As filed with the Securities and Exchange Commission on October 24, 2003.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 20-F

Commission File No. 001-12142

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, 2002.

        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.

TABLE OF CONTENTS

i

INCORPORATION OF CERTAIN DOCUMENTS 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, 9.950% Notes due 2020 and 8.500% Notes due 2012 (collectively, the "PDVSA Finance Notes"), PDVSA Finance Ltd.'s annual report on Form 20-F for the year ended December 31, 2002, as first filed with the U.S. Securities and Exchange Commission (Commission file No. 333-09678) on October 24, 2003 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, drilling and production activities, refining processes, petrochemicals, gas, 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, sales, taxes, dividends and contributions to Venezuela, and our recovery efforts, are forward-looking statements. Words such as "anticipate," "estimate," "prospect" and similar expressions are used to identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties related to Venezuelan and international markets, inflation, the availability of continued access to capital markets and financing on favorable terms, regulatory compliance requirements, changes in import controls or import duties, levies or taxes and changes in prices or demand for our products as a result of actions of our competitors or economic factors. Those statements are also subject to the risks of costs and anticipated performance capabilities of technology, and performance by third parties of their contractual obligations. Exploration activities are subject to risks arising from the inherent difficulty of predicting the presence, yield and 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 risks or uncertainties 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, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this annual report. We undertake no obligation to publicly release any revision to these forward-looking statements to reflect events or circumstances after the date of this annual report.

        The annual report on Form 20-F of PDVSA Finance Ltd., our wholly-owned subsidiary, for the year ended December 31, 2002 incorporated by reference herein also contains forward-looking statements. For a discussion of the factors affecting these statements contained in PDVSA Finance'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 contained in Annex A. When used in this annual report, the term "Petróleos de Venezuela" refers 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.

Other miscellaneous terms

        Unless the context indicates otherwise, the following terms have the meanings shown below:

"Amerada Hess"—Amerada Hess Corporation

"Bitor"—Bitúmenes Orinoco, S.A.

"BORCO"—The Bahamas Oil Refining Company International Limited

"Carbozulia"—Carbones del Zulia, S.A.

"Chalmette Refining"—Chalmette Refining, L.L.C.

"ChevronTexaco"—ChevronTexaco Corporation

"CIED"—Centro Internacional de Educación y Desarrollo

"CITGO"—CITGO Petroleum Corporation

"CITGO Latin America"—CITGO International Latin America, Inc.

"Conoco"—ConocoPhillips

"CVP"—Corporación Venezolana del Petróleo, S.A.

"Deltaven"—Deltaven, S.A.

"ExxonMobil"—ExxonMobil Corporation.

"FIEM"—Fondo de Inversión para la Estabilización Macroeconómica (Macroeconomic Stabilization Investment Fund)

"Hovensa"—Hovensa, L.L.C.

"Intevep"—Intevep, S.A.

"Isla Refinery"—Refinería Isla (Curaçao), S.A.

"Lyondell"—Lyondell Petrochemical Corporation

"LYONDELL-CITGO"—LYONDELL-CITGO Refining Company, L.P.

"Merey Sweeny"—Merey Sweeny, L.L.C.

"Nynäs"—AB Nynäs Petroleum

"OPEC"—Organization of Petroleum Exporting Countries

"PDV America"—PDV America, Inc.

"PDV Chalmette"—PDV Chalmette, Inc.

"PDV Europa"—PDV Europa B.V.

"PDV Holding"—PDV Holding, Inc.

"PDV Marina"—PDV Marina, S.A.

"PDVMR"—PDV Midwest Refining, L.L.C.

"PDV VI"—PDVSA Virgin Island, Inc.

"PDVSA Cerro Negro"—PDVSA Cerro Negro, S.A.

"PDVSA Finance"—PDVSA Finance Ltd.

"PDVSA Gas"—PDVSA Gas, S.A.

"PDVSA Petróleo"—PDVSA Petróleo, S.A.

