The bulk of the sum being considered - between 900 billion yen and one trillion yen (eight-nine billion dollars) - would be in the form of low-interest loans and trade insurance, the Tokyo Shimbun newspaper said.

It would be one of Japan's biggest amounts of aid to the overseas oil sector, the regional daily said, adding Japan was motivated by energy security.

Japan and China - which have an increasingly tense relationship and are both in dire need of energy imports to feed their huge economies -- have fought furiously for the right to access Russia's untapped oil reserves.

Russian Industry and Energy Minister Viktor Khristenko said in April that the details of the pipeline were still to be finalized after Japan threatened to cut funding if China was given access to Russian oil first.

A Russian plan in December called for the 4,118-kilometer (2,559-mile) pipeline to reach the Pacific by linking Taishet near Lake Baikal with Perevoznaya near Nakhodka. It would make Japan the nearest overseas market for the Siberian oil.

But Khristenko has suggested that Russia would build a branch to China before completing the main pipeline, prompting Japan to threaten not to fund the pipeline, which is estimated to cost at least 15 billion dollars.

In the first phase of the project, the pipeline will be laid from Taishet to Skovorodino near the Russian-Chinese border. A China branch could stretch from the border area.

No immediate comment on the reports of Japan's possible aid was available from the foreign ministry.

Japan and China have also been at loggerheads over their wartime history and over gas fields in the East China Sea.

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