ExxonMobil sells properties, organizes

Dec. 20, 1999
BP Amoco PLC and ExxonMobil Corp. have agreed to dissolve their European fuels and lubricants joint venture and split the assets in line with their equity stakes.

BP Amoco PLC and ExxonMobil Corp. have agreed to dissolve their European fuels and lubricants joint venture and split the assets in line with their equity stakes.

To satisfy the European Commission's conditions for the merger of Exxon Corp. and Mobil Corp., Mobil's joint venture with BP Amoco is being dissolved, and some of its European fuels business is being sold. ExxonMobil also has begun selling US assets to satisfy the US Federal Trade Commission (OGJ, Dec. 6, 1999, p. 30).

Meanwhile, BP Amoco and ARCO have reached a deal with Alaska regarding their proposal to combine operations there.

ExxonMobil structure

ExxonMobil is restructuring to operate as 11 separate global businesses. Based in Houston will be the exploration, development, production, gas marketing, upstream research, chemicals, and coal and minerals companies.

Based in Fairfax, Va., will be the fuels marketing, lubricants and petroleum specialties, refining and supply, and research and engineering companies.

Outside the US, ExxonMobil said it would continue to operate two Singapore refineries. Esso Singapore Pte. Ltd. has a 235,000 b/d plant and Mobil a 300,000 b/d refinery.

In Canada, ExxonMobil said separate operations will continue. Exxon owned 70% of Imperial Oil Ltd., Toronto, while Mobil held 100% of Mobil Oil Canada Ltd., Calgary.

A spokesman for Imperial said ExxonMobil does not plan to buy the 30% of Imperial shares that minority investors hold. Officials for Imperial and Mobil Canada could not comment on the possibility of a future merger.

ExxonMobil estimated that the merger will save $3.8 billion, up from a $2.8 billion estimate made a year ago. It plans to reduce staffing by 16,000 jobs through 2002, up 7,000 jobs from an estimate a year ago.

The job estimates don't include workers who will be transferred to other companies as part of asset sales. Some analysts estimate total ExxonMobil employment to drop by 20,000 jobs.

European breakup

Effective Jan. 1, BP Amoco will purchase Mobil's 30% interest in the European fuels business and Mobil's share in pipelines serving Gatwick Airport outside London for about $1.5 billion.

BP Amoco and Mobil will divide the assets of the lubricants business broadly in line with their equity stakes (51% Mobil, 49% BP Amoco).

The fuels part of the venture, operated by BP Amoco, includes 8,500 service stations across Europe, representing about 12% of the market, while the lubricants part of the venture, operated by ExxonMobil, has a market share of just over 18% in Europe.

BP Amoco will receive the service stations and other marketing assets, together with the fuels refineries at Grangemouth and Coryton, UK; Lavera, France; Europoort, the Netherlands; and Castellon, Spain; as well as shareholdings in the Turkish Mersin, French Reichstett, and German Bayernoil refineries. Mobil will get the refinery at Gravenchon, France.

On the lubricants side, ExxonMobil will get the Dunkirk refinery in France and the lubricants leg at Gravenchon. BP Amoco will retain the base oil refinery in Neuhof, Germany, and the lubricants leg of Coryton, together with the blending plants at Neuhof; Ghent, Belgium; Gemlik, Turkey; Batsons, UK; Drapetsona, Greece; and a 45% share of the Turkish Serviburnu plant. The remaining 10 lubricant blending plants will go to ExxonMobil.

In European lubricants marketing, BP Amoco will get: all the lubes marketing businesses in Portugal, Spain, Greece, Gibraltar, and Malta, including for an interim period businesses currently branded as Mobil; all the direct commercial vehicle lubricants business throughout Europe, including the Mobil-branded business; and the BP and Duckhams-branded passenger vehicle lubricants business and all distributor relationships associated with those brands.

ExxonMobil will receive (outside of Portugal, Spain, Greece, Gibraltar, and Malta) all the direct industrial lubricants businesses, including the BP and Duckhams-branded businesses; all Mobil-branded passenger vehicle lubricants business; and all distributor relationships associated with the Mobil brand.

Tosco sale

Meanwhile, ExxonMobil agreed to sell 1,740 stations in the US Mid-Atlantic and Northeast to Tosco Corp. for $860 million. The deal includes the Exxon system from New York to Maine and the Mobil system from New Jersey to Virginia.

The outlets include 686 owned or leased sites and 1,054 additional open dealers and branded distributor sites. Also included is the right to buy undeveloped sites and a Mobil terminal in Manassas, Va.

Thomas O'Malley, Tosco chairman and CEO, said, "The ExxonMobil sites are very high-quality locations. We are excited to be adding this outstanding network to our existing system of over 4,500 gasoline and convenience outlets throughout the US."

Tosco said it would supply the stations from its two East Coast refineries.

BP Amoco-ARCO merger

Meanwhile, further developments have arisen in the only remaining oil megamerger awaiting approval in the US.

Alaska Gov. Tony Knowles has urged the FTC to approve BP Amoco's planned $37.6 billion acquisition of ARCO. Knowles wrote FTC Chairman Robert Pitofsky urging FTC to support an agreement he has signed with the two firms.

Knowles said, "The longer the acquisition remains in limbo, the greater the chill on further exploration and development."

To maintain competition in Alaska, the two companies agreed to sell properties worth up to $4 billion. The sales would include fields that produce 175,000 b/d and at least 620,000 acres of undeveloped state and federal leases.

BP will sell 50.1% of Kuparuk River field and 50.1% of its holdings in the National Petroleum Reserve-Alaska. It also agreed to spend $10 million to clean "orphan" waste sites on the North Slope, $1 million for oil spill research and development, and $5 million for other Alaskan environmental programs.

The deal requires BP to negotiate in good faith with any company or group that proposes to build a project to move North Slope gas to market.

John Browne, BP Amoco CEO, said the Alaska deal and a previous one with California have addressed the key concerns of the two states most affected by the merger.

"We believe this will provide us with the foundation for more focused and productive discussions with the FTC," Browne said.

An FTC spokeswoman said the agency is continuing its review of the BP Amoco-ARCO deal.

Meanwhile, competitors have complained to FTC that the merger would reduce competition and raise gasoline prices in Washington state, which gets 75% of its crude from Alaska. ARCO has a 202,000 b/d refinery at Ferndale, Wash.