"PDVSA Sincor"—PDVSA Sincor, S.A.

"PDVSA-P&G"—PDVSA Petróleo y Gas, S.A.

"Pequiven"—Petroquímica de Venezuela, S.A.

"Petrozuata"—Petrolera Zuata, C.A.

"Phillips Petroleum"—Phillips Petroleum Corporation

"Ruhr"—Ruhr Oel GmbH

"Statoil"—Statoil Sincor AS

"Total Fina"—Total Fina Venezuela, S.A.

"Veba Oel"—Veba Oel AG

"Venezuela"—The Bolivarian Republic of Venezuela

2

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

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3.A Selected financial data

        The selected data presented below for, and as of the end of, each of the years in the five-year period ended December 31, 2002, are derived from the consolidated financial statements of PDVSA. The consolidated financial statements as of and for the years ended December 31, 2002, 2001 and 2000 have been audited by Alcaraz Cabrera Vazquez (a member firm of KPMG International), independent auditors. The consolidated financial statements as of and for the years ended December 31, 1999 and 1998 have been audited by Espiñeira, Sheldon y Asociados (a member firm of PricewaterhouseCoopers, LLP), independent auditors. The consolidated financial statements as of December 31, 2002 and 2001, and for each of the years in the three-year period ended December 31, 2002, and the report thereon, which is based partially upon the report of other auditors, are included elsewhere herein. See "Item 18. Financial Statements."

(1)

Effective January 1, 1998, we changed our method of accounting for the cost of major refinery repairs and maintenance (turnarounds).

(2)

Excludes current portion of capital lease obligations, which amounted to $30 million, $62 million, $122 million, $117 million and $90 million in 2002, 2001, 2000, 1999 and 1998, respectively.

(3)

Calculated as total debt (long-term debt, including current portion of long-term debt and capital leases) divided by stockholder's equity.

(4)

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

(5)

During 2001, 2000, 1999 and 1998, we used CERTS amounting to $84 million, $255 million, $22 million and $622 million, respectively, to pay income taxes.

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(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.

(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, 2002, approximately 10,639 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—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

5

100% of these reserves during their term. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation—Operating Service Agreements."

(8)

Includes 12,454 BCF, 12,476 BCF, 12,505 BCF, 12,400 BCF and 12,437 BCF in each of 2002, 2001, 2000, 1999 and 1998, respectively, associated with extra-heavy crude oil reserves.

(9)

Based on crude oil production from the top of wells 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—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."

Exchange rates

        The following table sets forth certain information concerning the exchange rate of the bolivar to the dollar based on daily rates of exchange established by the Central Bank of Venezuela pursuant to a foreign exchange agreement between Venezuela's Ministry of Finance and the Central Bank of Venezuela. See notes 2, 3 and 21 to our consolidated financial statements, included under "Item 18. Financial Statements."

(1)

Represents the average exchange rate for each full month during the year, calculated based on the average daily exchange rate established by the Central Bank of Venezuela pursuant to the foreign exchange agreement referred to above.

(2)

The exchange rate for the sale and purchase of the bolivar relative to the dollar was fixed by the Venezuelan government pursuant to a new foreign exchange regime at Bs. 1,600.00 to $1 and Bs. 1,596.00 to $1, respectively, commencing February 5, 2003.

        On February 13, 2002, the Venezuelan government and the Central Bank of Venezuela adopted a floating exchange rate system in place of the band system. On January 21, 2003, the Venezuelan government and the Central Bank of Venezuela adopted temporary measures to restrict the convertibility of the Bolivar, and on February 5, 2003, the Venezuelan government established a foreign exchange regime, setting the exchange rates for the sale and purchase of foreign currency at Bs. 1,600.00 to $1 and Bs. 1,596.00 to $1, respectively. It also created the Commission for the Administration of Foreign Exchange (CADIVI) and established rules for the administration and control of foreign currency.

