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1 02 TRADING, REFINING, DISTRIBUTION & MARKETING Refining, Distribution & Marketing Figures in millions of euros Product sales (millions of tons) Capital expenditures in the year EBITDA EBIT SUMMARY OF CEPSA GROUP ACTIVITIES

2 Supply and Trading In 2002, 20.4 million tons of crude oil (148.2 million barrels) were unloaded at CEPSA s refineries, over 6% more than the previous year s volume. As regards crude oil sourcing, 35% came from countries in West Africa, 30% from the Middle East, 18% from Russia, Ukraine and Poland; 12% from Latin America and the Caribbean, and the remaining 5% from Northern Africa and various European countries. Furthermore, over 5.4 million tons of other oil and chemical products, primarily gas oils and fuel oils, were acquired to meet the needs of CEPSA s growing customer base. Refining CEPSA conducts its core refining operations at its 3 whollyowned refineries,tenerife, located in Santa Cruz de Tenerife, Gibraltar in San Roque (Cádiz) and La Rábida in Palos de la Frontera (Huelva), with distillation capacities of 4.5, 12 and 5 million tons of crude oil per year, respectively. Additionally, CEPSA has a 50% interest in the share capital of Asfaltos Españoles, S.A. ASESA, which owns a refinery in Tarragona, chiefly engaged in the production of asphalt, with a treatment capacity of 1.1 million tons per year. The Group s four refineries have been operating for over a decade using an integrated optimization model, which has enabled maximizing synergies from transfers between the refineries of intermediate feedstock and products and from a high level of integration between chemical and refining operations at the Gibraltar and La Rábida refineries. In 2002, the La Rábida Refinery resumed normal operating conditions following the fire which broke out in October 2001 in the Vacuum unit. Likewise, scheduled maintenance turnarounds were performed on the refineries throughout the year, and the RZ-100 unit for the catalytic reforming of light naphtha was revamped The CEPSA Group s overall installed refining capacity, including its share in ASESA, comes to 22 million tons of oil per year and accounts for 33.6% of the country s total capacity. In 2002, 20.5 million tons of crude oil were processed at the company s facilities, up 700,000 tons, or over 3.5%, from the year before. Out of total tonnage treated, the Gibraltar Refinery processed 11.5 million tons of crude oil; La Rábida, 4.4 million tons;tenerife, 4.0 million tons; and 600,000 tons corresponding to CEPSA s stake in the ASESA Refinery. With regard to activities to expand and/or upgrade facilities, several projects were carried out in the Gibraltar Refinery, namely modifications to the units involved in the project to expand the Crude 3 unit and some remodeling and upgrading of a variety of conversion units; the coming online of a new plant to biologically treat and recycle waste water; the link-ups with the new adjacent butane bottling plant belonging to CEPSA ELF GAS; and the adjustments made to the RZ-100 unit which started up. In the Tenerife Refinery, the remodeling of the waste water treatment plant was completed. And lastly, in the La Rábida Refinery, 4 new diesel fuel tanks for product storage, with a capacity of 50,000 m3 each, came on stream as scheduled; a new effluent collector at the Reina Sofia docking facilities was commissioned and the railway loading facilities were modernized to improve future operative safety and efficiency. Additionally, successful results continued to be harnessed from implementation of the PIP (Profit Improvement Program) projects in the three refineries, to optimize yield and process performance, as well as from the completion of the M.I.P project for maintenance planning and programming. Furthermore, CEPSA s three refineries witnessed the phased deployment of various SAP R/3 models, known as MM (Materials Management), PM (Plant Maintenance), PS (Project System) and EBP (Enterprise Buyer Professional).Work also moved ahead on developing and implementing a number of projects in the areas of supplies and maintenance included in the M.A.S. (Maintenance, Supplies and Services) project. 17

