TonenGeneral Seikyu KK will be buying a controlling stake in itself from Exxon Mobil Corp (NYSE:XOM) for about $4 billion, the company, Japan’s second biggest oil refiner, announced on Monday. Jim Mutoh, TonenGeneral’s managing director stated that the buyback would allow the company make faster business decisions. The buyback would reduce Exxon Mobil’s voting share to 22 percent from 50 percent.
The purchase comes in the face of government regulations that require the country’s oil companies to either improve competitiveness by building a new secondary unit or cut its refining capacity. TonenGeneral, which is a 50-50 joint venture of Mitsui & Co. and Kyokuto Petroleum industries will likely not be making new investments, which will likely force the company to have to cut petroleum from 836,000 barrels per day to about 578,000 per day. The regulations have come as both domestic oil demand (due to a weakened economy and a shift to environmental friendly energy sources) and the marketplace for Japan’s oil products have both markedly declined. Consolidation of refineries have been a worldwide concern, most recently in Europe.
The deal will give TonenGeneral control over Exxon Mobil service stations in Japan, a fourfold increase in its quantity of stations. The company will still use the Exxon Mobil name, however, and will be the distributor and developer o Exxon crude in Japan.
Japan is the world’s number 3 oil consumer. Refining capacity in Japan currently sits at 4.5 bpd, down from 5.4 million at peak demand back in 1999.