        Notwithstanding the new regime, the foreign exchange agreement between Venezuela's Ministry of Finance and the Central Bank of Venezuela contains provisions that are specific to PDVSA, which have been in effect since 1982. Among other things, the foreign exchange agreement effectively exempts PDVSA and its affiliates from the exchange controls described above, up to a specified dollar limit. As a result, we believe that the new exchange controls will not have a significant impact on PDVSA's operations.

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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.

        PDVSA's business, financial condition, results of operations and prospects depend largely on international prices for crude oil and refined petroleum products. Prices of oil and refined petroleum products are cyclical and highly volatile, and have, historically, 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;



•

political events in major oil producing and consuming nations;



•

agreements among OPEC members;



•

the availability and price of competing products;



•

actions of commodity markets participants and competitors;



•

international economic trends;



•

technological advancements and developments in the industry;



•

currency exchange fluctuations; and



•

inflation.

        Historically, OPEC members 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 production agreement quotas, and we expect that Venezuela will continue to comply with such agreements in the future. Since 1998, OPEC's production quotas have resulted in a worldwide decline in crude oil production and substantial increases in 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 for a substantial period of time may materially and adversely affect our results of operations, cash flows and financial results.

Risks Related to Venezuela's Ownership, Regulation and Supervision of PDVSA.

        We are owned by the Bolivarian Republic of Venezuela. The Venezuelan government regulates and supervises our operations, and the President of Venezuela appoints the members of our board of directors by an executive decree. However, 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. In December 2002 and January 2003. The opponents of the Venezuelan government initiated a nationwide work stoppage that disrupted most activities in Venezuela, including PDVSA's operations. Although PDVSA's operations began to normalize in February 2003, any prolonged disruption in PDVSA's activities could have a material adverse effect on the generation of eligible receivables by PDVSA Petróleo. A similar labor stoppage briefly occurred in February 2002. We have no control over the occurrence of such developments and cannot assure you that similar events will not occur in the future. Additionally, because we are controlled by the Venezuelan government, we cannot assure you that the Venezuelan government will not in the future intervene in our commercial affairs in a manner that could adversely affect our business.

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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 Venezuela and not to us. The exploration of these hydrocarbon reserves are reserved to Venezuela. Petróleos de Venezuela was formed to coordinate, monitor and control operations related to Venezuela's hydrocarbon reserves.

        While Venezuelan law requires that Venezuela retain exclusive ownership of Petróleos de Venezuela, it does not require the country to continue to conduct its crude oil exploration and exploitation activities through us. If the government elects to conduct its hydrocarbon activities other than through us, our operations will be materially and adversely affected. We can offer no assurance that Venezuelan law or the implementation of policies by the Venezuelan government will not adversely affect our operations. See also "Item 7.A Major shareholders."

Our business requires substantial capital expenditures.

        The exploration and development of hydrocarbon reserves, production, processing and refining and the maintenance of machinery and equipment require substantial capital investments. We must continue to invest capital to maintain or to increase the number of hydrocarbon reserves that we operate and the amount of crude oil that we produce and process. We cannot assure you that we will maintain our production levels or generate sufficient cash flows 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 are subject to production, equipment, transportation and other risks that are common to oil and gas companies.

        As an integrated oil and gas company, we are exposed to production, equipment and transportation risks that are common to oil and gas companies, including fluctuations in production volume 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—Operations."

        These risks may lower our production levels, increase our production costs and expenses, or cause damage to our property or personal injury to 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. These risks may materially and adversely affect our operations and financial results. 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 is the national oil and gas company of the Bolivarian Republic of Venezuela. 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"), and its operations are supervised by Venezuela's Ministry of Energy and Mines. Through its subsidiaries, Petróleos de Venezuela supervises, controls and develops the petroleum, petrochemical, gas, coal and Orimulsion® industries in Venezuela. These activities are complemented by Petróleos de Venezuela's operating companies established abroad, which are responsible for refining and marketing activities in North America, Europe and the Caribbean. See also "Item 7.A Major shareholders."

