The deal between Idemitsu, already ranked second by sales, and Showa Shell, ranked fourth, became official with the start of Japan's April-March fiscal year. The new company, formed after a deal long-delayed by opposition from Idemitsu's founding family, has annual sales of more than $52 billion.

Amid falling sector sales spurred by population decline and better fuel efficiency, industry leader JXTG Holdings Inc was created two years ago through top refiner JX's acquisition of then third-ranked TonenGeneral Sekiyu.

"We have finally come to the last stage of consolidation," said Takashi Tsukioka, president of the Petroleum Association of Japan (PAJ) and also Idemitsu's chairman, speaking about the Idemitsu-Show Shell tie-up at a news conference in March.

Japan's demand for oil products such as gasoline, naphtha and kerosene, has fallen nearly 30 percent in about the past two decades to 175 million kilolitres (kl) in the year ended March 31, 2018, according to government data.

And that figure is predicted by the industry ministry to drop further to 160 million kl in the year to March 2023.

The new Idemitsu operates seven refineries which can process 950,000 barrels of crude oil per day, as well as 6,500 gas stations. The refiner has a share of about 30 percent of the domestic gasoline market, compared with JXTG's more-than-50 percent share.

($1 = 111.0900 yen)

(Reporting by Yuka Obayashi; Editing by Henning Gloystein and Kenneth Maxwell)

By Yuka Obayashi