Oil Giants Reportedly Set to Deal on Merger

Exxon Corp. and Mobil Corp., pushing for Federal Trade Commission approval of their $81-billion merger, reportedly have offered to unload enough service stations and refining assets to sharply reduce how much of the California market the combined company would control.

Exxon, the largest U.S. oil company, and No. 2 Mobil have proposed divesting or cutting ties to about 2,400 service stations nationwide, including about 360 in California, the Wall Street Journal reported Tuesday. Exxon is also expected to shed its refinery in Benicia, near San Francisco, the newspaper reported, citing company documents and people familiar with the situation.

Under the proposed deal, Exxon would relinquish stations in the Northeast and Mobil would vacate the mid-Atlantic states, the newspaper said.

The proposed divestitures represent about 15% of the 15,700 gas stations owned by the nation’s two largest oil companies. But the potential deal would mean the sale of nearly all of Exxon’s 380 California gasoline stations, leaving the 711 stations owned by Mobil.

In addition, the combined company would shed half its West Coast refining assets. Exxon’s Benicia refinery has the capacity to process 129,500 barrels of oil a day, and Mobil’s refinery in Torrance is able to process 130,000 barrels, each equal to about 7% of California’s refining capacity.

“What this would do is basically stop the effect of the merger in California,” particularly in refining, said Barry Pulliam, senior economist with Econ One Research Inc., a consulting firm that helped produce a report on the California gasoline market for state Atty. Gen. Bill Lockyer.

The report, released Monday, noted that Mobil stations sold 9.7% of the gasoline in California last year and Exxon stations 8.9%, placing the companies in fifth and sixth place, respectively, among the state’s marketers. Los Angeles-based Atlantic Richfield Co., itself in the process of being acquired by BP Amoco, led the market with a 20.4% share.

A spokesman for Exxon in Irving, Texas, and a spokesman for Mobil in Fairfax, Va., declined to comment on the Journal’s report.

The paper said Mobil would divest about 1,220 stations in Virginia, Maryland, Delaware, Pennsylvania, New Jersey and the District of Columbia and another 300 stations in Texas. Exxon is expected to unload about 520 stations in New York, Rhode Island, Massachusetts, Vermont, New Hampshire and Maine.

In New York Stock Exchange trading, Exxon shares declined $1.25 to close at $78 and Mobil lost $1.94 to close at $101.94.

*

The Associated Press was used in compiling this report.