        PDVSA's oil-related activities are governed by the Hydrocarbons Law, which came into effect in January 2002. PDVSA's gas-related activities are regulated by the Organic Law of Gas Hydrocarbons of September 1999 and its regulations dated June 2000.

        Since its formation, Petróleos de Venezuela has been operated as a commercial entity, vested with commercial and financial autonomy. Petróleos de Venezuela and its domestic subsidiaries are organized under the Commercial Code of Venezuela, which sets forth the basic corporate legal framework applicable to all Venezuelan companies.

        Petróleos de Venezuela is domiciled in Venezuela and its 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. Our website is: www.pdvsa.com. All references to our website in this annual report are inactive textual references only. Information contained on our website is not incorporated by reference into this annual report.

4.B    Business overview

        PDVSA is engaged 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 derivative of natural bitumen, known as Orimulsion®, and coal resources.

        Our crude oil and natural gas reserves and our upstream operations are located in Venezuela, while our downstream operations are located in Venezuela, North America, Europe and the Caribbean.

        Our exploration, production and upgrading executive office, manages our upstream operations, our Orinoco Belt development projects and the activities of our subsidiaries, Bitor, Carbozulia and CVP. In addition to the management of the exploration and production activities under profit sharing agreements with private sector oil companies, since August 2003, CVP assumed from PDVSA Petróleo the management of the operating agreements and the Orinoco Belt through projects conducted pursuant to joint venture agreements with international oil companies.

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        Our downstream operations are conducted through our supply and marketing executive office, through which we:

•

operate refineries and market crude oil and refined petroleum products in Venezuela under the PDV brand name and in the Eastern and Midwestern regions of the United States under the CITGO brand name;



•

own equity interests in three refineries (one 50%-owned by ExxonMobil, one 50.75%-owned by Lyondell and one 50%-owned by Amerada Hess) and in a coker/vacuum crude distillation unit (50%-owned by Conoco) through joint ventures in the United States;



•

own equity interests in eight refineries and market petroleum products in Germany, the United Kingdom, Belgium and Sweden through two joint ventures (one 50%-owned by Veba Oil and one 50%-owned by Fortum Oil and Gas OY);



•

conduct most of our business in the Caribbean through the Isla Refinery (a refinery and storage terminal which we lease in Curaçao);



•

operate storage terminals in Bonaire and The Bahamas;



•

process, market and transport all natural gas in Venezuela; and



•

conduct shipping activities.

        In the United States, we conduct our crude oil refining operations and refined petroleum product marketing through our wholly-owned subsidiary, PDV Holding, which, through PDV America, owns 100% of CITGO. CITGO refines, markets and transports gasoline, diesel fuel, jet fuel, petrochemicals, lubricants, asphalt and other refined petroleum products in the United States. CITGO's transportation fuel customers include primarily CITGO branded independent wholesale marketers, major convenience store chains and airlines located mainly east of the Rocky Mountains. Asphalt is generally marketed to independent paving contractors on the East and Gulf Coasts and in the Midwest of the United States. Lubricants are sold principally in the United States to independent marketers, mass marketers and industrial customers. CITGO sells lubricants, gasoline, and distillates in various Latin American markets. Petrochemical feedstocks and industrial products are sold to various manufacturers and industrial companies throughout the United States. Petroleum coke is sold primarily in international markets. In addition, CITGO sells petrochemicals and industrial products directly to various manufacturers and industrial companies throughout the United States. In 2002, CITGO sold a total of 25.4 billion gallons of petroleum products. PDV Holding also owns 100% of PDVMR (through CITGO) and 50% of Chalmette Refining (through PDV Chalmette), each of which is primarily engaged in the refining of crude oil. In October 1998, we entered into agreements with Conoco to form Merey Sweeny, a joint venture to process crude oil in the United States, and with Amerada Hess to form Hovensa, a joint venture to process crude oil in the U.S. Virgin Islands. We are, through our U.S. subsidiaries, one of the largest refiners of crude oil in the United States, based on our aggregate net ownership interest in crude oil refining capacity at December 2002.

