Nippon Oil Corp, Japan's largest refiner, may process 40 percent more crude oil for a unit of PetroChina Co under an accord expected to be signed this month.
The Tokyo-based refiner wants to increase daily processing for China National United Oil Corp, known as Chinaoil, to 70,000 barrels from 50,000 barrels, two Nippon Oil officials said, asking not to be identified because of company policy.
Refiners in Japan, the world's third-biggest oil user, need to tap overseas markets as domestic consumption of oil products, including gasoline, shrinks.
Nippon Oil wants to expand its 2004 deal with Beijing-based PetroChina, which expires at the end of March, to help China's largest oil company cope with growing demand for automotive fuels.
"This contract helps Nippon Oil to maintain operating rates at its refineries," Lalita Gupta, an analyst at Morgan Stanley in Tokyo, told Bloomberg News.
"Chinaoil can boost oil processing volumes with lower cost than building their own refineries as greenfield investment. The contract will probably continue growing in coming years."
Japan's gasoline sales fell 1.7 percent in 2007, down for a second year.