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Nigeria says must offer work to illegal refiners in peace drive

* Crackdown on illegal refineries raises tension

* Attacks cost Nigeria up to $100 bln in lost revenue

* Graphic on Nigeria oil output http://tmsnrt.rs/2j4spa2 (Adds losses to oil militancy)

By Tife Owolabi

PORT HARCOURT, Nigeria, Feb 14 (Reuters) - Nigeria needs to offer work to people who make a living from illegally refining oil in the Niger Delta to achieve peace there, Vice President Yemi Osinbajo said on Tuesday.

The government has been holding talks with militants to end attacks on oil pipelines which cost the country up to $100 billion in lost oil revenues in 2016, Oil Minister Emmanuel Ibe Kachikwu said in a video on his Facebook page.

But a military crackdown on thousands of illegal refineries in the southern swamps, which process crude oil stolen from oil majors and state oil firm NNPC, has raised tensions again.

Illicit refineries process stolen crude in makeshift, blackened structures of pipes and metal tanks hidden in oil-soaked clearings deep in the Niger Delta's thick bush land.

"Our approach to that is that we must engage them (illegal refiners) by establishing modular refineries so that they can participate in legal refineries," Osinbajo said during a visit to Rivers state, part of the Delta region.

"We have recognised that young men must be properly engaged," he said, without giving details.

He also said the government would make more provisions for an amnesty scheme for former militants who laid down arms in 2009 in exchange for cash stipends and job training.

Illegal refining is one of the few businesses flourishing in an otherwise desolate region, as petrol is scarce in Nigeria due to the country's derelict state refineries.

Authorities had originally cut the budget for cash payments to militants to end corruption but later resumed payments to stop surging pipeline attacks which cut output by 700,000 barrels a day for several months last year.

"We have to make more provisions for amnesty and provisions for social intervention," Osinbajo told residents of Port Harcourt, the region's major city. He has been visiting the Niger Delta since last month to calm tensions.

The militants and residents who sympathise with them say they want a greater share of Nigeria's oil wealth to go to the impoverished region.

Crude sales make up about 70 percent of government revenue and the attacks have deepened an economic crisis brought about by low global oil prices.

Nigeria's oil production climbed to 1.576 million bpd in January, roughly 102,000 bpd higher than December, according to secondary sources in a monthly OPEC report released on Monday

Osinbajo put total oil output last month at between 1.7 million bpd and 1.8 million bpd down from the 2.2 million bpd at the start of 2016.

(additional reporting by Libby George in London; Writing by Ulf Laessing; Editing by Alexander Smith and Adrian Croft)