3 02 In 2002, the value added from refining stood at $14.09/ton, 29% lower than the year before. Distribution & Marketing The CEPSA Group sold 25.8 million tons of oil products in 2002, up 360,000 tons, or 1.5%, from the previous year. CEPSA s share of Spain s energy market, considering all sales made through its retail network and direct sales channels, rose from last year, coming to roughly 25% against a background of heavy competition, the restructuring of the retail networks of several major oil companies, the expanding number of facilities in hypermarkets and the enforcement of restrictive legislation in some areas of Spain regarding the sale of specific non-oil products in gas station convenience stores. In compliance with the Spanish Government Ruling 6/2000 of June 23rd, regarding urgent measures to intensify competition in the goods and services market, throughout the year CEPSA reduced its shareholding in Compañía Logística de Hidrocarburos (CLH) engaged in storing, transporting and distributing oil and gas nationwide, from 25% to 17% of its share capital, with the objective being to achieve the maximum permitted by the Government, which in the company s case is 15%, during the first quarter of Retail/Direct Sales Operations CEPSA ESTACIONES DE SERVICIO continued to selectively target higher returns through a rigorous and costeffective capital spending program aimed at upgrading the company s retail network in a more challenging market environment, as well as improving the range and quality of its offerings. Accordingly, an innovative training program called IMAN was put into practice, contributing towards developing a new and more customer-oriented focus, as well as other personnel training initiatives in environmental protection, health and safety, micromarketing, c-store merchandising and Cepsanet (high-speed data transmission), which have been successful in giving our retail network a technical and commercial edge.all in all, 2,692 hours of instruction were given through 856 courses, in which nearly 5,000 employees from the subsidiaries CEPSA ESTACIONES DE SERVICIO, VENTAS DIRECTAS, PROMIMER and CEDIPSA participated. Throughout the year and in full compliance with provisions set out in the Spanish Government Ruling 6/2000 of June 23rd, imposing restrictions on the opening of new stations, until June 2003 for CEPSA, steps and actions were taken to increase the number of company-owned and operated stations and marketing measures were put into place, in the context of the company s new positioning, building new outlets in selectively chosen sites to offset the closure of other sites.additionally, the merger of AVANTI s retail network into CEPSA ESTACIONES DE SERVICIO, to reap the full benefits of retail synergies, was recently completed. CEPSA expanded its motor fuel retail share with over 4 million tons of automotive gasoline and diesel sales, 4% more than the previous year. CEPSA also continued to be at the forefront of the C-store segment in Spain, adding 41 new outlets in the year, under the names DEPASO or MINIMARKET, whereby the total number of stores operated by PROMIMER comes to approximately 800. These stores come equipped with the most modern conveniences, and efforts have been made in training personnel and increasing the number and variety of products as well as customer service and quality, which resulted in a year-on-year sales increase of 18% in Progress was made throughout the year in expanding the number of CEPSA STAR, GRUPO, GASOLEO BONIFICADO, RESSA and SERVISA cardholders, with nearly 500,000, cards issued so far, up 4.3% from the year before. In addition, the new EUROTRAFFIC card began operating, which will lead to a sharp growth in volume in the future, representing one of the most competitive international means of payment available on the market, with a network of 11,000 retail sites in 15 countries. 18 SUMMARY OF CEPSA GROUP ACTIVITIES

4 As regards customer loyalty schemes, CEPSA s TRANSCLUB, a leader in the fleet driver segment in recent years, launched a new smart card system coupled with a new catalog of free gifts and special offers. As a result of this initiative, average monthly sales have risen 11%. Another successful scheme comes under the name TURYOCIO, a frequent shopper program aimed at individual motorists, with over 2 million cardholders. Promotional campaigns continued in service stations to attract more customers and new gift catalogs and special travel offers were developed. AGRO-CLUB, a loyalty scheme targeting users of diesel for farm equipment, increased its membership by 12,000 in the year. CEPSA continued to put into practice a plan to refurbish and ensure environmentally-friendly operations at its sites. Agreements were signed with the Environmental Quality Directorates of Spain s regional governments and additionally, a cost-effective project was undertaken to purify waste waters at gas stations. Likewise, an integrated environmental and quality management system began to be implemented, pursuant to UNE-EN ISO 9001/2000 and UNE-EN ISO standards. CECOMASA and CECOGALSA, subsidiaries of CEPSA VENTAS DIRECTAS, obtained Qualicert certification, which is being awarded for the first time in Spain to diesel and fuel oil distribution companies, offering independent recognition to an organization for meeting 44 specifications regarding the level of quality and service provided to customers and guaranteeing conformity with the most rigorous standards. Steps will be taken in upcoming months to seek certification for the rest of the company s subsidiaries. installing a heating oil furnace, with value added services such as remote control, teleprocessing and an integral heating plan.the success of this program can be measured by more than 1,000 furnaces that have been replaced to date. In recognition of CEPSA s marketing achievements, the company s numerous campaigns have received the following prizes and distinctions: Lion Direct Award, gold, in the Cannes Direct Festival; Echo Award, silver, in the Echo Awards Festival (DMA); IMAN, silver, and Special Prize for the Best Loyalty Scheme in the IMAN Festival of FECEMD; and John Caples Award, gold, in the John Caples Festival. Bunker Fuels CEPSA s staying power as the leading bunker supplier on the Spanish market was evidenced by an exceptional sales figure of 5.8 million tons of products. International bunkering business was strengthened from CEPSA s increased activity in the Panama Canal through the subsidiary CEPSA PANAMÁ, which sold 200,000 tons of bunker fuel products in Aviation Fuels CEPSA s sales in the aviation market in 2002 reached 2 million tons, 1% higher than the year before, despite a particularly difficult year for airlines. The planned capital spending program continued to be pursued in the year, noteworthy being the construction of a new supply station in Fuerteventura which is due to be completed in Highlights of the year include CEPSA s entry in the Portuguese market, servicing the Portuguese Air Force, as well as supply contracts signed with other operators. CEPSA was the first and only oil company in Spain to offer a Heating Oil Furnace Replacement Plan, providing a convenient and inexpensive way of repairing, replacing or

