As filed with the Securities and Exchange Commission on June 27, 2001

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 20-F

(Mark One)

For the fiscal year ended December 31, 2000

For the transition period from                to               

Commission File No. 001-12142

Petróleos de Venezuela, S.A.
(Exact Name of Registrant as Specified in Its Charter)

Avenida Libertador, La Campiña, Apdo. 169, Caracas 1010-A, Venezuela
(Address of Principal Executive Offices)

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

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:

    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: 51,204 shares of the common stock of Petróleos de Venezuela, S.A. were outstanding as of December 31, 2000.

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

    Indicate by check mark which financial statement item the registrant has elected to follow.

PETROLEOS DE VENEZUELA, S.A.
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2000

Table of Contents

i

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

    With respect to our guarantees of PDV America, Inc.'s 7⁷/8% Senior Notes due 2003, PDV America, Inc.'s annual report on Form 10-K for the year ended December 31, 2000, as first filed with the U.S. Securities and Exchange Commission (Commission file No. 001-12138) on April 2, 2001 is incorporated herein by reference.

    With respect to our obligations as co-registrant of PDVSA Finance Ltd.'s 6.450% Notes due 2004, 6.650% Notes due 2006, 6.800% Notes due 2008, 7.400% Notes due 2016, 7.500% Notes due 2028, 8.750% Notes due 2004, 9.375% Notes due 2007, 9.750% Notes due 2010 and 9.950% Notes due 2020 (collectively, the "PDVSA Finance Notes"), PDVSA Finance Ltd.'s annual report on Form 20-F for the year ended December 31, 2000, as first filed with the U.S. Securities and Exchange Commission (Commission file No. 333-9678) on June 27, 2001 is incorporated herein by reference.

FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

    This annual report on Form 20-F contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specifically, certain statements under the caption "Item 4.B. Business overview" and under the caption "Item 5. Operating and Financial Review and Prospects" relating to the expected results of exploration and exploitation activities, refining processes, petrochemicals, Orimulsion® and coal activities and related capital expenditures and investments, the expected results of joint venture projects, the anticipated demand for new or improved products, environmental compliance and remediation and related capital expenditures, future capital expenditures, sales to customers and in general taxes, dividends and contributions to the Bolivarian Republic of Venezuela, are forward-looking statements. Such statements are subject to certain risks and uncertainties in both Venezuelan and international markets, including risks and uncertainties relating to inflation, continued access capital markets on favorable terms, regulatory burdens in such markets, changes in import controls or import duties, levies or taxes and changes in prices or demand for products produced by us or our subsidiaries or affiliates as a result of competitive actions or economic factors. Such statements are also subject to the risks of increased costs in related technologies and such technologies producing expected results, and performance by third parties in accordance with contractual terms and specifications. The expectations of our management with respect to exploration activities, whether conducted by us, our subsidiaries or affiliates, joint ventures or third parties, are subject to risks arising from the inherent difficulty of predicting the presence, yield or quality of hydrocarbon deposits, as well as unknown or unforeseen difficulties in extracting, transporting or processing any hydrocarbons found or doing so on an economic basis. Should one or more of these uncertainties or risks materialize, actual results may vary materially from those estimated, anticipated or projected. Specifically, but without limitation, capital costs could increase, projects could be delayed, and anticipated improvements in capacity or performance may not be fully realized. Although we believe that the expectations reflected by such forward-looking statements are reasonable based on information currently available to it and its subsidiaries and affiliates, we cannot assure you that such expectations will prove to be correct. Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements.

    The annual report of PDV America, Inc., our wholly owned subsidiary, for the year ended December 31, 2000 on Form 10-K, incorporated by reference herein, also contains forward-looking statements. For a discussion of the factors affecting the forward-looking statements contained in PDV America, Inc.'s annual report, see "Factors Affecting Forward-looking Statements" on page ii thereof.

