Exxon Mobil Sells Japanese Refining Company for $3.9 Billion

Due to tight rules for petroleum fuels in developed countries, demand growth is expected to decrease. The margins are also small, and as a result many of the oil majors are restructuring and shedding refining operations to concentrate on oil exploration and production in the search of bigger profits.

Marathon Oil sold its refining operations last July, and BP and Shell are selling their refineries in the US and Western Europe. Whilst ConocoPhillips has announced its plans to split itself in two this summer, with the refining operations moving away from its more profitable oil and gas exploration and production business.

Now Exxon Mobil Corp., the world’s largest, publicly traded oil company, is selling its Japanese refining and marketing business to partner TonenGeneral Sekiyu K.K. for $3.9 billion. Sherman Glass, president of ExxonMobil Refining, said that it was just part of a restructuring move in response to a changing global energy market. "What we continue to do is try to restructure — in some cases invest, in some cases divest and in some cases restructure — to make it a strong group of operations in our downstream business.”

The deal will be concluded in June when TonenGeneral Sekiyu will buy 99 percent of the shares of Exxon Mobil Yugen Kaisha, which refines and sells fuel and lubricants. Exxon Mobil’s stake in TonenGeneral will decrease from 50 percent to 22 percent.

The deal will also massively benefit TonenGeneral who will experience increased flexibility and competitiveness in the Japanese market, which has a population that is both ageing and shrinking. Jun Mutoh the managing director said that "The Japanese market is getting tougher. The decision-making within the company will be more effective in the newly integrated production-distribution operation."

Oil and gas exploration and production  offers investors a chance for faster growth than with refining; also, oil prices are expected to remain high, which has helped fund a boom in new exploration.

By. James Burgess of Oilprice.com