Nigeria may hold an oil licensing round in August subject to approval by President Goodluck Jonathan, a presidential source said, in a move that could help fund a growing budget deficit and increase Chinese investment.
The OPEC member holds periodic licensing rounds for new blocks and has said this year's auction will be a chance for domestic companies and foreign firms new to Nigeria to gain a foothold in Africa's biggest oil and gas industry.
"The moment Mr President approves the proposed August date, everything would be put in motion to carry out the oil blocks licensing round in August," the source said, requesting anonymity.
Officials have said the next licensing round is likely to be for both onshore and offshore fields totalling at least 2 billion barrels.
China made a proposal late last year to buy 6 billion barrels of Nigerian oil. Although Nigeria could sell stakes in its existing joint ventures with Western oil firms, Beijing is seen as more likely to succeed in bidding for new acreage.
The source said China had not approached Nigeria for discussions since last year.
"No further discussion has been held with the Chinese since the last one in October last year. They are yet to come for further discussions since then," the source said.
Former junior oil minister Odein Ajumogobia said in September that state-run oil firm NNPC could sell its stakes in joint ventures to China if it wanted to.
But analysts say the sale of stakes to China by NNPC would likely be challenged by other partners -- which include Royal Dutch Shell, ExxonMobil and Chevron and that putting a greater share of Nigerian reserves in foreign hands would also face huge political opposition.
The president two months ago signed into law a 4.6 trillion naira ($31 billion) 2010 budget for sub-Saharan Africa's second-biggest economy, an increase in spending of 50 percent from the previous year.
Much of the resulting budget deficit is due to be funded by domestic borrowing, but around 132 billion naira is expected to come from the licensing round.
Jonathan has since submitted a proposal to amend the spending plans to parliament, cutting expenditure in the main budget but also proposing a supplementary budget. The net effect will be to increase expenditure and deepen the deficit.