    The annual report of PDVSA Finance Ltd., our wholly owned subsidiary, for the year ended December 31, 2000 on Form 20-F, incorporated by reference herein, also contains forward-looking statements. For a discussion of the factors affecting the forward-looking statements contained in PDVSA Finance Ltd's annual report, see "Factors Affecting Forward-looking Statements" on page ii thereof.

ii

    As used in this annual report references to "dollars" or "$" are to the lawful currency of the United States and references to "Bolivars" or "Bs." are to the lawful currency of Venezuela. A unit conversion table and a glossary of certain oil and gas terms, including abbreviations for certain units, used in this annual report are attached hereto as Annex A. When used in this annual report, the term "Petróleos de Venezuela" refer to Petróleos de Venezuela, S.A. and the terms "we," "our," "us" and "PDVSA" refer to Petróleos de Venezuela, S.A. and its consolidated subsidiaries.

PART I

Item 1.  Identity of Directors, Senior Management and Advisers

    Not Applicable.

Item 2.  Offer Statistics and Expected Timetable

    Not Applicable.

Item 3.  Key Information

3.A  Selected financial data

    The following selected financial data presented below for, and as of the end of, each of the years in the five-year period ended December 31, 2000, has been derived from the consolidated financial statements of Petróleos de Venezuela and subsidiaries, which financial statements have been prepared using accounting principles generally accepted in the United States of America, and should be read in conjunction with "Item 5. Operating and Financial Review and Prospects". The consolidated financial statements as of and for the year ended December 31, 2000 have been audited by Alcaraz Cabrera Vázquez (a member firm of KPMG), independent accountants. The consolidated financial statements as of and for the two years ended December 31, 1999 have been audited by Espiñera, Sheldon y Asociados (a member firm of PricewaterhouseCoopers), independent accountants. The consolidated financial statements as of December 31, 2000 and 1999, and for each of the years in the three-year period ended December 31, 2000, and the reports of Alcaraz Cabrera Vázquez and Espiñera, Sheldon y Asociados thereon, which are based partially upon the reports of other auditors, are included elsewhere herein.

1

(1)

Represents bonuses received by us pursuant to operating service agreements entered into in 1997 and pursuant to profit sharing agreements with private sector oil companies. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation."

(2)

Effective January 1, 1998, we changed our method of accounting for the cost of major refinery repairs and maintenance (turnarounds). See Note 1(u) to our consolidated financial statements included herein.

(3)

Excludes current portion of capital lease obligations, which amounted to $122 million, $117 million, $90 million, $81 million and $78 million in 2000, 1999, 1998, 1997 and 1996, respectively.

(4)

Calculated as long-term debt (including capital lease obligations) divided by the sum of long-term debt, minority interest and shareholder's equity.

(5)

Total payments to shareholder include production tax, income taxes and dividends paid.

(6)

During 1999, special tax recovery certificates, or CERTS, amounting to $1,291 million were used to pay dividends

(7)

During 2000, 1999 and 1998, we used CERTS amounting to $255 million, $22 million and $622 million, respectively, to pay income tax.

2

3

(1)

Amounts indicated are net of natural gas used for reinjection purposes.

(2)

Natural gas is converted to barrels of oil equivalent (BOE) at a ratio of 5.8 thousand cubic feet of natural gas per one barrel of crude oil.

(3)

Weighted average sales price of crude oil, refined petroleum products and liquid petroleum gas exports.

(4)

Calculated by dividing total costs (excluding depreciation and depletion) and expenses of crude oil, natural gas and liquid natural gas producing activities by total crude oil, liquid petroleum gas and net natural gas (BOE) produced, in each case for the relevant period.

(5)

Proved reserves include both proved developed and undeveloped reserves.

(6)

Proved reserves of extra-heavy oil located in the Orinoco Belt have a low development grade. Of the total gross proved reserves to be exploited under our Orinoco Belt project at December 31, 2000, approximately 10,857 MMB reserves were being developed under four association agreements in which PDVSA has an equity interest of less than 50%. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation—Joint Ventures with Private Sector Participants—Orinoco Belt Extra-heavy Crude Oil Projects."

