative no longer qualifies as an effective fair value hedge, PEMEX will continue to carry the derivative on the balance sheet at its



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



fair value. The related hedged asset or liability will cease to be adjusted for changes in fair value that are due to the previously hedged
risk. When PEMEX discontinues hedge accounting in a cash flow hedge because it is no longer probable that the forecasted transaction will occur in the originally expected period, the gain or loss on the derivative remains in accumulated other
comprehensive income and is reclassified into earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an
additional two-month period of time thereafter, the gains and losses that were accumulated in other comprehensive income will be recognized in current earnings. If a derivative instrument ceases to meet the criteria for hedge accounting, any
subsequent gains and losses are recognized in current earnings.

An adjustment of the carrying amount of a hedged asset held for sale will
remain part of the carrying amount of that asset until the asset is sold, at which point the entire carrying amount of the hedged asset would be recognized as the cost of the item sold in determining earnings. An adjustment of the carrying amount of
a hedged interest-bearing financial instrument will be amortized to earnings; amortization will begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

For Mexican GAAP purposes, effective January 1, 2005, PEMEX adopted the provisions of Bulletin C-10, Derivative Financial Instruments and Hedging
Operations, issued by the MIPA, which provisions are more similar to those of SFAS 133, as it provides an expanded guidance for the recognition, valuation, accounting treatment and disclosures applicable to derivative financial instruments
designated as hedges and embedded derivatives, included hedge documentation and effectiveness testing therein.

Similar to the provisions
of U.S. GAAP, contracts need to be evaluated for embedded derivatives with such derivatives needing to be bifurcated from the host contracts under certain conditions. Nevertheless, unlike U.S. GAAP, whereby foreign currency embedded derivatives are
bifurcated from host contracts when such contracts are not in the functional currency of either one of the counterparties, for Mexican GAAP, it does not require that such embedded derivatives be bifurcated if the contract containing the embedded
derivative does not obligate the counterparties to full payments of the generated future obligations derived from differences in currencies. Therefore, at December 31, 2005, differences continue to exist between Mexican GAAP and U.S. GAAP as they
relate to certain foreign currency embedded derivates.

The principal differences between derivative accounting under Mexican GAAP and U.S.
GAAP through December 31, 2004 relate to the following:



| | i) | As disclosed in Note 10, PEMEX has entered into cross currency swaps under which it swaps principal and interest payments on non-U.S. dollar-denominated obligations for U.S. dollar
amounts. This limits PEMEXs exposure to fluctuations in these currencies as they relate to the U.S. dollar. Under U.S. GAAP, foreign currency hedges can only be designated as such when hedging the risk to the entitys functional
currency, and therefore, contracts entered into by PEMEX entities whose functional currency is not U.S. dollars do not qualify for hedge accounting under U.S. GAAP although they did under Mexican GAAP Bulletin C-2, which had no similar requirement
that foreign currency hedge transactions be carried out in the entitys functional currency.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii) | Given the need for specialized technology, PEMEX enters into infrastructure and supply contracts whose settlement terms are denominated in U.S. dollars. Such contracts are
generally entered into by entities whose functional currency is not the U.S. dollar, thus creating a foreign currency embedded derivative which is bifurcated and evaluated separately under U.S. GAAP. Such embedded derivatives were not required to be
bifurcated under Mexican GAAP Bulletin C-2 since they were considered normal contractual provisions in Mexico.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



| | iii) | Lastly, as of December 31, 2003, under Mexican GAAP Bulletin C-2, PEMEX recognized a loss on the fair value of the equity swap and other contracts related to the Repsol shares
described in Note 10. As more fully described in adjustment (j), under U.S. GAAP, the transfer of the Repsol shares did not meet the definition of a true sale. Thus, the swap would not have been fair valued under U.S. GAAP. During 2004, this equity
swap was terminated, and as such there is no remaining adjustment for U.S. GAAP purposes.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iv) | With the termination of the equity swap, during 2004, PEMEX exercised the option to purchase the Repsol shares and transferred those shares to RepCon Lux, which issued debt
securities that are exchangeable into Repsol shares at the option of the bondholder. This embedded option to exchange debt securities of RepCon Lux for Repsol shares is bifurcated and accounted for separately at fair value under Mexican and U.S.
GAAP, and changes in fair values are recorded in earnings. Thus, there is no U.S. GAAP adjustment related to this embedded option feature.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the years ended December 31, 2005, 2004 and 2003, PEMEX recognized a net gain (loss) of Ps. 954,824, Ps. 5,977,780 and
Ps. 2,256,287, respectively, reported as a component of interest, net in the consolidated statements of operations, which included the ineffective portion of all fair-value hedges. All components of each derivatives gain or
loss were included in the assessment of hedge effectiveness, except for the time value of option contracts.

For the years ended
December 31, 2005, 2004 and 2003, PEMEX recognized a net gain (loss) of Ps. (4,567,056), Ps. (7,826,598) and Ps. 5,459,641, respectively, reported as derivative financial instruments in the consolidated other
comprehensive loss statement under U.S. GAAP. All components of each derivatives gain or loss were included in the assessment of hedge effectiveness, except for the time value of option contracts.

For cash flow hedges, gains and losses on derivative contracts that are reclassified from accumulated other comprehensive income to current-period
earnings are included in the line item in which the hedged item is recorded in the period in which the forecasted transaction affects earnings. During 2005, a net loss of Ps. 3,778,772 was reclassified from other comprehensive income (loss)
into earnings and as of December 31, 2005, a net loss of Ps. 5,480,522 of the balance related to derivative instruments accumulated in other comprehensive income (loss) is expected to be reclassified during the next twelve months to the consolidated
statement of operations.

(j)    Sale of shares of Repsol

Under Mexican GAAP, PEMEX recorded gains in years prior to 2002 related to the transfer of its Repsol shares to a third party. For U.S. GAAP
purposes, the transfer of the shares did not meet the criteria for sale recognition as the transaction included a repurchase feature at the option of PEMEX, and, accordingly, all gains were reversed and the transfer of the shares treated as a
financing transaction. Therefore, under U.S. GAAP, the Repsol shares would be evaluated pursuant to SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS No. 115) (adjustment (m)), and
a liability resulting from these transactions would also be reflected on the balance sheet. During 2003, PEMEX recognized Ps. 826,644, for purposes of the U.S. GAAP reconciliation, of monetary gains, included in adjustment (o), and
(Ps. 604,741) of foreign exchange losses on the U.S. dollar liability reflected as adjustment (j).

During 2004, PEMEX exercised the
option to repurchase the Repsol shares, terminated the equity swap arrangements relating thereto and subsequently transferred the repurchased shares to RepCon Lux, a consolidated



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



entity. Therefore, the cumulative equity adjustment of Ps. 698,833 as of December 31, 2003 has been reversed as of December 31, 2004.

(k)    Profit in inventory

Under Mexican GAAP, PEMEX values crude oil and derivatives for export at net realizable value with the difference between the net realizable value and cost recorded in earnings. In contrast, U.S. GAAP requires that inventories be recorded
at net realizable value, but not to exceed cost. For U.S. GAAP equity reconciliation purposes, PEMEX has eliminated the effect of recognizing a profit within its ending inventory balance at each period end; and for net income reconciliation
purposes, the adjustment reflects the reversal of the prior years equity adjustment as inventory is sold, as well as profit in inventory at the balance sheet date.

(l)    Advance payments on minimum guaranteed dividend

Under Mexican GAAP,
advance payments on the minimum guaranteed dividend owed to the Mexican Government derived from the capitalization of debt as described in Note 15 are recorded as an account receivable prior to approval of the total annual dividend amount by the
Board of Directors, which is usually in the following fiscal year.

Under U.S. GAAP, such receivable balances are reflected as a reduction
in equity. PEMEX has accordingly adjusted equity to reflect the minimum guaranteed dividend payment as a reduction in equity.

The
effective rate used to calculate the minimum guaranteed dividend is LIBOR plus 0.8125% (which ranged from 3.3625% to 4.8125% and from 1.9225% to 2.7725% for 2005 and 2004, respectively).

The outstanding principal amount of the capitalized debt of U.S. $392,310 will mature in 2006.

(m)    Accounting for available-for-sale securities (Repsol)

Pursuant to SFAS No. 115, PEMEX classifies its investment securities as available-for-sale and, accordingly, they are recorded at fair value with unrealized gains and losses excluded from the
statement of operations and reported in other comprehensive income (loss). The fair value of the securities is determined by quoted market prices at December 31, 2005, 2004 and 2003. An impairment loss is recognized when the loss is considered
other than temporary.

During 2004, PEMEX exercised the option to repurchase the Repsol shares and transferred those shares to RepCon Lux
pursuant to a swap agreement, as described above, and RepCon Lux issued debt securities that are exchangeable into Repsol shares at the option of the bondholder. For Mexican GAAP and U.S. GAAP purposes, RepCon Lux is consolidated, and thus, at
December 31, 2004, the shares are reflected on the balance sheet under Mexican GAAP and have been classified as available-for-sale and recorded at fair value. Nevertheless, under Mexican GAAP, the unrealized gains and losses are
reflected in earnings. Therefore, the adjustment in income for U.S. GAAP purposes for December 31, 2004 reflects the reversal of the equity reconciliation item for December 31, 2003 and the reclassification of the unrealized gains under
Mexican GAAP from the statement of operations to other comprehensive income (loss). The income adjustment for December 31, 2005 reflects the reversal of the fair value adjustment to earnings as reflected under Mexican GAAP whereas U.S. GAAP
would require such adjustment be reflected in Other Comprehensive Income (loss).



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The U.S. GAAP cost and fair value of PEMEXs investments at December 31, 2005, and 2004,
are as follows:



|     |  |               |  |                |  |                      
|---- |  | ------------- |  | -------------- |  | ---------------------
|     |  | Cost          |  | Fair Value     |  | UnrealizedGain (Loss)
|2005 |  | Ps. 9,335,124 |  | Ps. 18,567,473 |  | Ps. 9,232,349        
|2004 |  | Ps. 9,335,124 |  | Ps. 17,798,537 |  | Ps. 8,463,413        

(n)    Cumulative effect of adoption of new accounting standard (SFAS No. 143)

As discussed in Note 2h., effective January 1, 2003, PEMEX adopted Bulletin C-9; for U.S. GAAP purposes, it also adopted SFAS
No. 143 Asset Retirement Obligations (SFAS No. 143).

The cumulative effect of adopting SFAS No. 143
on PEMEXs results of operations and financial condition at January 1, 2003 was a decrease in the reserve for dismantlement and abandonment costs of Ps. 1,615,549, and a benefit for the cumulative effect of adoption of
Ps. 2,187,823. There is no U.S. GAAP adjustment for the adoption of SFAS No. 143 as the equivalent amounts were recorded under Mexican GAAP upon the adoption of Bulletin C-9 in 2003. PEMEXs liability provisions recognized in the
balance sheet represent present obligations whose settlement will probably require the future use of estimated economic resources. These provisions have been recorded based on managements best estimate of the amount needed to presently settle
the liability; however, actual results could differ from the provisions recognized. No assets or trust funds have been established to satisfy these obligations.

In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement ObligationsAn Interpretation of FASB Statement No. 143,(FIN 47), which
was effective for PEMEX on December 31, 2005. FIN 47 clarifies that the phrase conditional asset retirement obligation, as used in FAS 143, refers to a legal obligation to perform an asset retirement activity for which the timing
and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or
method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FAS 143 acknowledges that in
some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset
retirement obligation. The adoption of FIN 47 has not had a material impact on PEMEXs financial position and results of operations.

The following table indicates the changes to PEMEXs pre-tax asset retirement obligations in 2005:



|                                  |  |                |  
|--------------------------------- |  | -------------- | -
|                                  |  | 2005           |  
|Balance at January 1              |  | Ps. 14,102,817 |  
|Liabilities incurred              |  | 1,727,000      |  
|Liabilities settled               |  |               |  
|Accretion expense                 |  | 616,827        |  
|Inflation                         |  | (454,851       | )
|Currency exchange gain            |  | (590,150       | )
|Revisions in estimated cash flows |  | (1,705,373     | )
|                                  |  |                |  
|Balance at December 31            |  | Ps. 13,696,270 |  
|                                  |  |                |  



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



(o)    Effects of inflation on the U.S. GAAP adjustments

Various U.S. GAAP adjustments included herein are adjustments to monetary assets and liabilities recorded under Mexican GAAP pursuant to Bulletin B-10 as
described in Note 2b. and, therefore, the adjustments to the respective balance would also result in an adjustment to the monetary gain or loss as reported under Mexican GAAP for each of the three years presented.

(p)    Deferred taxes

As
described in Note 18, during 2005, a new fiscal regime applicable to PEMEX and its subsidiaries was enacted. Beginning January 1, 2006, certain subsidiary companies of PEMEX will be subject to the tax regime applicable to all other Mexican
corporations. Mexican companies are generally required to pay the higher of their income tax liability (determined at a rate of 29% after 2005) or their asset tax liability (determined at a rate of 1.8% of the average tax value of virtually all of
their assets, less the average tax value of certain liabilities). Due to the change in tax regime, PEMEX began recognizing deferred taxes relating to the entities that will begin to be taxed based on taxable income after January 1, 2006. The
U.S. GAAP equity adjustment represents the cumulative impact of deferred taxes relating to the other U.S. GAAP adjustments.

(q)    Reclassification of Pemex Finance equity to minority interest

As described in Note 2c.,
effective July 1, 2005, PEMEX entered into an option agreement with BNP Paribas Private Bank and Trust Cayman Limited to acquire 100% of the share of Pemex Finance. As a result, in 2005, the financial results of Pemex Finance have been
consolidated into the financial statements of Pemex for Mexican GAAP purposes. Historically, Pemex Finance has been consolidated in the accompanying condensed consolidated U.S. GAAP information included herein for all periods presented. However,
under U.S. GAAP, net income and retained earnings from Pemex Finance is reclassified as minority interest. The U.S. GAAP adjustment related to Pemex Finance represents the reclassification of net income and equity recognized under Mexican GAAP to
minority interest.

II.    Additional disclosure requirements:

(a)    Consolidation of Pemex Finance

As more fully disclosed in Note 10, PEMEX
and certain subsidiaries entered into several agreements with Pemex Finance under which Pemex Finance purchases existing accounts receivable and rights to future receivables from certain customers. Pemex Finance obtains resources for such purchases
through the placement of debt instruments in the international markets as well as the recurring returns on its investments. Through December 31, 2004, Pemex Finance was not consolidated for Mexican GAAP purposes. Starting in 2005, Pemex Finance
is consolidated under Mexican GAAP as further described in Note 2c.

Under U.S. GAAP SFAS No. 140, Accounting for the Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, PEMEX has evaluated the Pemex Finance structure in light of the permitted and non-permitted activities of a Qualified Special Purpose Entity (QSPE) and
determined that Pemex Finance did not qualify as a QSPE and should therefore be consolidated for U.S. GAAP purposes. Consequently, Pemex Finance has been consolidated in the accompanying condensed consolidated U.S. GAAP information included herein
for all periods presented.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



(b)    Special Tax on Production and Services (IEPS Tax)

Under Mexican GAAP, the IEPS Tax is reflected as part of Net domestic sales when charged to customers and the amounts payable to the Mexican
Government are then deducted from Income before hydrocarbon extraction duties and other, special tax on production and services, and cumulative effect of adoption of new accounting standards.

Under U.S. GAAP, this tax would have no net effect on revenues nor would it be deducted from Income before hydrocarbon extraction duties and other,
special tax on production and services, and cumulative effect of adoption of new accounting standards, as both the amount charged to customers and the amount accrued as payable to the tax authorities would be excluded from revenues (i.e., no
gross-up).

(c)    Environmental, dismantlement and abandonment

Environmental:

PEMEX estimates its environmental liabilities on a site-by-site basis based on the
best available information. After an affected area is identified, PEMEX establishes accruals for its environmental liabilities using costs of prior or current remediation works with similar characteristics. PEMEX establishes accruals using estimates
based on costs of similar remediation works most recently contracted and in progress at that time.

In 1999, PEMEX implemented new internal
guidelines for estimating and recording environmental liabilities. The guidelines, Pasivos Ambientales: Definición y Lineamientos para su Cuantificación y Registro Contable (Environmental Liabilities: Definition and Guidelines
for their Quantification and Accounting Treatment), sought to standardize and improve upon PEMEXs internal procedures for identifying necessary remediation works and estimating and monitoring environmental liabilities. These guidelines
codified existing policy with respect to estimating environmental liabilities, and establish that an environmental liability exists when:



| | i) | As a result of the activities of PEMEX, an affected area is identified in a particular site, and PEMEX undertakes a formal commitment to correct the environmental deficiency, in
accordance with the criteria, guidelines, standards and legal framework in force; and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii) | A reasonable estimate of the costs of remediation or clean-up of the identified affected area has been made, including the costs of the assessment studies.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

As stated above, in accordance with past and present internal guidelines, PEMEX conducts site-by-site studies to identify environmental liabilities
and develop a reasonable estimate of such liabilities. These guidelines consider many factors but are tailored to specific Mexican requirements. Each contaminated site must be characterized, quantified and assessed through a specific study. The
contamination of the affected sites may extend to the soil, subsoil and bodies of water, including water deposits, lagoons, swamps and others. These sites may be located inside PEMEXs facilities, in surrounding areas, in abandoned areas where
PEMEX had activity in the past or along the pipelines.

Once the corresponding contaminated site has been identified and evaluated,
expenses for the cleanup of (i) hydrocarbon seepage and other spills that may cause pollution and that cannot be corrected in a short



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



timeframe, (ii) water deposits and (iii) the concentration of hazardous residuals, will be included in the remediation or restoration of affected
areas. Estimates are kept current based on best available information.

Based on reports from field managers and other available
information, management prepares reports for identified affected areas on a periodic basis. When the contamination relates to a new incident, PEMEX informs Procuradora Federal de Protección al Ambiente (PROFEPA) and
responds immediately to eliminate the cause of the incident or to minimize its effects. Subsequently, PEMEX and PROFEPA jointly determine whether the contamination has been eliminated or if additional actions are necessary for the remediation of the
site.

PEMEX believes its environmental liabilities are probable when its initial studies reveal the existence of contamination in the
inspected areas at levels above those permitted by Mexican law, indicating that PEMEX will have to perform remediation works necessary to bring the site into compliance. PEMEX believes the liability is reasonably estimable when (i) an
assessment of the size of the affected area has been made, (ii) it has compared the affected area to other affected areas identified and addressed in the past, and (iii) based on PEMEXs experience with current or recent works on
similar sites, PEMEX can assess the estimated remediation costs in order to be able to calculate the corresponding environmental liability. Thus, PEMEX accrues for these environmental liabilities when it identifies affected areas with contamination
levels above those permitted by Mexican law and PEMEX is able to make a reasonable estimate of the size of the affected area and the remediation cost. In addition, PEMEX periodically revises its estimates of environmental liabilities as it obtains
new information during the course of the remediation works in order to ensure its estimates are based on the most accurate and updated information.

PROFEPA administers the Mexican environmental regulatory rubric and establishes acceptable standards of environmental remediation. Although PROFEPA has the authority to review and inspect remediation works performed by PEMEX and compliance
with permitted contamination levels established by laws and regulations, it does not determine PEMEXs environmental liabilities. PEMEX maintains proper records of all of the studies, estimations, performed works and any other information that
PROFEPA may request from time to time.

During 2005, 2004 and 2003, PEMEX invested Ps. 2,900,982, Ps. 2,514,095 and
Ps. 3,781,551, respectively, in various environmental projects and related expenditures. The most important of these projects have been directed to the modernization of installations, the implementation of systems and control mechanisms to
monitor atmospheric pollution, the acquisition of equipment to clean hydrocarbon spills, the expansion of aquatic effluent systems, the restoration and reforestation of affected areas, studies for environmental investigation and the conducting of
environmental audits. In addition, PEMEX has engaged in extensive research and development efforts to develop capacity for increased production of unleaded gasoline, diesel and fuel oil with lower sulfur content and alternative fuels, such as
industrial oil gas and natural gas. Currently, PEMEX is developing a procedure (Procedimiento para la Determinación de Gastos Asociados a las Actividades de Seguridad Industrial y Protección Ambiental) to determine the costs and
expenses related to the activities associated with integral safety and environmental management.

