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Daily Telegraph: Gaddafi welcomes BP back after $2bn deal

By Roland Gribben
Last Updated: 1:09am BST 30/05/2007

BP is returning to Libya after 34 years as it struggles to maintain its interests in a major Russian gas complex.

The price of re-entry to a desert state with the biggest oil reserves in Africa is a down payment of $900m (£450m) in an exploration programme targeted at tapping the country’s huge gas potential.

Tony Hayward, new chief executive, signed a deal that gives BP exploration rights over 54,000 square kilometres onshore and offshore and could involve total spending of up to $2bn in the deal with the state-owned National Oil Corporation.

Mr Hayward said: “It is BP’s single biggest exploration commitment.”

Tony Blair heralded the BP deal during a visit to Libya as part of his farewell tour and to mark the rehabilitation of Muammar Gaddafi following the lifting of economic sanctions. He said British companies stood to win huge contracts because of Gaddafi’s support in the fight against terrorism.

Shell has already made a Libyan comeback but the BP accord provides relief for an energy giant attempting to recover from the hasty resignation of Lord Browne, chief executive, and a crisis over its US safety record.

Mr Hayward has been working behind the scenes for more than a year to hammer out the exploration deal and cope with demanding terms following the signing of a memorandum of understanding with the state oil company. “This is his baby,” said an insider.

BP was kicked out of Libya during Gaddafi’s nationalisation blitz. The company fought a dogged rearguard action, tracking oil from its former Libyan interests to try to block deliveries, but after a lengthy legal battle ended up with compensation of just £17.4m.

Mr Hayward is facing a tougher battle in Russia where BP and its partners stand to lose their licence to operate the huge Kovytka gas field in Siberia because the Kremlin wants to see Gazprom, the state gas giant, in control.

Russian authorities say TNK-BP has failed to meet licence conditions and a meeting of regulators on Friday could end with the companies being stripped of the licence.

TNK-BP says it is ready to let Gazprom move into the driving seat but a Gazprom spokesman said: “The project can be basically described as a suitcase without a handle. It would be a pity to throw it away but it is tough to drag it around.”

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/30/cnbp30.xml 

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