(7)

Includes portion of proved crude oil reserves in fields relating to operating service agreements as of December 31 of the year in which each of such agreements went into effect. Such agreements may not necessarily result in the exploitation of 100% of these reserves during their term. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation—Operating Service Agreements."

(8)

Includes 12,505 BCF, 12,437 BCF, 12,437 BCF, 12,438 and 11,215 BCF in each of 2000, 1999, 1998, 1997 and 1996, respectively, associated with extra-heavy crude oil reserves.

(9)

Based on crude oil production for each period and total proved crude oil reserves at the end of each period. Proved reserves of extra-heavy crude oil are substantially undeveloped. Proved reserves of extra-heavy crude oil in the Orinoco Belt will be developed in association with third parties, although there is uncertainty as to when production will begin, or what interest PDVSA will have in these projects. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation—Joint Ventures with Private Sector Participants—Orinoco Belt Extra-heavy Crude Oil Projects."

(10)

Amounts represent PDVSA's interest in the refining capacity of all refineries in which it holds an equity or leasehold interest. See "Item 4.B Business overview—Refining and Marketing."

4

Exchange Rates

    The following table sets forth, for the years and dates indicated, certain information concerning the rate of exchange of Bolivars (Bs), the lawful currency of Venezuela, to the U.S. dollar based on daily rates of exchange established by the Central Bank of Venezuela pursuant to a foreign exchange agreement (see note (2) to our consolidated financial statements).

(1)

Represents the average of the average rate of exchange for each full month during the year. The average rate of exchange for each full month during the year is calculated based on the average daily rate of exchange for each day that exchange rates are established by the Central Bank of Venezuela pursuant to the foreign exchange agreement.

3.D  Risk factors

Our business depends substantially on international prices for oil and oil products and such prices are volatile. A decrease in such prices could materially and adversely affect our business.

    Our business, financial condition, results of operations and prospects depend greatly on international prices for crude oil and refined petroleum products. Historically, prices of international crude oil and refined petroleum products have been volatile and have fluctuated widely due to various factors that are beyond our control, including:

•

changes in global supply and demand for crude oil and refined petroleum products,



•

the availability and price of competing commodities,



•

international economic trends,



•

currency exchange fluctuations,



•

inflation,



•

the actions of commodity markets participants, and



•

political events in major oil producing and consuming nations.

    Historically, members of the organization of Oil Producing and Exporting Countries, otherwise known as OPEC, have entered into agreements to reduce their production of crude oil. Such agreements have sometimes increased global crude oil prices by decreasing the global supply of crude oil. Venezuela is a party to and has complied with such OPEC production agreement quotas and we expect that Venezuela will continue to comply with such production quota agreements with other

5

OPEC members. Since 1998, OPEC's production quotas have resulted in a worldwide decline in production and substantial increases in the international crude oil prices.

    A reduction in our crude oil production or export activities or a decline in the prices of crude oil and refined petroleum products below certain levels for a substantial period may materially and adversely affect our operations.

Risks related to the Venezuelan government's ownership, regulation and supervision of PDVSA.

    The Bolivarian Republic of Venezuela is the sole owner of Petróleos de Venezuela. We are owned and controlled by the Venezuelan government that regulates and supervises our operations. The President of Venezuela appoints the members of our board of directors by an executive decree. However, the Republic of Venezuela is not legally liable for our obligations, including our guarantees of indebtedness of our subsidiaries, or the obligations of our subsidiaries.

    We have been operated as an independent commercial entity since our formation. However, we cannot assure you that the Venezuelan government will not in the future intervene in our commercial affairs in a manner that will adversely affect our business.

Our business requires substantial capital expenditures.

    Our business is capital intensive. Specifically, the exploration and development of hydrocarbon reserves, production, processing and refining costs and the maintenance of machinery and equipment require substantial capital expenditures. We must continue to invest capital to maintain or to increase the amount of hydrocarbon reserves that we operate and the amount of crude oil that we process.

    We cannot assure you that we will be able to maintain our production levels or generate sufficient cash flow or that we will have access to sufficient investments, loans or other financing alternatives to continue our refining, exploration and development activities at or above our present levels.

