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Abubakar Yar'Adua of the Nigerian National Petroleum Corporation (NNPC) made the comments to a national assembly committee.
He later said he had been misunderstood, and that the company had paid no money to the rebels.
It was the first time the NNPC appeared to acknowledge paying militants.
In recorded comments heard by a BBC reporter in Abuja, Mr Yar'Adua told the parliamentary committee that rebels had asked for a $6m monthly fee, telling them to "take it or leave it".
"You have to pay, that's the truth," he said.
He was also quoted in local newspapers as saying that the company decided to pay up to protect oil facilities sabotaged by militants after it lost $81m worth of oil in two months.
"The price we pay is very high. It is difficult to get expatriates to work in the Niger Delta," Mr Yar'Adua was quoted as saying in the Guardian newspaper.
"We paid militants $12 million because we were losing $81 million to the problem of the Charnomi pipeline in Delta State."
It has long been suspected by human rights activists that the NNPC has been paying militant groups in Nigeria's oil-rich Niger Delta to stop their activities.
Attacks on Nigeria's oil infrastructure have cut oil production by about a quarter.
(BBC)
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