UK eyes Libya trade bonanza

TONY Blair's groundbreaking trip to Libya could open the door to billions of pounds of business for Britain, with Shell and BAE Systems close to clinching deals.

'The door in Libya was ajar and now is opening,' said Trade Minister Mike O'Brien.

Thawing relations with the West and signs that Tripoli wants to sweeten commercial terms, have set the scene for a massive oil and trade bonanza.

Shell is expected to sign an agreement within days, allowing it to drill for gas off Libya.

Defence giant BAE is understood to be in advanced negotiations to supply civilian aircraft equipment. That could pave the way for further contracts if the EU lifts its embargo on weapons sales to the former pariah nation.

The British Government is hopeful firms can also secure deals in airports, ports and logistics, healthcare and tourism.

Exports to Libya last year rose 12% to £241m and could now rocket as leader Muammar Gadaffy courts foreign investment.

In polls by oil and gas consultancy Fugro Robertson, energy companies voted Libya the world's most attractive country for new exploration and production ventures in 2000, 2001 and 2002. It came third last year. However, even if British firms secure deals, they will be playing catch-up with US and European rivals.

Since America relaxed trade terms after Gadaffy renounced his nuclear programme in December, major US oil firms have moved aggressively to re-establish their presence. Representatives of Occidental, ConocoPhillips, Marathon and Amerada Hess have visited Tripoli recently. Occidental opened an office in the capital 10 days ago.

While the Americans have been out of the country, however, European companies such as Spain's Repsol YPF and Eni of Italy have boosted their profile.

Libya is already one of the top 10 oil producers, with an estimated 29.5 billion barrels of proved reserves, but experts believe far more may lie undetected.

A member of the Organisation of Petroleum Exporting Countries, it is thought to need some £30 billion to lift oil production to its targeted two million barrels a day by 2010.

It also wants to expand natural gas production by tapping reserves of up to 100 trillion cubic feet and boost exports to European markets via a planned 900-mile pipeline.

By mid-summer, Libya is likely to introduce a new version of its Exploration and Production Sharing Agreement, offering better terms, streamlined licensing procedures and greater transparency.

'The government's making all the right noises,' says an analyst at consultancy Wood Mackenzie.