We do not own any of the hydrocarbon reserves that we develop and operate.

    Under Venezuelan law, the hydrocarbon reserves that we develop and operate belong to the Bolivarian Republic of Venezuela and not to us. The exploration and exploitation of these hydrocarbon reserves are reserved to the Republic of Venezuela. Petróleos de Venezuela was formed by the government of Venezuela to coordinate, monitor and control its operations that relate to hydrocarbons.

    While Venezuelan law requires that the Republic of Venezuela retain exclusive ownership of Petróleos de Venezuela, it does not require the Republic of Venezuela to continue to conduct its crude oil exploration and exploitation activities through us. See also "Item 7.A Major shareholders."

We are subject to production, equipment, transportation and other risks that are common to oil and gas companies.

    We are an integrated oil and gas company and we are exposed to production, equipment and transportation risks that are common to oil and gas companies, including fluctuations in production due to changes in reserve levels, production accidents, mechanical difficulties, adverse natural conditions, unforeseen production costs, condition of pipelines and the vulnerability of other modes of transportation and the adequacy of our equipment and production facilities. See "Item 4.B Business overview—Exploration and Production."

    These risks may, among other things, lower our production levels, increase our production costs and expenses, cause damage to our property or cause personal injury in our employees or others. We maintain insurance to cover certain losses and exposure to liability. However, consistent with industry practice, we are not fully insured against the risks described above. We cannot assure you that our insurance coverage is sufficient to cover all of our losses or our exposure to liability that may result from these risks.

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Item 4.  Information on the Company

4.A  History and development of the company

    Petróleos de Venezuela was formed by the Venezuelan government in 1975 pursuant to the Organic Law Reserving to the State, the Industry and Commerce of Hydrocarbons (the "Nationalization Law") as the entity entrusted to coordinate, supervise and control activities within the Venezuelan oil industry following its nationalization, which became effective January 1, 1976. Since our formation, we have been operating as a commercial entity, vested with commercial and financial autonomy. We and our domestic subsidiaries are organized under the Commercial Code of Venezuela, which sets forth the basic corporate legal framework applicable to all Venezuelan companies. We are domiciled in Venezuela and are governed by the laws of Venezuela.

    Our registered office is located at Avenida Libertador, La Campiña, Apdo. 169, Caracas 1010-A, Venezuela, and our telephone number is 011-58-212-708-1111.

4.B  Business overview

    Through our subsidiaries, we engage in various aspects of the petroleum industry, including the exploration, production and upgrading of crude oil and natural gas (or "upstream operations"), the refining, marketing and transportation of crude oil, natural gas and refined petroleum products (or "downstream operations"), the production and marketing of petrochemicals and the development and marketing of Venezuela's natural bitumen ("Orimulsion®") and coal resources. Our crude oil and natural gas reserves and upstream operations are located exclusively in Venezuela, while our downstream operations are located in the United States, Germany, Sweden, the United Kingdom, Belgium and the Caribbean, as well as in Venezuela.

    According to a 2000 comparative study published by Petroleum Intelligence Weekly, based on a combination of 1999 operating criteria, including reserves, production, refining capacity and refined petroleum product sales, we are the world's second largest vertically integrated oil and gas company. We were also ranked third in the world in production of crude oil, fifth in crude oil proved reserves, third in refining capacity and seventh in product sales. Venezuela has been exporting crude oil without interruption since 1914. In 2000, we accounted for approximately 23.9% of Venezuelan gross domestic product, approximately 84.3% of its exports and approximately 51% of its fiscal revenues.

Business strategy

    Our business strategy is to pursue the development of Venezuela's hydrocarbon resources through national and foreign private capital investments, to maximize shareholder value and ensure our financial strength. Our 2001-2006 business plan focuses on the following activities: exploration, production, refining and trading of hydrocarbons. Additionally, it promotes investment from the private sector in the overall development of the gas and petrochemical industry, in the industrialization of refining currents and in Orimulsion® and coal. We are also actively pursuing the maintenance of high safety and hygiene standards and effective and timely integration of business technologies in our operations.

