The company is working with Ernst and Young's energy advisory group to market its 600,000-barrel Petro-Diamond terminal in Long Beach, California, and its corresponding fuel trading division, the sources said.

Mitsubishi is seeking either a joint venture partner for Petro-Diamond or an outright sale, the sources added.

The terminal is the only U.S. refined products asset owned by Mitsubishi, Japan's biggest trading house by sales.

Mitsubishi previously had a sizable trading operation in Singapore, also named Petro-Diamond (PDS). The company began winding down in 2020 after it said a PDS trader had lost $320 million in unauthorized transactions in crude oil derivatives.

Mitsubishi could still scrap the sale of the U.S. terminal if it fails to find a suitable buyer, they said. A target valuation for Petro-Diamond could not be determined.

EY and Mitsubishi did not return requests for comment.

PetroDiamond was formed in 1983 and markets and distributes on-spec transportation fuels in Southern California including CARB gasoline, low sulfur diesel, ethanol and marine fuels.

Last year, an executive order required that by 2035 all new cars and passenger trucks sold in California be zero-emission vehicles, and that the state reduce the dirtiest forms of oil extraction.

Royal Dutch Shell Plc has been looking for a buyer for Aera, its California-based oil and gas-producing joint venture with Exxon Mobil Corp, Reuters reported in July.

(Reporting by Laura Sanicola and Shariq Khan; Editing by Richard Chang)

By Shariq Khan and Laura Sanicola