Management of PEMEX believes that its
operations are in substantial compliance with the Environmental Law as such law has been historically interpreted and enforced.

Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



benefit are expensed. Liabilities for expenditures of a non-capital nature are recorded on an undiscounted basis when environmental assessment and/or
remediation is probable and the costs can be reasonably estimated.

As PEMEX has exclusive rights to production and processing of crude
oil, natural gas, and refined products within Mexico, there are no instances of joint liability; PEMEX is the sole responsible party in the event of environmental damage. PEMEX has contracted insurance policies to cover the cost of certain
environmental contingencies. The liability accruals are not reflected net of any amounts forthcoming under such policies.

Environmental
liabilities accrued in the consolidated financial statements, for both Mexican GAAP and U.S. GAAP purposes, as of December 31, are divided among the operating units as follows:



|                                      |  |               |  |              
|------------------------------------- |  | ------------- |  | -------------
|                                      |  | 2005          |  | 2004         
|PemexExploration and Production      |  | Ps. 753,556   |  | Ps. 858,530  
|PemexRefining                        |  | 665,158       |  | 736,166      
|PemexGas and Basic Petrochemicals    |  | 258,596       |  | 234,364      
|PemexPetrochemicals                  |  | 49,895        |  | 40,226       
|                                      |  |               |  |              
|Total Environmental Liability Accrual |  | Ps. 1,727,205 |  | Ps. 1,869,286
|                                      |  |               |  |              

(d)    Dismantlement and abandonment costs

Under current Mexican law, PEMEXs legal obligation related to dismantlement and abandonment activities is governed by the following two federal
laws: the Petroleum Works Law and the Environmental Law described above. Although PEMEX is subject to other laws and regulations established at a local level in areas where PEMEX undertakes petroleum extractive activities, these local laws and
regulations do not contain any specific guidance on abandonment, restoration and removal of oil and gas facilities or otherwise impose a higher standard on PEMEX in this regard. The United Mexican States is not a party to any international treaty or
convention that would affect PEMEXs understanding of its obligation with regard to dismantlement and abandonment activities. Thus, the only relevant law for PEMEX as to abandonment and removal of facilities related to oil- and gas-producing
activities is Mexican federal law.

The Petroleum Works Law provides that wells must be plugged, or in certain special cases capped, to
ensure the maintenance of sanitary and safe conditions and to prevent the seepage of hydrocarbons to the surface. The Petroleum Works Law requires that PEMEX plug a well when it turns out to be dry, invaded with salt water or abandoned due to a
mechanical accident, or once a wells production has been depleted such that abandonment is necessary due to economic unfeasibility of production. All activities required for plugging a well are undertaken with the purpose of isolating, in a
definitive and convenient manner, the cross formations in the perforation that contains oil, gas or water in order to ensure that hydrocarbons do not seep to the surface.

PEMEX must obtain authorization from the Ministry of Energy before performing any plugging activities. The Petroleum Works Law also states that the Ministry of Energy may also authorize temporary plugging of
exploratory wells where production of hydrocarbons is commercially feasible but for which there are no adequate means for its exploitation.

PEMEX monitors and reviews its own internal estimates of costs to undertake dismantlement and abandonment at levels consistent with Mexican legal requirements and guidelines for oil and gas industry



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



extractive activities. Estimates as to aggregate costs consider PEMEXs operational specifics such as its number of onshore and offshore wells, depth of
wells, varying nature of offshore platforms, expected production lives, current expectations as to when the costs will be incurred based on present production rates and other operational specifics. The actual costs incurred in the dismantlement and
retirement of wells are considered where practicable, as described above. The average cost for plugging and dismantlement varies from producing region to producing region and from platform to platform. For the offshore regions, to the extent that
actual costs are not available due to limited plugging and dismantlement activity historically, PEMEX uses estimates based on services costs. The estimated costs are both peso- and U.S. dollar-denominated.

(e)    Pensions and seniority premiums

The components of seniority premium and pension plan cost, calculated in accordance with SFAS No. 87, using December 31 as a measurement date, consist of the following:



|                                                         |  |               |   |  |               |   |  |               |  
|-------------------------------------------------------- |  | ------------- | - |  | ------------- | - |  | ------------- | -
|                                                         |  | 2005          |   |  | 2004          |   |  | 2003          |  
|Service cost                                             |  | Ps. 6,033,096 |   |  | Ps. 6,574,746 |   |  | Ps. 5,826,860 |  
|Interest cost                                            |  | 19,435,946    |   |  | 18,691,542    |   |  | 17,091,023    |  
|Return on plan assets                                    |  | (172,268      | ) |  | (828,135      | ) |  | (1,119,032    | )
|Net amortization and deferral                            |  |              |   |  | 41,012        |   |  |              |  
|Amortization of net transition obligation                |  | 5,325,123     |   |  | 5,228,755     |   |  | 5,271,156     |  
|Adjustment to net periodic pension cost due to inflation |  | 1,017,649     |   |  | 1,536,885     |   |  | 1,137,331     |  
|Plan amendments                                          |  | 939,165       |   |  |              |   |  |              |  
|                                                         |  |               |   |  |               |   |  |               |  
|Net cost under U.S. GAAP                                 |  | 32,578,711    |   |  | 31,244,805    |   |  | 28,207,338    |  
|Net cost under Mexican GAAP                              |  | (33,516,478   | ) |  | (32,017,876   | ) |  | (28,811,751   | )
|                                                         |  |               |   |  |               |   |  |               |  
|Additional (benefit) expense recognized under U.S. GAAP  |  | (Ps. 937,767  | ) |  | (Ps. 773,071  | ) |  | (Ps. 604,413  | )
|                                                         |  |               |   |  |               |   |  |               |  

Actuarial assumptions used (net of inflation) in the calculation of benefit obligations, net
seniority premium and pension plan cost under U.S. GAAP as of December 31 are:



|                                            |  |      |   |  |      |   |  |      |  
|------------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                                            |  | 2005 |   |  | 2004 |   |  | 2003 |  
|Discount rate                               |  | 4.50 | % |  | 4.59 | % |  | 4.59 | %
|Rates of increase in compensation levels    |  | 0.50 | % |  | 0.92 | % |  | 0.92 | %
|Expected long-term rate of return on assets |  | 5.00 | % |  | 5.50 | % |  | 5.50 | %

The calculation of pension cost and benefit obligations under SFAS No. 87 requires
considerable judgment with respect to choosing actuarial assumptions. Each significant assumption reflects PEMEXs best estimate of the plans future experience solely with respect to that assumption. Assumed discount rates and
compensation levels often have the greatest effect on pension cost and benefit obligations and are related because both are affected by some of the same economic factors. The discount rate is based upon the current prices for settling the pension
obligation, referred to as the settlement rate. Assumed compensation levels reflect PEMEXs estimate of actual future compensation levels for the individuals involved and is consistent with assumed discount rates to the extent that
both incorporate expectations of the same future economic conditions, such as inflation.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The combined seniority premium and pension plan liability as of December 31 under SFAS
No. 87 is as follows:



|                                                                         |  |                 |   |  |                 |  
|------------------------------------------------------------------------ |  | --------------- | - |  | --------------- | -
|                                                                         |  | 2005            |   |  | 2004            |  
|Accumulated benefit obligation                                           |  | Ps. 265,785,395 |   |  | Ps. 233,347,390 |  
|                                                                         |  |                 |   |  |                 |  
|Projected benefit obligation                                             |  | 271,323,616     |   |  | 239,606,708     |  
|Plan assets at fair value                                                |  | (1,414,073      | ) |  | (2,578,511      | )
|                                                                         |  |                 |   |  |                 |  
|Projected benefit obligation in excess of plan assets                    |  | 269,909,543     |   |  | 237,028,197     |  
|Unrecognized net loss                                                    |  | (20,167,461     | ) |  | (3,050,380      | )
|Unrecognized transition obligation                                       |  | (69,932,918     | ) |  | (75,414,851     | )
|Unrecognized prior service costs                                         |  | (5,829,281      | ) |  | (2,827,826      | )
|                                                                         |  |                 |   |  |                 |  
|Accrued liability under U.S. GAAP                                        |  | 173,979,883     |   |  | 155,735,140     |  
|Accrued liability recognized under Mexican GAAP                          |  | (164,888,851    | ) |  | (145,706,342    | )
|                                                                         |  |                 |   |  |                 |  
|Net U.S. GAAP adjustment to seniority premium and pension plan liability |  | 9,091,032       |   |  | 10,028,798      |  
|                                                                         |  |                 |   |  |                 |  
|Additional minimum liability                                             |  | Ps. 92,585,503  |   |  | Ps. 74,449,181  |  
|                                                                         |  |                 |   |  |                 |  

The scheduled maturities on the benefits expected to be paid in each of the next five years, and
through 2015, are as follows:



|             |  |                          |            
|------------ |  | ------------------------ | -----------
|Year         |  | Expected BenefitPayments
|2006         |  | Ps.                      | 9,659,001  
|2007         |  |                          | 11,698,882 
|2008         |  |                          | 12,094,029 
|2009         |  |                          | 12,374,617 
|2010         |  |                          | 12,727,861 
|2011 to 2015 |  |                          | 67,143,331 
|             |  |                          |            
|Total        |  | Ps.                      | 125,697,721
|             |  |                          |            

In accordance with the provisions of SFAS No. 87, PEMEX has reflected, for U.S. GAAP
purposes, an additional minimum liability at the end of each year representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liabilities. The additional minimum liability is offset by
recording an intangible asset provided that the asset recognized does not exceed the sum of the unrecognized prior service cost and the unrecognized transition obligation for the year. As of December 31, 2005 and 2004, for U.S. GAAP purposes,
PEMEX recognized an intangible asset of Ps. 71,663,671 and Ps. 71,767,158, respectively. In addition, in 2005 and 2004 PEMEX recognized in other comprehensive loss the excess of the additional minimum pension liability over the sum of the
unrecognized prior service cost and the unrecognized transition obligation of Ps. 20,921,832 and Ps. 2,682,023 respectively. The 2005 and 2004 U.S. GAAP equity adjustments of Ps. 6,360,080 and Ps. 4,526,045 reflect the difference
in the amounts recognized in other comprehensive loss under Mexican GAAP of Ps. 27,281,912 and Ps. 7,208,068 respectively and the amount unrecognized under U.S. GAAP of Ps. 20,921,832 and Ps. 2,682,023 respectively, related to
additional minimum pension liabilities.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The objective of PEMEXs investment guidelines with respect to the plan assets is to grant the
highest security together with an adequate rate of return, maintaining the purchasing power of the investments. The comparative benchmark used by PEMEX is the monthly average of primary interest rates of Mexican 28-day T-bills (Cetes 28).

The investment guidelines list certain prohibited investments, such as securities of companies that are subject to intervention by a
regulatory authority, subordinated securities, convertible securities, certain foreign exchange securities, derivatives other than the structured notes mentioned above, securities having terms with certain characteristics such as liquidity, risk,
return, or maturity that do not comply with certain requirements set by PEMEXs Financial Resources Committee and securities not listed on the Mexican Stock Exchange.

The expected long-term rate of return is based on the guidelines of the Mexican Society of Consulting Actuaries which annually issues recommendations for
selecting financial assumptions based on a historical analysis conducted on economic variables such as inflation, risk-free interest rates and increases to the legal minimum wage and salaries in general.

At December 31, 2005 and 2004, all of PEMEXs plan assets were invested in Federal Government bonds and bonds issued by financial institutions
listed on the Mexican Stock Exchange. The following table shows PEMEXs actual investment allocation at December 31 of each year.



|                                                                            |  |      |   |  |      |  
|--------------------------------------------------------------------------- |  | ---- | - |  | ---- | -
|Securities                                                                  |  | 2005 |   |  | 2004 |  
|Federal Government Bonds                                                    |  | 63   | % |  | 44   | %
|Bonds issued by financial institutions listed on the Mexican Stock Exchange |  | 37   | % |  | 56   | %
|                                                                            |  |      |   |  |      |  
|Total                                                                       |  | 100  | % |  | 100  | %
|                                                                            |  |      |   |  |      |  

(f)    Other post-retirement benefits

PEMEX has implemented SFAS No. 106 effective January 1, 1995, using the transitional recognition method and December 31 as a measurement
date.

PEMEX makes supplemental payments in respect of its obligation for gas, gasoline and basic food supplies and provides health care
benefits, in each case to retired employees and immediate family members. PEMEX regularly determines the level of its supplemental payments considering inflationary conditions. Health care is provided through a regional network of PEMEX hospitals
and medical centers, which also provide care to active PEMEX employees. No commitments have been made regarding the level of such contributions in the future.

Effective January 1, 2004, PEMEX adopted the amendments to Bulletin D-3 which established an obligation to recognize a reserve for post-retirement medical benefits and to include the supplemental payments as a
part of PEMEXs other post-retirement benefits obligation. In prior years, the obligation for post-retirement medical benefits was recognized under U.S. GAAP, but not under Mexican GAAP. In prior years, the obligation for supplemental payments
under Mexican GAAP was recognized as a part of PEMEXs pensions and seniority premiums obligation and reclassified for U.S. GAAP purposes as a component of the SFAS No. 106 adjustment. In 2004, under Mexican GAAP, these benefits were
reclassified to form part of the liability for other post-retirement benefits, which is now consistent with U.S. GAAP.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The scheduled maturities on the benefits expected to be paid in each of the next five years, and
through 2015, are as follows:



|             |  |                          |            
|------------ |  | ------------------------ | -----------
|Year         |  | Expected BenefitPayments
|2006         |  | Ps.                      | 8,535,847  
|2007         |  |                          | 9,536,889  
|2008         |  |                          | 10,919,193 
|2009         |  |                          | 12,356,836 
|2010         |  |                          | 14,197,439 
|2011 to 2015 |  |                          | 76,265,060 
|             |  |                          |            
|Total        |  | Ps.                      | 131,811,264
|             |  |                          |            

In 2004, PEMEX reevaluated the estimated costs used in the calculation of its obligations for
post-retirement benefits. As a result of the reevaluation, the estimated allocable cost per employee was reduced resulting in a reduction in PEMEXs post-retirement benefits obligation. In accordance with SFAS No. 106, the gain resulting
from this change in estimate has been recorded as an unrecognized actuarial gain and will be amortized over the related service period.



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The components of other post-retirement benefits expense consist of the
following for the years ended December 31, 2005, 2004 and 2003:



|                                                                         |  |                      |             |   |                |      |             |       |  |      |                      |   |  |                |             |   |       |     |            |                      |  |     |                |   |  |       |             |   |  |     |            |   |  |     |             |  
|------------------------------------------------------------------------ |  | -------------------- | ----------- | - | -------------- | ---- | ----------- | ----- |  | ---- | -------------------- | - |  | -------------- | ----------- | - | ----- | --- | ---------- | -------------------- |  | --- | -------------- | - |  | ----- | ----------- | - |  | --- | ---------- | - |  | --- | ----------- | -
|                                                                         |  | 2005                 |             |   | 2004           |      |             | 2003  | 
|                                                                         |  | SupplementalPayments |             |   | HealthServices |      |             | Total |  |      | SupplementalPayments |   |  | HealthServices |             |   | Total |     |            | SupplementalPayments |  |     | HealthServices |   |  | Total |            
|Service cost                                                             |  | Ps.                  | 2,515,192   |   |                | Ps.  | 1,341,484   |       |  | Ps.  | 3,856,676            |   |  | Ps.            | 2,449,508   |   |       | Ps. | 1,984,977  |                      |  | Ps. | 4,434,485      |   |  | Ps.   | 2,293,719   |   |  | Ps. | 2,458,147  |   |  | Ps. | 4,751,866   |  
|Interest cost                                                            |  |                      | 8,974,653   |   |                |      | 5,161,870   |       |  |      | 14,136,523           |   |  |                | 8,024,320   |   |       |     | 6,490,366  |                      |  |     | 14,514,686     |   |  |       | 7,951,267   |   |  |     | 6,417,874  |   |  |     | 14,369,141  |  
|Amortization of actuarial (gains) and losses                             |  |                      | (164,308    | ) |                |      | (1,565,460  | )     |  |      | (1,729,768           | ) |  |                | 1,273       |   |       |     | (20,213    | )                    |  |     | (18,940        | ) |  |       |            |   |  |     |           |   |  |     |            |  
|Amortization of prior service cost and plan amendments                   |  |                      | (14,447     | ) |                |      |            |       |  |      | (14,447              | ) |  |                | (6,911      | ) |       |     |           |                      |  |     | (6,911         | ) |  |       |            |   |  |     |           |   |  |     |            |  
|Amortization of transition obligation                                    |  |                      | 2,879,338   |   |                |      | 2,585,792   |       |  |      | 5,465,130            |   |  |                | 2,828,476   |   |       |     | 2,537,012  |                      |  |     | 5,365,488      |   |  |       | 2,861,507   |   |  |     | 2,515,657  |   |  |     | 5,377,164   |  
|Adjustment to net periodic post-retirement benefit cost due to inflation |  |                      | 474,609     |   |                |      | 250,511     |       |  |      | 725,120              |   |  |                | 690,245     |   |       |     | 570,585    |                      |  |     | 1,260,830      |   |  |       | 521,182     |   |  |     | 455,020    |   |  |     | 976,202     |  
|                                                                         |  |                      |             |   |                |      |             |       |  |      |                      |   |  |                |             |   |       |     |            |                      |  |     |                |   |  |       |             |   |  |     |            |   |  |     |             |  
|Net expense under U.S. GAAP                                              |  |                      | 14,665,037  |   |                |      | 7,774,197   |       |  |      | 22,439,234           |   |  |                | 13,986,911  |   |       |     | 11,562,727 |                      |  |     | 25,549,638     |   |  |       | 13,627,675  |   |  |     | 11,846,698 |   |  |     | 25,474,373  |  
|Expense under Mexican GAAP                                               |  |                      | (14,718,083 | ) |                |      | (10,847,378 | )     |  |      | (25,565,461          | ) |  |                | (14,076,215 | ) |       |     | (8,726,433 | )                    |  |     | (22,802,648    | ) |  |       | (13,514,410 | ) |  |     | (2,564,520 | ) |  |     | (16,078,930 | )
|                                                                         |  |                      |             |   |                |      |             |       |  |      |                      |   |  |                |             |   |       |     |            |                      |  |     |                |   |  |       |             |   |  |     |            |   |  |     |             |  
|Additional expense (benefit) under U.S. GAAP                             |  | (Ps.                 | 53,046      | ) |                | (Ps. | 3,073,181   | )     |  | (Ps. | 3,126,227            | ) |  | (Ps.           | 89,304      | ) |       | Ps. | 2,836,294  |                      |  | Ps. | 2,746,990      |   |  | Ps.   | 113,265     |   |  | Ps. | 9,282,178  |   |  | Ps. | 9,395,443   |  
|                                                                         |  |                      |             |   |                |      |             |       |  |      |                      |   |  |                |             |   |       |     |            |                      |  |     |                |   |  |       |             |   |  |     |            |   |  |     |             |  



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Actuarial assumptions used in the calculation of other post-retirement benefits and cost under U.S.
GAAP as of December 31 were:



|                            |  |      |   |  |      |   |  |      |  
|--------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                            |  | 2005 |   |  | 2004 |   |  | 2003 |  
|Discount rate               |  | 4.50 | % |  | 4.59 | % |  | 4.59 | %
|Health care cost trend rate |  | 1.50 | % |  | 0.92 | % |  | 0.92 | %

Since the other post-retirement benefits are not based on levels of compensation, it is not
necessary to use salary increase assumptions to determine expenses. The effect of a 1% increase in the health care cost trend rate is to increase net expense for other post-retirement benefits by Ps. 2,119,252 for 2005 (Ps. 517,271 for
2004 and Ps. 611,515 for 2003) and increase the accumulated post-retirement benefit obligation by Ps. 19,796,374 for 2005 (Ps. 4,117,960 for 2004 and Ps. 5,601,535 for 2003). The effect of a 1% decrease in the health care cost
trend rate is to decrease net expense for other post-retirement benefits by Ps. 2,333,853 for 2005 (Ps. 419,502 for 2004 and Ps. 689,583 for 2003) and decrease the accumulated post-retirement benefit obligation by Ps. 24,708,598
(Ps. 3,349,541 for 2004 and Ps. 4,820,081 for 2003).