5 02 Asphalt CEPSA produces asphalt at its Tenerife and La Rábida refineries as well as in ASESA s refinery in Tarragona, with a total nominal capacity of 1 million tons per year. Sales are made through the wholly-owned subsidiary PROAS, a company which distributes these products from the refineries and 8 proprietary terminals, where special asphalt derivatives for the construction sector are likewise manufactured. In 2002, PROAS sold over 1 million tons of asphalt and byproducts, up 8% from the year before. Out of total sales, 19% were channeled to markets abroad. At year-end, all of PROAS work centers were in possession of ISO-9002 quality assurance certification by AENOR, and are currently in the process of being certified as per the new ISO-9000 quality management standard and ISO environmental management standard. Lubricants The CEPSA Group has two manufacturing plants located in San Roque at the La Rábida Refinery and in LUBRISUR - an affiliate in which CEPSA holds an interest of 65%, the other shareholder being BP Oil España S.A. - and a blending and bottling facility, in which finished lubricants, base stocks and paraffin are produced. During the year, CEPSA s facilities yielded a combined output of over 274,000 tons, slightly lower than the year before, once problems resulting from the accident which took place in October 2001 in the La Rábida Refinery were successfully managed. Retailing activity is carried out by the 100% affiliate CEPSA LUBRICANTES, as well as through wholly or majorityowned companies, such as LUBRISUR, ATLANTICO, LUBRITURIA, LUBRINER, and PETROJAÉN. Aggregate sales of lubricants, base stocks, paraffin, greases and other related products exceeded 301,000 tons. These products were sold under the brand names CEPSA a leader in the Spanish lubricants market and ERTOIL, with 55% channeled to the domestic market, where the Group sells a variety of other automotive products and accessories for both passenger vehicles and fleet drivers. Capital expenditures in the year, amounting to 6.3 million euros, were earmarked towards deploying cutting-edge technologies, enhancing productivity in industrial operations and bolstering marketing performance. In 2002,AENOR, the company that audits quality systems in CLSA, awarded it certification for compliance with international ISO 9001:2000 standards, which will be required as of December 2003, with more stringent specifications than the previous ISO 9001:1994 quality standards. CEPSA in Portugal CEPSA operates in Portugal through CEPSA PORTUGUESA DE PETRÓLEOS, 100% CEPSA-owned, with reception, storage, distribution and marketing facilities for motor fuels, asphalt, lubricants, bunker fuel, and propane. Furthermore, this affiliate has also started selling aviation products to the Portuguese Air Force. A total of 900,000 tons of these products were sold in 2002, up 2.8% from the year before, generating sales revenues of 462 million euros. By products, sales of motor fuels amounted to 326,000 cubic meters, with a market share of roughly 6%, while sales of fuel oil came to 161,000 tons, asphalt, to 188,000 tons and bunker fuel, to 32,000 tons. Capital expenditures totaled 21 million euros, chiefly for the service station network, which numbered 146 retail sites, 5 of which started operating in the year. Noteworthy was a new service area in Almodovar, on the Lisbon-Algarve motorway, as well as the Abrantes station, on the IP6 motorway. 20 SUMMARY OF CEPSA GROUP ACTIVITIES

