Sunoco 2009 Annual Report Download - page 23

Logistics operations are very competitive. Generally, pipelines are the lowest cost method for long-haul,
overland movement of crude oil and refined products. Therefore, the most significant competitors for large
volume shipments in the areas served by the Partnership’s pipelines are other pipelines. However, high capital
requirements, environmental considerations and the difficulty in acquiring rights-of-way and related permits
make it difficult for other companies to build competing pipelines in areas served by the Partnership’s pipelines.
As a result, competing pipelines are likely to be built only in those cases in which strong market demand and
attractive tariff rates support additional capacity in an area. In addition, pipeline operations face competition from
trucks that deliver product in a number of areas that the Partnership’s pipeline operations serve. While their costs
may not be competitive for longer hauls or large volume shipments, trucks compete effectively for incremental
and marginal volumes in many areas served by the Partnership’s pipelines. The Partnership’s refined product
terminals compete with other independent terminals with respect to price, versatility and services provided. The
competition primarily comes from integrated petroleum companies, refining and marketing companies,
independent terminal companies and distribution companies with marketing and trading operations.
The metallurgical cokemaking business is also highly competitive. Current production from Sunoco’s
cokemaking business is largely committed under long-term contracts; therefore, competition mainly impacts its
ability to obtain new contracts supporting development of additional production capacity, both in the United
States and internationally. The principal competitive factors affecting Sunoco’s cokemaking business include
coke quality and price, technology, reliability of supply, proximity to market, access to metallurgical coals, and
environmental performance. Competitors include conventional chemical by-product coke oven engineering and
construction companies, other merchant coke producers and competitors that have developed and are attempting
to develop heat-recovery cokemaking technology. Most of the world’s coke production capacity is owned by
integrated steel companies utilizing conventional chemical by-product coke oven technology. The international
merchant coke market is largely supplied by Chinese producers. Sunoco believes it is well-positioned to compete
with other coke producers since its proven proprietary technology allows Sunoco to construct coke plants that,
when compared to other proven technologies, produce virtually no hazardous air pollutants, produce consistently
high quality coke and produce ratable quantities of steam that can be utilized as industrial grade steam or
converted into electrical power.
Research and Development
Sunoco’s research and development activities are currently focused on applied research, process and product
development, and engineering and technical services related to chemicals. Sunoco spent $9, $10 and $11 million
on research and development activities in 2009, 2008 and 2007, respectively.
Employees
As of December 31, 2009, Sunoco had approximately 11,200 employees compared to approximately 13,700
employees as of December 31, 2008. The 18 percent decline was primarily due to employee terminations, the
impact of the ongoing Retail Portfolio Management program and the divestments of the Tulsa refinery and the
retail heating oil and propane distribution business. Approximately 4,000 of Sunoco’s employees as of
December 31, 2009 were employed in Company-operated convenience stores and service stations and
approximately 22 percent were covered by 39 collective bargaining agreements as of December 31, 2009 with
various terms and dates of expiration.
Environmental Matters
Sunoco is subject to extensive and frequently changing federal, state and local laws and regulations,
including, but not limited to, those relating to the discharge of materials into the environment or that otherwise
relate to the protection of the environment, waste management and the characteristics and composition of fuels.
As with the industry generally, compliance with existing and anticipated laws and regulations increases the
overall cost of operating Sunoco’s businesses. These laws and regulations have required, and are expected to
continue to require, Sunoco to make significant expenditures of both a capital and an expense nature. For
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