        In Europe, we conduct our crude oil refining and refined petroleum product activities through PDV Europa, which owns our 50% interest in Ruhr, a company operating in Germany and owned jointly with Veba Oel, and our 50% interest in Nynäs, a company operating in Belgium, Sweden and the United Kingdom and owned jointly with Fortum Oil and Gas OY. Through Ruhr, we refine crude oil and market and transport gasoline, diesel fuel, heating oil, petrochemicals, lubricants, asphalt and other refined petroleum products. Through Nynäs, we refine crude oil and market and transport asphalt, specialty products, lubricants and other refined petroleum products.

        We conduct our petrochemical activities through Pequiven, which has three petrochemical complexes in Venezuela and is currently involved in 17 joint ventures with private sector partners.

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        Our gas business is conducted through PDVSA Gas, which oversees our production and distribution of natural gas and gas liquids.

        We have, since 1997, marketed and distributed retail gasoline and other refined petroleum products under the PDV brand in the Venezuelan local market through our subsidiary, Deltaven. Deltaven also is promoting the development of the commercial infrastructure and services for retail clients with the participation of the private sector.

        PDVSA Finance was established in 1998 to serve as our principal vehicle for corporate financing through the issuance of unsecured debt.

        Our other important subsidiary is Intevep, through which we manage our research and development activities. Additionally, PDVSA manages an educational center, CIED, which is responsible for the training and development of our personnel.

        See "Item 4.C Organizational structure" for a list of our significant subsidiaries.

        According to a comparative study published by Petroleum Intelligence Weekly in 2002, based on a combination of operating criteria and other data for 2001, including reserves, production, refining capacity and refined petroleum product sales, we were the world's third largest vertically integrated oil and gas company, ranked seventh in the world in production, sixth in proved reserves of crude oil, fourth in refining capacity and fifth in product sales. Venezuela has been exporting crude oil, primarily to the United States, without interruption, since 1914. In 2002, PDVSA accounted for approximately 27% of Venezuelan gross domestic product, approximately 79% of its exports and approximately 30% of its revenues.

Business Strategy

        Our business strategy is to pursue the development of Venezuela's hydrocarbon resources with the support of both national and foreign private capital, to maximize shareholder value and to ensure our financial strength and stability.

        Our business plan in respect of our operations in Venezuela for 2003-2008 focuses on the exploration, production, refining and marketing of hydrocarbons. Additionally, the plan also promotes investment from the private sector in the overall development of the gas and petrochemical industry, in the industrialization of refining streams and in Orimulsion® and coal. We anticipate that our business

11

plan would require approximately $36 billion to achieve a sustainable production capacity of 4,400 MBPD by 2008. A summary of our 2003-2008 business plan is as follows:

Capital Investment Plan 2003 - 2008
($ in millions)

        We also are committed to maintaining high safety and health standards in conducting our business, and we aim to achieve effective and timely integration of business technologies in our operations. We also endeavor to provide quality training for our personnel.

        As part of our business strategy, we intend to:

With respect to exploration, production and upgrading activities—

•

increase reserves of light and medium gravity crude oil;



•

increase overall recovery factor;



•

continue the development of our Orinoco Belt extra-heavy crude oil projects; and



•

improve on our existing technology in order to maximize the return on our investments.

With respect to refining and marketing—

•

invest in product enhancement and environmental compliance in Venezuela and abroad;



•

expand our markets in Latin America and the Caribbean; and



•

improve the efficiency of our refining processes and marketing activities.

With respect to gas—

•

promote active national and international private sector participation in nonassociated gas reserves and processing;



•

enhance our distribution processes in order to increase the breadth of our domestic and international markets; and



•

increase our focus in the liquified natural gas (or LNG) markets.

With respect to petrochemicals—

•

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

12

•

promote active national and international private sector participation and investments in this sector.