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The other post-retirement benefits liability as of December 31, 2005 and
2004 is as follows:



|                                                         |  |                      |             |   |                 |     |             |       |  |     |                      |   |  |                 |             |   |       |     |             |   |  |     |             |  
|-------------------------------------------------------- |  | -------------------- | ----------- | - | --------------- | --- | ----------- | ----- |  | --- | -------------------- | - |  | --------------- | ----------- | - | ----- | --- | ----------- | - |  | --- | ----------- | -
|                                                         |  | 2005                 |             |   | 2004            |    
|                                                         |  | SupplementalPayments |             |   | Health Services |     |             | Total |  |     | SupplementalPayments |   |  | Health Services |             |   | Total |    
|Accumulated unfunded post retirement benefit obligation: |  |                      |             |   |                 |     |             |       |  |     |                      |   |  |                 |             |   |       |     |             |   |  |     |             |  
|Retirees                                                 |  | Ps.                  | 64,951,009  |   |                 | Ps. | 43,265,377  |       |  | Ps. | 108,216,386          |   |  | Ps.             | 62,632,519  |   |       | Ps. | 39,541,788  |   |  | Ps. | 102,174,307 |  
|Fully eligible active participants                       |  |                      | 10,396,085  |   |                 |     | 1,563,992   |       |  |     | 11,960,077           |   |  |                 | 2,459,250   |   |       |     | 2,673,800   |   |  |     | 5,133,050   |  
|Other active plan participants                           |  |                      | 62,199,844  |   |                 |     | 18,597,442  |       |  |     | 80,767,286           |   |  |                 | 44,959,098  |   |       |     | 21,173,276  |   |  |     | 66,132,374  |  
|                                                         |  |                      |             |   |                 |     |             |       |  |     |                      |   |  |                 |             |   |       |     |             |   |  |     |             |  
|Total                                                    |  |                      | 137,546,938 |   |                 |     | 63,426,811  |       |  |     | 200,973,749          |   |  |                 | 110,050,867 |   |       |     | 63,388,864  |   |  |     | 173,439,731 |  
|Unrecognized actuarial gains (losses)                    |  |                      | (13,515,580 | ) |                 |     | 31,342,391  |       |  |     | 17,826,811           |   |  |                 | 2,047,200   |   |       |     | 27,850,609  |   |  |     | 29,897,809  |  
|Prior service cost and plan amendments                   |  |                      | (459,331    | ) |                 |     | (519,613    | )     |  |     | (978,944             | ) |  |                 | (97,867     | ) |       |     |            |   |  |     | (97,867     | )
|Unamortized transition obligation                        |  |                      | (37,822,892 | ) |                 |     | (33,104,558 | )     |  |     | (70,927,450          | ) |  |                 | (40,797,715 | ) |       |     | (35,715,986 | ) |  |     | (76,513,701 | )
|                                                         |  |                      |             |   |                 |     |             |       |  |     |                      |   |  |                 |             |   |       |     |             |   |  |     |             |  
|Net post-retirement benefit liability:                   |  |                      |             |   |                 |     |             |       |  |     |                      |   |  |                 |             |   |       |     |             |   |  |     |             |  
|U.S. GAAP                                                |  |                      | 85,749,135  |   |                 |     | 61,145,031  |       |  |     | 146,894,166          |   |  |                 | 71,202,485  |   |       |     | 55,523,487  |   |  |     | 126,725,972 |  
|Mexican GAAP                                             |  |                      | (91,480,913 | ) |                 |     | (15,348,790 | )     |  |     | (106,829,703         | ) |  |                 | (76,880,713 | ) |       |     | (6,654,569  | ) |  |     | (83,535,282 | )
|                                                         |  |                      |             |   |                 |     |             |       |  |     |                      |   |  |                 |             |   |       |     |             |   |  |     |             |  
|Net U.S. GAAP adjustment                                 |  | (Ps.                 | 5,731,778   | ) |                 | Ps. | 45,796,241  |       |  | Ps. | 40,064,463           |   |  | (Ps.            | 5,678,228   | ) |       | Ps. | 48,868,918  |   |  | Ps. | 43,190,690  |  
|                                                         |  |                      |             |   |                 |     |             |       |  |     |                      |   |  |                 |             |   |       |     |             |   |  |     |             |  



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PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Pursuant to the requirements of SFAS No. 132, the following tables
present a reconciliation of the beginning and ending balances of plan assets fair value and the accumulated post-retirement benefit obligation.



|                                               |  |                                         |             |   |                       |     |             |                 |  |     |             |   |  |      |             |   |      |     |            |   |  |     |             |  
|---------------------------------------------- |  | --------------------------------------- | ----------- | - | --------------------- | --- | ----------- | --------------- |  | --- | ----------- | - |  | ---- | ----------- | - | ---- | --- | ---------- | - |  | --- | ----------- | -
|                                               |  | Seniority Premiums and Pension Benefits |             |   | Supplemental Payments |     |             | Health Services | 
|                                               |  | 2005                                    |             |   | 2004                  |     |             | 2005            |  |     | 2004        |   |  | 2005 |             |   | 2004 |    
|Change in benefit obligation (PBO)             |  |                                         |             |   |                       |     |             |                 |  |     |             |   |  |      |             |   |      |     |            |   |  |     |             |  
|Benefit obligation at beginning of year        |  | Ps.                                     | 239,606,708 |   |                       | Ps. | 237,671,039 |                 |  | Ps. | 110,050,866 |   |  | Ps.  | 102,461,642 |   |      | Ps. | 63,388,866 |   |  | Ps. | 83,267,618  |  
|Effect of inflation on beginning balance       |  |                                         | 873,697     |   |                       |     | (11,086,840 | )               |  |     | 384,456     |   |  |      | (5,056,126  | ) |      |     | 210,711    |   |  |     | (4,108,970  | )
|Service cost                                   |  |                                         | 6,033,096   |   |                       |     | 6,574,746   |                 |  |     | 2,515,192   |   |  |      | 2,449,508   |   |      |     | 1,341,484  |   |  |     | 1,984,967   |  
|Interest cost                                  |  |                                         | 19,435,946  |   |                       |     | 18,691,542  |                 |  |     | 8,974,653   |   |  |      | 8,024,320   |   |      |     | 5,161,870  |   |  |     | 6,490,366   |  
|Prior service costs and plan amendments        |  |                                         | 4,572,493   |   |                       |     | 2,827,825   |                 |  |     | 346,534     |   |  |      | 97,867      |   |      |     | 582,790    |   |  |     |            |  
|Actuarial (gains)/losses                       |  |                                         | 11,135,489  |   |                       |     | (3,050,380  | )               |  |     | 19,529,420  |   |  |      | 6,114,542   |   |      |     | (5,109,083 | ) |  |     | (22,173,275 | )
|Benefits paid                                  |  |                                         | (10,333,813 | ) |                       |     | (12,021,224 | )               |  |     | (4,254,183  | ) |  |      | (4,040,886  | ) |      |     | (2,149,827 | ) |  |     | (2,071,855  | )
|                                               |  |                                         |             |   |                       |     |             |                 |  |     |             |   |  |      |             |   |      |     |            |   |  |     |             |  
|Benefit obligation at end of year              |  | Ps.                                     | 271,323,616 |   |                       | Ps. | 239,606,708 |                 |  | Ps. | 137,546,938 |   |  | Ps.  | 110,050,867 |   |      | Ps. | 63,426,811 |   |  | Ps. | 63,388,864  |  
|                                               |  |                                         |             |   |                       |     |             |                 |  |     |             |   |  |      |             |   |      |     |            |   |  |     |             |  
|Change in plan assets                          |  |                                         |             |   |                       |     |             |                 |  |     |             |   |  |      |             |   |      |     |            |   |  |     |             |  
|Fair value of plan assets at beginning of year |  | Ps.                                     | 2,578,511   |   |                       | Ps. | 14,226,881  |                 |  | Ps. |            |   |  | Ps.  |            |   |      | Ps. |           |   |  | Ps. |            |  
|Effect of inflation on beginning balance       |  |                                         | (83,163     | ) |                       |     | (636,244    | )               |  |     |            |   |  |      |            |   |      |     |           |   |  |     |            |  
|Actual return on plan assets                   |  |                                         | (917,775    | ) |                       |     | 609,037     |                 |  |     |            |   |  |      |            |   |      |     |           |   |  |     |            |  
|Company contributions                          |  |                                         | 14,038,277  |   |                       |     | 1,959,970   |                 |  |     |            |   |  |      |            |   |      |     |           |   |  |     |            |  
|Transfer of funds                              |  |                                         | (4,136,399  | ) |                       |     | (4,040,886  | )               |  |     | 4,136,399   |   |  |      | 4,040,886   |   |      |     |           |   |  |     |            |  
|Benefits paid                                  |  |                                         | (10,065,378 | ) |                       |     | (9,540,247  | )               |  |     | (4,136,399  | ) |  |      | (4,040,886  | ) |      |     |           |   |  |     |            |  
|                                               |  |                                         |             |   |                       |     |             |                 |  |     |             |   |  |      |             |   |      |     |            |   |  |     |             |  
|Fair value of plan assets at end of year       |  | Ps.                                     | 1,414,073   |   |                       | Ps. | 2,578,511   |                 |  | Ps. |            |   |  | Ps.  |            |   |      | Ps. |           |   |  | Ps. |            |  
|                                               |  |                                         |             |   |                       |     |             |                 |  |     |             |   |  |      |             |   |      |     |            |   |  |     |             |  



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



(g)    Leases

During the three years ended December 31, 2005, PEMEX did not have any significant operating lease arrangements.

PEMEX enters into non-cancelable lease arrangements for equipment used in the ordinary course of business. The following table shows the future minimum
obligations under lease commitments in effect at December 31, 2005:



|                    |  |                   
|------------------- |  | ------------------
|                    |  | Capital Leases (1)
|2006                |  | Ps. 986,187       
|2007                |  | 255,556           
|2008                |  | 145,093           
|2009                |  | 145,813           
|2010                |  | 145,813           
|2011 and thereafter |  | 291,866           
|                    |  |                   
|                    |  | Ps. 1,970,328     
|                    |  |                   

---

|(1) | Includes a total of Ps. 226,510 of imputed interest and commissions.
|--- | --------------------------------------------------------------------

Assets acquired under capital leases, together with their related depreciation, are included in Properties and equipment, net.

(h)    Supplemental geographical information

The majority of PEMEXs
operations are in Mexico. The following shows PEMEXs domestic and export sales for the years ended December 31 (on a Mexican GAAP basis):



|                                  |  |                 |  |                 |  |                
|--------------------------------- |  | --------------- |  | --------------- |  | ---------------
|                                  |  | 2005            |  | 2004            |  | 2003           
|Domestic sales                    |  | Ps. 505,109,185 |  | Ps. 463,976,988 |  | Ps. 420,912,591
|Export sales:                     |  |                 |  |                 |  |                
|United States                     |  | 348,892,662     |  | 278,852,233     |  | 212,345,627    
|Canada, Central and South America |  | 31,932,331      |  | 28,030,223      |  | 20,109,083     
|Europe                            |  | 36,716,487      |  | 24,008,987      |  | 19,221,952     
|Far East                          |  | 5,992,311       |  | 4,500,032       |  | 7,229,765      
|                                  |  |                 |  |                 |  |                
|Total export sales                |  | 423,533,791     |  | 335,391,475     |  | 258,906,427    
|                                  |  |                 |  |                 |  |                
|Total sales                       |  | Ps. 928,642,976 |  | Ps. 799,368,463 |  | Ps. 679,819,018
|                                  |  |                 |  |                 |  |                

PEMEX does not have significant long-lived assets outside of Mexico.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



(i)    Valuation and qualifying accounts

The valuation and qualifying accounts for PEMEX are as follows:



|                                                                            |  |                              |  |                                       |  |                |   |  |                         
|--------------------------------------------------------------------------- |  | ---------------------------- |  | ------------------------------------- |  | -------------- | - |  | ------------------------
|Description                                                                 |  | Balance atbeginning ofperiod |  | Additionscharged to costsand expenses |  | Deductions     |   |  | Balance at end of period
|For the year ended December 31, 2005:                                       |  |                              |  |                                       |  |                |   |  |                         
|Reserves deducted in the balance sheet from the assets to which they apply: |  |                              |  |                                       |  |                |   |  |                         
|Allowance for uncollectible trade accounts                                  |  | Ps. 1,983,935                |  | Ps. 1,547,442                         |  | (Ps. 1,021,798 | ) |  | Ps. 2,509,579           
|Allowance for slow-moving inventory and obsolescence                        |  | 1,713,112                    |  | 316,567                               |  | (356,592       | ) |  | 1,673,087               
|                                                                            |  |                              |  |                                      
|For the year ended December 31, 2004:                                       |  |                              |  |                                       |  |                |   |  |                         
|Reserves deducted in the balance sheet from the assets to which they apply: |  |                              |  |                                       |  |                |   |  |                         
|Allowance for uncollectible trade accounts                                  |  | Ps. 2,274,452                |  | Ps. 1,059,179                         |  | (Ps. 1,349,696 | ) |  | Ps. 1,983,935           
|Allowance for slow-moving inventory and obsolescence                        |  | 2,008,946                    |  | 99,727                                |  | (395,561       | ) |  | 1,713,112               
|                                                                            |  |                              |  |                                      
|For the year ended December 31, 2003:                                       |  |                              |  |                                       |  |                |   |  |                         
|Reserves deducted in the balance sheet from the assets to which they apply: |  |                              |  |                                       |  |                |   |  |                         
|Allowance for uncollectible trade accounts                                  |  | 2,160,728                    |  | 270,486                               |  | (156,762       | ) |  | 2,274,452               
|Allowance for slow-moving inventory and obsolescence                        |  | 2,331,286                    |  | 359,530                               |  | (681,870       | ) |  | 2,008,946               

---

Note:The above valuation and qualifying
accounts are presented in accordance with U.S. GAAP. The Mexican GAAP accounts titled reserve for dismantlement and abandonment activities, sundry creditors and others and reserve for retirement payments, pensions, and seniority
premiums are accrued liability accounts, and not valuation and qualifying accounts and have not been included in the table above.

(j)    Significant risks and uncertainties

Environmental

The ultimate costs to be incurred in relation to PEMEXs environmental contingencies may exceed the total amounts reserved. Additional liabilities
may be accrued as the assessment work is completed and formal remedial plans are formulated. Numerous factors affect the reliability and precision of clean-up cost estimates, including the individual characteristics of the site, the lack of specific
guidance as to permissible levels of pollution and type of technology available for the remediation as well as general economic factors such as inflation.

As discussed previously, PEMEX accrues an environmental liability when a reasonable estimate of the costs for remediation or clean-up of the identified affected area has been made. In some cases, investigations are
not



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



yet at a stage where PEMEX is able to quantify the liability or estimate a range of possible exposure. In such cases, the amounts of PEMEXs liabilities
are indeterminate due to the unknown magnitude of possible contamination, the imprecise and conflicting engineering evaluations and estimates of proper cleanup methods and costs, the unknown timing and extent of the corrective actions that may be
required, and the ambiguities in Mexican environmental laws and regulations.

PEMEX is not aware of any unasserted claims or assessments,
which may give rise to an environmental liability, and therefore, no amounts related to such items have been reflected in the environmental accrual.

Mexican Government

The operations and earnings of PEMEX have been, and may in the future be, affected from time to time in
varying degree by political developments and laws and regulations, such as forced divestiture of assets, budgetary adjustments, restrictions on production levels and capital expenditures, price controls, tax increases, cancellation of contract
rights, refined product specifications, and environmental, health and safety regulations. Both the likelihood of such occurrences and their overall effect upon PEMEX are not predictable.

Labor

PEMEX employees belonging to the Petroleum Workers Union of the Mexican Republic
represent approximately 80.1% of the workforce. They have a collective bargaining agreement which is renegotiated every two years and is set to expire on July 31, 2007.

Product prices

Because PEMEXs major products are commodities, significant changes in the
international prices of crude oil, natural gas and chemical products could have a significant impact on PEMEXs results of operations in any particular year. Crude oil represents approximately 35% of PEMEXs sales revenues net of the IEPS
Tax, and prices of the products PEMEX produces can be influenced by changes in crude oil prices, which makes it reasonably possible that PEMEX is vulnerable to near-term severe impacts from fluctuations in prices.

(k)    Capitalized software costs

Direct internal and external costs related to the development of internal use software are deferred and included in other assets. Capitalized software costs, net of amortization, as of December 31, 2005 and 2004 amounted to
Ps. 294,169 and Ps. 651,395, respectively. Amortization expense for the years ended December 31, 2005, 2004 and 2003 amounted to Ps. 257,825, Ps. 118,595 and Ps. 94,548, respectively.

(l)    Supplemental condensed information on a U.S. GAAP basis

The following condensed consolidating information reflects the U.S. GAAP adjustments disclosed in this note.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2004



|                                                                                              |  |      |               |   |      |     |             |  
|--------------------------------------------------------------------------------------------- |  | ---- | ------------- | - | ---- | --- | ----------- | -
|                                                                                              |  | 2005 |               |   | 2004 |    
|ASSETS                                                                                        |  |      |               |   |      |     |             |  
|Total current assets                                                                          |  | Ps.  | 281,953,608   |   |      | Ps. | 248,068,680 |  
|Properties and equipment, net                                                                 |  |      | 613,854,409   |   |      |     | 589,596,165 |  
|Intangible asset derived from the actuarial computation of labor obligations and other assets |  |      | 104,282,907   |   |      |     | 105,767,745 |  
|                                                                                              |  |      |               |   |      |     |             |  
|Total assets                                                                                  |  | Ps.  | 1,000,090,924 |   |      | Ps. | 943,432,590 |  
|                                                                                              |  |      |               |   |      |     |             |  
|LIABILITIES                                                                                   |  |      |               |   |      |     |             |  
|Total current liabilities                                                                     |  | Ps.  | 165,027,596   |   |      | Ps. | 150,137,849 |  
|Long-term debt                                                                                |  |      | 501,592,619   |   |      |     | 457,370,680 |  
|Reserve for dismantlement and abandonment activities, sundry creditors and others             |  |      | 25,719,785    |   |      |     | 26,834,783  |  
|Reserve for retirement payments, pensions and seniority premiums                              |  |      | 413,459,552   |   |      |     | 356,910,293 |  
|Deferred income taxes                                                                         |  |      | 4,965,637     |   |      |     |            |  
|                                                                                              |  |      |               |   |      |     |             |  
|Total liabilities                                                                             |  |      | 1,110,765,189 |   |      |     | 991,253,605 |  
|                                                                                              |  |      |               |   |      |     |             |  
|Minority interest                                                                             |  |      | 1,346,286     |   |      |     | 2,663,262   |  
|TOTAL EQUITY (DEFICIT)                                                                        |  |      | (112,020,551  | ) |      |     | (50,484,277 | )
|                                                                                              |  |      |               |   |      |     |             |  
|Total liabilities and equity                                                                  |  | Ps.  | 1,000,090,924 |   |      | Ps. | 943,432,590 |  
|                                                                                              |  |      |               |   |      |     |             |  

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003



|                                                                                                                                                            |  |      |              |   |      |      |              |      |  |      |              |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------------ | - | ---- | ---- | ------------ | ---- |  | ---- | ------------ | -
|                                                                                                                                                            |  | 2005 |              |   | 2004 |      |              | 2003 | 
|Total revenues, net of IEPS Tax                                                                                                                             |  | Ps.  | 920,262,983  |   |      | Ps.  | 749,905,953  |      |  | Ps.  | 580,780,387  |  
|Total costs and operating expenses                                                                                                                          |  |      | (424,339,465 | ) |      |      | (331,701,255 | )    |  |      | (312,453,233 | )
|Comprehensive financing (cost) income                                                                                                                       |  |      | (10,899,835  | ) |      |      | 2,152,454    |      |  |      | (29,144,206  | )
|                                                                                                                                                            |  |      |              |   |      |      |              |      |  |      |              |  
|Income before deferred income taxes hydrocarbon extraction duties and other, cumulative effect of adoption of new accounting standard and
minority interest |  |      | 485,023,683  |   |      |      | 420,357,152  |      |  |      | 239,182,948  |  
|Deferred income taxes                                                                                                                                       |  |      | (1,567,717   | ) |      |      |             |      |  |      |             |  
|Hydrocarbon extraction duties and other                                                                                                                     |  |      | (558,434,487 | ) |      |      | (433,614,144 | )    |  |      | (313,443,951 | )
|Cumulative effect of adoption of new accounting standard                                                                                                    |  |      |             |   |      |      |             |      |  |      | 2,187,823    |  
|Minority interest                                                                                                                                           |  |      | 1,073,715    |   |      |      | (187,814     | )    |  |      | (2,801       | )
|                                                                                                                                                            |  |      |              |   |      |      |              |      |  |      |              |  
|Net loss                                                                                                                                                    |  | (Ps. | 73,904,806   | ) |      | (Ps. | 13,444,806   | )    |  | (Ps. | 72,075,981   | )
|                                                                                                                                                            |  |      |              |   |      |      |              |      |  |      |              |  



