Exxon sells Japanese unit

Tonengeneral Sekiyu KK agreed to buy partner Exxonmobil Corp.’s Japanese business in a $3.9 billion deal that may force the oil refiner to seek new alliances.

Tonengeneral will acquire 99 per cent of Exxonmobil Yugen Kaisha, which produces and sells fuels, for $3.9 billion using cash and bank loans, the Tokyo-based company said Monday.

Refiners in Japan are grappling with rising operating costs after a 2010 order from the government to upgrade their oldest plants to extract more fuel from crude. While Japan’s consumption is declining due to a shrinking population and greater use of hybrid and electric autos, the transaction also reflects Exxonmobil chief executive Rex Tillerson’s strategy of focusing on oil exploration.

“Tonengeneral will struggle to recover their acquisition costs unless they find a strategic partner,” said Osamu Fujisawa, an independent energy economist in Tokyo. “There are no Japanese refiners that can partner with Tonen. So, it should be someone from the Middle East.”

Saudi Arabia’s state oil company, the source of almost 31 per cent of Japan’s crude imports during the first nine months of 2011, owns a 15 per cent stake in domestic refiner Showa Shell Sekiyu KK. The Abu Dhabi government owns a 21 per cent stake in Japanese refiner Cosmo Oil Co.

Tonengeneral Managing Director Jun Muto said at a briefing in Tokyo Monday the company isn’t planning to sell a stake in the revamped company.