The implementation of our business plan includes the following initiatives:

•

Exploration, production and upgrading. Our exploration and production strategy focuses on increasing our efforts to search for new light and medium gravity crude oil reserves and the 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 with other oil producing countries, maintaining competitive production costs by using state-of-the-art technology and completing the development of our Orinoco Belt projects, including Petrozuata (a joint venture between PDVSA and Conoco), Cerro Negro (a PDVSA—ExxonMobil—Veba Oel joint venture), Sincor (a PDVSA—TotalFinaElf—Statoil joint venture), Hamaca (a PDVSA—Conoco—ChevronTexaco joint venture).



•

Refining. Our refining strategy focuses on improving the efficiency of our downstream operations in Venezuela, the United States, Europe and the Caribbean. We continue to aim 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 recognition for our products. We also aim to strengthen our market position in the United States through a more efficient distribution by CITGO of its refined petroleum products. Through CITGO Latin America, a wholly-owned subsidiary of CITGO, we plan to introduce the PDV and CITGO brands into various Latin American and Caribbean markets, including through wholesale and retail sales of refined petroleum products. In 2001, CITGO Latin America set up an office in Guayaquil, Ecuador. In 2002, CITGO-branded service stations were established in Puerto Rico, and the PDV brand was recently launched in Argentina and Brazil.

In Venezuela, we plan to continue to promote a reliable supply of our products and the use of unleaded gasoline (a process which we started during the fourth quarter of 1999) to improve the competitive position of our network of service stations, lubrication centers and macro-stores, to continue the development of 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 our major goals. We plan to focus on creating investment opportunities for the private sector in nonassociated gas production, expanding our transmission and distribution systems and natural gas liquids extraction, processing and fractioning capacity, and developing new gas export ventures, including exports of LNG. We intend to operate most of the existing associated natural gas production fields, currently assigned to us by the Ministry of Energy and Mines. We will continue to explore and develop nonassociated gas reserves with the support of private investment. We expect to support the activities related to our gas business using our existing gas transmission and distribution systems.

The Ministry of Energy and Mines completed a round of nonassociated gas licensing bids for exploration and production activities in 11 new onshore areas in 2001. Six of those areas were awarded to foreign and domestic investors: Yucal-Placer Norte and Yucal-Placer Sur (both development areas), Barrancas, Tinaco, Tiznado and Barbacoas (each exploratory areas). We anticipate the Yucal-Placer areas to produce approximately 100 MMCFD of gas beginning January 2004, and approximately 300 MMCFD by 2006-2007. During the first quarter of 2003, the Venezuelan government assigned two blocks within the Plataforma Deltana area (on the border with Trinidad & Tobago) to Statoil and ChevronTexaco. Additionally, we are currently

13

exploring the development of a project for the production of LNG in an area located in the northeast of the country.

We anticipate that development of our gas business strategy will require approximately $4.5 billion in capital from 2003 to 2008. We expect that such capital expenditures will be obtained primarily from investments by the private sector.

We believe that our natural gas resources and Venezuela's geographical location at the center of the Atlantic Basin puts us in an advantageous position to achieve our goals with respect to our gas business. We intend to capitalize on our position by promoting an increased and more diverse use of natural gas within the country.

•

Petrochemicals. We plan 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 to ensure maximum economic benefit and to promote independence of our business performance from the volatility of the oil and petrochemical markets. We intend to focus on three specific areas: development of petrochemicals from gas, industrialization of refinery streams and the manufacturing of certain aromatic products.



•

Orimulsion®. We plan to expand our Orimulsion® business and increase our production based on anticipated market opportunities, mainly in the Far East. We will execute our expansion plan 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 this time, our entire Orimulsion® production is operated to meet the needs of our clients in Europe, Asia and the United States.