    As part of our business strategy, we intend to:

With respect to exploration, production and upgrading activities—

•

increase our reserves of light and medium gravity crude oil,



•

increase our recovery factor,



•

complete our development in the Orinoco basin,

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With respect to refining and marketing—

•

invest in product upgrade and environmental compliance in Venezuela and the United States,



•

expand the sale of our products in Latin America and the Caribbean,

With respect to our gas business—

•

promote active national and international private sector participation in non-associated gas reserves and in gas transmission and distribution.

With respect to petrochemicals—

•

develop new lines of business with natural gas and refining streams, and



•

promote private investment in the petrochemical sector.

    The implementation of our business plan includes the following initiatives relating to our principal activities:

•

Exploration, production and upgrading.  Our exploration and production strategy focuses on increasing our exploration of new light and medium gravity crude oil reserves and continued replacement of such reserves, developing new production areas, adjusting our production activities to cater to market demands and agreements reached with OPEC members and other oil producing countries, maintaining competitive production costs by using current technologies as well as new technologies and completing the development of our Orinoco Belt projects.



•

Refining.  Our refining strategy focuses on upgrading our downstream operations in Venezuela and the United States and Europe, our major worldwide markets, by upgrading our product mix to achieve a higher margin of refined petroleum products and to comply with all applicable environmental quality standards.



•

Marketing.  We plan to continue the expansion of our international marketing operations to ensure market growth for our crude oil and refined petroleum products and to increase brand awareness for our products. We also intend to strengthen our position in the United States through CITGO through the efficient distribution by CITGO of its refined petroleum products and the products of our other U.S. subsidiaries and affiliates. Through our subsidiary, PDVSA Trading S.A., we also plan to increase our crude oil and petroleum products trading operations.

We plan to expand the sale of our products in Latin America and the Caribbean markets by increasing the number of service stations there and promoting the sale of PDV and CITGO brander lubricants and fuels.

In Venezuela, we plan to continue to promote a reliable supply of our products, to continue to promote the use of unleaded gasoline in Venezuela (a process of which we started during the fourth quarter of 1999), to improve the competitive position of our network of service stations, lubrication center stores and macro-stores, to continue to develop our commercial network through business relationships and other associations and to increase our product supply to high traffic airports.

•

Gas.  The development of our gas business is one of the major focuses of our 2001-2006 business plan. We plan to focus our gas business unit on creating investment opportunities for the private sector in non-associated gas production, expanding our transmission and distribution systems, natural gas liquids processing systems and extraction and fractionation capacity and developing new gas export ventures. We intend to retain our own associated natural gas production fields. We intend to continue to explore and develop non-associated gas reserves with private sector investment.

8

The Venezuelan Ministry of Energy and Mines is currently leading a licensing process for exploration and production of 11 new on-shore reserve areas with the participation of about 37 potential investors. We anticipate this licensing process to be completed by the end of June 2001. We also intend to support the gas transmission and distribution activities which are also currently being implemented by the Ministry of Energy and Mines.

We anticipate that the capital required for the development of our gas business strategy could be up to $10,000 million. We hope to fund such required capital expenditures primarily through investments from private sectors.

We believe that our gas resources and the geographical positioning of Venezuela at the center of the Atlantic Basin puts us in an advantageous position with respect to our business plan. We also believe that our gas business plan will also promote a more diverse use for gas as a fuel and as a raw material in Venezuela.

•

Petrochemicals.  We intend to continue to promote the development of the petrochemical industry in Venezuela by maximizing the use of our existing petrochemical infrastructure and by integrating our refineries and petrochemical plants with a view to ensuring maximum economic benefit that is independent of the demand cycles of the oil and petrochemical markets. We also intend to continue the development of the petrochemical industry in three specific areas: petrochemicals from gas, industrialization of refinery streams and the manufacturing of certain aromatic products.



