UK oil major BP and Italy’s Eni signed a letter of intent on 8 October with Libya’s state-owned National Oil Corporation (NOC), which could lead to the two oil companies working together to resume oil exploration in the embattled North African country next year.

NOC chairman Mustafa Sanalla signed a letter of intent with BP chief executive Bob Dudley and Eni CEO Claudio Descalzi in London, to finalise the arrangements with a target of resuming exploration work in 2019.

The agreement covers an existing exploration and production-sharing agreement (EPSA), which includes three areas — two in the onshore Ghadames basin in the northwest and one in the offshore eastern Sirte basin.

Originally awarded in 2007 to BP, work in the 54,000 square-kilometre contract areas has been suspended since 2014.

BP holds an 85 per cent working interest in the EPSA, with the Libyan Investment Authority holding the remaining 15 per cent. However, under the new agreement Eni will acquire a 42.5 per cent interest in the EPSA, and become its new operator. NOC hopes the arrangements for this process will be completed this year.

With existing exploration and production activities and infrastructure adjacent to the onshore contract areas, the transfer to Eni creates an opportunity for activity to resume.

Eni is already one of the largest investors in Libya’s oil and gas sector, producing 384,000 barrels a day (b/d) in 2017. It is the operator of the 100,000 b/d Elephant oil field in western Libya, and a partner in Mellitah Oil & Gas, which operates the offshore Bouri oil field among others. However, in taking over the contract area in the Sirte basin, this will be Eni’s first venture as an operator in the east of the country.

“This agreement is a clear signal and recognition by the market of the opportunities Libya has to offer and will only serve to strengthen our production outlook. This initiative will hopefully drive further inward investment and facilitate higher production levels,” Sanalla said in a statement.

“This is an important milestone that will help to unlock Libyan exploration potential by resuming EPSA operations that have remained suspended since 2014,” Descalzi added.

The latest announcement follows agreements with Gazprom and Tatneft, two Russian energy companies, that are also lining up to return to resume exploration activities in the country’s oil and gas sector.

Libya’s production is about 1.25 million b/d, its highest level in years, but it remains vulnerable to conflict, with the country split between political factions based in Tripoli and the east. Sanalla has previously spoken of Libya’s potential to eventually boost output to about 2 million b/d, but this will require massive investments and a sustained period of political stability.