OIL and petrol prices are expected to fall by a half penny a litre (2.27p a gallon) as a result of the Government's decision to modify the arrangement between oil importers and the Whitegate oil refinery.

Until now, oil importers were required to purchase 35 per cent of their oil requirements from the refinery. But a decision announced yesterday by the Minister of State at the Department of Transport, Energy, and Communications, Mr Emmet Stagg, means they will (be required to buy only 20 per cent from January 1st, 1997.

The estimated saving to the consumer will be more than £7 million.

All major oil companies have been informed of the decision by the Minister and he said he expected "the benefits to be seen at the petrol pumps". Mr Stagg said it was "up to the refinery now" to search out new markets for its oil.

Mr Ed O'Connell, chairman of the Irish National Petroleum Corporation (INPC), which owns and operates the refinery, said: "We will continue to intensify our efforts towards commerciality by means of cost reduction, revenue enhancement and further development of service to our customers.

Mr Fergus Cahill, IN PC chief executive, said significant advances had been by made by the company in reducing its unit costs. He pointed out that the cost per tonne of crude oil processed at Whitegate had been reduced from £8.10p in 1993 to £6.70p in 1995.

The new 20 per cent requirement will cost the INPC £3 million annually and Mr Stagg said he could see "a situation evolving" where there would be no requirement to purchase from Whitegate for oil importers.

Mr Stagg said: "The Government is committed to maintaining a refinery within the State on security of supply grounds but on a basis which will minimise the cost to the consumer."

Mr Stagg said he was hopeful that by 2000 any requirement to purchase would be abolished and he hoped the levels of the requirement could be continually reduced over the next four years. He did not see any redundancies arising from such a move.