Japan's Teikoku, Nippon Oil eye gas project-Nikkei

TOKYO, June 21 (Reuters) - Japan's Teikoku Oil and Nippon Oil Corp (5001.T) are considering exploration projects in the East China Sea after a pact between China and Japan on developing oil and gas resources in the disputed waters, the Nikkei daily reported on Saturday.

Teikoku Oil, a part of Japan's largest oil and gas exploration company, INPEX Holdings (1605.T), is likely to invest in the development of the Chunxiao gas field, while Nippon Oil will aim to participate in a joint development project agreed upon by the two nations, the economic daily said.

China and Japan announced an agreement on Wednesday on ways to develop oil and gas resources in the East China Sea, defusing a volatile row. The move is the latest sign of improving ties between the neighbours and former foes.

Under the agreement, Beijing has allowed Japanese companies to take a stake in China's development of the Chunxiao field, which is on the Chinese side of the median line that Japan claims as a sea boundary.

The two nations also decided to jointly develop and share profits from other fields in the East China Sea. Nippon Oil, Japan's top refiner, hopes to take part in the project, the Nikkei said.

Officials of Teikoku Oil and Nippon Oil were not immediately available for comment.

Estimated known reserves in the disputed fields are a modest 92 million barrels of oil equivalent -- around three weeks of energy demand in Japan -- but both countries have pursued the issue as there may be a lot more yet to be found.

The long-running dispute between Japan and China had centred on where the boundary between the two countries' exclusive maritime economic zones falls, and has come to embody the sometimes bitter rivalry over influence and sovereignty.

Japan says the median line between the two countries' coasts marks the divide. China says the boundary is defined by its continental shelf, extending its zone towards Japan.

Tokyo had objected to Chinese development of the Chunxiao gas field, which lies just west of what Japan considers the boundary, and fears drilling there could drain gas through a honeycomb of seabed rocks from what Tokyo sees as its economic zone. (Reporting by Leika Kihara; Editing by Clarence Fernandez)