(EnergyAsia, May 30, Friday) — China National Petroleum Corp’s (CNPC) has agreed with Nippon Oil to use spare capacity at the Japanese refiner to make oil products for the growing Chinese market.

The deal includes giving CNPC access to Nippon Oil’s 115,000 b/d refinery in Osaka. 

If everything goes to plan, CNPC will, from April 2009, take charge of securing crude feedstock and selling the output from the Osaka refinery. The unit has an export capacity of 40,000 b/dof refined products, mostly gasoil and kerosene.

PetroChina, CNPC’s listed subsidiary, already has a deal with Nippon Oil under which it uses part of the Japanese refiner’s capacity to process crude for the Chinese market.

Overall, Japan’s refining industry has 16% surplus capacity, opening up the door for more such capacity deals between the two countries.

Meanwhile, CNPC and rival Sinopec are building up additional refining capacities in China to meet growing demand. They are investing despite Beijing’s current controls on fuel and energy prices which prevent them from passing through the full increases in crude costs to consumers. The firms expect that Beijing may soon change those policies.