•

Orimulsion®.  We intend to expand our Orimulsion® business and increase our production levels based on anticipated market opportunities, mainly in the Far East. We intend to carry out our planned expansion through joint ventures. The growing popularity of Orimulsion® as a fuel is due to a new formulation, which makes it more environmentally friendly and more economical. At present our entire Orimulsion® production is operated to meet the needs of our clients in Europe, Asia and the United States.

Exploration and production

    According to a 2000 comparative study (based on a composite of 1999 operating criteria) published by Petroleum Intelligence Weekly, based on a combination of operating criteria, Venezuela's proved crude oil reserves are the fifth largest in the world. Such reserves have continued to increase over the years, despite a cumulative production of crude oil in from 1914 through December 31, 2000 totaling approximately 53 billion barrels. Venezuela's commercial production of crude oil is concentrated in the Western Zulia basin and the Western Barinas—Apure basin and in the eastern basin in Monagas and Anzoategui states. The large number of fields in production in these three basins are broadly distributed geographically. This results in a substantially diversifies our production risks because the impact of a loss of production in any one of these fields would be relatively minor when compared to our total production. The western basins have produced 39.5 billion barrels of crude oil to date and the eastern basin has produced 13.9 billion barrels of crude oil to date. Substantial portions of the sedimentary basins in Venezuela have not yet been explored.

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10

    The following table shows the location, volume of production, discovery year, recoverable reserves and the ratio of reserves to production for each of our ten largest oil fields as of December 31, 2000:

    The following table shows our proved reserves, proved/developed reserves, production and the ratio of proved reserves to production in each of the principal basins, as well as the ratio of reserves at December 31, 2000 to production for 2000:

Reserves and Production by Basin

(1)

Developed and undeveloped.

(2)

Refers to production from the top of our wells, and includes condensate.

(3)

Net natural gas production (gross production less natural gas reinjected), obtained from the top of our wells.

(4)

Includes proved reserves of heavy and extra-heavy crude oil in the Orinoco Belt, estimated to be 37.2 billion barrels at December 31, 2000. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation."

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(5)

Includes proved reserves of natural gas in the Orinoco Belt, estimated to be 2.4 billion BOE at December 31,2000.

Reserves

    Crude oil and natural gas represented 75% and 25%, respectively, of our total estimated proved crude oil and natural gas reserves on an oil equivalent basis at December 31, 2000.

    Crude Oil.  We had estimated proved crude oil reserves at December 31, 2000 totaling approximately 78 billion barrels (including an estimated 37.2 billion barrels of heavy and extra-heavy crude oil in the Orinoco Belt). We also had estimated proved reserves of natural gas totaling approximately 147,585 billions of cubic feet ("BCF") (including an estimated 14,189 BCF in the Orinoco Belt). The average API gravity of our estimated proved crude oil reserves was 16.6° as compared to an average API gravity of 23.9° for our crude oil produced in 2000. Based on 2000 production levels, our estimated proved reserves of crude oil, including heavy and extra-heavy crude oil reserves that will require significant future development costs to produce and refine, have a remaining life of approximately 64 years.

    From December 31, 1995 to December 31, 2000, our estimated proved reserves of crude oil increased by 11.4 billion barrels and our estimated proved reserves of natural gas increased by 0.7 billion BOE. In 2000, 1999 and 1998, our proved crude oil reserve replacement ratio was 169%, 165% and 200%, respectively. These increases resulted from revisions to the expected recovery rate of oil in place and the application of secondary recovery technology to existing crude oil deposits.

    Natural Gas.  We have substantial proved developed reserves of natural gas amounting to 103,310 BCF (or 17,812 millions of barrels of oil equivalent) at December 31, 2000. Virtually all of our natural gas reserves are composed of associated gas that are developed incidental to the development of our crude oil reserves. A large proportion of our proved natural gas reserves are developed. During 2000, approximately 33% of the natural gas that we produced was reinjected for well pressure maintenance purposes.

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    The following table shows our proved crude oil and natural gas reserves and proved developed crude oil and natural gas reserves, all located in Venezuela:

PDVSA's Proved Reserves

(1)

Proved reserves include both proved developed and undeveloped reserves.

