Japanese refiner Showa Shell Sekiyu plans to close its 120,000bpd Ogimachi plant at the Keihin refinery complex in Kawasaki in the summer of 2011.
The company also plans to reduce its refining capacity by 23% to cope with weak demand.
Showa has rented the plant to its affiliate Toa Oil for ten years from 2000 through to September 2010.
The two firms have agreed to close the plant due to severe domestic and international oil market conditions.
Showa Shell has recorded a $64m net loss for 2009 due to shrinking margins on weak domestic demand, according to Bloomberg.
Industry experts believe that the over 20% cut in capacity indicates that the firm would restructure and shift its focus to solar-panel manufacturing.
The refiner will build $1.1bn photovoltaic-panel factory in southern Japan with commercial production due to begin in late 2011.
