Shell today marked its return to Libya after an absence of more than a decade by signing a $200m (110.6m) gas exploration deal with the former pariah state.
The agreement - described by the oil giant as a landmark deal - was signed in Tripoli, coinciding with the groundbreaking visit to Libya by the prime minister, Tony Blair.
"I am delighted by the warm invitation to Shell from the Libyan National Oil Corporation to participate in the country's oil and gas industry," Malcolm Brinded, Shell's chief of exploration and production, who signed the agreement, said.
"I look forward to our cooperation becoming a cornerstone in a renewed trade relationship between the UK and Libya."
The move paves the way for Shell to carry out exploration and develop facilities for liquid natural gas. The company will continue negotiations on specific projects in Libya during the course of 2004, and the value of today's agreement could rise to $1bn in the long term, one British official, travelling with the prime minister, said.
Shell was active upstream in Libya from the 50s until 1974, and conducted exploration in the country in the late 80s. It used to produce 300,000 barrels a day in Libya, until it left as relations between the west and Tripoli deteriorated.
Abdel-Rahman Shalqam, Libya's foreign minister, told reporters in Tripoli that Libya was throwing its doors open to foreign oil companies, and had granted more than 180 concessions on oil exploration.
"We are completely open now. We have a new policy, especially regarding the sector of oil," he said.
"We want to rehabilitate our oil fields and wells and upgrade their capacity and production. We are open. We are waiting for other partners to come."
Mr Shalqam said that Libya wanted to increase its quota in the oil cartel, Opec, due to its reserves. Its export quota within Opec is 1.2 million barrels per day.
The country's proven reserves of oil are estimated at a modest 30 billion barrels - compared with 113 billion in Iraq - but some analysts believe that its actual reserves could be much larger.
Mr Shalqam said that Libya had an open bidding policy with open competition for all companies from China, the US and the UK. "But Shell is the second company in the world. We have a history, we have a legacy with them," he added.
Today's deal will provide some welcome relief for Shell, which has been engulfed in controversy about how it reports its oil and gas reserves.
The Anglo-Dutch company is under investigation by the US securities and exchange commission, the financial watchdog, after revising its reserves down by one fifth this year.
BAE, the British aerospace company, is also seeking to capitalise on the end of Libya's economic isolation, and is negotiating with Muammar Gadafy's regime to supply commercial aircraft and build airports.
Britain has taken the diplomatic lead in guiding Libya back into the international fold, and Mr Blair's visit is the first by a British leader since Col Gadafy seized power in 1969.