Italy's Eni has agreed to buy half of BP's 85 percent stake in a Libyan oil and gas licence with the aim of resuming exploration next year, the companies said on Monday.
Eni will acquire the 42.5 percent stake and become the operator of the exploration and production sharing agreement (EPSA) in Libya, in which the Libyan Investment Authority holds the remaining 15 percent, the companies said in a statement.
The companies, along with state-owned National Oil Corp (NOC), signed a letter of intent in London on Monday paving the way for the final deal. They did not disclose financial terms of the transaction.
NOC chairman Mustafa Sanalla said the agreement showed renewed confidence in the war-torn country's oil and gas sector.
"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," he said.
BP Chief Executive Officer Bob Dudley hailed the deal as an important step "towards returning to our work in Libya".
"We believe that working closely together with Eni and with Libya will allow us to bring forward restarting exploration in these promising areas," he said in the statement.
The resumption of exploration would help boost Libya's oil and gas output which fell sharply in the years following a civil war that started in 2011, Eni CEO Claudio Descalzi said.
Libya is producing around 1.25 million barrels of oil per day (bopd), still below its pre-civil war capacity of 1.6 million bpd.
BP does not produce any oil or gas in Libya. It signed the EPSA agreement in 2007 to explore onshore in the Ghadames basin and offshore in the Sirte basin.
Its exploration programme was interrupted in 2011 when the civil war broke out and remains under force majeure. In 2015, the company wrote off $432 million from its Libyan activities.
Eni, which has been operating in Libya since 1959, is currently active in six contract areas in Libya and its production in 2017 reached a record 384,000 barrels of oil equivalent per day.
The EPSA includes two onshore areas in the Ghadames basin and one in the offshore Sirte basin, covering a total area of around 54,000 square kilometres.
(Additional reporting by Stephen Jewkes in Milan; Editing by Emelia Sithole-Matarise and Mark Potter)