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



CONSOLIDATED STATEMENTS OF CASH FLOWS FOR

THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003



|                                                                                               |  |      |              |   |      |      |             |      |  |      |             |  
|---------------------------------------------------------------------------------------------- |  | ---- | ------------ | - | ---- | ---- | ----------- | ---- |  | ---- | ----------- | -
|                                                                                               |  | 2005 |              |   | 2004 |      |             | 2003 | 
|Operating Activities                                                                           |  |      |              |   |      |      |             |      |  |      |             |  
|Net (loss) income for the year                                                                 |  | (Ps. | 73,904,806   | ) |      | (Ps. | 13,444,806  | )    |  | (Ps. | 72,075,981  | )
|Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: |  |      |              |   |      |      |             |      |  |      |             |  
|Depreciation and amortization                                                                  |  |      | 48,910,575   |   |      |      | 37,257,064  |      |  |      | 41,115,185  |  
|Reserve for retirement payments, pensions and seniority premiums                               |  |      | 55,017,945   |   |      |      | 56,794,455  |      |  |      | 53,681,706  |  
|Impairment of fixed assets                                                                     |  |      | (629,955     | ) |      |      |             |      |  |      | 5,077,018   |  
|Loss on disposal of fixed assets                                                               |  |      | 4,985,245    |   |      |      | 3,738,835   |      |  |      | 12,067,821  |  
|Allowance for uncollectible trade accounts                                                     |  |      | 589,631      |   |      |      | 290,517     |      |  |      | 113,724     |  
|Allowance for slow-moving inventory and obsolescence                                           |  |      |              |   |      |      | 295,833     |      |  |      | (322,340    | )
|Minority interest                                                                              |  |      | (1,073,715   | ) |      |      | 234,296     |      |  |      | 315,725     |  
|Foreign exchange loss (gain)                                                                   |  |      | (27,991,310  | ) |      |      | 5,818,494   |      |  |      | 37,029,343  |  
|Profits sharing in Subsidiaries                                                                |  |      | 647,867      |   |      |      |            |      |  |      |            |  
|Deferred taxes                                                                                 |  |      | 1,567,717    |   |      |      |            |      |  |      |            |  
|Financial instruments                                                                          |  |      | (678,824     | ) |      |      | (5,701,780  | )    |  |      | (1,906,142  | )
|Loss on available for sale investment securities                                               |  |      | 768,936      |   |      |      | 5,196,749   |      |  |      |             |  
|Gain from monetary position                                                                    |  |      | (16,332,447  | ) |      |      | (22,865,031 | )    |  |      | (13,559,210 | )
|                                                                                               |  |      |              |   |      |      |             |      |  |      |             |  
|Changes in operating assets and liabilities:                                                   |  |      |              |   |      |      |             |      |  |      |             |  
|Accounts and notes receivable                                                                  |  |      | (44,902,439  | ) |      |      | (94,920,592 | )    |  |      | (15,840,617 | )
|Inventories                                                                                    |  |      | (6,727,690   | ) |      |      | (2,973,067  | )    |  |      | (1,825,960  | )
|Other assets                                                                                   |  |      | 1,218,489    |   |      |      | (18,265,286 | )    |  |      | 784,959     |  
|Accounts payable and accrued liabilities                                                       |  |      | 20,216,479   |   |      |      | 58,415,336  |      |  |      | (23,704,340 | )
|                                                                                               |  |      |              |   |      |      |             |      |  |      |             |  
|Cash flows provided by operating activities                                                    |  |      | (38,318,302  | ) |      |      | (9,871,017  | )    |  |      | 20,950,891  |  
|Investing Activities                                                                           |  |      |              |   |      |      |             |      |  |      |             |  
|Acquisition of fixed assets                                                                    |  |      | (72,011,358  | ) |      |      | (84,077,661 | )    |  |      | (63,303,712 | )
|                                                                                               |  |      |              |   |      |      |             |      |  |      |             |  
|Cash flows used in investing activities                                                        |  |      | (72,011,358  | ) |      |      | (84,077,661 | )    |  |      | (63,303,712 | )
|Financing Activities                                                                           |  |      |              |   |      |      |             |      |  |      |             |  
|Proceeds from long term financing                                                              |  |      | 243,644,059  |   |      | Ps.  | 142,053,805 |      |  | Ps.  | 160,138,170 |  
|Financing payments                                                                             |  |      | (130,358,557 | ) |      |      | (78,765,071 | )    |  |      | (74,743,294 | )
|Increase in Equity of Subsidiary Entities                                                      |  |      | 44,591,018   |   |      |      | 33,725,241  |      |  |      |            |  
|Dividends paid to the Mexican Government                                                       |  |      | (15,283,418  | ) |      |      | (10,734,035 | )    |  |      | (11,249,158 | )
|                                                                                               |  |      |              |   |      |      |             |      |  |      |             |  
|Cash flows provided by financing activities                                                    |  |      | 142,593,102  |   |      |      | 86,279,940  |      |  |      | 74,145,718  |  
|Effects of inflation on cash and cash equivalents                                              |  |      | (1,869,012   | ) |      |      | (4,067,474  | )    |  |      | (1,903,927  | )
|Increase (decrease) in cash and equivalents                                                    |  |      | 30,394,430   |   |      |      | 8,005,822   |      |  |      | 29,888,970  |  
|Cash and cash equivalents, beginning of period                                                 |  |      | 90,432,159   |   |      |      | 82,426,337  |      |  |      | 52,537,369  |  
|                                                                                               |  |      |              |   |      |      |             |      |  |      |             |  
|Cash and cash equivalents, end of period                                                       |  | Ps.  | 120,826,588  |   |      | Ps.  | 90,432,159  |      |  | Ps.  | 82,426,339  |  
|Supplemental cash disclosures:                                                                 |  |      |              |   |      |      |             |      |  |      |             |  
|Interest paid (net of amounts capitalized)                                                     |  | Ps.  | 54,790,806   |   |      | Ps.  | 37,228,885  |      |  | Ps.  | 32,823,080  |  
|Taxes paid                                                                                     |  |      | 501,332,817  |   |      |      | 462,586,362 |      |  |      | 399,355,534 |  
|Supplemental non-cash disclosures:                                                             |  |      |              |   |      |      |             |      |  |      |             |  
|Unrealized gains (losses) on available for sale securities                                     |  | Ps.  | 768,936      |   |      | Ps.  | 3,830,084   |      |  | Ps.  | 4,929,451   |  
|Additional minimum pension liability                                                           |  |      | (13,723,752  | ) |      |      | 7,208,068   |      |  |      | 3,053,771   |  
|Derivative financial instruments                                                               |  |      | (4,567,056   | ) |      |      | 7,826,598   |      |  |      | 5,459,641   |  



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



(m)    Recently issued accounting standards

In June 2005, the FASB published SFAS No. 154, Accounting Changes and Error Corrections a replacement of APB Opinion No. 20 and FASB
Statement No. 3 (SFAS No. 154), which changes the requirements for the accounting for and reporting of a change in accounting principle and redefines restatement as the revising of previously issued financial statements
to reflect the correction of an error. SFAS No. 154 requires retrospective application to prior periods financial statements of changes in accounting principle, unless it is impracticable to determine the period-specific effects of the
cumulative effect of the change. This Statement also carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. This
Statement does not change the transition provisions of any existing accounting pronouncement. SFAS No. 154 will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. PEMEX is
currently evaluating the impact SFAS No. 154 will have on its results of operations and financial position.

On February 16, 2006, the
FASB issued SFAS No. 155, Accounting for Certain Hybrid Instruments (SFAS 155), which permits, but does not require, fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise
would require bifurcation in accordance with SFAS 133. The statement also establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation. The statement is effective as of January 1, 2007, with earlier adoption permitted. PEMEX is currently evaluating the impact SFAS 155 will have on its results of operations
and financial position.

(n)    Accounting for Buy/Sell Contracts

In the first quarter 2005, the Securities and Exchange Commission (SEC) issued comment letters to companies in the oil and gas industry requesting
disclosure of information related to the accounting for buy/sell contracts. Under a buy/sell contract, a company agrees to buy a specific quantity and quality of a commodity to be delivered at a specific location while simultaneously agreeing to
sell a specified quantity and quality of a commodity at a different location to the same counterparty. Physical delivery occurs for each side of the transaction, and the risk and reward of ownership are evidenced by title transfer, assumption of
environmental risk, transportation scheduling, credit risk and risk of nonperformance by the counterparty. Both parties settle each side of the buy/sell through separate invoicing.

The SEC raised the issue as to whether the accounting for buy/sell contracts should be shown net on the income statement and accounted for under the
provisions of Accounting Principles Board (APB) Opinion No. 29, Accounting for Nonmonetary Transactions(APB 29). PEMEX understands that others in the oil and gas industry may report buy/sell transactions on a net basis
in the income statement rather than gross.

The Emerging Issues Task Force (EITF) of the FASB deliberated this topic as Issue
No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty. At its September 2005 meeting, the EITF reached consensus that two or more legally separate exchange transactions with the same
counterparty, including buy/sell transactions, should be combined and considered as a single arrangement for purposes of applying APB 29 when the transactions were entered into in contemplation of one another. EITF 04-13 was ratified by
the FASB in September 2005 and is effective for new arrangements, or modifications or renewals of existing arrangements, entered into beginning on or after April 1, 2006, which will be the effective date for PEMEXs adoption of this
standard. During the year ended in December 2005, PEMEX did not enter into any arrangement that would be considered a buy/sell contract under EITF 04-13.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



(o)    Deferred income taxes

Effective January 1, 2000, PEMEX follows the provisions of the revised Statement D-4, Accounting Treatment of Income Tax, Asset Tax and
Employee Profit Sharing, for Mexican GAAP purposes. Accounting for income taxes in accordance with this statement is similar to accounting for income tax in accordance with U.S. GAAP SFAS 109, Accounting for Income Taxes (FAS
109).

As described in Note 18, during 2005, a new fiscal regime applicable to PEMEX and its subsidiaries was enacted. Beginning
January 1, 2006, certain subsidiary companies of PEMEX will be subject to the tax regime applicable to all other Mexican corporations. In general, Mexican companies are taxed based on pre-tax income at a statutory rate. The statutory rate for
Mexico beginning January 1, 2006 is 29%. As a result of the change in fiscal regime in 2005, PEMEX began generating deferred taxes.

At December 31, 2005, the primary components of the net deferred tax liability under U.S. GAAP consist of the following.



|                                                                     |  |                   |  
|-------------------------------------------------------------------- |  | ----------------- | -
|                                                                     |  | December 31, 2005 |  
|Current deferred tax asset:                                          |  |                   |  
|Accounts and other receivables                                       |  | Ps. 1,697,231     |  
|Inventories                                                          |  | 949,555           |  
|Accrued liabilities                                                  |  | 103,799           |  
|Prepaids and other current assets                                    |  | 227,763           |  
|                                                                     |  |                   |  
|Total current deferred tax asset                                     |  | 2,978,349         |  
|Less: current valuation allowance                                    |  | (2,298,671        | )
|                                                                     |  |                   |  
|Net current deferred tax asset                                       |  | 679,678           |  
|                                                                     |  |                   |  
|Current deferred tax liability:                                      |  |                   |  
|Prepaids and other current assets                                    |  | (2,444            | )
|                                                                     |  |                   |  
|Total current deferred tax liability                                 |  | (2,444            | )
|                                                                     |  |                   |  
|Noncurrent deferred tax asset:                                       |  |                   |  
|Contingencies                                                        |  | 109,296           |  
|Derivative financial instruments                                     |  | 23,061            |  
|Reserve for environmental costs                                      |  | 1,099,959         |  
|Property taxes                                                       |  | 1,287,079         |  
|Tax loss carryforwards                                               |  | 13,855,041        |  
|Fixed assets                                                         |  | 11,502,128        |  
|                                                                     |  |                   |  
|Total noncurrent deferred tax asset                                  |  | 27,876,563        |  
|Less: noncurrent valuation allowance                                 |  | (25,155,876       | )
|                                                                     |  |                   |  
|Net noncurrent deferred tax asset                                    |  | 2,720,688         |  
|                                                                     |  |                   |  
|Noncurrent deferred tax liability:                                   |  |                   |  
|Derivative financial instruments                                     |  | (2,524,591        | )
|Fixed assets                                                         |  | (2,441,046        | )
|                                                                     |  |                   |  
|Total noncurrent deferred tax liability                              |  | (4,965,637        | )
|                                                                     |  |                   |  
|Net deferred tax liability                                           |  | (Ps. 1,567,716    | )
|                                                                     |  |                   |  
|Net deferred tax liability under U.S. GAAP                           |  | (Ps. 1,567,716    | )
|Net deferred tax liability under Mexican GAAP                        |  | (1,977,728        | )
|                                                                     |  |                   |  
|Net deferred U.S. GAAP adjustments to the net deferred tax liability |  | Ps. 410,012       |  
|                                                                     |  |                   |  



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Note 21Subsidiary guarantor information, PIDIREGAS liabilities and the Pemex Project Funding Master Trust
(Master Trust)

The following consolidating information presents condensed consolidating balance sheets at December 31,
2005 and 2004 and condensed consolidating statements of operations and cash flow for the years ended December 31, 2005, 2004 and 2003 of Petróleos Mexicanos, the Master Trust, Pemex-Exploration and Production, Pemex-Refining, Pemex-Gas
and Basic Petrochemicals and the Non-Guarantor Subsidiaries (excluding the Master Trust).

These statements are prepared in conformity with
accounting principles generally accepted in Mexico, including the recognition of inflation in accordance with Bulletin B-10, with one exception: for the purposes of the presentation of the subsidiary guarantor information, the Subsidiary Entities
and Subsidiary Companies have been accounted for as investments under the equity method by Petróleos Mexicanos. Earnings of subsidiaries are therefore reflected in Petróleos Mexicanos investment account and earnings. The
principal elimination entries eliminate Petróleos Mexicanos investment in subsidiaries and intercompany balances and transactions. Pemex-Exploration and Production, Pemex-Refining and Pemex-Gas and Basic Petrochemicals (collectively,
the Subsidiary Guarantors) and Pemex-Petrochemicals are 100%-owned subsidiaries of Petróleos Mexicanos. Pemex-Petrochemicals, Pemex Finance and the Subsidiary Companies collectively comprise the non-guarantor subsidiaries
(Non-Guarantor Subsidiaries). Petróleos Mexicanos guaranty of the indebtedness of the Master Trust is full and unconditional. The guaranties by the Subsidiary Guarantors of Petróleos Mexicanos guaranty of the
Master Trusts payment obligations are full and unconditional and joint and several.

The Master Trust, a consolidated entity which is
a Delaware statutory trust, was organized under the laws of Delaware on November 10, 1998. On December 31, 1998, PEMEX transferred all assets and liabilities related to PIDIREGAS for an amount equaling Ps. 12,471,156 (in nominal
terms) to the Master Trust. The main objective of the Master Trust is to administer financial resources related to PIDIREGAS, such financial resources being designated by PEMEX for that purpose, by assuming payment obligations under contracts
relating to PIDIREGAS and acting as the borrower under financing arrangements for PIDIREGAS.

Under an Assignment and Indemnity Agreement
dated November 10, 1998, among Petróleos Mexicanos, the Master Trust and the Subsidiary Guarantors, Petróleos Mexicanos and the Subsidiary Guarantors have certain obligations to the Master Trust with respect to the liabilities
incurred by the Master Trust in connection with PIDIREGAS. These obligations include:



| | (i) | the obligation of Petróleos Mexicanos to guarantee the repayment of the debt obligations undertaken by the Master Trust to finance PIDIREGAS;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | the obligation of Petróleos Mexicanos and the Subsidiary Guarantor which is sponsoring the relevant PIDIREGAS to make such payments to the Master Trust as may be necessary
for the Master Trust to fulfill its payment obligations in respect of any financing the Master Trust has entered into in connection with such project; and
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | the joint and several obligation of Petróleos Mexicanos and each of the aforementioned Subsidiary Guarantors to indemnify the Master Trust with respect to any liability
incurred by the Master Trust in connection with PIDIREGAS.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Master Trust is consolidated in the financial statements of
PEMEX for each of the periods presented in accordance with consolidation principles detailed in Mexican GAAP Bulletin B-8 Consolidated and Combined



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Financial Statements and Valuation of Permanent Investments in Stocks. In accordance with U.S. accounting principles, the Master Trust is a special
purpose entity requiring consolidation to the financial statements as it does not meet non-consolidation criteria as specified in U.S. accounting literature.

The following table sets forth, as of the date of this report, the principal amount outstanding of the registered debt securities issued by Master Trust, for which Petróleos Mexicanos is the Guarantor and Pemex
Exploration and Production, Pemex Refining and Pemex Gas and Basic Petrochemicals are the Subsidiary Guarantors:

Table 1: Registered
Debt Securities of the Master Trust



|                                 |  |              |  |                     |  |                             |          
|-------------------------------- |  | ------------ |  | ------------------- |  | --------------------------- | ---------
|Security                         |  | Issuer       |  | Guarantor           |  | Principal AmountOutstanding
|5.75% Guaranteed Notes due 2015  |  | Master Trust |  | Petróleos Mexicanos |  | U.S.$                       | 990,746  
|                                 |  |              | 
|6.125% Notes due 2008            |  | Master Trust |  | Petróleos Mexicanos |  |                             | 716,258  
|                                 |  |              | 
|6.625% Guaranteed Bonds due 2035 |  | Master Trust |  | Petróleos Mexicanos |  |                             | 498,005  
|                                 |  |              | 
|7.375% Notes due 2014            |  | Master Trust |  | Petróleos Mexicanos |  |                             | 1,747,650
|                                 |  |              | 
|7.875% Notes due 2009            |  | Master Trust |  | Petróleos Mexicanos |  |                             | 995,449  
|                                 |  |              | 
|8.00% Notes due 2011             |  | Master Trust |  | Petróleos Mexicanos |  |                             | 743,614  
|                                 |  |              | 
|8.5% Notes due 2008              |  | Master Trust |  | Petróleos Mexicanos |  |                             | 984,674  
|                                 |  |              | 
|8.625% Bonds due 2022            |  | Master Trust |  | Petróleos Mexicanos |  |                             | 969,990  
|                                 |  |              | 
|8.85% Guaranteed Notes due 2007  |  | Master Trust |  | Petróleos Mexicanos |  |                             | 407,241  
|                                 |  |              | 
|9.00% Guaranteed Notes due 2007  |  | Master Trust |  | Petróleos Mexicanos |  |                             | 180,244  
|                                 |  |              | 
|9.125% Notes due 2010            |  | Master Trust |  | Petróleos Mexicanos |  |                             | 998,206  
|                                 |  |              | 
|9.25 % Guaranteed Bonds due 2018 |  | Master Trust |  | Petróleos Mexicanos |  |                             | 339,915  
|                                 |  |              | 
|9.375% Guaranteed Notes due 2008 |  | Master Trust |  | Petróleos Mexicanos |  |                             | 487,600  
|                                 |  |              | 
|9.50% Guaranteed Bonds due 2027  |  | Master Trust |  | Petróleos Mexicanos |  |                             | 790,747  



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The following table sets forth, as of the date of this report, the principal amount outstanding of
the registered debt securities issued by Petróleos Mexicanos, and guaranteed by Pemex Exploration and Production, Pemex Refining and Pemex Gas and Basic Petrochemicals:

Table 2: Registered Debt Securities of Petróleos Mexicanos



|                                        |  |                     |  |                                                                                         |  |                            
|--------------------------------------- |  | ------------------- |  | --------------------------------------------------------------------------------------- |  | ---------------------------
|Security                                |  | Issuer              |  | Guarantor                                                                               |  | Principal AmountOutstanding
|8.85% Global Guaranteed Notes due 2007  |  | Petróleos Mexicanos |  | Pemex Exploration and Production, Pemex Refining and Pemex Gas and Basic Petrochemicals |  | U.S.$162,526               
|9.25 % Global Guaranteed Bonds due 2018 |  | Petróleos Mexicanos |  | Pemex Exploration and Production, Pemex Refining and Pemex Gas and Basic Petrochemicals |  | 9,296                      
|9.375% Guaranteed Notes due 2008        |  | Petróleos Mexicanos |  | Pemex Exploration and Production, Pemex Refining and Pemex Gas and Basic Petrochemicals |  | 99,859                     
|9.50% Global Guaranteed Bonds due 2027  |  | Petróleos Mexicanos |  | Pemex Exploration and Production, Pemex Refining and Pemex Gas and Basic Petrochemicals |  | 102,149                    

The Master Trust does not guaranty debt securities issued by Petróleos Mexicanos.

