Tesoro Corporation (“Tesoro”) is based in San Antonio, Texas. We were incorporated
in Delaware in 1968 under the name Tesoro Petroleum Corporation, which was subsequently
changed in 2004 to Tesoro Corporation. We are one of the largest independent
petroleum refiners and marketers in the United States with two operating segments
— (1) refining crude oil and other feedstocks at our six refineries in the western
and mid-continental United States and selling refined products in bulk and wholesale
markets (“refining”) and (2) selling motor fuels and convenience products in
the retail market (“retail”) through our 460 branded retail stations in 18 states.
Through our refining segment, we produce refined products, primarily gasoline
and gasoline blendstocks, jet fuel, diesel fuel and heavy fuel oils for sale
to a wide variety of commercial customers in the western and mid-continental
United States. Our retail segment distributes motor fuels through a network
of retail stations, primarily under the Tesoro® and Mirastar® brands.
REFINING
We currently own and operate six petroleum refineries, located in California
(the Golden Eagle refinery in the “California” region), Alaska and Washington
(“Pacific Northwest” region), Hawaii (“Mid-Pacific” region) and North Dakota
and Utah (“Mid-Continent” region), and sell refined products to a wide variety
of customers in the western and mid-continental United States. Our refineries
produce a high proportion of our refined product sales volumes, and we purchase
the remainder from other refiners and suppliers. We operate the largest refineries
in Hawaii and Utah, the second largest refineries in northern California and
Alaska, and the only refinery in North Dakota.
We sell refined products including gasoline and gasoline blendstocks, jet
fuel, diesel fuel, heavy fuel oils and residual products in both the bulk and
wholesale markets. The majority of our wholesale volumes are sold in 10 states
to independent unbranded distributors that sell refined products purchased through
our owned and third-party terminals. Our bulk volumes are primarily sold to
independent and other oil companies, electric power producers, railroads, airlines
and marine and industrial end-users, which are distributed by pipelines, ships,
railcars and trucks. In addition, we sell refined products that we manufacture,
purchase or receive on exchange from third parties. Exchange agreements provide
for the delivery of our refined products primarily to third-party terminals
in exchange for the delivery of refined products from the third parties at specific
locations.
RETAIL
Through our network of retail stations, we sell gasoline and diesel fuel in
the western and mid-continental United States. The demand for gasoline is seasonal
in a majority of our markets, with highest demand for gasoline during the summer
driving season. We sell gasoline and diesel to retail customers through company-operated
retail stations and agreements with third-party branded distributors (or “jobber/dealers”).
As of December 31, 2006, our retail segment included a network of 460 branded
retail stations (under the Tesoro® and Mirastar® brands), comprising 194 company-operated
retail stations and 266 jobber/dealer retail stations. Our retail network provides
a committed outlet for a portion of the motor fuels produced by our refineries.
Most of our company-operated retail stations include 2-Go Tesoro® brand convenience
stores that sell a wide variety of merchandise items.
COMPETITION AND OTHER
We compete on a global basis with a number of major integrated oil companies
who produce crude oil for use in their refining operations and other companies
that may have greater financial and other resources. The availability and cost
of crude oil is affected by global supply and demand dynamics. Similarly, the
supply and prices of refined products are impacted by global dynamics. Our Golden
Eagle and Washington refineries compete with several refineries on the U.S.
West Coast. In addition, products flow into the West Coast from the Gulf Coast
and other parts of the world. Our Hawaii refinery competes primarily with one
other refinery in Hawaii, owned by a major integrated oil company that also
is located at Kapolei and has a crude oil capacity of 54,000 bpd. The Alaska
refinery competes with other refineries in Alaska and on the U.S. West Coast.
Our refining competition in Alaska includes two refineries near Fairbanks and
a refinery near Valdez. We estimate that the other Alaska refineries have a
combined capacity to process approximately 270,000 bpd of crude oil. Our North
Dakota refinery is the only refinery in North Dakota. Refineries in Wyoming,
Montana, the Midwest and the United States Gulf Coast region are the primary
competitors with our North Dakota refinery. Our Utah refinery is the largest
of five refineries located in Utah. We estimate that these other refineries
have a combined capacity to process approximately 107,500 bpd of crude oil.
These five refineries collectively supply a high proportion of the gasoline
and distillate products consumed in the states of Utah and Idaho, with additional
supplies provided from refineries in surrounding states. Our Golden Eagle, Washington,
Hawaii and Alaska refineries also compete with companies that import refined
products from other parts of the world, including the Far East and Europe.