A regulatory condition allowing the merger was that the new company sell $2 billion in assets in the United States. A spokeswoman for Esso Singapore, a unit of Exxon, culled speculation that one of the refineries would be shut down because weak profit margins were forecast for several years to come.

She said Exxon Mobil Corp would operate both their refineries in Singapore, which have a total refinery capacity of 5,70,000 barrels per day (bpd). ``We consider both refineries as world class refineries. Both will be retained and we will operate both refineries,'' she said.

The combined operation would dominate the Singapore sector taking up around half of the combined capacity of around 1.2 million bpd.

Royal/Dutch Shell operates a 4,35,000 bpd refinery and Singapore Refining Co a 2,85,000-bpd complex. Singapore acts as a barometer for Asian refining because it is the most sensitive to international price swings. Refineries in other countries generally have the cushion of a large domestic market to support their profit margins.

A combined operation of Exxon Mobil in Singapore would bring economies of scale through single crude purchases and through wielding combined marketing power for product sales.

The Mobil refinery is integrated with a lubricants plant and an aromatics petrochemical plant, adding deeper business integration - often a protection against swings in prices.

Esso plans to integrate its refinery with an ethylene plant, which is due to be completed in 2000. In Australia, the future was not so clear, analysts said. Mobil Oil Australia Ltd and Exxon unit Esso Australia Ltd have headquarters in Melbourne, pointing to some consolidation.

Esso's major asset is a 50 per cent stake in the Bass Strait offshore oil and gas field. This is Australia's largest crude producer at 2,30,000 bpd.Mobil owns the 1,35,000 bpd Altona refinery in Melbourne and the 78,500 fuel and lubricants plant at Adelaide, while its upstream assets are focused mostly on the North West Shelf, which produces condensate and gas.

But analysts said with refining under pressure in Australia, the merged entity might look to consolidate its refinery interests.

Exxon had pulled out of refining in Australia earlier this decade. ``I would say it is a very good chance for them to do something without making too many waves,'' said a senior research analyst at Wilson HTM Ltd Andrew Williams

Too early to gauge full impact
But spokesmen from the companies said it was too early to say how the merger might impact operations in Australia.

In Japan, Exxon Mobil has jumped into second place in market share with around 9,17,000 bpd of refinery capacity.

The combined company has 20 per cent of the market, second to Nippon Mitsubishi Oil Corp. But analysts said the interests of minority shareholders mean it will take time for Exxon Mobil to integrate the affiliates fully.

The way Exxon Mobil proceeds will be closely watched by Japan's struggling oil industry, which analysts say has been slow to consolidate in the face of weakening profits and over capacity.

Japan's Fair Trade Commission had cleared the merger of the two companies in Japan in October.