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Tosco Marketing Company Quality Control
TOSCO MARKETING COMPANY
Quality control comes in many forms. For some it is following a specific philosophy, such as those developed by Demming or Juran. For others it is achieving a specific degree of merit as that established by the Malcolm Baldridge Awards, or International Standard Organizations (ISO). However, the petroleum industry as a whole has compromised, shifted, and remained adaptable to an ever-changing world filled with government regulations and restrictions.
The negative environmental impact of the petroleum industry is either not understood, grossly downplayed, or it is blatantly ignored. Government agencies have amended and abolished amendments in many of their policies so quickly that establishing best practices is nearly impossible.
However, one thing in the petroleum industry remains the same. Safety is a key quality concept that must be adhered to. Tosco Corporation made a bad name for itself by ignoring certain safety issues. Quality control in the safety department was ineffective, and people died because of their neglect. Only recently have they outsourced the development of their safety program to Dupont.
Introduction to Government Standards
The Department of Energy (DOE) and the Environmental Protection Agency (EPA) require an insurmountable amount of data, reports, testing, and auditing to ensure the compliance of all U.S. Oil Companies around the world. The most recent concern regarding the petroleum industry is that of methyl tertiary butyl ether (MTBE’s) that are put in our fuel.
Early on it was believed that adding MTBE’s to fuel would result in cleaner burning gasoline. However, according to the “Ground Water Monitor” small amounts seeped into the ground water and caused an unacceptable amount of contamination.
The conception of MTBE’s was in 1967 with the passage of the Clean Air Act. This is the primary statute governing air quality in the United States. It assigns responsibilities to government and industry to reduce emissions from pollution sources such as automobiles, refineries, chemical plants, and power plants. However, it seems as though every solution to meet the stringent requirements poses another problem. The Clean Air Act has been amended several times, and most recently it is to be amended to ban MTBE’s by the year 2002.
Many of the large oil companies, including Tosco Corp., have already made plans to completely remove MTBE’s from their fuel production (MTBE’s have already been removed from Connecticut fuel production).
Currently the EPA requires operators of facilities handling a regulated substance that exceeded a threshold quantity to prepare a Risk Management Plan (RMP). However, According to Hydrocarbon Processing (Nov 1997), it is the EPA’s intention to implement a nationwide standard in accordance with policies specified by ISO 14001 (an International Organization Standard related to environmentally hazardous materials).
Most people do not understand the complete process involved with fuel production. However, it is necessary to understand when the quality control of the product or the operation is being analyzed.
A Refinery is a factory that cost billions to build, millions to maintain, and they run around the clock 365 days per year. They create the basis for many of the products that we see and/or use daily. The following is a short list of some of those products:
Ø Bubble Gum
Ø Denture Adhesive
Ø Eyeglass Frames
Ø Eyeglass frames
Ø Floor Polish
Ø Guitar Strings
Ø Heart Valves
To put it simply, there are three basic steps that can be clearly identified in the production process. The first step is the separation of the petroleum. The next step is the conversion process so that definitive boundaries between the types of petroleum can be set. Last is the treatment of the finished product.
Separation is as simple as separating the heavy and the light petroleum. Inside the towers the liquids and vapors are separated into
fractions according to weight and boiling point. The lightest fractions are what we all know as “liquid petroleum gas” or LPG’s. Medium weight liquids are turned into diesel fuel and
kerosene. The tar like fraction, or “residuum” comes from the bottom of the barrel. Most of this is what is used to make plastics and other products.
The most complicated step in the refinement of petroleum occurs
in the “conversion” stage. The most widely used method of conversion is call “cracking” or “Hydrocracking.” Once again, this is using heat and pressure to crack heavy
hydrocarbon molecules into lighter ones. This process is what defines whether the LPG’s become gas, racing fuel, or jet fuel. The process occurs in the large bullet shape furnaces that you may have seen at refineries.
The final step in refinement is adding all of the treatments that are required by the many government bureaucracies that were previously mentioned. Among the many variables that determine the blend are octane levels, vapor pressure ratings, and even MTBE’s. This is the production step that differentiates products throughout the industry.
The common denominator of processing hazardous materials brings industries, and even competitors together. According to Paul Thorvaldson (Operations Manager of the Tosco Santa Maria refinery), the “keep it clean and dry” policies now in effect throughout Tosco were adopted from the example set by Chevron. In 1997 it was discovered that all North Western refineries had been having problems with rust in their fuel. After researching the problem, analysts found that water was getting into the holding tanks and creating the rust.
It happens that this was a shared problem with all refineries, and it was a quality issue that needed to be addressed. Chevron Corp. developed the “keep it clean and dry” policies, and dubbed them “housekeeping.”
Other examples of best practices policies will be further discussed in the Dupont portion of this paper.
History and Current Events
Tosco is based in Stamford, Connecticut. It is one of the largest independent oil refineries and marketers of petroleum products in the United States. Their current annualized revenues total more than twelve billion dollars, as stated in the 1998 annual report. Their refining system produces approximately 950,000 barrels per day of petroleum products. Tosco’s refining division converts crude oil and other feedstock’s into finished petroleum products. The most valuable products are clean fuels such as gasoline, diesel fuel, jet fuel, and heating oil.
Tosco’s mission is to maximize long-term investments value to their shareholder’s, while providing quality products and services to their customers at competitive prices. They are also committed to having a safe and challenging work environment for their employees, and have a meaningful contribution to their local communities.
The constant shifting supply and demand for raw materials and refined products have created volatile profit margins in the refinery industry. Due to these margins, Tosco constantly strives to increase output of clean fuels, while maintaining a strong commitment to employee safety and environmental protection.
Tosco is now the biggest independent refiner in the United States. Tosco has constantly been advancing. With only one refiner in 1993, it bought Bayway from Exxon, and two more refineries from British Petroleum (BP). “In March they became America’s biggest independent refinery through the acquisition of the west-coast downstream operations of Unocal, a LA based firm for nearly $2 billion.”(The Economist, May 1997). This resulted in the gain of three more refineries and over 1,000 petrol stations. Their retail division is one of the nation’s largest operators of company-controlled convenience stores. Annually, they sell four billion gallons of retail transportation in fuels, primarily the “76” brand, and over two billion in merchandise at their “Circle K” convenience stores.
According to the Economist Magazine dated May 1997, they believe that, “Tosco has been demonstrating across America what bigger companies in the oil industry thought impossible: that there is money to be made out of refining.” Bayway’s east coast refinery, built in 1908, looks like a sad relic of dying industry. Tosco has completely turned things around. What looked like a loss-making operation turned into a highly profitable one.
Tosco has a number of strategies to account for their success. They believe that minor improvements can have a big impact on profits. For example, Tosco buys crude oil a few cents ch
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