(2)

Proved reserves of extra-heavy oil located in the Orinoco Belt have a low development grade. Of the total proved reserves to be exploited under the Orinoco Belt Project, at December 31, 2000, approximately 646 MMB were being developed under four association agreements in which we have an equity interest of less than 50%. See "Item 4.B—Initiatives Involving Private Sector

13

Participation—Joint Ventures with Private Sector Participants—Orinoco Belt Extra-Heavy Crude Oil Projects."

(3)

Portion of reserves in fields assigned to our operating service agreements as of December 31 of the year in which each such operating agreement went into effect. Such agreements will not necessarily result in the exploitation of 100% of those reserves during their term. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation—Operating Service Agreements."

(4)

Includes 12,505 BCF, 12,437 BCF, 12,437 BCF, 12,438 BCF and 11,215 BCF in each of 2000, 1999, 1998, 1997, and 1996, respectively, associated with extra-heavy crude oil reserves.

(5)

Natural gas is converted to BOE at a ratio of 5.8 thousand cubic feet of natural gas per one barrel of crude oil.

(6)

Based on crude oil production and total crude proved reserves. Proved reserves of extra-heavy crude oil in the Orinoco Belt are being developed in association with third parties. See Note (2) above.

(7)

Includes proved developed reserves of extra-heavy crude oil utilized in the production of Orimulsion®.

(8)

Proved developed crude oil reserves divided by total proved crude oil reserves.

(9)

Proved developed natural gas reserves divided by total proved natural gas reserves.

    For a summary of the annual changes in our estimated proved reserves of crude oil and natural gas for 2000, 1999 and 1998, see also Note 17, Table I, to our consolidated financial statements included herein.

    We use geological and engineering data to estimate our proved crude oil and natural gas reserves, including proved developed and undeveloped reserves. Such data is capable of demonstrating with reasonable certainty whether such reserves are recoverable in future years from existing reservoirs under existing economic and operating conditions. We expect to recover proved developed crude oil and natural gas reserves principally from new wells and acreage that has not been drilled using our currently available equipment and operating methods. Our estimate of reserve are not precise and are subject to revision. We review our crude oil and natural gas reserves annually to take into account, among other things, production levels, field reviews, the addition of new reserves from discoveries, year-end prices and economic and other factors. Proved reserve estimates may be materially different from the quantities of crude oil and natural gas that are ultimately recovered.

Operations

    We maintain an active exploration and development program designed to increase our proved crude oil reserves and production capacity. We have been successful in our efforts to increase our proved crude oil and natural gas reserves in each of the last 20 years. Beginning in 1992, we commenced a program designed to attract and incorporate private sector participation into its exploration and production activities. We currently conduct our exploration and development activities in the Western Zulia, the Western Barinas—Apure and the eastern basin. We are currently conducting extensive exploration and development activities in the Orinoco Belt of the eastern basin and in the other basins, either through our independent efforts or together with foreign partners through joint venture associations. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation."

    In 2000, our exploration expenditures were used principally to fund the drilling of 14 exploratory wells and acquisition of 653 km² of 3D and 952 km of 2D seismic lines. Additionally, 15 exploratory wells were drilled and 1,633 km² of 3D seismic lines were acquired pursuant to our operating services

14

agreements. We added 209 MMB of new crude oil reserves in 2000 as a result of our exploration activities, compared to 184 MMB in 1999 and 170 MMB in 1998. We invested $1,771 million in 474 development wells and other facilities in 2000.

    The following table summarizes our drilling activities for the periods indicated:

PDVSA Exploration and Development

(1)

Includes wells in progress, even if they were spud in previous years, and injector wells.

    In 2000, our crude oil production averaged 3,085 MBPD with an average API gravity of 25.6°. This production level represented 80% of the estimated average crude oil production capacity of 3,854 MBPD. The average production costs of crude oil during this period were approximately $3.48 per BOE, or $2.22 per BOE excluding the production and costs attributable to our operating service agreements.

