July 18 (Bloomberg) -- Nippon Oil Corp. expects Japan's oil and heavy fuel demand to rise by about 700,000 kiloliters in August after the shutdown of a Tokyo Electric Power Co. nuclear station, Chairman Fumiaki Watari said.

The Kashiwazaki-Kariwa nuclear station, the world's biggest, was shut after a magnitude 6.8 earthquake struck Niigata prefecture in central Japan on July 16. The trade ministry and Kashiwazaki city authorities have ordered the utility to keep the plant shut until they approve its restart.

Demand for oil products in Japan, the world's third-biggest energy user, may increase in summer because Tokyo Electric is likely to increase operations at thermal power plants to make up for the nuclear shutdown. Gasoline consumption typically rises during the warmest months of the year as Japanese take driving holidays and use their air-conditioners.

``It's possible to import heavy fuel to meet demand from utilities,'' Watari told reporters in Tokyo today.

The refiner has yet to receive any requests from Tokyo Electric to supply additional oil or fuel oil, he said. Tokyo Electric had planned to buy 1.5 million kiloliters of oil and heavy fuel oil before the nuclear power plant was shut, he said.

Nippon Oil, Japan's biggest oil refiner, may increase wholesale fuel prices by 2 yen a liter in August because costs have increased, Watari, who is also chairman of the Petroleum Association of Japan, said. The Tokyo-based company may increase crude oil processing by about 3 percent to 4 percent next month, compared with July, he said.

Iran, Yen

Japanese refiners are considering a switch to using the yen to pay for Iranian crude oil instead of the U.S. dollar, Watari said.

Iran last week asked refiners in Japan to pay for all the crude oil they buy from the Middle Eastern nation in yen to avoid potential financial sanctions that may freeze dollar payments to country and after the nation's central bank said it's cutting holdings of the U.S. dollar.

``It's possible to use yen for half of the Iranian payments,'' Watari said. Payments may be switched to yen as early as September, he said. Iran is Japan's third-biggest supplier of oil, after Saudi Arabia and the United Arab of Emirates.

The United Nations Security Council is preparing for another round of sanctions against Iran because of the nation's nuclear research.

Iran, holder of the world's second-largest oil and gas reserves, has refused to halt uranium enrichment that it says is for use in nuclear power plants to produce electricity. The U.S. says Iran seeks instead to develop an atomic bomb. Enriched uranium can be used to make nuclear fuel or build nuclear weapons.

To contact the reporters on this story: Yuji Okada in Tokyo at yokada6@bloomberg.net; Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.

Last Updated: July 18, 2007 06:39 EDT