Exhibit 10.1

                         MANAGEMENT STABILITY AGREEMENT


     This Management Stability Agreement is dated March 15, 2000, between Tesoro
Petroleum Corporation,  a  Delaware  corporation  (the  "Company"),  and Faye W.
Kurren ("Employee").

                                   Recitals:

     WHEREAS, the Board of Directors of the Company has determined that it is in
the best interest of the Company to reduce uncertainty to certain key  employees
of  the Company in the event of certain fundamental events involving the control
or existence of the Company;

     WHEREAS, the Board  of  Directors  of  the  Company  has determined that an
agreement protecting certain interests of key employees of the  Company  in  the
event  of  certain  fundamental events involving the control or existence of the
Company is in the  best  interest  of  the  Company  because  it will assist the
Company in attracting and retaining key employees such as this Employee; and

     WHEREAS, the Employee is relying on this Agreement and the  obligations  of
the Company hereunder in continuing to work for the Company.

     NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

     1.   Termination Following Change of Control.

     Should  Employee  at any time within two years of a change of control cease
to be  an  employee  of  the  Company  (or  its  successor),  by  reason  of (i)
involuntary termination by the Company (or its successor) other than for "cause"
(following a change of control), "cause" shall be limited to the  conviction  of
or  a plea of nolo contendere to the charge of a felony (which, through lapse of
time or otherwise, is not  subject  to  appeal),  a material breach of fiduciary
duty to the Company through the misappropriation of Company funds  or  property)
or  (ii)  voluntary  termination  by  Employee  for  "good reason upon change of
control" (as  defined  below),  the  Company  (or  its  successor)  shall pay to
Employee within ten days of such termination the  following  severance  payments
and benefits:

          (a)  A  lump-sum  payment  equal to two times the base salary of
          the Employee at the then current rate; and


          (b)  A lump-sum payment equal to  (i)  two  times the sum of the
          target bonuses under all of the Company's incentive bonus  plans
          applicable to the Employee for the year in which the termination
          occurs  or  the  year  in  which the change of control occurred,
          whichever is greater,  and  (ii)  if  termination  occurs in the
          fourth quarter of a calendar year, the sum of the target bonuses
          under all of the Company's incentive bonus plans  applicable  to
          Employee  for  the year in which the termination occurs prorated
          daily based on the  number  of  days  from  the beginning of the
          calendar year in which the termination occurs to  and  including
          the date of termination.

The  Company  (or  its  successor)  shall  also  provide continuing coverage and
benefits comparable to all life, health  and disability plans of the Company for
a period of 24 months from the date of termination and shall receive  two  years
additional  service  credit under the current non-qualified supplemental pension
plans, or successors thereto, of the  Company  applicable to the Employee on the
date of termination.

               For purposes of this Agreement,  a  "change  of  control"
          shall  be  deemed  to  have  occurred  if  (i)  there shall be
          consummated (A) any consolidation or  merger of the Company in
          which  the  Company  is  not  the  continuing   or   surviving
          corporation  or  pursuant  to  which  shares  of the Company's
          Common Stock would be converted into cash, securities or other
          property, other than a merger  of the Company where a majority
          of the Board of Directors of the  surviving  corporation  are,
          and  for  a  two  year period after the merger continue to be,
          persons who were directors of the Company immediately prior to
          the merger or  were  elected  as  directors,  or nominated for
          election as directors, by a vote of at least two-thirds of the
          directors then still in  office  who  were  directors  of  the
          Company  immediately  prior  to  the  merger, or (B) any sale,
          lease, exchange or transfer (in one transaction or a series of
          related transactions)  of  all  or  substantially  all  of the
          assets of the Company, or (ii) the shareholders of the Company
          shall approve any plan or  proposal  for  the  liquidation  or
          dissolution of the Company, or (iii) (A) any "person" (as such
          term  is used in Sections 13(d) and 14(d)(2) of the Securities
          Exchange Act of 1934,  as  amended (the "Exchange Act"), other
          than the Company or  a  subsidiary  thereof  or  any  employee
          benefit plan sponsored by the Company or a subsidiary thereof,
          shall  become the beneficial owner (within the meaning of

