Nigeria and China have signed a tentative deal to build three oil refineries in the West African state at a cost of $23 billion to boost badly needed gasoline supply in Nigeria and position China for more access to the country's coveted high-quality oil reserves.

"This is a deal we need for Nigeria to cut our reliance on imports," said a senior Nigerian oil official.

He said the Chinese commitment to build refineries in Nigeria--which has spent billions of dollars annually for years importing gasoline due to rickety refineries at home--would also help put China "in the running" for getting additional access to oil acreage in Nigeria, one of Africa's biggest crude producers and exporters.

"This is business but it builds goodwill in addition," the official said, adding there were still details to be settled before a final deal is concluded. Nigeria has seen other efforts in recent years to build refineries with foreign assistance fail to materialize.

Still, the Nigeria government's provisional deal represents a bragging right of sorts vis a vis U.S. and European oil companies, which have long turned a deaf ear to Nigerian government calls to operate refineries in the country because of the poor financial returns.

Nigerian gasoline and diesel prices are highly subsidized. This government benefit is one of the few that Nigerians, most of whom live in poverty, have seen over the years from their country's big crude reserves.

But the fuel subsidies mean Nigeria 's refineries operate at little or no profit, a primary factor that has hurt new investment and upkeep at existing facilities. The subsidies have also encouraged a thriving black market for Nigerian gasoline and other fuel products in neighboring states like Benin that has helped cause shortages in Nigeria .

Various Western companies, such as Exxon Mobil Corp. (XOM), refused to include funding for refineries as part of negotiations several months ago to re-sign expiring oil drilling leases in Nigeria , and still managed to keep those licenses, according to several people close to the matter.

But Nigeria 's tough refining economics are an opportunity for the Chinese government, which is bent on procuring its state oil companies access to new oil reserves to fuel the country's speedy economic growth. Nigeria is looking to offer offshore oil fields to foreign companies but hasn't yet announced a date for any new licensing rounds.

Funding for the three refineries, each slated to pump 250,000 barrels a day of refined products, is expected to come from the China Export & Credit Insurance Corp. and a group of Chinese banks. The Nigerian official said he didn't have details on what sort of returns Chinese banks might see from their funding.

It's unclear if Nigeria would permit any gasoline or other fuel products from the three planned refineries to be exported after they satisfy domestic demand, something the country permits with its natural gas.

Nigeria 's mostly low-sulphur crude oil is exported largely to the U.S. and Europe , where it is processed relatively easily and cheaply into gasoline.

Officials from China State Construction Engineering Corp. and Cnooc Ltd. (CEO), the Chinese state offshore oil company, weren't immediately available for comment, while China National Petroleum Corp, China 's largest oil company by assets, said it had no information on the Nigerian government's announcement.

The deal also envisages Chinese help in constructing a petrochemicals facility, which could help Nigeria convert some of its big proven natural gas reserves, among the biggest in the world, into high-value products such as plastics for export.

China currently has limited drilling rights in Nigeria , something it is trying to change in order to reduce its dependence on oil from Angola , China 's top supplier.

China imported just 28,000 barrels a day of Nigerian crude last year, a drop in the bucket compared with China 's total oil imports of 4.77 million barrels a day in 2009, according to China Customs data.

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