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Japanese bunker supplier Nippon Oil Corporation has entered into an agreement with China National Petroleum Corporation (CNPC) for both companies to jointly manage the existing Takaishi refinery in Osaka province and export output from the refinery to China and other regional markets.

The agreement was signed by Nippon Oil Chairman Fumiaki Watari and CNPC President Jiang Jiemin , giving the Chinese firm a 49 percent share and Nippon Oil the remaining interest.

The Takaishi facility, one of seven refineries owned by Nippon Oil, has recently decreased production due to lower demand in Japan for refined products such as fuel oil, gas oil and gasoline. The joint management project is expected to help Nippon Oil raise capacity utilization at the 115,000 barrels-per-day (b/d) refinery, whilst also making it easier for CNPC to procure oil products such as fuel oil from abroad.

Imports of fuel oil into China have surged in recent months, rising to 1.72 million tonnes during the month of February, a 8.7 percent increase in fuel oil imports compared to January. In recent months, however, Chinese traders have discovered that their Japanese counterparts have been outbidding them for Russian M100 fuel oil cargoes, forcing them to look elsewhere for alternative product sources. The joint venture project should enable CNPC to strengthen its ability to secure oil products from abroad as demand continues to surge on the back of strong economic growth in China and local refineries find it difficult to keep up with the rise in demand.