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          Rule 13d-3  under  the  Exchange  Act)  of  securities  of the Company
          representing 20 percent or more of the combined voting  power  of  the
          Company's  then  outstanding  securities  ordinarily  (and  apart from
          rights accruing in special circumstances)  having the right to vote in
          the election of directors, as a result of a tender or exchange  offer,
          open  market  purchases,  privately negotiated purchases or otherwise,
          and  (B)  at  any  time  during  a  period  of  one  year  thereafter,
          individuals who immediately  prior  to  the  beginning  of such period
          constituted the Board of Directors of the Company shall cease for  any
          reason  to constitute at least a majority thereof, unless the election
          or the nomination  by  the  Board  of  Directors  for  election by the
          Company's shareholders of each new director  during  such  period  was
          approved  by a vote of at least two-thirds of the directors then still
          in office who were directors at the beginning of such period.

          For purposes of this Section 1, "good reason  upon  change  of
          control" shall exist if any of the following occurs:

          (i)    without   Employee's   express   written  consent,  the
          assignment to Employee  of  any  duties  inconsistent with the
          employment of Employee immediately  prior  to  the  change  of
          control,  or a significant diminution of Employee's positions,
          duties, responsibilities  and  status  with  the  Company from
          those immediately prior to a change of control or a diminution
          in Employee's titles or offices as in effect immediately prior
          to a change of control, or any removal of  Employee  from,  or
          any failure to reelect Employee to, any of such positions;

          (ii)   a reduction by the Company in Employee's base salary in
          effect immediately prior to a change of control;

          (iii)  the  failure  by  the Company to continue in effect any
          thrift,  stock  ownership,  pension,  life  insurance, health,
          dental and accident or disability plan in  which  Employee  is
          participating or is eligible to participate at the time of the
          change   of   control   (or   plans  providing  Employee  with
          substantially similar benefits),  except as otherwise required
          by the terms of such plans as in effect at  the  time  of  any
          change  of  control or the taking of any action by the

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          Company which would  adversely  affect  Employee's participation in or
          materially reduce Employee's benefits  under  any  of  such  plans  or
          deprive  Employee  of any material fringe benefits enjoyed by Employee
          at the time of the change of  control or the failure by the Company to
          provide the Employee with the number of paid vacation  days  to  which
          Employee  is  entitled in accordance with the vacation policies of the
          Company in effect at the time of a change of control;

          (iv)   the failure by the Company to continue  in  effect  any
          incentive  plan  or arrangement (including without limitation,
          the  Company's   Incentive   Compensation   Plan  and  similar
          incentive  compensation  benefits)  in   which   Employee   is
          participating  at  the  time  of  a  change  of control (or to
          substitute and continue other  plans or arrangements providing
          the Employee with substantially similar benefits),  except  as
          otherwise  required by the terms of such plans as in effect at
          the time of any change of control;

          (v)    the failure by the  Company  to  continue in effect any
          plan or arrangement with respect to securities of the  Company
          (including,  without  limitation,  any  plan or arrangement to
          receive and exercise stock options, stock appreciation rights,
          restricted stock or  grants  thereof  or  to  acquire stock or
          other  securities  of  the  Company)  in  which  Employee   is
          participating  at  the  time  of  a  change  of control (or to
          substitute and continue  plans  or  arrangements providing the
          Employee  with  substantially  similar  benefits),  except  as
          otherwise required by the terms of such plans as in effect  at
          the  time of any change of control or the taking of any action
          by  the  Company  which   would  adversely  affect  Employee's
          participation in  or  materially  reduce  Employee's  benefits
          under any such plan;

