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Shell clinches multi-million dollar gas exploration deal with Libya

long-term strategic partnership to include rejuvenation of LNG plant

Energy giant Royal Dutch/Shell on Tuesday announced a long-term deal with Libya to explore for gas in the energy-rich north African country. The deal, which could see Shell invest as much as $637 million, followed an agreement with the Libyan government 13 months ago to establish a long-term strategic partnership following the former pariah state's return from international wilderness.

"The National Oil Corporation of the Great Socialist People's Libyan Arab Jamahiriya (NOC) and Shell Exploration and Production Libya have reached a long-term agreement for a major gas exploration and development deal," a statement issued by Shell said.

"The agreement covers the rejuvenation and upgrade of the existing Liquified Natural Gas (LNG) plant at Marsa al-Brega on the Libyan coast, together with exploration and development of five areas located in the heart of Libya's major oil and gas producing Sirte Basin."

Shell's share price rose 1.28 percent to 475.5 pence in early deals following the news, while London's FTSE 100 index of leading shares was up 1.11 percent at 4,855.10 points.

Libya is seeking massive investment to boost its energy sector, whose development was stunted under international sanctions imposed after a U.S. airliner was downed by a bomb over the Scottish town of Lockerbie, killing 270 people, in 1988. Libya eventually accepted responsibility and agreed to pay $2.7 billion in compensation to families of the victims, but only after years of United Nations sanctions. Under the agreement announced Tuesday, Shell said it would rejuvenate and upgrade the Marsa al-Brega LNG plant at a minimum cost of $105 million, rising possibly to $450 million, which would in turn raise the plant output from 0.7 to some 3.2 million tons per annum.

Subject to gas availability, Shell said it would also undertake jointly with NOC the development of a new LNG facility.

The agreement meanwhile grants Shell gas exploration rights in five blocks, covering some 20,000 square kilometers at a minimum commitment cost of $187 million, with the program beginning immediately.

"We are delighted to be back in Libya and honored to work together with NOC to develop a modern LNG industry, and explore for and develop gas in the prolific Sirte Basin," said Shell's executive director for exploration and production, Malcolm Brinded.

"Libya's integrated gas industry has enormous potential, based on its large gas resources and favorable geographic location. I look forward to our cooperation and believe that this is the beginning of a new lasting and fruitful partnership with Libya."

Shell last conducted exploration work in Libya during the 1980s.

In late March 2004, Shell and the NOC signed an agreement in Tripoli to coincide with a visit to Libya's capital by British Prime Minister Tony Blair that reflected thawing relations between the two countries.

Libya was welcomed back into the international fold by London and Washington last year after Tripoli renounced its pursuit of weapons of mass destruction in December 2003.

Tripoli,05 09 2005
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