    At December 31, 2000, we operated approximately 18,979 oil wells and 71 gas wells. At such date, we had 37,659 gross kms² undeveloped acreage and 90,914 gross kms² acreage under development, including 45,647 kms² developed pursuant to our operating service agreements.

    During 2000, our natural gas production averaged 5,946 millions of cubic feet per day ("MMCFD"), or an amount equal to a production of approximately 1,025 MBPD on an oil equivalent basis. Of this production, approximately 33%, or 1,967 MMCFD, was reinjected for purposes of maintaining reservoir pressure. The net natural gas production of 3,979 MMCFD was consumed in production of liquid natural gas (9%), as fuel in refinery and production operations (47%), in petrochemical operations (9%) and the remainder (35%) was sold to third parties in power generation, aluminum, iron and other manufacturing industries and domestic uses. Approximately 64% of our 2000 natural gas production and approximately 76% of total estimated proved net natural gas reserves are located in the eastern basin. A significant portion of such production is transported through our pipelines for use by industries in the coastal region and central Venezuela

15

    The following table summarizes our historical average net daily crude oil and natural gas production by type and by basin and average sales price and production cost for total production for the periods specified:

Average Production, Sales Price and Production Cost

(1)

In 2000, excludes 155 MBPD of extra-heavy crude oil production from our Cerro Negro and Petrozuata Orinoco Belt joint venture and includes 25 MBPD of PDVSA's interest in the Cerro Negro joint venture.

(2)

See "Item 4.B Business overview—Initiatives Involving Private Sector Participation—Operating Service Agreements."

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(3)

Including sales to subsidiaries and affiliates.

(4)

The combined average production cost per barrel (for crude oil, natural gas and liquid petroleum gas), is calculated by dividing the sum of all direct and indirect production costs (including our own consumption but not including depreciation and depletion); by the combined total production volumes of crude oil, natural gas and liquid petroleum gas.

Initiatives Involving Private Sector Participation

    We are permitted, pursuant to Article 5 of the Nationalization Law, to enter into operating agreements and, with the approval of the National Assembly, association agreements, with private entities. We have, since 1992, with the approval of the Venezuelan government and the Venezuelan congress where required, implemented various arrangements designed to attract investments by unaffiliated private sector oil companies in our exploration and development activities.

Operating Service Agreements

    In 1992, 1993 and 1997, we auctioned to and entered into agreements with private sector operators on three occasions (hereinafter referred to as the "first round," "second round" and the "third round") the right to reactivate and develop, using secondary and tertiary recovery techniques, certain oil fields that no longer met our minimum rate of return on investment pursuant to the terms of our operating service agreements with such operators. Under our operating service agreements, the operator makes all required capital expenditures and pays all operating expenses. The operator is paid a fee for the hydrocarbons produced to reimburse such operator for its capital and operating expenses and to provide the operator with a return on investment. We own the capital assets employed and we retain title to the hydrocarbons produced.

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•

The First and Second Rounds.  In the first and second rounds, a total of 27 oil companies were awarded rights to exploit 15 oil fields. An average of 329 MBPD of crude oil was produced from these fields in 2000, and it is expected that such production will increase to approximately 460 MBPD when the fields are in substantially full operation by 2005. As of December 31, 2000, these fields had estimated proved reserves of approximately 3.8 billion barrels of crude oil. As of December 31, 2000, under this initiative, foreign companies had invested in excess of $4,000 million.



•

The Third Round. In the third round, we auctioned the right to reactivate, rehabilitate, develop and additionally explore certain hydrocarbon reservoirs located in 20 geographical areas. An average of 137 MBPD of crude oil was produced from these fields in 2000. As of December 31, 2000, these fields had estimated proved reserves of 1.6 billion barrels of crude oil. Our business plan currently contemplates daily production of 424 MBPD by 2005 under our operating service agreements. As of December 31, 2000, under this initiative, the operator companies had invested in excess of $2,000 million.

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    The following table sets forth information with respect to the contracts awarded to reactivate the marginal fields under our operating service agreements:

Operating Service Agreements
As of December 31, 2000