Exxon to sell most of Japan refining stake — sources

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TOKYO — US oil group ExxonMobil is in talks to sell most of its 50% stake in Japanese refiner TonenGeneral Sekiyu KK, in a deal that could be worth as much as $5 billion, four sources with knowledge of the matter said.

The talks see Exxon belatedly join international oil and gas industry peers in scaling back downstream activities such as crude processing and fuel marketing, to focus on more lucrative activities — finding and pumping oil and gas.

The move could also spark realignment among Japan’s oil refiners, which have been cutting capacity to cope with falling demand caused by a weak economy and a shift to more efficient and environmentally friendly forms of energy.

TonenGeneral, which imports and distributes Exxon oil in Japan, ranks as the country’s Number two refiner behind JX Holdings. Smaller rivals include Idemitsu Kosan Co, Cosmo Oil and Showa Shell.

“If this report is true, it could open the door for TonenGeneral to realign in alliance with another company. That may or may not include capital ties,” said Hidetoshi Shioda, senior analyst at SMBC Nikko Securities.

Royal Dutch Shell, BP and Chevron have sold, closed or put up for sale many refineries in the past decade.

Exxon, the world’s largest publicly traded oil company by market value, has long been a strong advocate of the integrated oil model, in which companies are active in every stage of the business from well head to forecourt.

The planned sale may be an acknowledgement of a widely held view that in markets with slow-growing or falling fuel demand such as Japan and Europe, refining investments will struggle to offer good returns.