UPDATE 1-Japan Nippon Oil to keep CDU shut amid slow demand

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TOKYO Oct 15 (Reuters) - Japan's top refiner, Nippon Oil Corp 5001.T, said on Thursday it plans to keep shut the 110,000 barrels per day (bpd) No.2 crude distillation unit (CDU) at its Mizushima refinery in western Japan until the end of March 2010 if domestic oil demand stays stagnant.

Nippon Oil has kept the CDU shut since July 24 to curb refining amid slow domestic demand. The CDU is undergoing maintenance from Oct. 4 to Nov. 2, and the company had said it may keep it shut after that depending on demand.

The company is considering closing the CDU as part of its plans to cut the group's CDU capacity by 400,000 bpd by the end of March 2012 after its merger with Nippon Mining Holdings 5016.T next year.

Despite a reprieve in oil prices from record highs last July, the appetite for petroleum has remained dull as industries from photo film makers to paper manufacturers have switched fuel for their boilers from oil to natural gas, leading to a rapid decline in demand in the world's third-biggest consumer.

Trade ministry data has shown that the nation's oil demand fell 8 percent in the year that ended in March.

Nippon Oil also said it plans to shut the 127,000 bpd CDU at the Marifu refinery for about a month from mid-February next year for scheduled maintenance. (Reporting by Osamu Tsukimori; Editing by Hugh Lawson)