The deal will mark a retreat from the world's
third-largest economy by the US oil giant, which is focusing its resources
globally on exploration and production and shifting away from so-called
downstream assets, such as its sales network in Japan.
The move could also spark another round of consolidation
in an industry reeling from sluggish demand due to Japan's sputtering economy
and increased use of more environmentally-friendly energy sources.
"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.
Shares of TonenGeneral, owned 50.02 percent by Exxon,
last traded down 5.5 percent at 795 yen - a near 14-month low and set to be the
biggest one-day fall in almost 10 months - reflecting investor worries over how
it would fund the share purchase. Trading in the shares was the busiest in more
than 22 years.
The entire stake is worth 228 billion yen ($3 billion) at
the current market price.
TonenGeneral imports and distributes oil from the Exxon
group in Japan, where it ranks second in oil refining capacity after JX
Holdings, the industry leader created in a merger of refiners and miners in
April 2010.
Other rivals include Idemitsu Kosan Co., Cosmo Oil and
Showa Shell.
In addition to its stake in TonenGeneral, Exxon is also
in talks to sell its sales operations, which include a nationwide network of
about 4,000 gas stations, to its Japanese partner.
In total, a deal could top 400 billion yen ($5.2
billion), according to the sources, who spoke on condition of anonymity due to
the sensitivity of the matter.
While holding on to a reduced stake, Exxon plans to keep
supplying oil to TonenGeneral, the sources said, adding that an official
announcement could come as early as this month with an aim to finalizing the
deal in the spring.
"Exxon does not comment on speculation. ExxonMobil
has no plans to exit the Japan market," the oil giant said in a statement
to Reuters.
TonenGeneral plans to borrow money from several banks to
finance the purchase of its shares from Exxon, the sources said.
Total oil demand in Japan, the world's No.3 consumer, has
been on a steady decline, dropping to about 3.4 million barrels per day (bpd),
from a record 4.2 million bpd in 1999.
That slide has accelerated following a devastating
earthquake and tsunami in March that dented economic activity.