The significant differences between Mexican and U.S. GAAP as they affect PEMEX are described in Note 20. The following also presents the
reconciliation of equity to U.S. GAAP as of December 31, 2005 and 2004 and the reconciliation of income to U.S. GAAP for the three years ended December 31, 2005 for each of Petróleos Mexicanos, the Master Trust, the Subsidiary
Guarantors and the Non-Guarantor Subsidiaries. The following reconciliation to U.S. GAAP does not include the reversal of Mexican GAAP inflation accounting adjustments, as these adjustments represent a comprehensive measure of the effects of price
level changes in the inflationary Mexican economy, which is considered a more meaningful presentation than historical cost-based financial reporting for both Mexican and U.S. accounting purposes.

As of December 31, 2005, Petróleos Mexicanos, the Master Trust, Fideicomiso F/163 and RepCon Lux are the only entities of PEMEX authorized to
contract debt with debt outstanding as of that date, and thus all guaranteed debt is issued by these entities. The guarantees of the Subsidiary Guarantors are full and unconditional and joint and several. Management has not presented separate
financial statements for the Subsidiary Guarantors because it has determined that such information is not material to investors.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

BALANCE SHEET

As of December 31, 2005



|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----------- | - | --------------- | --- | ------------------------ |  | -------------------------- | ------------- | ------------ | --- | ----------- | ------------------ | ---- | -------------- | - |  | --- | ------------- | -
|                                                                                                                                      |  | Petróleos Mexicanos(1) |             |   | Master Trust(1) |     | Subsidiary Guarantors(1) |  | Non-Guarantor Subsidiaries |               | Eliminations |     |             | PEMEX Consolidated |     
|ASSETS                                                                                                                                |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Current assets:                                                                                                                       |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Cash and cash equivalents                                                                                                             |  | Ps.                    | 37,906,394  |   |                 | Ps. | 54,094,365               |  | Ps.                        | 2,459,101     |              | Ps. | 26,366,729  |                    | Ps.  | 0              |   |  | Ps. | 120,826,589   |  
|Accounts, notes receivable and other, net and derivative financial instruments                                                        |  |                        | 53,402,172  |   |                 |     | 0                        |  |                            | 22,069,905    |              |     | 45,881,846  |                    |      | 0              |   |  |     | 121,353,923   |  
|Accounts receivable-intercompany                                                                                                      |  |                        | 136,985,835 |   |                 |     | 33,344,862               |  |                            | 462,759,184   |              |     | 83,474,465  |                    |      | (716,564,346   | ) |  |     | 0             |  
|Inventories, net                                                                                                                      |  |                        | 370,319     |   |                 |     | 0                        |  |                            | 44,103,910    |              |     | 6,108,079   |                    |      | 0              |   |  |     | 50,582,308    |  
|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Total current assets                                                                                                                  |  |                        | 228,664,720 |   |                 |     | 87,439,227               |  |                            | 531,392,100   |              |     | 161,831,119 |                    |      | (716,564,346   | ) |  |     | 292,762,820   |  
|Long-term receivables  intercompany                                                                                                  |  |                        | 355,921,501 |   |                 |     | 312,309,275              |  |                            | 25,033,504    |              |     | 105,092,917 |                    |      | (798,357,197   | ) |  |     | 0             |  
|Investments in subsidiaries                                                                                                           |  |                        | 237,581,264 |   |                 |     | 0                        |  |                            | 1,538,659     |              |     | 23,917,678  |                    |      | (236,472,361   | ) |  |     | 26,565,240    |  
|Properties and equipment, net                                                                                                         |  |                        | 8,341,435   |   |                 |     | 0                        |  |                            | 620,019,212   |              |     | 14,874,909  |                    |      | 0              |   |  |     | 643,235,556   |  
|Intangible asset derived from the actuarial computation of labor obligations                                                          |  |                        | 12,048,657  |   |                 |     | 0                        |  |                            | 58,278,424    |              |     | 6,337,204   |                    |      | 0              |   |  |     | 76,664,285    |  
|Other assets                                                                                                                          |  |                        | 168,030     |   |                 |     | 0                        |  |                            | 1,090,485     |              |     | 2,073,459   |                    |      | 0              |   |  |     | 3,331,974     |  
|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Total assets                                                                                                                          |  | Ps.                    | 842,725,607 |   |                 | Ps. | 399,748,502              |  | Ps.                        | 1,237,352,384 |              | Ps. | 314,127,286 |                    | (Ps. | 1,751,393,904  | ) |  | Ps. | 1,042,559,875 |  
|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|LIABILITIES                                                                                                                           |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Current liabilities:                                                                                                                  |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Current portion of long-term debt                                                                                                     |  | Ps.                    | 7,846,660   |   |                 | Ps. | 25,305,265               |  | Ps.                        | 743,663       |              | Ps. | 2,199,429   |                    | Ps.  | 0              |   |  | Ps. | 36,095,017    |  
|Accounts payable  intercompany                                                                                                       |  |                        | 475,078,816 |   |                 |     | 5,311,985                |  |                            | 165,951,097   |              |     | 70,222,448  |                    |      | (716,564,346   | ) |  |     | 0             |  
|Other current liabilities                                                                                                             |  |                        | 4,975,993   |   |                 |     | 15,421,152               |  |                            | 74,517,230    |              |     | 33,466,666  |                    |      | 0              |   |  |     | 128,381,041   |  
|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Total current liabilities                                                                                                             |  |                        | 487,901,469 |   |                 |     | 46,038,402               |  |                            | 241,211,990   |              |     | 105,888,543 |                    |      | (716,564,346   | ) |  |     | 164,476,058   |  
|Long-term debt                                                                                                                        |  |                        | 26,430,007  |   |                 |     | 333,587,059              |  |                            | 1,107,226     |              |     | 140,468,327 |                    |      | 0              |   |  |     | 501,592,619   |  
|Long-term payables-intercompany                                                                                                       |  |                        | 301,579,404 |   |                 |     | 20,123,041               |  |                            | 473,718,565   |              |     | 2,929,948   |                    |      | (798,350,958   | ) |  |     | 0             |  
|Reserve for retirement payments, pensions, seniority premiums, dismantlement and abandonment activities, sundry creditors, and
others |  |                        | 54,145,453  |   |                 |     | 0                        |  |                            | 313,261,542   |              |     | 35,953,934  |                    |      | 0              |   |  |     | 403,360,929   |  
|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Total Liabilities                                                                                                                     |  |                        | 870,056,333 |   |                 |     | 399,748,502              |  |                            | 1,029,299,323 |              |     | 285,240,752 |                    |      | (1,514,915,304 | ) |  |     | 1,069,429,606 |  
|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|EQUITY                                                                                                                                |  |                        | (27,330,726 | ) |                 |     | 0                        |  |                            | 208,053,061   |              |     | 28,886,534  |                    |      | (236,478,600   | ) |  |     | (26,869,731   | )
|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  
|Total liabilities and equity                                                                                                          |  | Ps.                    | 842,725,607 |   |                 | Ps. | 399,748,502              |  | Ps.                        | 1,237,352,384 |              | Ps. | 314,127,286 |                    | Ps.  | (1,751,393,904 | ) |  | Ps. | 1,042,559,875 |  
|                                                                                                                                      |  |                        |             |   |                 |     |                          |  |                            |               |              |     |             |                    |      |                |   |  |     |               |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

U.S. GAAP RECONCILIATION OF EQUITY

For the year ended
December 31, 2005



|                                                                  |  |                        |             |   |                 |     |                          |   |  |                            |             |   |              |     |             |                    |  |      |             |   |  |      |             |  
|----------------------------------------------------------------- |  | ---------------------- | ----------- | - | --------------- | --- | ------------------------ | - |  | -------------------------- | ----------- | - | ------------ | --- | ----------- | ------------------ |  | ---- | ----------- | - |  | ---- | ----------- | -
|                                                                  |  | Petróleos Mexicanos(1) |             |   | Master Trust(1) |     | Subsidiary Guarantors(1) |   |  | Non-Guarantor Subsidiaries |             |   | Eliminations |     |             | PEMEX Consolidated | 
|Equity under Mexican GAAP                                         |  | (Ps.                   | 27,330,726  | ) |                 | Ps. |                          |  |  | Ps.                        | 208,053,061 |   |              | Ps. | 28,886,534  |                    |  | (Ps. | 236,498,600 | ) |  | (Ps. | 26,869,731  | )
|U.S. GAAP adjustments:                                            |  |                        |             |   |                 |     |                          |   |  |                            |             |   |              |     |             |                    |  |      |             |   |  |      |             |  
|Exploration and drilling costs                                    |  |                        |            |   |                 |     |                          |  |  |                            | 14,252,898  |   |              |     |            |                    |  |      |            |   |  |      | 14,252,898  |  
|Pensions and seniority premiums                                   |  |                        | (726,899    | ) |                 |     |                          |  |  |                            | (7,433,624  | ) |              |     | (930,509    | )                  |  |      |            |   |  |      | (9,091,032  | )
|Additional Pension liability                                      |  |                        | 916,340     |   |                 |     |                          |  |  |                            | 4,868,212   |   |              |     | 575,528     |                    |  |      |            |   |  |      | 6,360,080   |  
|Post-retirement benefits                                          |  |                        | (5,669,949  | ) |                 |     |                          |  |  |                            | (30,425,714 | ) |              |     | (3,968,800  | )                  |  |      |            |   |  |      | (40,064,463 | )
|Accrued vacation                                                  |  |                        | (75,867     | ) |                 |     |                          |  |  |                            | (417,826    | ) |              |     | (55,400     | )                  |  |      |            |   |  |      | (549,093    | )
|Fixed asset adjustments:                                          |  |                        |             |   |                 |     |                          |   |  |                            |             |   |              |     |             |                    |  |      |             |   |  |      |             |  
|Capitalized gains (losses) of hedging financial instruments, net  |  |                        |            |   |                 |     |                          |  |  |                            | (803,151    | ) |              |     |            |                    |  |      |            |   |  |      | (803,151    | )
|Capitalization of interests, net                                  |  |                        | 11,624      |   |                 |     |                          |  |  |                            | (10,126,453 | ) |              |     | (154,237    | )                  |  |      |            |   |  |      | (10,269,066 | )
|Impairment, net                                                   |  |                        |            |   |                 |     |                          |  |  |                            | (27,149,719 | ) |              |     | (4,237,707  | )                  |  |      |            |   |  |      | (31,387,426 | )
|Depreciation convention                                           |  |                        | (32,774     | ) |                 |     |                          |  |  |                            | (1,364,704  | ) |              |     | (53,261     | )                  |  |      |            |   |  |      | (1,450,739  | )
|Derivative financial instruments                                  |  |                        | 194,292     |   |                 |     |                          |  |  |                            | 7,279,504   |   |              |     | 5,534       |                    |  |      |            |   |  |      | 7,479,330   |  
|Profit in inventory                                               |  |                        |            |   |                 |     |                          |  |  |                            | (3,408,466  | ) |              |     |            |                    |  |      |            |   |  |      | (3,408,466  | )
|Deferred taxes                                                    |  |                        |            |   |                 |     |                          |  |  |                            | 410,012     |   |              |     |            |                    |  |      |            |   |  |      | 410,012     |  
|Advance payment of minimum guaranteed dividends (APMGD)           |  |                        | (15,283,418 | ) |                 |     |                          |  |  |                            |            |   |              |     |            |                    |  |      |            |   |  |      | (15,283,418 | )
|Reclassification of Pemex Finance net income to minority interest |  |                        |            |   |                 |     |                          |  |  |                            |            |   |              |     | (1,346,286  | )                  |  |      |            |   |  |      | (1,346,286  | )
|                                                                  |  |                        |             |   |                 |     |                          |   |  |                            |             |   |              |     |             |                    |  |      |             |   |  |     
|Total U.S. GAAP adjustments, net                                  |  |                        | (20,666,651 | ) |                 |     |                          |  |  |                            | (54,319,031 | ) |              |     | (10,165,138 | )                  |  |      |            |   |  |      | (85,150,820 | )
|                                                                  |  |                        |             |   |                 |     |                          |   |  |                            |             |   |              |     |             |                    |  |      |             |   |  |     
|                                                                  |  |                        |             |   |                 |     |                          |   |  |                            |             |   |              |     |             |                    |  |      |             |   |  |      |             |  
|Equity (Deficit) under U.S. GAAP                                  |  | (Ps.                   | 47,997,377  | ) |                 | Ps. |                          |  |  | Ps.                        | 153,734,030 |   |              | Ps. | 18,721,396  |                    |  | (Ps. | 236,478,600 | ) |  | (Ps. | 112,020,551 | )
|                                                                  |  |                        |             |   |                 |     |                          |   |  |                            |             |   |              |     |             |                    |  |      |             |   |  |     

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-78



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

BALANCE SHEET

As of December 31, 2004



|                                                                                                                                      |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ----------- | -------------- | --- | ----------------------- |  | -------------------------- | ------------- | ------------ | --- | ----------- | ----------------- | ---- | -------------- | - |  | --- | -----------
|                                                                                                                                      |  | PetróleosMexicanos(1) |             | MasterTrust(1) |     | SubsidiaryGuarantors(1) |  | Non-Guarantor Subsidiaries |               | Eliminations |     |             | PEMEXConsolidated
|ASSETS                                                                                                                                |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|Current assets:                                                                                                                       |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|Cash and cash equivalents                                                                                                             |  | Ps.                   | 45,319,040  |                | Ps. | 23,720,785              |  | Ps.                        | 2,168,105     |              | Ps. | 16,492,838  |                   | Ps.  |               |   |  | Ps. | 87,700,768 
|Accounts, notes receivable and other, net                                                                                             |  |                       | 80,218,471  |                |     | 57,614,453              |  |                            | 52,898,677    |              |     | 9,196,830   |                   |      | (72,850,261    | ) |  |     | 127,078,170
|Accounts receivables-intercompany                                                                                                     |  |                       | 22,043,577  |                |     | 40,682,493              |  |                            | 360,256,575   |              |     | 80,456,765  |                   |      | (503,439,412   | ) |  |     |           
|Inventories, net                                                                                                                      |  |                       | 335,654     |                |     |                        |  |                            | 31,525,304    |              |     | 5,094,668   |                   |      |               |   |  |     | 36,955,626 
|                                                                                                                                      |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|Total current assets                                                                                                                  |  |                       | 147,916,742 |                |     | 122,017,731             |  |                            | 446,848,661   |              |     | 111,241,101 |                   |      | (576,289,673   | ) |  |     | 251,734,564
|Long-term receivablesintercompany                                                                                                    |  |                       | 71,999,611  |                |     | 306,799,833             |  |                            | 1,886,355     |              |     | 49,024,480  |                   |      | (429,710,279   | ) |  |     |           
|Investments in subsidiaries                                                                                                           |  |                       | 266,343,279 |                |     |                        |  |                            | 2,554,794     |              |     | 24,205,294  |                   |      | (266,343,278   | ) |  |     | 26,760,089 
|Properties and equipment, net                                                                                                         |  |                       | 8,627,150   |                |     |                        |  |                            | 588,358,195   |              |     | 17,398,779  |                   |      |               |   |  |     | 614,384,124
|Intangible asset derived from the actuarial computation of labor obligations                                                          |  |                       | 12,035,333  |                |     |                        |  |                            | 60,291,713    |              |     | 6,659,261   |                   |      |               |   |  |     | 78,986,307 
|Other assets                                                                                                                          |  |                       | 1,951,220   |                |     | 765,903                 |  |                            | 42,856,413    |              |     | 6,425,205   |                   |      | (44,758,244    | ) |  |     | 7,240,497  
|                                                                                                                                      |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|Total assets                                                                                                                          |  | Ps.                   | 508,873,335 |                |     | 429,583,467             |  | Ps.                        | 1,142,796,131 |              | Ps. | 214,954,120 |                   | (Ps. | 1,317,101,474  | ) |  | Ps. | 979,105,581
|                                                                                                                                      |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|LIABILITIES                                                                                                                           |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|Current liabilities:                                                                                                                  |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|Current portion of long-term debt                                                                                                     |  | Ps.                   | 17,429,724  |                | Ps. | 28,455,596              |  |                            | 2,002,237     |              | Ps. | 2,891,868   |                   |      |               |   |  | Ps. | 50,779,425 
|Accounts payableintercompany                                                                                                         |  |                       | 298,493,714 |                |     | 447,257                 |  |                            | 157,259,956   |              |     | 47,238,485  |                   |      | (503,439,412   | ) |  |     |           
|Other current liabilities                                                                                                             |  |                       | 25,179,890  |                |     | 98,678,307              |  |                            | 66,253,967    |              |     | 9,525,968   |                   |      | (105,253,170   | ) |  |     | 94,384,940 
|                                                                                                                                      |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|Total current liabilities                                                                                                             |  |                       | 341,103,328 |                |     | 127,581,160             |  |                            | 225,516,160   |              |     | 59,656,321  |                   |      | (608,692,582   | ) |  |     | 145,164,365
|Long-term debt                                                                                                                        |  |                       | 27,241,164  |                |     | 302,002,307             |  |                            | 11,661,178    |              |     | 78,455,002  |                   |      |               |   |  |     | 419,359,651
|Long-term payablesintercompany                                                                                                       |  |                       | 59,233,963  |                |     |                        |  |                            | 362,653,555   |              |     | 7,822,760   |                   |      | (429,710,279   | ) |  |     |           
|Sale of future accounts receivables                                                                                                   |  |                       |            |                |     |                        |  |                            | 50,211,945    |              |     |            |                   |      | (12,355,298    | ) |  |     | 37,856,647 
|Reserve for retirement payments, pensions, seniority premiums, dismantlement and abandonment activities, sundry creditors, and
others |  |                       | 46,840,743  |                |     |                        |  |                            | 259,576,142   |              |     | 35,853,896  |                   |      |               |   |  |     | 342,270,781
|                                                                                                                                      |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|Total liabilities                                                                                                                     |  |                       | 474,419,198 |                |     | 429,583,467             |  |                            | 909,618,980   |              |     | 181,787,979 |                   |      | (1,050,758,159 | ) |  |     | 944,651,444
|                                                                                                                                      |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            
|EQUITY                                                                                                                                |  |                       | 34,454,137  |                |     |                        |  |                            | 233,177,138   |              |     | 33,166,141  |                   |      | (266,343,279   | ) |  |     | 34,454,137 
|Total liabilities and equity                                                                                                          |  | Ps.                   | 508,873,335 |                | Ps. | 429,583,467             |  | Ps.                        | 1,142,796,118 |              | Ps. | 214,954,099 |                   | (Ps. | 1,317,101,438  | ) |  | Ps. | 979,105,581
|                                                                                                                                      |  |                       |             |                |     |                         |  |                            |               |              |     |             |                   |      |                |   |  |     |            