          (vi)   the  relocation of the Company's offices where Employee
          is presently based to a  location outside that office area, or
          the Company's requiring Employee to be  based  anywhere  other
          than  at  the location of the Company's offices where Employee
          is  presently  based,  except   for  required  travel  on  the
          Company's business to an extent substantially consistent  with
          Employee's  present  business  travel  obligations, or, in the
          event  Employee  consents  to

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          any  such  relocation  of  the  Company's  offices  where  Employee is
          presently based, the failure by  the  Company  to  pay  (or  reimburse
          Employee  for)  all  reasonable  moving  expenses incurred by Employee
          relating to a change  of  Employee's principal residence in connection
          with such relocation  and  to  indemnify  Employee  against  any  loss
          (defined  as  the  difference  between  the  actual sale price of such
          residence and the  higher  of  (a)  Employee's aggregate investment in
          such residence or (b) the fair market value thereof as determined by a
          real estate appraiser reasonably satisfactory to both Employee and the
          Company at the time the Employee's principal residence is offered  for
          sale in connection with any such change of residence;

          (vii)  any failure by the Company  to obtain the assumption of
          this Agreement by any successor or assign of the Company;

     In the event of a change of control as "change of control"  is  defined  in
any  stock  option plan or stock option agreement pursuant to which the Employee
holds options to purchase common stock of the Company, Employee shall retain the
rights to all accelerated vesting and other benefits under the terms thereof.

     The Company shall pay any attorney  fees incurred by Employee in reasonably
seeking to enforce the terms of this Paragraph 1.

     2.   Complete Agreement.

     This Agreement constitutes the entire agreement  between  the  parties  and
cancels  and  supersedes all other agreements between the parties which may have
related to the subject matter contained in this Agreement.

     3.   Modification; Amendment; Waiver.

     No modification, amendment or  waiver  of  any provisions of this Agreement
shall be effective unless approved in writing by both parties.  The  failure  at
any  time  to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver  of  such  provisions  and  shall  not affect the right of
either party thereafter to enforce each and every provision hereof in accordance
with its terms.

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     4.   Governing Law; Jurisdiction.

     This Agreement and performance under it, and all proceedings that may ensue
from its breach, shall be construed in accordance with and under the laws of the
State of Texas.

     5.   Severability.

     Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and  valid  under  applicable  law,  but  if  any
provision  of  this Agreement shall be held to be prohibited by or invalid under
applicable law, such provision shall be  ineffective  only to the extent of such
prohibition or invalidity, without invalidating the remainder of such  provision
or the remaining provisions of this Agreement.

     6.   Assignment.

     The  rights  and  obligations  of the parties under this Agreement shall be
binding upon and inure to  the  benefit of their respective successors, assigns,
executors, administrators and heirs, provided, however, that the Company may not
assign any duties under this Agreement without the prior written consent of  the
Employee.

     7.   Limitation.

     This  Agreement  shall not confer any right or impose any obligation on the
Company to continue the employment  of  Employee  in  any capacity, or limit the
right of the Company or Employee to terminate Employee's employment.

     8.   Notices.

     All notices and other communications  under  this  Agreement  shall  be  in
writing  and  shall be given in person or by telegraph, facsimile or first class
mail, certified or registered with return receipt requested, and shall be deemed
to have been duly given when delivered personally or three days after mailing or
one day after transmission of a  telegram  or  facsimile, as the case may be, to
the representative persons named below:

     If to the Company:            Corporate Secretary
                                   Tesoro Petroleum Corporation
                                   300 Concord Plaza Drive
                                   San Antonio, Texas  78216-6999

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     If to the Employee:           Faye W. Kurren
                                   813 Hunakai Street
                                   Honolulu, Hawaii 96816


     IN WITNESS WHEREOF, the parties have executed this Agreement as of the  day
and year first above written.

                    COMPANY:       TESORO PETROLEUM CORPORATION


                                   By /s/ BRUCE A. SMITH
                                   Bruce A. Smith,
                                   Chairman of the Board of Directors,
                                   President and Chief Executive Officer


                    EMPLOYEE:      /s/ FAYE W. KURREN
                                   Faye W. Kurren

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