I use water only on my Japanese Stones and use a diamond plate to flatten them. I can't imagine using oil or kerosine or anything like that on a stone
IF you're going to use sandpaper, make sure to lay it flat on a countertop, and then rub the stone over it, not the other way around.
You can use a pencil or sharpie marker to make lines all across the stone and then check periodically on the lines to make sure you're removing even amounts of stone while your'e leveling it. if the marks still remain, you need to take more off of that part of the stone, obviously