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-79



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

U.S. GAAP RECONCILIATION OF EQUITY

For the year ended
December 31, 2004



|                                                              |  |                       |             |   |                |     |                         |  |     |                            |   |  |              |             |   |                   |      |             |   |  |      |             |  
|------------------------------------------------------------- |  | --------------------- | ----------- | - | -------------- | --- | ----------------------- |  | --- | -------------------------- | - |  | ------------ | ----------- | - | ----------------- | ---- | ----------- | - |  | ---- | ----------- | -
|                                                              |  | PetróleosMexicanos(1) |             |   | MasterTrust(1) |     | SubsidiaryGuarantors(1) |  |     | Non-Guarantor Subsidiaries |   |  | Eliminations |             |   | PEMEXConsolidated |     
|Equity under Mexican GAAP                                     |  | Ps.                   | 34,454,137  |   |                | Ps. |                        |  | Ps. | 233,177,138                |   |  | Ps.          | 33,166,141  |   |                   | (Ps. | 266,343,279 | ) |  | Ps.  | 34,454,137  |  
|U.S. GAAP adjustments:                                        |  |                       |             |   |                |     |                         |  |     |                            |   |  |              |             |   |                   |      |             |   |  |      |             |  
|Exploration and drilling costs                                |  |                       |            |   |                |     |                        |  |     | 15,688,385                 |   |  |              |            |   |                   |      |            |   |  |      | 15,688,385  |  
|Pensions and seniority premiums:                              |  |                       |             |   |                |     |                         |  |     |                            |   |  |              |             |   |                   |      |             |   |  |      |             |  
|Pensions and seniority premiums                               |  |                       | (876,566    | ) |                |     |                        |  |     | (8,135,449                 | ) |  |              | (1,016,784  | ) |                   |      |            |   |  |      | (10,028,799 | )
|Additional pension liability                                  |  |                       | 569,269     |   |                |     |                        |  |     | 2,498,876                  |   |  |              | 1,457,900   |   |                   |      |            |   |  |      | 4,526,045   |  
|Post-retirement benefits                                      |  |                       | (6,075,420  | ) |                |     |                        |  |     | (32,871,987                | ) |  |              | (4,243,283  | ) |                   |      |            |   |  |      | (43,190,690 | )
|Accrued vacation                                              |  |                       | (76,190     | ) |                |     |                        |  |     | (419,576                   | ) |  |              | (55,632     | ) |                   |      |            |   |  |      | (551,398    | )
|Fixed asset adjustments:                                      |  |                       |             |   |                |     |                         |  |     |                            |   |  |              |             |   |                   |      |             |   |  |      |             |  
|Capitalized gains and losses of hedging financial instruments |  |                       |            |   |                |     |                        |  |     | 7,019,775                  |   |  |              |            |   |                   |      |            |   |  |      | 7,019,775   |  
|Capitalization of interest, net                               |  |                       |            |   |                |     |                        |  |     | (11,663,999                | ) |  |              | (391,088    | ) |                   |      |            |   |  |      | (12,055,087 | )
|Impairment, net                                               |  |                       |            |   |                |     |                        |  |     | (29,355,699                | ) |  |              | (7,817,867  | ) |                   |      |            |   |  |      | (37,173,566 | )
|Depreciation convention                                       |  |                       | (41,895     | ) |                |     |                        |  |     | (2,067,264                 | ) |  |              | (66,950     | ) |                   |      |            |   |  |      | (2,176,110  | )
|Derivative financial instruments                              |  |                       | 966,712     |   |                |     | 3,903,867               |  |     | 266,169                    |   |  |              | (716,320    | ) |                   |      | 153,782     |   |  |      | 4,574,210   |  
|Profit in inventory                                           |  |                       |            |   |                |     |                        |  |     | (837,144                   | ) |  |              |            |   |                   |      |            |   |  |      | (837,144    | )
|Advance payment of minimum guaranteed dividends               |  |                       | (10,734,035 | ) |                |     |                        |  |     |                           |   |  |              |            |   |                   |      |            |   |  |      | (10,734,035 | )
|                                                              |  |                       |             |   |                |     |                         |  |     |                            |   |  |              |             |   |                   |      |             |   |  |      |             |  
|Total U.S. GAAP adjustments, net                              |  |                       | (16,268,126 | ) |                |     | 3,903,867               |  |     | (59,877,913                | ) |  |              | (12,850,867 | ) |                   |      | 153,782     |   |  |      | (84,938,414 | )
|                                                              |  |                       |             |   |                |     |                         |  |     |                            |   |  |              |             |   |                   |      |             |   |  |      |             |  
|Equity (deficit) under U.S. GAAP                              |  | (Ps.                  | 18,186,011  | ) |                | Ps. | 3,903,867               |  | Ps. | 173,299,225                |   |  | Ps.          | 20,316,117  |   |                   | (Ps. | 266,189,497 | ) |  | (Ps. | 50,484,277  | )
|                                                              |  |                       |             |   |                |     |                         |  |     |                            |   |  |              |             |   |                   |      |             |   |  |      |             |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-80



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

STATEMENT OF INCOME

For the year ended December 31, 2005



|                                                                                                                                                                   |  |                        |             |   |                |     |                          |  |      |                            |   |  |              |             |   |                    |      |              |   |  |      |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------- | ----------- | - | -------------- | --- | ------------------------ |  | ---- | -------------------------- | - |  | ------------ | ----------- | - | ------------------ | ---- | ------------ | - |  | ---- | ----------- | -
|                                                                                                                                                                   |  | Petróleos Mexicanos(1) |             |   | MasterTrust(1) |     | Subsidiary Guarantors(1) |  |      | Non-Guarantor Subsidiaries |   |  | Eliminations |             |   | PEMEX Consolidated |     
|Net sales                                                                                                                                                          |  | Ps.                    | 22,286,229  |   |                | Ps. |                         |  | Ps.  | 1,324,653,311              |   |  | Ps.          | 549,918,646 |   |                    | (Ps. | 968,215,210  | ) |  | Ps.  | 928,642,976 |  
|Other (expenses) revenues, net                                                                                                                                     |  |                        | 1,442,932   |   |                |     |                         |  |      | (2,609,094                 | ) |  |              | 26,882,500  |   |                    |      | (13,879,254  | ) |  |      | 11,837,084  |  
|                                                                                                                                                                   |  |                        |             |   |                |     |                          |  |      |                            |   |  |              |             |   |                    |      |              |   |  |      |             |  
|Total revenues                                                                                                                                                     |  |                        | 23,729,161  |   |                |     |                         |  |      | 1,322,044,217              |   |  |              | 576,801,146 |   |                    |      | (982,094,464 | ) |  |      | 940,480,060 |  
|Costs and operating expenses:                                                                                                                                      |  |                        |             |   |                |     |                          |  |      |                            |   |  |              |             |   |                    |      |              |   |  |      |             |  
|Cost of sales                                                                                                                                                      |  |                        | 133,697     |   |                |     |                         |  |      | 752,192,467                |   |  |              | 571,692,694 |   |                    |      | (962,841,519 | ) |  |      | 361,177,339 |  
|Transportation and distribution expenses                                                                                                                           |  |                        |            |   |                |     |                         |  |      | 20,831,593                 |   |  |              | 1,079,196   |   |                    |      |             |   |  |      | 21,910,789  |  
|Administrative expenses                                                                                                                                            |  |                        | 23,764,225  |   |                |     | 25,554                   |  |      | 42,820,826                 |   |  |              | 4,984,793   |   |                    |      | (24,795,007  | ) |  |      | 46,800,391  |  
|                                                                                                                                                                   |  |                        |             |   |                |     |                          |  |      |                            |   |  |              |             |   |                    |      |              |   |  |      |             |  
|Total costs and operating expenses                                                                                                                                 |  |                        | 23,897,922  |   |                |     | 25,554                   |  |      | 815,844,886                |   |  |              | 577,756,683 |   |                    |      | (987,636,526 | ) |  |      | 429,888,519 |  
|Comprehensive financing cost (income)                                                                                                                              |  |                        | (130,858    | ) |                |     | 3,811,021                |  |      | (6,874,902                 | ) |  |              | 11,784,164  |   |                    |      | (4,110,097   | ) |  |      | 4,479,328   |  
|Equity participation in subsidiaries                                                                                                                               |  |                        | (75,974,185 | ) |                |     |                         |  |      |                           |   |  |              |            |   |                    |      | 75,974,185   |   |  |      |            |  
|Capitalization of Master Trust operations and others                                                                                                               |  |                        |            |   |                |     | 3,836,575                |  |      |                            |   |  |              | 5,816,751   |   |                    |      | (9,653,326   | ) |  |      |            |  
|                                                                                                                                                                   |  |                        |             |   |                |     |                          |  |      |                            |   |  |              |             |   |                    |      |              |   |  |      |             |  
|(Loss) income before hydrocarbon extraction duties and other, special tax on production and services and cumulative effect of adoption of
new accounting standards |  |                        | (76,012,088 | ) |                |     |                         |  |      | 513,074,233                |   |  |              | (6,922,950  | ) |                    |      | 75,973,018   |   |  |      | 506,112,213 |  
|Hydrocarbon extraction duties and other                                                                                                                            |  |                        |            |   |                |     |                         |  |      | 554,656,660                |   |  |              | 3,871,828   |   |                    |      |             |   |  |      | 558,437,488 |  
|Special tax on production and services (IEPS Tax)                                                                                                                  |  |                        |            |   |                |     |                         |  |      | 20,214,077                 |   |  |              |            |   |                    |      |             |   |  |      | 20,214,077  |  
|Deferred taxes                                                                                                                                                     |  |                        |             |   |                |     |                          |  |      | 1,977,728                  |   |  |              |             |   |                    |      |              |   |  |      | 1,977,728   |  
|                                                                                                                                                                   |  |                        |             |   |                |     |                          |  |      |                            |   |  |              |             |   |                    |      |              |   |  |      |             |  
|                                                                                                                                                                   |  |                        |            |   |                |     |                         |  |      | 576,757,465                |   |  |              | 3,871,828   |   |                    |      |             |   |  |      | 580,629,293 |  
|Cumulative effect of adoption of new accounting standards                                                                                                          |  |                        | 455,579     |   |                |     |                          |  |      | 1,149,845                  |   |  |              | 169,846     |   |                    |      |             |   |  |      | 1,765,270   |  
|                                                                                                                                                                   |  |                        |             |   |                |     |                          |  |      |                            |   |  |              |             |   |                    |      |              |   |  |      |             |  
|Net (loss) income for the year                                                                                                                                     |  | (Ps.                   | 76,457,667  | ) |                | Ps. |                         |  | (Ps. | 64,833,077                 | ) |  | (Ps.         | 10,964,624  | ) |                    | Ps.  | 75,973,018   |   |  | (Ps. | 76,282,350  | )
|                                                                                                                                                                   |  |                        |             |   |                |     |                          |  |      |                            |   |  |              |             |   |                    |      |              |   |  |      |             |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-81



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

U.S. GAAP RECONCILIATION OF INCOME

For the year ended
December 31, 2005



|                                                                  |  |                       |            |   |                |      |            |                         |  |      |                            |   |  |              |            |                    |  |     |            |  |      |            |  
|----------------------------------------------------------------- |  | --------------------- | ---------- | - | -------------- | ---- | ---------- | ----------------------- |  | ---- | -------------------------- | - |  | ------------ | ---------- | ------------------ |  | --- | ---------- |  | ---- | ---------- | -
|                                                                  |  | PetróleosMexicanos(1) |            |   | MasterTrust(1) |      |            | SubsidiaryGuarantors(1) |  |      | Non-Guarantor Subsidiaries |   |  | Eliminations |            | PEMEX Consolidated | 
|Net loss under Mexican GAAP                                       |  | (Ps.                  | 76,457,666 | ) |                |      | Ps.       |                         |  | (Ps. | 64,833,077                 | ) |  | (Ps.         | 10,964,624 | )                  |  | Ps. | 75,973,017 |  | (Ps. | 76,282,350 | )
|U.S. GAAP adjustments                                             |  |                       |            |   |                |      |            |                         |  |      |                            |   |  |              |            |                    |  |     |            |  |      |            |  
|Exploration and drilling costs                                    |  |                       |           |   |                |      |           |                         |  |      | (1,435,487                 | ) |  |              |           |                    |  |     |           |  |      | (1,435,487 | )
|Pensions and seniority premiums                                   |  |                       | 149,668    |   |                |      |           |                         |  |      | 701,825                    |   |  |              | 86,274     |                    |  |     |           |  |      | 937,767    |  
|Post-retirement benefits                                          |  |                       | 405,472    |   |                |      |           |                         |  |      | 2,446,273                  |   |  |              | 274,482    |                    |  |     |           |  |      | 3,126,227  |  
|Accrued vacation                                                  |  |                       | (2,170     | ) |                |      |           |                         |  |      | (11,760                    | ) |  |              | (1,550     | )                  |  |     |           |  |      | (15,480    | )
|Fixed asset adjustments                                           |  |                       |            |   |                |      |            |                         |  |      |                            |   |  |              |            |                    |  |     |           |  |      |            |  
|Capitalized gains (losses) of hedging financial instruments, net  |  |                       |           |   |                |      |           |                         |  |      | (7,822,926                 | ) |  |              |           |                    |  |     |           |  |      | (7,822,926 | )
|Capitalization of interests, net                                  |  |                       | 11,624     |   |                |      |           |                         |  |      | 1,537,546                  |   |  |              | 236,851    |                    |  |     |           |  |      | 1,786,021  |  
|Impairment, net                                                   |  |                       |           |   |                |      |           |                         |  |      | 2,205,980                  |   |  |              | 3,580,160  |                    |  |     |           |  |      | 5,786,140  |  
|Depreciation convention                                           |  |                       | 9,121      |   |                |      |           |                         |  |      | 702,560                    |   |  |              | 13,690     |                    |  |     |           |  |      | 725,371    |  
|Derivative financial instruments                                  |  |                       | (772,419   | ) |                |      | (3,903,867 | )                       |  |      | 4,939,882                  |   |  |              | 691,228    |                    |  |     |           |  |      | 954,824    |  
|Profit in inventory                                               |  |                       |            |   |                |      |            |                         |  |      | (2,571,322                 | ) |  |              |           |                    |  |     |           |  |      | (2,571,322 | )
|Available-for-sale securities                                     |  |                       | (768,936   | ) |                |      |           |                         |  |      |                           |   |  |              |           |                    |  |     |           |  |      | (768,936   | )
|Deferred Taxes                                                    |  |                       |           |   |                |      |           |                         |  |      | 410,012                    |   |  |              |           |                    |  |     |           |  |      | 410,012    |  
|Effect of inflation accounting on U.S. GAAP adjustment            |  |                       | 176,327    |   |                |      |           |                         |  |      | 13,510                     |   |  |              | 1,781      |                    |  |     |           |  |      | 191,618    |  
|Reclassification of Pemex Finance net income to minority interest |  |                       |           |   |                |      |           |                         |  |      |                           |   |  |              | 1,073,715  |                    |  |     |           |  |      | 1,073,715  |  
|                                                                  |  |                       |            |   |                |      |            |                         |  |      |                            |   |  |              |            |                    |  |     |            |  |      |            |  
|Total U.S. GAAP adjustments                                       |  |                       | (791,313   | ) |                |      | (3,903,867 | )                       |  |      | 1,116,093                  |   |  |              | 5,956,631  |                    |  |     |           |  |      | 2,377,544  |  
|                                                                  |  |                       |            |   |                |      |            |                         |  |      |                            |   |  |              |            |                    |  |     |            |  |      |            |  
|Net (loss) income for the year                                    |  | (Ps.                  | 77,248,979 | ) |                | (Ps. | 3,903,867  | )                       |  | (Ps. | 63,716,984                 | ) |  | (Ps.         | 5,007,993  | )                  |  | Ps. | 75,973,017 |  | (Ps. | 73,904,806 | )
|                                                                  |  |                       |            |   |                |      |            |                         |  |      |                            |   |  |              |            |                    |  |     |            |  |      |            |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-82



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

STATEMENT OF INCOME

For the year ended December 31, 2004



|                                                                                                                                                                   |  |                        |   |  |                |  |                          |   |  |                            |   |  |                   |   |  |                    |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------- | - |  | -------------- |  | ------------------------ | - |  | -------------------------- | - |  | ----------------- | - |  | ------------------ | -
|                                                                                                                                                                   |  | Petróleos Mexicanos(1) |   |  | MasterTrust(1) |  | Subsidiary Guarantors(1) |   |  | Non-Guarantor Subsidiaries |   |  | Eliminations      |   |  | PEMEX Consolidated |  
|Net sales                                                                                                                                                          |  | Ps. 19,022,683         |   |  | Ps.           |  | Ps. 1,123,634,283        |   |  | Ps.437,537,244             |   |  | (Ps. 780,825,747  | ) |  | Ps. 799,368,463    |  
|Other (expenses) revenues, net                                                                                                                                     |  | 434,124                |   |  |               |  | 2,437,140                |   |  | 10,020,767                 |   |  | (1,365,912        | ) |  | 11,526,119         |  
|                                                                                                                                                                   |  |                        |   |  |                |  |                          |   |  |                            |   |  |                   |   |  |                    |  
|Total revenues                                                                                                                                                     |  | 19,456,807             |   |  |               |  | 1,126,071,423            |   |  | 447,558,011                |   |  | (782,191,659      | ) |  | 810,894,582        |  
|Costs and operating expenses:                                                                                                                                      |  |                        |   |  |                |  |                          |   |  |                            |   |  |                   |   |  |                    |  
|Cost of sales                                                                                                                                                      |  | 183,004                |   |  |               |  | 594,690,395              |   |  | 438,733,146                |   |  | (760,699,214      | ) |  | 272,907,331        |  
|Transportation and distribution expenses                                                                                                                           |  |                       |   |  |               |  | 17,841,112               |   |  | 508,345                    |   |  | (189,450          | ) |  | 18,160,007         |  
|Administrative expenses                                                                                                                                            |  | 22,608,062             |   |  | 8,001          |  | 29,987,459               |   |  | 4,746,412                  |   |  | (19,420,598       | ) |  | 37,929,336         |  
|                                                                                                                                                                   |  |                        |   |  |                |  |                          |   |  |                            |   |  |                   |   |  |                    |  
|Total costs and operating expenses                                                                                                                                 |  | 22,791,066             |   |  | 8,001          |  | 642,518,966              |   |  | 443,987,903                |   |  | (780,309,262      | ) |  | 328,996,674        |  
|Comprehensive financing cost (income)                                                                                                                              |  | (9,221,972             | ) |  | 5,453,017      |  | 13,154,033               |   |  | 8,506,390                  |   |  | (10,608,421       | ) |  | 7,283,047          |  
|Equity participation in subsidiaries                                                                                                                               |  | (31,106,343            | ) |  |               |  |                         |   |  |                           |   |  | 31,106,343        |   |  |                   |  
|Capitalization of Master Trust operations and others                                                                                                               |  |                       |   |  | 5,461,018      |  |                         |   |  | 3,250,179                  |   |  | (8,711,197        | ) |  |                   |  
|                                                                                                                                                                   |  |                        |   |  |                |  |                          |   |  |                            |   |  |                   |   |  |                    |  
|(Loss) income before hydrocarbon extraction duties and other, special tax on production and services and cumulative effect of adoption of new
accounting standards |  | (25,218,630            | ) |  |               |  | 470,398,424              |   |  | (1,686,103                 | ) |  | 31,121,170        |   |  | 474,614,861        |  
|Hydrocarbon extraction duties and other                                                                                                                            |  |                       |   |  |               |  | 431,977,408              |   |  | 1,621,909                  |   |  | 14,826            |   |  | 433,614,143        |  
|Special tax on production and services (IEPS Tax)                                                                                                                  |  |                       |   |  |               |  | 56,527,996               |   |  |                           |   |  |                  |   |  | 56,527,996         |  
|                                                                                                                                                                   |  |                        |   |  |                |  |                          |   |  |                            |   |  |                   |   |  |                    |  
|                                                                                                                                                                   |  |                        |   |  |                |  | 488,505,404              |   |  | 1,621,909                  |   |  | 14,826            |   |  | 490,142,139        |  
|Cumulative effect of adoption of new accounting standards                                                                                                          |  | (1,126,926             | ) |  |               |  | (6,773,593               | ) |  | (2,917,505                 | ) |  |                  |   |  | (10,818,024        | )
|                                                                                                                                                                   |  |                        |   |  |                |  |                          |   |  |                            |   |  |                   |   |  |                    |  
|Net (loss) income for the year                                                                                                                                     |  | (Ps. 26,345,556        | ) |  | Ps.           |  | (Ps.     24,880,573      | ) |  | (Ps.     6,225,517         | ) |  | Ps.    31,106,344 |   |  | (Ps.   26,345,302  | )
|                                                                                                                                                                   |  |                        |   |  |                |  |                          |   |  |                            |   |  |                   |   |  |                    |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-83



