Libya announced on Tuesday it will sign a 900-million-dollar exploration deal with British energy giant BP, paving the way for its return to the north African country after a 33-year absence.
“We are going to sign with BP an oil exploration and prospecting accord on Libyan territory worth 900 million dollars,” said the head of Libya's National Oil Corporation, Shokri Ghanem.
The announcement came as British Prime Minister Tony Blair arrived in the oil-rich nation at the start of a tour of Africa before he leaves office next month.
“BP will be announcing that they're going back into Libya,” a spokesman for Blair said, confirming that the outgoing premier was due to hold talks with Libyan leader Moamer Kadhafi.
A spokeswoman at BP in London said the company was checking details of the announcement with its office in Libya but could confirm nothing for now.
“Negotiations are ongoing and a deal could be signed later today,” the spokeswoman told AFP, specifying that the company was only involved in negotiations about gas, not oil.
A BP spokesman told AFP earlier that “for the past couple of years we have been in discussions with the Libyan authorities regarding possible opportunities in gas in the country.”
An energy industry source told AFP that the confusion over whether it was an oil or a gas deal reflected the uncertain nature of energy exploration.
“It is primarily gas. But obviously until they start digging and doing tests, they're not quite sure what else they might find. It might be oil, it could well be gas, but primarily it's gas,” the source said on condition of anonymity.
Libya, a member of the Organisation of Petroleum Exporting Countries, is the African continent's second largest oil producer at 1.7 million barrels per day. It also has natural gas reserves estimated at 1,314 billion cubic metres.
The Financial Times reported in January 2006 that BP had entered negotiations on a multi-billion dollar gas exploration and development agreement in Libya.
It said discussions involved a liquefied natural gas project that could supply the North American or European markets.
Libya is seeking massive investment to boost its energy sector, whose development was stunted under UN sanctions imposed after a US airliner was downed in 1988 by a bomb over the Scottish town of Lockerbie, killing 270 people.
Libya eventually accepted responsibility in August 2003 and agreed to pay 2.7 billion dollars in compensation to victims' families, leading to an end to years of United Nations sanctions.
The rapprochement then gathered steam with Libya's surprise decision in December 2003 to renounce and dismantle its weapons of mass destruction under US, British and international supervision.
Washington then announced an easing of sanctions imposed in 1986 and 1996.
Since then, Western companies have flooded into the country, encouraged by a wave of privatisations in what was a tightly controlled socialist economy.
When Blair made a landmark visit to Tripoli in 2004, Royal Dutch/Shell announced a “long-term strategic relationship” with Libya, essentially, exploration for new energy reserves and development of existing natural gas facilities.
