Company Overview

Tesoro Corporation (NYSE:TSO) is a Fortune 150 and Global 500 company with approximately 5,500 employees headquartered in San Antonio, Texas. It operates seven refineries primarily in the western United States with a combined crude oil capacity of approximately 660,000 barrels per day.

As one of the largest independent refining companies in the United States, Tesoro produces a full range of petroleum products including gasoline, jet, diesel, heavy fuel oils, liquefied petroleum gas, liquid asphalt, naphtha, propane and butane.  Retail marketing system includes over 900 branded retail stations.

Background

Tesoro was experiencing the growing pains that came with a series of refinery acquisitions that boosted capacity output to position it for future expansion in key growth markets throughout the western United States.   To take on the increased IT accountability, the company fast tracked an SAP implementation to keep pace with expanding business.  These changes invariably led to fragmented and often redundant business processes and systems related to trade and contract management, master data, risk controls and settlements.  Coupled with a resource stressed IT infrastructure support network that was saddled by excessive hand offs, data integrity and visibility issues, deficient accountability and performance incentives, and an ultimate lack of information transparency, the organization’s ability to make informed business decisions was reduced.

Cubiq Solution

Tesoro turned to Cubiq to lead a six week impact assessment of an enterprise trading and risk management solution built on an integrated SolArc RightAngle and SAP footprint.   Upon review and validation of the business drivers and O2S benefits case, key stakeholders were interviewed across the business lines and the IT organization.   Integration domains such as inventory valuation, lease crude, treasury and cash forecasting, pricing data, trade book and strategy definition were vetted.  Cubiq created an integration architecture point of view and subsequently developed high level cost models and resource estimates to give leadership the confidence they needed to execute the program.

In addition to delivering a customized integration solution, Cubiq resources also facilitated the configuration and implementation of several areas of the project including:

• Market exposure and commodity price risk mapping
• Corporate finance exposure and commodity forward curve definition
• Distilling market price data into physical spot, forward assessed, derivative exchange traded commodity based and transport related price attributes
• Corporate portfolio and strategy definitions
• Assessment of operational, financial, and tax accounting domains
• Facilitation of intracompany transfer price methods
• Trade book definition for optimizing intracompany mark-to-market PL measurements
• Hedge documentation and corporate policy evaluation for FAS requirements
• Operational cut over process definition between “as is” and “to be” states

Business Value

The Cubiq integration solution helped support Tesoro’s vision and commitment to success, not only as a crucial piece of enabling technology but also as an extensible platform to support their future integration needs.

The Cubiq team has helped us understand and resolve complex issues. Our interfaces have been greatly improved because of their help.
Pete Kleffner, Director IT, S&O, Finance, Tesoro

Executive Summary

Customer Name

Tesoro Corporation

Industry

Crude Oil Refining and Marketing

Business Drivers

• Implement enterprise wide origination to settlement (O2S) for physical and financial crude and refined products
• Restructure front, mid and back office domains to capture increased transactional fidelity and system efficiencies
• Reconciliation across operational and financial profit & loss
• Establish a singular ‘version of the truth’ for risk exposure and position
• Increase transfer pricing transparency outside the refinery gates

Challenges

• Order vs. FI level integration
• Master data integration across system boundaries
• System of record for taxes, freight, credit reporting
• Maintenance of inventory/exchange balances
• Integration to LIM price repository
• Cross system intercompany and profit center definition
• End to end modeling of O2S scenarios (Bulk Sale, Exchange Receipt, Paper and Physical trades, etc).

Results

• XML data driven RightAngle .NET integration framework
• Trading risk controls and procedures definition
• Hierarchical portfolio modeling and mapping
• Sarbanes-Oxley review, internal audit and controls definition
• Integration to external commodity exchanges ICE and NYMEX
• Interfaces to TriplePoint Tempest for futures trade migration
• SAP XI integration for lease crude, PO/SO, AR/AP and derivatives