Exploration and Production

        Venezuela's proved crude oil reserves have continued to increase over the years, with a cumulative production of crude oil from 1914 through December 31, 2002 totaling approximately 55.7 billion barrels. Venezuela's commercial production of crude oil is concentrated in the Western Zulia Basin and the Western Barinas—Apure Basin in Western Venezuela and in the Monagas and Anzoategui states in the Eastern Basin. The large number of fields in production in these three basins are broadly distributed geographically and, as a result, substantially diversifies our production risk. The impact of a loss of production in any one field would be relatively minor when compared to Venezuela's total production. The Western and Eastern basins have produced 40.6 billion and 15.1 billion barrels, respectively, of crude oil to date. Substantial portions of the sedimentary basins in Venezuela have not yet been explored.

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Principal Oil-Producing Basins in Venezuela

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        The following table shows our proved reserves, proved and developed reserves, 2002 production and the ratio of proved reserves to annual production in each of the principal basins at December 31, 2002:

PDVSA's Proved Reserves and Production by Basin

(1)

Developed and undeveloped.

(2)

Includes condensate. Production obtained from the top of wells.

(3)

Net natural gas production (gross production less natural gas reinjected).

(4)

Includes proved reserves of heavy and extra-heavy crude oil in the Orinoco Belt, estimated to be 35.4 billion barrels at December 31, 2002. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation—Orinoco Belt Extra-Heavy Crude Oil Projects."

(5)

Includes proved reserves of natural gas in the Orinoco Belt, estimated to be 2.147 billion BOE at December 31, 2002.

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        The following table shows the location, 2002 production volume, discovery year, proved reserves and the ratio of proved reserves to annual production for each of PDVSA's eleven largest oil fields as of December 31, 2002:

PDVSA's Proved Reserves and Production by Field

Reserves

        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 known 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 currently available equipment and operating methods. Our estimates of reserves are not precise and are subject to revision. We review these 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.

New Hydrocarbon Reserves Findings

        During recent exploration and drilling activities, which are still in progress in the Eastern part of Venezuela, new hydrocarbon reserves were discovered near Maturín. We expect these reserves to yield approximately 460 million barrels of crude oil of 32° API and 1.6 BCF of associated gas. Additionally, we currently are in the process of drilling an exploratory well located north of Anaco. We expect this exploratory well to yield approximately 2,800 BCF of free gas and 50 million barrels of crude oil. Further, new reserves were discovered in the Furrial field, which has been in production since 1996. We expect these reserves to yield approximately 2,000 million barrels of crude oil.

        In the Western part of the country, we continue our exploration activities at Franquera-1, Pauji and Misoa Formations of Eocene. We expect these reserves to yield from 218 MMB to 1,559 MMB of crude oil and from 0.1 to 1,300 BCF of associated gas.

        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, 2002.

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        Crude Oil.    We had estimated proved crude oil reserves at December 31, 2002 totaling approximately 77.2 billion barrels (including an estimated 35.4 billion barrels of heavy and extra-heavy crude oil in the Orinoco Belt). We also had estimated proved reserves of natural gas totaling approximately 147,109 BCF (including an estimated 12,454 BCF in the Orinoco Belt). The average API gravity of our estimated proved crude oil reserves was 16.5° as compared to an average API gravity of 24.2° for our crude oil produced in 2002; the API gravity of the oil produced by the Orinoco Belt projects ranges from 9 to 23° API. Based on 2002 production levels, 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 70 years.

        From December 31, 1995 to December 31, 2002, our estimated proved reserves of crude oil increased by 10.9 billion barrels and our estimated proved reserves of natural gas increased by 0.62 billion barrels of oil equivalent ("BOE"). In 2002, 2001, 2000 and 1999, our proved crude oil reserve replacement ratio was 104%, 108%, 169% and 165%, respectively. These variations 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 102,191 BCF (or 17,619 MMBOE) at December 31, 2002. Our natural gas reserves are comprised 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 2002, approximately 39% 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 (see note 20 to our consolidated financial statements, included under "Item 18. Financial Statements"):

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, 2002, approximately 1,273 MMB were developed under four association agreements in which we have an equity interest of less than 50%. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation—Orinoco Belt Extra-Heavy Crude Oil Projects."

