Case Study On California Oil Company

1. Executive Summary

The study is being conducted by California Oil Company and it’s about the proposed construction of supertanker port and pipeline. This is supposed to supply the company’s refinery based in San Francisco Bay area. The mooring point I supposed to be located at a distance of about two to three miles offshore where supertankers would be unloaded. The company would employ the use of submarine pipelines that would be used to ferry the oil to an offshore destination. Among the things considered in the study to evaluate the proposes study site are, economic, political and environmental. A total of 4 locations were chosen for evaluation. These sites are Moss landing, Estero bay, Port Hueneme and Oso Flaco Dunes

2. Decision Problem

The California oil Company is looking at the best way and most economical way to enhance the refinery of its oil. This is a measure that is aimed at meeting the increased demand for oil within the United States as well as the world at large. The California Oil Company has therefore undertaken the initiative to improve its capacity by constructing a new refinery plant at the Richmond area. This study therefore covers the effects of construction of the refinery at the Richmond area as well as the benefits they could get from the initiative. The company also will evaluate the costs that will be incurred in the construction of the new refinery. It was therefore decided that the refinery should be constructed and to do this various factors were considered.

3. Analysis Of The Oil Industry In The United States And The California Oil Company

The criteria used to evaluate the sites were characterized in order of importance. They were characterized into 10 and these are.

Economic factors

These include the availability of facilities. It was discovered that the four location had a disparity on the availability of facilities in place. Among all the four locations, Estero bay had some facilities in place. The other three locations did not have any facilities in place. Therefore, it would be cheaper to establish the refinery at Estero bay.

Political factors

These are factors that are caused by the ruling class. Political leaders can either reject or accept the construction in order to get votes from the public. Therefore, politicians play a major role in the projects to be undertaken in a community.

Environmental factors

The environment can be affected in two major ways from the establishment of a facility. These are impacts that emanate from operations and accidents and environmental impacts from placement of facilities.

4. Qualitative And Quantitative Analysis Of Alternative

a) Moss landing port

Characteristics of the port

• It’s possibly opposed to the construction of the refinery as the people feel that the refinery will bring more harm than good to them and the environment as well.
• The initial cost of construction at this site is $40 less than Estero Bay.
• The annual cost of running the facility will be $ 52 million
• The area is close to Richmond and furthest that it is from Elk Hills and the base location.
• The possibility of future development and expansion are very minimal due to the high population that characterizes the area.
• The port is fairly recommendable for the construction of the refinery.
• The local people are highly opposed to the idea of constructing a refinery here because they are aware what other areas have experienced as a result of having oil refineries at their vicinity.
• The area does not have any facilities yet and therefore it’s more likely that it will cost the company a lot more if the refinery were to be established at Moss landing.

b) Estero Bay

• The local people are supportive of the initiative because they see it as a way of getting communal help through the social welfare programs
• It’s already established and therefore there is no initial cost and annual cost of running the refinery.
• The terrain is not conducive for future expansion of the facility.
• There is a possibility of the project getting a lot of opposition from both the locals and political leaders
• Tourism and fishing activities will be affected as the land is marshy and rocky which makes it bit hard to clean up.
• The tank farm is somehow hidden and this one would lead to the restructuring of the existing creek.
• The bird sanctuary will be affected from the emission if toxic substances into the environment.

c) Port Hueneme

• The locals are favorable to the idea of construction of the refinery at Port Hueneme.
• Its initial cost of establishment is approximately $60 million more than Estero Bay while the annual cost is $5 million more than Estero Bay.
• It’s located at a distance of 90 miles away from Richmond than the base location.
• It’s likely to encounter interference from the navy base nearby.
• The port and coastline is excellent.
• It has no effects on the environment on the environment.
• There are no facilities in place.
•  The tank can be seen as there is no settlement within this area.

d) Oso Flaco Dunes

• The local population favors the establishment of a refinery in this area.
• The initial cost is $5 million more than Estero Bay and the annual cost of running the facility is almost the same as the base location.
• It’s centrally located i.e. the distance between the base location and the refinery is equal.
• The area is suitable but there is a lot of influence from the local politicians.
• The coastline is very excellent and it can lead to effective management and establishment.
• There are minimal effects on the area due to the sandy coastline that is easy to clean up.
• There are no facilities in the area.
• The tank can be seen as there are no settlements in the area.

5. Possible Decision Alternatives

The best decision alternatives were based on the worst value criterion and the best value for each criterion.

• Characteristics of best value alternative
• Must be favored by the local politicians
• The initial cost should be less than $40 below Estero bay ( base)
• The annual cost must be $5million below base.
• The site should be locate between the Elka Hills and San Francisco but bit closer to Elka Hills which is much easy to lay the pipelines to san Joaquin valley.
• It should not have limitations for future expansion
• The coastline should be calm and at least one mile from the shore
• There should be very little and weak opposition from the locals.
• It should facilitate easy cleaning of oil spills.
• There should be facilities that are completed and those that can support port operations.
• There should not be adverse effects due to the placement of facilities

For a worst value alternative the above alternatives should not apply.

6. Recommendations

From the above analysis it’s evident that the best location to establish the port was Moss Landing. This site was most favored because it was the cheapest to build, operate and the closest to Richmond