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

U.S. GAAP RECONCILIATION OF INCOME

For the year ended
December 31, 2004



|                                                              |  |                        |   |  |                |  |                          |   |  |                            |   |  |                |  |                    |  
|------------------------------------------------------------- |  | ---------------------- | - |  | -------------- |  | ------------------------ | - |  | -------------------------- | - |  | -------------- |  | ------------------ | -
|                                                              |  | Petróleos Mexicanos(1) |   |  | MasterTrust(1) |  | Subsidiary Guarantors(1) |   |  | Non-Guarantor Subsidiaries |   |  | Eliminations   |  | PEMEX Consolidated |  
|Net loss under Mexican GAAP                                   |  | (Ps. 26,345,555)       |   |  | Ps.           |  | (Ps. 24,880,573          | ) |  | Ps. 6,225,517              |   |  | Ps. 31,106,343 |  | (Ps. 26,345,302    | )
|U.S. GAAP adjustments                                         |  |                        |   |  |                |  |                          |   |  |                            |   |  |                |  |                    |  
|Exploration and drilling costs                                |  |                       |   |  |               |  | (1,466,765               | ) |  |                           |   |  |               |  | (1,466,765         | )
|Pensions and seniority premiums                               |  | 12,283                 |   |  |               |  | 583,955                  |   |  | 176,833                    |   |  |               |  | 773,071            |  
|Post-retirement benefits                                      |  | (320,543               | ) |  |               |  | (2,145,851               | ) |  | (280,596                   | ) |  |               |  | (2,746,990         | )
|Accrued vacation                                              |  | 18,116                 |   |  |               |  | 99,768                   |   |  | 13,228                     |   |  |               |  | 131,112            |  
|Fixed asset adjustments                                       |  |                        |   |  |                |  |                          |   |  |                            |   |  |                |  |                    |  
|Capitalized gains and losses of hedging financial instruments |  |                       |   |  |               |  | 855,385                  |   |  |                           |   |  |               |  | 855,385            |  
|Capitalization of interests, net                              |  |                       |   |  |               |  | 1,973,191                |   |  | 41,658                     |   |  |               |  | 2,014,849          |  
|Impairment, net                                               |  |                       |   |  |               |  | 7,201,021                |   |  | 2,261,807                  |   |  |               |  | 9,462,828          |  
|Depreciation convention                                       |  | 13,965                 |   |  |               |  | 689,089                  |   |  | 22,317                     |   |  |               |  | 725,371            |  
|Derivative financial instruments                              |  | 2,559,413              |   |  | 3,835,647      |  | 1,101,736                |   |  | (1,620,077                 | ) |  | 101,061        |  | 5,977,780          |  
|Sales of shares of Repsol                                     |  | 698,833                |   |  |               |  |                         |   |  |                           |   |  |               |  | 698,833            |  
|Profit in inventory                                           |  |                       |   |  |               |  | 1,073,994                |   |  |                           |   |  |               |  | 1,073,994          |  
|Available-for-sale securities (Repsol)                        |  | (5,196,749)            |   |  |               |  |                         |   |  |                           |   |  |               |  | (5,196,749         | )
|Effect of inflation accounting on U.S. GAAP adjustment        |  | 572,605                |   |  |               |  | 22,225                   |   |  | 2,947                      |   |  |               |  | 597,777            |  
|                                                              |  |                        |   |  |                |  |                          |   |  |                            |   |  |                |  |                    |  
|Total U.S. GAAP adjustments                                   |  | (1,642,077             | ) |  | 3,835,647      |  | 9,987,748                |   |  | 618,117                    |   |  | 101,061        |  | 12,900,496         |  
|                                                              |  |                        |   |  |                |  |                          |   |  |                            |   |  |                |  |                    |  
|Net (loss) income under U.S. GAAP                             |  | (Ps. 27,987,632        | ) |  | Ps. 3,835,647  |  | (Ps. 14,892,825          | ) |  | Ps. 5,607,400              |   |  | Ps. 31,207,404 |  | (Ps. 13,444,806    | )
|                                                              |  |                        |   |  |                |  |                          |   |  |                            |   |  |                |  |                    |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-84



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

STATEMENT OF INCOME

For the year ended December 31, 2003



|                                                                                                                                                                   |  |                       |             |   |                |     |                         |  |      |                            |   |  |              |             |   |                   |      |              |   |  |      |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------- | ----------- | - | -------------- | --- | ----------------------- |  | ---- | -------------------------- | - |  | ------------ | ----------- | - | ----------------- | ---- | ------------ | - |  | ---- | ----------- | -
|                                                                                                                                                                   |  | PetróleosMexicanos(1) |             |   | MasterTrust(1) |     | SubsidiaryGuarantors(1) |  |      | Non-Guarantor Subsidiaries |   |  | Eliminations |             |   | PEMEXConsolidated |     
|Net sales                                                                                                                                                          |  | Ps.                   | 19,669,980  |   |                | Ps. |                        |  | Ps.  | 953,495,521                |   |  | Ps.          | 329,870,135 |   |                   | (Ps. | 623,216,618  | ) |  | Ps.  | 679,819,018 |  
|Other (expenses) revenues, net                                                                                                                                     |  |                       | (3,691,290  | ) |                |     |                        |  |      | 6,015,898                  |   |  |              | 9,740,410   |   |                   |      | (8,846,503   | ) |  |      | 3,218,515   |  
|                                                                                                                                                                   |  |                       |             |   |                |     |                         |  |      |                            |   |  |              |             |   |                   |      |              |   |  |      |             |  
|Total revenues                                                                                                                                                     |  |                       | 15,978,690  |   |                |     |                        |  |      | 959,511,419                |   |  |              | 339,610,545 |   |                   |      | (632,063,121 | ) |  |      | 683,037,533 |  
|                                                                                                                                                                   |  |                       |             |   |                |     |                         |  |      |                            |   |  |              |             |   |                   |      |              |   |  |      |             |  
|Costs and operating expenses:                                                                                                                                      |  |                       |             |   |                |     |                         |  |      |                            |   |  |              |             |   |                   |      |              |   |  |      |             |  
|Cost of sales                                                                                                                                                      |  |                       |            |   |                |     |                        |  |      | 493,198,748                |   |  |              | 335,699,048 |   |                   |      | (603,767,731 | ) |  |      | 225,130,065 |  
|Transportation and distribution expenses                                                                                                                           |  |                       |            |   |                |     |                        |  |      | 16,990,907                 |   |  |              | 357,274     |   |                   |      | (446,996     | ) |  |      | 16,901,185  |  
|Administrative expenses                                                                                                                                            |  |                       | 21,765,562  |   |                |     | 49,125                  |  |      | 30,899,889                 |   |  |              | 4,713,015   |   |                   |      | (19,172,002  | ) |  |      | 38,255,589  |  
|Total costs and operating expenses                                                                                                                                 |  |                       | 21,765,562  |   |                |     | 49,125                  |  |      | 541,089,544                |   |  |              | 340,769,337 |   |                   |      | (623,386,729 | ) |  |      | 280,286,839 |  
|Comprehensive financing cost (income)                                                                                                                              |  |                       | (4,392,774  | ) |                |     | 6,941,026               |  |      | 35,777,067                 |   |  |              | 10,768,308  |   |                   |      | (15,677,700  | ) |  |      | 33,415,927  |  
|Equity participation in subsidiaries                                                                                                                               |  |                       | (41,805,912 | ) |                |     |                        |  |      |                           |   |  |              |            |   |                   |      | 41,805,912   |   |  |      |            |  
|Capitalization of Master Trust operations and others                                                                                                               |  |                       |            |   |                |     | 6,990,151               |  |      |                           |   |  |              |            |   |                   |      | (6,990,151   | ) |  |      |            |  
|                                                                                                                                                                   |  |                       |             |   |                |     |                         |  |      |                            |   |  |              |             |   |                   |      |              |   |  |      |             |  
|(Loss) income before hydrocarbon extraction duties and other, special tax on production and services and cumulative effect of adoption of new
accounting standards |  |                       | (43,200,010 | ) |                |     |                        |  |      | 382,644,808                |   |  |              | (11,927,100 | ) |                   |      | 41,817,069   |   |  |      | 369,334,767 |  
|Hydrocarbon extraction duties and other                                                                                                                            |  |                       | 44,654      |   |                |     |                        |  |      | 312,371,838                |   |  |              | 1,016,302   |   |                   |      | 11,157       |   |  |      | 313,443,951 |  
|Special tax on production and services (IEPS Tax)                                                                                                                  |  |                       |            |   |                |     |                        |  |      | 102,257,637                |   |  |              |            |   |                   |      |             |   |  |      | 102,257,637 |  
|                                                                                                                                                                   |  |                       | 44,654      |   |                |     |                        |  |      | 414,629,475                |   |  |              | 1,016,302   |   |                   |      | 11,157       |   |  |      | 415,701,588 |  
|Cumulative effect of adoption of new accounting standards                                                                                                          |  |                       |            |   |                |     |                        |  |      | (2,187,823                 | ) |  |              |            |   |                   |      |             |   |  |      | (2,187,823  | )
|                                                                                                                                                                   |  |                       |             |   |                |     |                         |  |      |                            |   |  |              |             |   |                   |      |              |   |  |      |             |  
|Net (loss) income for the year                                                                                                                                     |  | (Ps.                  | 43,244,664  | ) |                | Ps. |                        |  | (Ps. | 29,796,844                 | ) |  | (Ps.         | 12,943,402  | ) |                   | Ps.  | 41,805,912   |   |  | (Ps. | 44,178,998  | )
|                                                                                                                                                                   |  |                       |             |   |                |     |                         |  |      |                            |   |  |              |             |   |                   |      |              |   |  |      |             |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-85



---

##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

U.S. GAAP RECONCILIATION OF INCOME

For the year ended
December 31, 2003



|                                                              |  |                        |            |   |                |     |                          |  |      |                            |   |  |              |            |                    |  |     |            |  |      |             |  
|------------------------------------------------------------- |  | ---------------------- | ---------- | - | -------------- | --- | ------------------------ |  | ---- | -------------------------- | - |  | ------------ | ---------- | ------------------ |  | --- | ---------- |  | ---- | ----------- | -
|                                                              |  | Petróleos Mexicanos(1) |            |   | MasterTrust(1) |     | Subsidiary Guarantors(1) |  |      | Non-Guarantor Subsidiaries |   |  | Eliminations |            | PEMEX Consolidated | 
|Net loss under Mexican GAAP                                   |  | (Ps.                   | 43,244,665 | ) |                | Ps. |                         |  | (Ps. | 29,796,844                 | ) |  | (Ps.         | 12,943,402 | )                  |  | Ps. | 41,805,913 |  | (Ps. | 44,178,998  | )
|U.S. GAAP adjustments                                         |  |                        |            |   |                |     |                          |  |      |                            |   |  |              |            |                    |  |     |            |  |      |             |  
|Exploration and drilling costs                                |  |                        |           |   |                |     |                         |  |      | (20,960,667                | ) |  |              |           |                    |  |     |            |  |      | (20,960,667 | )
|Pensions and seniority premiums                               |  |                        | (10,546    | ) |                |     |                         |  |      | 471,664                    |   |  |              | 143,295    |                    |  |     |           |  |      | 604,413     |  
|Post-retirement benefits                                      |  |                        | (1,246,270 | ) |                |     |                         |  |      | (7,274,014                 | ) |  |              | (875,159   | )                  |  |     |           |  |      | (9,395,443  | )
|Accrued vacation                                              |  |                        | (3,845     | ) |                |     |                         |  |      | (21,392                    | ) |  |              | (2,890     | )                  |  |     |           |  |      | (28,127     | )
|Fixed asset adjustments                                       |  |                        |            |   |                |     |                          |  |      |                            |   |  |              |            |                    |  |     |            |  |      |             |  
|Capitalized gains and losses of hedging financial instruments |  |                        |           |   |                |     |                         |  |      | (469,370                   | ) |  |              |           |                    |  |     |           |  |      | (469,370    | )
|Capitalization of interests, net                              |  |                        |           |   |                |     |                         |  |      | 1,826,910                  |   |  |              | 42,696     |                    |  |     |           |  |      | 1,869,606   |  
|Impairment, net                                               |  |                        |           |   |                |     |                         |  |      | (755,088                   | ) |  |              | (2,092,372 | )                  |  |     |           |  |      | (2,847,460  | )
|Depreciation convention                                       |  |                        | 13,965     |   |                |     |                         |  |      | 689,089                    |   |  |              | 22,317     |                    |  |     |           |  |      | 725,371     |  
|Derivative financial instruments                              |  |                        | (817,983   | ) |                |     | 71,079                   |  |      | 2,015,145                  |   |  |              | 935,326    |                    |  |     | 52,720     |  |      | 2,256,287   |  
|Sales of shares of Repsol                                     |  |                        | (604,741   | ) |                |     |                         |  |      |                           |   |  |              |           |                    |  |     |           |  |      | (604,741    | )
|Profit in inventory                                           |  |                        |           |   |                |     |                         |  |      | (112,958                   | ) |  |              |           |                    |  |     |           |  |      | (112,958    | )
|Available-for-sale securities                                 |  |                        |           |   |                |     |                         |  |      |                           |   |  |              |           |                    |  |     |           |  |      |            |  
|Effect of inflation accounting on U.S. GAAP adjustment        |  |                        | 1,010,003  |   |                |     |                         |  |      | 49,425                     |   |  |              | 6,678      |                    |  |     |            |  |      | 1,066,106   |  
|                                                              |  |                        |            |   |                |     |                          |  |      |                            |   |  |              |            |                    |  |     |            |  |      |             |  
|Total U.S. GAAP adjustments, net                              |  |                        | (1,659,417 | ) |                |     | 71,079                   |  |      | (24,541,256                | ) |  |              | (1,820,109 | )                  |  |     | 52,720     |  |      | (27,896,983 | )
|                                                              |  |                        |            |   |                |     |                          |  |      |                            |   |  |              |            |                    |  |     |            |  |      |             |  
|Net (loss) income under U.S. GAAP                             |  | (Ps.                   | 44,904,082 | ) |                | Ps. | 71,079                   |  | (Ps. | 54,338,100                 | ) |  | (Ps.         | 14,763,511 | )                  |  | Ps. | 41,858,633 |  | (Ps. | 72,075,981  | )
|                                                              |  |                        |            |   |                |     |                          |  |      |                            |   |  |              |            |                    |  |     |            |  |      |             |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

STATEMENT OF CASH FLOW

For the year ended December 31, 2005

|                                                                           |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|-------------------------------------------------------------------------- |  | ---------------------- | ------------ | - | --------------- | --- | ------------ | ------------------------ |  | ---- | -------------------------- | - |  | ------------ | ------------ | - | ------------------ | --- | ------------ | - |  | ---- | ------------ | -
|                                                                           |  | Petróleos Mexicanos(1) |              |   | Master Trust(1) |     |              | Subsidiary Guarantors(1) |  |      | Non-Guarantor Subsidiaries |   |  | Eliminations |              |   | PEMEX Consolidated |    
|Operating activities                                                       |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Net loss for the year                                                      |  | (Ps.                   | 76,457,667   | ) |                 | Ps. |             |                          |  | (Ps. | 64,833,076                 | ) |  | (Ps.         | 10,964,626   | ) |                    | Ps. | 75,973,019   |   |  | (Ps. | 76,282,350   | )
|Adjustments to reconcile net loss to cash provided by operating activities |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Depreciation and amortization                                              |  |                        | 663,422      |   |                 |     |             |                          |  |      | 51,099,675                 |   |  |              | 1,027,654    |   |                    |     |             |   |  |      | 52,790,751   |  
|Reserve for retirement payments, pensions and seniority premiums           |  |                        | 8,647,618    |   |                 |     |             |                          |  |      | 45,004,173                 |   |  |              | 5,430,148    |   |                    |     |             |   |  |      | 59,081,939   |  
|Impairment of fixed assets                                                 |  |                        |             |   |                 |     |             |                          |  |      | (2,117,798                 | ) |  |              | 3,444,798    |   |                    |     |             |   |  |      | 1,327,000    |  
|Loss on disposal of fixed assets                                           |  |                        | 280,128      |   |                 |     |             |                          |  |      | 3,986,561                  |   |  |              | 718,556      |   |                    |     |             |   |  |      | 4,985,245    |  
|Allowance for uncollectible trade accounts                                 |  |                        | (3,653       | ) |                 |     |             |                          |  |      | 887,375                    |   |  |              | (294,091     | ) |                    |     |             |   |  |      | 589,631      |  
|Foreign exchange loss (gain)                                               |  |                        | (3,060,006   | ) |                 |     | (24,345,680  | )                        |  |      |                           |   |  |              | (585,624     | ) |                    |     |             |   |  |      | (27,991,310  | )
|Profits sharing in Subsidiaries                                            |  |                        | 75,973,019   |   |                 |     |             |                          |  |      | (432,398                   | ) |  |              | (1,348,374   | ) |                    |     | (75,973,019  | ) |  |      | (1,780,772   | )
|Gain from monetary position                                                |  |                        | (4,338,645   | ) |                 |     |             |                          |  |      | (11,957,177                | ) |  |              | (36,625      | ) |                    |     |             |   |  |      | (16,332,447  | )
|Deferred taxes                                                             |  |                        |             |   |                 |     |              |                          |  |      | 1,977,728                  |   |  |              |             |   |                    |     |             |   |  |      | 1,977,728    |  
|Changes in operating assets and liabilities                                |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Accounts and notes receivable                                              |  |                        | 25,514,472   |   |                 |     | 333,813      |                          |  |      | 27,200,052                 |   |  |              | (38,148,457  | ) |                    |     | (14,231,400  | ) |  |      | 668,480      |  
|Inter-company changes and deductions                                       |  |                        | (10,917,345  | ) |                 |     | 284,642,496  |                          |  |      | (352,936,968               | ) |  |              | 79,211,817   |   |                    |     |             |   |  |      |             |  
|Inventories                                                                |  |                        | (45,490      | ) |                 |     | (147,692     | )                        |  |      | (6,294,974                 | ) |  |              | (2,837,856   | ) |                    |     |             |   |  |      | (9,326,012   | )
|Other assets                                                               |  |                        | 1,555,962    |   |                 |     | (56,660      | )                        |  |      | 731,204                    |   |  |              | 975,019      |   |                    |     |             |   |  |      | 3,205,525    |  
|Accounts payable and accrued liabilities                                   |  |                        | (2,410,591   | ) |                 |     | 2,404,861    |                          |  |      | 4,902,507                  |   |  |              | 17,259,085   |   |                    |     |             |   |  |      | 22,155,862   |  
|                                                                           |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Cash flows provided by operating activities                                |  |                        | 15,401,224   |   |                 |     | 262,831,138  |                          |  |      | (302,783,116               | ) |  |              | 53,851,424   |   |                    |     | (14,231,400  | ) |  |      | 15,069,270   |  
|Investing activities:                                                      |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Increase in fixed assets, net                                              |  |                        | (667,313     | ) |                 |     |             |                          |  |      | (80,223,692                | ) |  |              | (2,350,137   | ) |                    |     |             |   |  |      | (83,241,142  | )
|Inter-company (increase) decrease investing                                |  |                        | (383,933,777 | ) |                 |     | (289,383,043 | )                        |  |      | 14,162,515                 |   |  |              | (109,630,782 | ) |                    |     | 768,785,087  |   |  |      |              |  
|Investments in Pemex Finance                                               |  |                        |             |   |                 |     |             |                          |  |      |                           |   |  |              | 2,428,639    |   |                    |     |             |   |  |      | 2,428,639    |  
|                                                                           |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Cash flows used in investing activities                                    |  |                        | (384,601,090 | ) |                 |     | (289,383,043 | )                        |  |      | (66,061,177                | ) |  |              | (109,552,280 | ) |                    |     | 768,785,087  |   |  |      | (80,812,503  | )
|Financing Activities                                                       |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Proceeds from long term financing                                          |  |                        | 47,706,919   |   |                 |     | 122,523,958  |                          |  |      | 898,545                    |   |  |              | 72,514,635   |   |                    |     |             |   |  |      | 243,644,057  |  
|Financing payments                                                         |  |                        | (56,016,359  | ) |                 |     | (60,424,719  | )                        |  |      | (10,792,205                | ) |  |              | (3,125,272   | ) |                    |     |             |   |  |      | (130,358,555 | )
|Sale of future accounts receivable                                         |  |                        |             |   |                 |     |             |                          |  |      | (49,479,726                | ) |  |              |             |   |                    |     | 11,956,814   |   |  |      | (37,522,912  | )
|Inter-company (decrease) increase financing                                |  |                        | 371,658,226  |   |                 |     | (3,815,593   | )                        |  |      | 400,560,411                |   |  |              | 382,045      |   |                    |     | (768,785,089 | ) |  |      |             |  
|Increase in equity of subsidiary entities                                  |  |                        | 14,498,300   |   |                 |     |             |                          |  |      | 30,092,717                 |   |  |              |             |   |                    |     |             |   |  |      | 44,591,017   |  
|Dividends paid                                                             |  |                        | (16,787,004  | ) |                 |     |             |                          |  |      |                           |   |  |              | (2,274,589   | ) |                    |     | 2,274,588    |   |  |      | (16,787,005  | )
|                                                                           |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Cash flows provided by financing activities                                |  |                        | 361,060,082  |   |                 |     | 58,283,646   |                          |  |      | 371,279,742                |   |  |              | 67,496,819   |   |                    |     | (754,553,687 | ) |  |      | 103,566,602  |  
|Effects of inflation on cash and cash equivalents                          |  |                        | 2,188,777    |   |                 |     | (593,114     | )                        |  |      | (2,074,528                 | ) |  |              | (1,390,144   | ) |                    |     |              |   |  |      | (1,869,009   | )
|Increase (decrease) in cash and cash equivalents                           |  |                        | (5,951,007   | ) |                 |     | 31,138,627   |                          |  |      | 360,921                    |   |  |              | 10,405,819   |   |                    |     |              |   |  |      | 35,954,360   |  
|Cash and cash equivalents, beginning of period                             |  |                        | 43,857,404   |   |                 |     | 22,955,738   |                          |  |      | 2,098,178                  |   |  |              | 15,960,909   |   |                    |     |             |   |  |      | 84,872,229   |  
|                                                                           |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  
|Cash and cash equivalents, end of period                                   |  |                        | 37,906,397   |   |                 |     | 54,094,365   |                          |  |      | 2,459,099                  |   |  |              | 26,366,728   |   |                    |     |             |   |  |      | 120,826,589  |  
|                                                                           |  |                        |              |   |                 |     |              |                          |  |      |                            |   |  |              |              |   |                    |     |              |   |  |      |              |  