(3)

Portion of reserves in fields assigned to 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."

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(4)

Includes 12,454 BCF, 12,476 BCF, 12,505 BCF, 12,400 BCF and 12,437 BCF in each of 2002, 2001, 2000, 1999 and 1998, 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.

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 our exploration and production activities. We currently conduct our exploration and development activities in the Western Zulia Basin, the Western Barinas—Apure Basin and the Eastern Basin in the Monagas and Anzoategui states. We are currently conducting extensive exploration and development activities in the Orinoco Belt of the Eastern Basin and in the other basins, either independently or together with foreign partners through joint venture associations. See "Item 4.B Business overview—Initiatives Involving Private Sector Participation."

        In 2002, our exploration expenditures were used principally to fund the drilling of 10 exploratory wells and the acquisition of 3,142 square kilometers of 3D seismic lines and 6,714 km of 2D seismic lines. Additionally, 27 exploratory wells were drilled and 219 square kilometers of 3D seismic lines and 204 km of 2D seismic lines were acquired pursuant to our operating services agreements. 238 MMB proved crude oil reserves were added in 2002 (135 MMB from newly discovered reserves and 103 MMB from development wells), compared to 357 MMB in 2001 (46 MMB from newly discovered reserves and 311 MMB from development wells), 209 MMB in 2000 (5 MMB from newly discovered reserves and 204 MMB from development wells) and 184 MMB in 1999 (84 MMB from newly discovered wells and 100 MMB from development wells). In 2002, we invested $649 million in 366 development wells and other facilities.

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

PDVSA's Exploration and Development

(1)

Includes wells in progress, even if they were wells spud in previous years, and injector wells. Does not include 22 development wells from PDVSA Gas and 155 development wells (including 7 injector wells) attributable to our operating service agreements. See Item 4.B Business overview—Initiatives Involving Private Sector Participation—Operating Service Agreements."

        Pursuant to operating services agreements relating to the Orinoco Belt, 17 exploration wells and 144 development wells were drilled in 2002, nine exploration wells and 349 development wells were drilled in 2001 and 15 exploration wells and 453 development wells were drilled in 2000.

        In 2002, our crude oil production averaged 2,659 MBPD (including 92 MBPD attributable to our participation in the Orinoco Belt projects) with an average API gravity of 23.2°. This production level represented approximately 72% of PDVSA's estimated 2002 year end crude oil production capacity of 3,674 MBPD (including 443 MBPD of crude oil production capacity attributable to our Orinoco Belt projects). During 2002, our average production costs of crude oil was approximately $3.92 per BOE, or $2.42 per BOE excluding the production and costs attributable to our operating service agreements, and the average of our depreciation and depletion costs was $0.54 per BOE. See "Item 3.A Selected financial data."

        At December 31, 2002, we operated approximately 16,970 oil wells. At such date, we had 37,659 gross kms2 of undeveloped acreage and 177,829 gross kms2 of acreage under development, including 49,194 kms2 developed pursuant to our operating service agreements.

        On average, during 2002, our natural gas production was 6,023 MMCFD (or 1,038 MBPD on an oil equivalent basis), of which 2,351 MMCFD, or 39.0%, was reinjected for purposes of maintaining reservoir pressure. The net natural gas production of 3,672 MMCFD was consumed in production of liquid natural gas (8.0%), as fuel in refinery and production operations (37.9%), in petrochemical operations (4.0%) and the remainder (50.1%) is sold to third parties for power generation, aluminum, iron and other manufacturing industries and domestic uses. Approximately 75% of the 2002 natural gas production and the total estimated proved net natural gas reserves is located in the Eastern Basin. A significant portion of this production is transported through our pipeline systems for use by industries in the coastal and central regions of Venezuela.

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

PDVSA's Average Production, Sales Price and Production Cost