Nippon Oil Corp. plans to start refining oil for PetroChina Co., company officials said Tuesday.
The deal will allow Japan's largest oil refiner to increase its facility utilization, while helping PetroChina cover a shortage in refining capacity amid the growing demand for oil in China, they said.
Nippon Oil plans to sign an agreement with China Oil, a PetroChina group firm that manages refining and domestic sales operations, early next month.
China Oil will ship crude it mainly procures in the Middle East to Nippon Oil refineries in Kanagawa and Okayama prefectures.
The oil will be refined into naphtha, kerosene, light oil and fuel oil and shipped back to China by Nippon Oil.
Details are currently being negotiated, but the two sides are looking at a nine-month contract through March for the initial stage of the tieup.
Nippon Oil will refine about 20,000 barrels a day, the equivalent of 2 percent of its refining capacity.