* JXTG to close refinery amid industry consolidation
* Japan's oil demand has fallen sharply in recent years
* Interactive graphic on crude imports: tmsnrt.rs/2Odh7km (Adds graphic on Japanese oil imports, bullet points)
By Aaron Sheldrick
TOKYO, July 23 (Reuters) - JXTG Holdings, Japan's biggest oil refiner, said on Tuesday it plans to close a 115,000 barrel per day (bpd) Osaka refinery that it owns with PetroChina next year, amid falling demand for crude products in Japan.
The closure will cut Japan's refining capacity to just over 3.4 million bpd, down from 5.6 million bpd in the 1980s when Japan accounted for almost 10 percent of global oil product output.
Four of Japan's biggest refiners have merged into two in recent years and cut operations as they seek business from a shrinking, aging population that consumes less fuel because of more efficient vehicles and gasoline-electric hybrids.
"In light of the increasingly severe business environment, (JXTG) has decided to terminate refinery operations at the Osaka refinery," the company said in a statement, citing declining domestic demand as well as competition in Asia.
The refinery will be shut in October next year, a month after the expiry of JXTG's venture with PetroChina, and the site will be converted to an asphalt-fueled electric power station, JXTG said.
JXTG holds 51% of the venture while PetroChina, one of China's biggest energy companies, has the rest. No details were given on costs, although JXTG said the changes would not affect its earnings in the current financial year.
In the meantime, JXTG is in talks with PetroChina about the Chinese company becoming a partner in its 129,000 bpd Chiba refinery near Tokyo.
A JXTG spokesman told Reuters by phone that it was likely the companies would agree to similar stakes in that refinery as in the Osaka facility, but the arrangement has not been finalized.
PetroChina did not immediately respond to requests for comment.
The Osaka refinery mostly processes crude from the Middle East and Asia-Pacific supplied by PetroChina.
JXTG is focusing on growth areas such as chemical products, power generation and electronic materials under a plan through 2040, when it expects Japanese oil demand will have halved.
JXTG is the result of a takeover by JX Holdings of TonenGeneral in 2017 and controls roughly half the market for gasoline and other oil products in Japan. Idemitsu Kosan, the country's second-biggest refiner, completed the purchase of Showa Shell Sekiyu in April after a fractious drawn-out process.
Reporting by Aaron Sheldrick; Additional reporting by Muyu Xu in BEIJING; Editing by Subhranshu Sahu and Richard Pullin