---

|(1) | Petróleos Mexicanos is the issuer of the registered debt securities shown in Table 2 above and a full and unconditional guarantor of the registered debt securities shown in
Table 1 above. The Master Trust is the issuer of the registered debt securities shown in Table 1 above, but is not an obligor on the registered debt securities shown in Table 2 above. The Subsidiary Guarantors are full and unconditional guarantors
of the registered debt securities listed in both Table 1 and Table 2 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



NOTE 22Supplementary information on oil and gas exploration and production activities (unaudited)

The following tables provide supplementary information on the oil and gas exploration, development and producing activities of
Pemex-Exploration and Production in compliance with SFAS No. 69, Disclosures about Oil and Gas Producing Activities (SFAS No. 69). All exploration and production activities of Pemex-Exploration and Production are
located in Mexico.

The supplemental data presented herein reflects information for all of Pemex-Exploration and Productions oil and
gas producing activities. Capitalized costs and results of operations presented herein have been prepared in accordance with U.S. GAAP. Under otherwise indicated, all information is presented in constant pesos as of December 31, 2005.

Capitalized costs for oil and gas producing activities (unaudited):



|                                          |  |                    |   |  |                 |   |  |                 |  
|----------------------------------------- |  | ------------------ | - |  | --------------- | - |  | --------------- | -
|                                          |  | As of December 31, |  
|                                          |  | 2005               |   |  | 2004            |   |  | 2003            |  
|Proved properties                         |  | Ps. 684,784,553    |   |  | Ps. 590,965,458 |   |  | Ps. 515,320,021 |  
|Construction in progress                  |  | 52,550,862         |   |  | 62,828,794      |   |  | 74,441,375      |  
|Accumulated depreciation and amortization |  | (305,819,660       | ) |  | (263,536,840    | ) |  | (237,460,481    | )
|                                          |  |                    |   |  |                 |   |  |                 |  
|Net capitalized costs                     |  | Ps. 431,515,755    |   |  | Ps. 390,257,412 |   |  | Ps. 352,300,915 |  
|                                          |  |                    |   |  |                 |   |  |                 |  

Costs incurred for oil and gas property exploration and development activities (unaudited):



|                     |  |                         |  |                |  |               
|-------------------- |  | ----------------------- |  | -------------- |  | --------------
|                     |  | Year ended December 31,
|                     |  | 2005                    |  | 2004           |  | 2003          
|Exploration          |  | Ps. 14,580,800          |  | Ps. 21,688,779 |  | Ps. 19,112,893
|Development          |  | 74,954,425              |  | 69,663,895     |  | 49,946,297    
|                     |  |                         |  |                |  |               
|Total costs incurred |  | Ps. 89,535,225          |  | Ps. 91,352,674 |  | Ps. 69,059,190
|                     |  |                         |  |                |  |               

There are no property acquisition costs because PEMEX exploits oil reserves owned by the Mexican
nation.

Exploration costs include costs of geological and geophysical studies of fields amounting to Ps. 5,198,916,
Ps. 5,429,236 and Ps. 12,529,886 for 2005, 2004 and 2003, respectively, that, in accordance with the successful efforts methods are accounted for as geological and geophysical exploration expenses.

Development costs include those incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing
the oil and gas.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Results of operations for oil and gas producing activities (unaudited):



|                                                           |  |                         |  |                 |  |                
|---------------------------------------------------------- |  | ----------------------- |  | --------------- |  | ---------------
|                                                           |  | Year Ended December 31,
|                                                           |  | 2005                    |  | 2004            |  | 2003           
|Revenues from sale of oil and gas                          |  | Ps. 716,286,862         |  | Ps. 579,693,487 |  | Ps. 463,735,988
|                                                           |  |                         |  |                 |  |                
|Hydrocarbon duties                                         |  | 495,099,657             |  | 393,647,599     |  | 288,848,752    
|Excess-gains taxes                                         |  | 56,379,315              |  | 35,539,483      |  | 20,319,708     
|Production costs (excluding taxes)                         |  | 119,855,083             |  | 102,716,373     |  | 74,762,863     
|Exploration expenses                                       |  | 5,198,916               |  | 5,429,236       |  | 6,465,053      
|Depreciation, depletion, amortization and accretion        |  | 37,475,458              |  | 25,426,996      |  | 25,616,947     
|                                                           |  |                         |  |                 |  |                
|                                                           |  | 714,008,429             |  | 562,759,687     |  | 416,013,323    
|                                                           |  |                         |  |                 |  |                
|Results of operations for oil and gas producing activities |  | Ps. 2,278,433           |  | Ps. 16,933,800  |  | Ps. 47,722,665 
|                                                           |  |                         |  |                 |  |                

Crude oil and natural gas reserves:

Sales prices and production costs (unaudited)

The following table summarizes average sales prices
(excluding production taxes) in U.S. dollars:



|                                     |  |        |       |      |        |       |  |        |      
|------------------------------------ |  | ------ | ----- | ---- | ------ | ----- |  | ------ | -----
|                                     |  | 2005   |       | 2004 |        | 2003 
|December average sales price         |  | U.S. $ | 43.75 |      | U.S. $ | 30.00 |  | U.S. $ | 24.51
|Crude oil, per barrel                |  | U.S. $ | 47.04 |      | U.S. $ | 29.52 |  | U.S. $ | 25.83
|Natural gas, per thousand cubic feet |  | U.S. $ | 6.85  |      | U.S. $ | 6.64  |  | U.S. $ | 4.10 

Crude oil and natural gas reserves (unaudited)

Under the Political Constitution of the United Mexican States and Mexican statutory law, all oil and other hydrocarbon reserves within Mexico are owned by
the Mexican nation and not by PEMEX. Under the Organic Law, PEMEX has the exclusive right to produce these reserves and owns the extracted productions, not the reserves, subject to a federal production tax. As discussed in Note 20, during 2005, a
new fiscal regime, which is applicable only to PEMEX and its subsidiaries, was enacted. The new fiscal regime applicable to Pemex-Exploration and Production, which is effective January 1, 2006, by means of a decree, reforms dispositions of
Chapter XII of the Federal Law of Rights in relation to hydrocarbons. PEMEXs exploration and development activities are limited to reserves located in Mexico.

Proved oil and gas reserves are those estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating conditions, i.e., prices and costs at the date the estimate is made. Mexicos proved reserves are estimated by PEMEXs petroleum engineers. PEMEX uses the year-end
crude oil and natural gas prices to calculate its reserve estimates.

PEMEX estimates Mexicos reserves using standard geological and
engineering methods generally accepted by the petroleum industry. The choice of method or combinations of methods employed in the analysis of each reservoir is determined by experience in the area, the stage of development, quality and completeness
of basic



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



data and production and pressure history. The reserves data set forth herein represent only estimates. Reserves valuation is a subjective process of
estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate depends on the quality of available data, the engineering and geological interpretation and judgment.
As a result, estimates of different engineers may vary. In addition, results of drilling, testing and production subsequent to the date of an estimate are among the criteria which may be used to justify revision of such estimate.

Mexicos total proved developed and undeveloped reserves of crude oil and condensates decreased by 7.6% in 2005, from 14.8 billion barrels of oil
equivalent in 2004 to 13.7 billion barrels of oil equivalent in 2005. In 2005, proved developed reserves of crude oil and condensates decreased by 1.3%, from 9.7 billion barrels of oil equivalent in 2004 to 9.6 billion barrels in 2005. Mexicos
total proved developed and undeveloped dry gas reserves decreased by 1.7% in 2005, from 14.8 trillion cubic feet in 2004 to 14.6 trillion cubic feet in 2005. Mexicos proved developed dry gas reserves decreased by 6.8% in 2005, from 8.3
trillion cubic feet in 2004 to 8.9 trillion cubic feet in 2005.

Taxes were calculated based on the new fiscal regime (at a base rate of
76.9%) applied to the annual value of extracted production of crude oil and natural gas less certain permitted deductions. The annual value of extracted production of crude oil and natural gas was estimated based on the volume of extracted
production in millions of barrels per year multiplied by the specified unit price for each project. The maximum deductions of U.S. $6.50 per equivalent crude oil barrel and U.S. $2.70 per thousand cubic feet of natural gas were applied to the
related volume to determine the permitted deductions. When this results in a negative after-tax flow on any given year, tax expenses applied are taken equal to the pre-tax net cash flow of this particular year.

The following two tables of oil and gas reserves set forth PEMEXs estimates of Mexicos proved reserves at December 31, 2005, 2004 and
2003 in accordance with the definition of proved reserves under Rule 4-10(a) Regulation S-X of the Securities Act of 1933.

Crude oil and condensate
reserves (including natural gas liquids)a



|                                          |  |                       |   |  |        |   |  |        |  
|----------------------------------------- |  | --------------------- | - |  | ------ | - |  | ------ | -
|                                          |  | (Millions of barrels) |  
|                                          |  | 2005                  |   |  | 2004   |   |  | 2003   |  
|Proved developed and undeveloped reserves |  |                       |   |  |        |   |  |        |  
|At January 1                              |  | 14,803                |   |  | 16,041 |   |  | 17,196 |  
|Revisions                                 |  | 197                   |   |  | (109   | ) |  | 120    |  
|Extensions and discoveriesb               |  | 25                    |   |  | 245    |   |  | 84     |  
|Production                                |  | (1,354                | ) |  | (1,374 | ) |  | (1,359 | )
|                                          |  |                       |   |  |        |   |  |        |  
|At December 31                            |  | 13,671                |   |  | 14,803 |   |  | 16,041 |  
|                                          |  |                       |   |  |        |   |  |        |  
|Proved developed reserves at December 31  |  | 9,617                 |   |  | 9,745  |   |  | 10,473 |  
|                                          |  |                       |   |  |        |   |  |        |  

---

|Note: | Table amounts may not total due to rounding.
|----- | --------------------------------------------

|a. | Crude oil and condensate reserves include the fraction of liquefiable hydrocarbons recoverable in natural gas processing plants.
|-- | --------------------------------------------------------------------------------------------------------------------------------

|b. | Extensions include positive and negative changes due to new data gathered through drilling of extension wells.
|-- | --------------------------------------------------------------------------------------------------------------

|Source: | Pemex-Exploration and Production
|------- | --------------------------------



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



Dry gas reserves



|                                          |  |                          |   |  |        |   |  |        |  
|----------------------------------------- |  | ------------------------ | - |  | ------ | - |  | ------ | -
|                                          |  | (Billions of cubic feet) |  
|                                          |  | 2005                     |   |  | 2004   |   |  | 2003   |  
|Proved developed and undeveloped reserves |  |                          |   |  |        |   |  |        |  
|At January 1                              |  | 14,807                   |   |  | 14,850 |   |  | 14,985 |  
|Revisions                                 |  | 661                      |   |  | 547    |   |  | 695    |  
|Extensions and discoveriesa               |  | 394                      |   |  | 641    |   |  | 354    |  
|Productionb                               |  | (1,305                   | ) |  | (1,231 | ) |  | (1,184 | )
|                                          |  |                          |   |  |        |   |  |        |  
|At December 31                            |  | 14,557                   |   |  | 14,807 |   |  | 14,850 |  
|                                          |  |                          |   |  |        |   |  |        |  
|Proved developed reserves at December 31  |  | 8,888                    |   |  | 8,325  |   |  | 8,094  |  
|                                          |  |                          |   |  |        |   |  |        |  

---

|Note: | Table amounts may not total due to rounding.
|----- | --------------------------------------------

|a. | Extensions include positive and negative changes due to new data gathered through drilling of extension wells.
|-- | --------------------------------------------------------------------------------------------------------------

|b. | Natural gas production reported in other tables refer to wet, sour gas. There is a shrinkage in volume when natural gas liquids and impurities are extracted to obtain dry gas.
Therefore, reported natural gas volumes are greater than dry gas volumes.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on the reservoir performance, new
information, and discoveries, proved reserves for all regions as of December 31, 2005 were estimated to be 16,469.6 million barrels of oil equivalent (17,649.8 million barrels of oil equivalent at December 31, 2004).

Standardized measure of discounted future net cash flows related to proved oil and gas reserves (unaudited)

The standardized measure tables presented below relate to proved oil and gas reserves, excluding proved reserves scheduled to be produced after the year
2030.

Estimated future cash inflows from production are computed by applying average prices of oil and gas on December 31 to the
year-end quantities. Future development and production costs are those estimated future expenditures needed to develop and produce the year-end estimated proved reserves, assuming constant year-end economic conditions.

Future tax expenses are computed by applying the appropriate year-end statutory tax rateswith consideration of the tax rates of the new fiscal
regime for Pemex-Exploration and Production already legislated for 2006to the future pre-tax net cash flows related to Mexicos proved oil and gas reserves.

The estimated future payment of taxes was made based on the new fiscal regime applicable to Pemex-Exploration and Production, effective January 1, 2006, by means of a decree, which reformed Chapter XII of the
Federal Law of Hydrocarbon Duties.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



The standardized measure provided below represents a comparative benchmark value rather than an
estimate of expected future cash flows or fair market value of PEMEXs production rights. There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the producer. Accordingly, reserve estimates may be materially different from the quantities of crude oil and natural gas that are ultimately recovered.

Standardized measure of discounted net cash flows (unaudited)



|                                                         |  |                    |          |   |      |       |          |      |  |       |          |  
|-------------------------------------------------------- |  | ------------------ | -------- | - | ---- | ----- | -------- | ---- |  | ----- | -------- | -
|                                                         |  | As of December 31, |         
|                                                         |  | 2005               |          |   | 2004 |       |          | 2003 | 
|Future cash inflows                                      |  | U.S.$              | 653,914  |   |      | U.S.$ | 493,971  |      |  | U.S.$ | 419,343  |  
|Future production costs                                  |  |                    | (85,432  | ) |      |       | (70,922  | )    |  |       | (60,515  | )
|Future development costs                                 |  |                    | (35,966  | ) |      |       | (29,314  | )    |  |       | (29,834  | )
|Future production and income tax expenses                |  |                    | (448,162 | ) |      |       | (311,918 | )    |  |       | (261,370 | )
|                                                         |  |                    |          |   |      |       |          |      |  |       |          |  
|Future net cash flows                                    |  |                    | 84,354   |   |      |       | 81,817   |      |  |       | 67,624   |  
|Effect of discounting net cash flows at 10%              |  |                    | (32,728  | ) |      |       | (35,193  | )    |  |       | (29,974  | )
|                                                         |  |                    |          |   |      |       |          |      |  |       |          |  
|Standardized measure of discounted future net cash flows |  | U.S.$              | 51,626   |   |      | U.S.$ | 46,624   |      |  | U.S.$ | 37,650   |  
|                                                         |  |                    |          |   |      |       |          |      |  |       |          |  

---

Note: Table amounts may not total due to
rounding.

To comply with SFAS No. 69, the next table presents the aggregate standardized measure change for each year and significant
sources of variance:

Changes in standardized measure of discounted net cash flows (unaudited)



|                                                       |  |       |         |   |      |       |         |      |  |       |         |  
|------------------------------------------------------ |  | ----- | ------- | - | ---- | ----- | ------- | ---- |  | ----- | ------- | -
|                                                       |  | 2005  |         |   | 2004 |       |         | 2003 | 
|Sales of oil and gas produced, net of production costs |  | U.S.$ | (55,988 | ) |      | U.S.$ | (41,740 | )    |  | U.S.$ | (32,870 | )
|Net changes in prices and production costs             |  |       | 122,257 |   |      |       | 46,463  |      |  |       | 1,876   |  
|Extensions and discoveries                             |  |       | 3,149   |   |      |       | 3,629   |      |  |       | 1,869   |  
|Development cost incurred during the year              |  |       | 7,067   |   |      |       | 6,207   |      |  |       | 7,709   |  
|Changes in estimated development costs                 |  |       | (11,453 | ) |      |       | (5,212  | )    |  |       | (12,702 | )
|Reserves revisions and timing change                   |  |       | 3,419   |   |      |       | 9,082   |      |  |       | 11,440  |  
|Accretion of discount of pre-tax net cash flows        |  |       | 20,523  |   |      |       | 17,507  |      |  |       | 17,908  |  
|Net changes in production-and excess-gains taxes       |  |       | (83,972 | ) |      |       | (26,962 | )    |  |       | (995    | )
|                                                       |  |       |         |   |      |       |         |      |  |       |         |  
|Aggregate change in standardized measure               |  | U.S.$ | 5,002   |   |      | U.S.$ | 8,974   |      |  | U.S.$ | (5,765  | )
|                                                       |  |       |         |   |      |       |         |      |  |       |         |  
|Standardized measure                                   |  |       |         |   |      |       |         |      |  |       |         |  
|As of January 1                                        |  |       | 46,624  |   |      |       | 37,650  |      |  |       | 43,415  |  
|As of December 31                                      |  |       | 51,626  |   |      |       | 46,624  |      |  |       | 37,650  |  
|                                                       |  |       |         |   |      |       |         |      |  |       |         |  
|Change                                                 |  | U.S.$ | 5,002   |   |      | U.S.$ | 8,974   |      |  | U.S.$ | (5,765  | )
|                                                       |  |       |         |   |      |       |         |      |  |       |         |  

---

Note: Table amounts may not total due to
rounding.



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##### Table of Contents

PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

(Figures stated in thousands of Mexican pesos
as of December 31, 2005 purchasing power

and in thousands of U.S. dollars or other currency units)



In computing the amounts under each factor of change, the effects of variances in prices and costs
are computed before the effects of changes in quantities. Consequently, changes in reserves are calculated at December 31 prices and costs. The change in computed taxes includes taxes effectively incurred during the year and the change in
future tax expense.



F-93