6 CEPSA in Morocco Throughout the year, CEPSA supplied Moroccan operators with 260,000 tons of gasoline, diesel fuels and liquefied petroleum gases, 30% more than in CEPSA has been developing its activities in Morocco through CEPSA MAGHREB and PETROSUD, selling up to 35,000 cubic meters of gasoline and diesel fuels in 2002, up more than 75% from the previous year, largely concentrated in the fishing sector (Agadir). Liquefied Petroleum Gases (LPG): Butane and Propane CEPSA markets the Group s LPGs through its whollyowned subsidiary CEPSA ELF GAS, with 12 storage and decanting facilities nationwide; 5 of these sites bottle the 12.5 kg. butane canisters, 11 and 35 kg propane containers and the 12 kg. automotive LPG containers. Additionally, a new center came on-line in 2002 in San Roque (Cádiz), practically doubling previous bottling capacity, in order to meet growing demand. Butane for residential use is currently sold in the provinces of Andalusia, Murcia,Valencia, Galicia and Madrid, as well as in some regions of Castilla-La Mancha, Castilla-León and Asturias.As bottling capacity grows, equipped with the most advanced technologies, plans are to continue extending retailing activity over the next few months throughout the rest of the two Castilian provinces and Extremadura, as well as to begin distribution in the areas of Aragón, Navarre, Cantabria and the Basque Country. Natural Gas The Group s strategy in this segment is pursued through MEDGAZ, CEPSA GAS COMERCIALIZADORA, NUEVA GENERADORA DEL SUR and GAS DIRECTO. MEDGAZ This company, started up initially by CEPSA and SONATRACH, each with a 20% interest, was created to study and promote a new sub-sea natural gas pipeline linking Algeria directly to Europe via Spain. Companies currently involved in this project include TOTAL, ENDESA, BP, GAZ DE FRANCE and ENI, each one having a share of 12%. Progress was made in the year towards completing the marine survey to seek a suitable pipeline corridor stretching from Beni Saf in Algeria to the coast of Almeria, Spain, as well as the project s conceptual engineering and market studies. Plans are to conclude the feasibility study in early 2003 and begin the second phase of the project, which involves setting up the new company to undertake the detailed engineering and construction of the pipeline, slated for completion at the end of The MEDGAZ Project, included by the European Commission last year in the proposed List of Projects of Common Interest in the energy sector, was likewise included by Spain s Finance Ministry in the document titled Planning of Gas and Power Sectors. Development of Transportation Networks of September 13, Butane and propane canisters are delivered either door-todoor through a network of 72 distributors, or can be bought directly in more than 740 outlets, 482 of which belong to CEPSA s service station network. Overall, 170,900 tons of propane and butane were sold on the domestic market to end customers in 2002, with an increase of 43,000 tons, or over 34%, from the previous year. The number of canisters came to nearly 6 million, almost twice as many as the year before

7 02 CEPSA GAS COMERCIALIZADORA In 2002, CEPSA GAS COMERCIALIZADORA, S.A. continued to build on its natural gas marketing business to large consumers, signing agreements with customers nationwide involving 10,192 GWh/year. Sales came to 6,553 GWh in the year, 50% of which were for the Group s internal consumption, with revenues coming to 95.1 million euros, rising sharply by 443% from the year before. The company signed a long-term agreement with the Basque utility, Bahía Bizkaia Gas, S.L. to reserve regassification capacity, in addition to what it already has in effect with ENAGAS, and likewise secured two long-term supply contracts for LNG (liquefied natural gas) with the Algerian national oil company SONATRACH, to meet its gas retailing requirements.the company also added to its gas provisions by importing shipments of LNG from the Middle East. One of the year s highlights was the agreement signed by CEPSA and TOTAL with SONATRACH for the Algerian company to acquire an interest in CEPSA GAS COMERCIALIZADORA, S.A. Once the administrative formalities of this acquisition, now underway, have been completed, the new shareholding structure will be SONATRACH (30%),TOTAL (35%) and CEPSA (35%). 22 NUEVA GENERADORA DEL SUR NUEVA GENERADORA DEL SUR, a venture between CEPSA (25%) and UNION FENOSA GENERACIÓN (75%), continued to advance the project to build and operate a natural gas-fired combined cycle power generation plant on property belonging to the Gibraltar refinery, with two 370 mw electrical units, the steam by-product of which will be reused by the refinery itself for its industrial processes. At year-end, contracts for the power islands, the electrical equipment of the 400 Kw sub-station, the water cooling system, the water treatment plant and other auxiliary systems were already awarded.the facility is expected to be operational by mid GAS DIRECTO CEPSA, through its 40% stake in GAS DIRECTO, S.A., in par tnership with UNION FENOSA GAS (60%), is also active in the natural gas distribution sector for the regulated tariff market, and has been authorized by the government to supply gas in 21 townships of Madrid, Galicia, Castilla-La Mancha and Castilla-León. The company delivered natural gas to over 1,200 residential, commercial and industrial customers, generating revenues of 4.2 million euros, in 2002, with a year-on-year increase of over 400%. S U M M A RY O F C E P S A G R O U P A C T I V I T I E S

8 Power Cogeneration In order to enhance energy efficiency at its refineries, chemical plants and production sites, the CEPSA Group s has five cogeneration facilities, with a total capacity of 240 MW, which have been operating since These five plants generated 1,743 million kwh in 2002, as well as 3.75 million tons of steam, used in the Group s internal processes, similar to last year s production volumes, with capacity utilization in these facilities averaging about 86%. Spanish Government Ruling 841/2002 of September 2 granted access to the power market for the sale of surplus electricity production from cogeneration units.this activity was undertaken through CEPSA s affiliate DETISA in the last four months of the year. CEPSA signed an agreement with SONATRACH to collaborate on the development of co-generation facilities on the Spanish Peninsula, which will take effect with the acquisition of a 30% interest in DETISA by the Algerian oil company. Companies MW power Output Million kwh COTESA "Tenerife" DETISA "La Rábida" GEGSA "Gibraltar" GEMASA "Ertisa" GETESA "Interquisa" TOTAL 230 1,