The Libyan Government has sold a controlling interest in Tamoil, a leading European petrol retailing business, in the latest sign that the socialist regime in Tripoli is loosening its grip on oil assets.

The buyer is Colony Capital, a US private equity group, which is paying €4 billion (£2.7 billion) for 65 per cent of Tamoil and Oilinvest, a Dutch company which owns several refineries and distribution businesses.

The deal follows the signing last week of a pact between BP and Libya’s National Oil Corporation, which will enable the British multinational to explore Libya’s extensive hydrocarbon reserves for the first time in three decades.

The sale of Tamoil has been lengthy and tortuous, mired in the complexity of Libya’s internal politics. First mooted in April 2005, BNP Paribas was hired to conduct an auction, and despite several rounds of bids and a pack of potential buyers including Total, Repsol and Lukoil, the process failed to elicit a winner acceptable to Tripoli.

At one point a consortium of private equity firms including Carlyle and CVC were thought to be close to a deal, but failed to secure an agreement. Kazmunaigas, the Kazakh national oil company, also was a major contender after winning a formal auction. However, the Libyans were unimpressed by its $3 billion (£1.5 billion) bid and caused consternation by snubbing the deal.

The process got off to a shaky start in 2005 when Saadi Gaddafi, son of the Libyan leader, Muammar Gaddafi, explained the rationale for selling out in modest terms. “To sell less than the majority maybe is good,” he said. “But you know the reason to sell is very specific. The fact is there is a problem in Tamoil, or Libya doesn’t want Tamoil, so it’s just to escape.”

The Libyan Government acquired Tamoil in 1988, a period when crude oil prices were weak and Opec countries were keen to venture abroad to secure outlets for their crude production. while capturing some of the downstream retailing margin monopolised by the major Western oil companies.

Libya followed the lead of Kuwait Petroleum Corporation, which bought refineries and established the Q8 brand, while Venezuela established Citgo in the US.

Tamoil has some 3,000 petrol stations in Europe and boasts 10 per cent of the Italian petrol market. In 2005 it sponsored Juventus, the Italian football club, in a deal reckoned to be the biggest such financial transaction, worth €110 million for five years.

Tamoil owns three refineries: a plant in Cremona, Italy with 90,000 barrels per day output; one in Hamburg producing 100,000 barrels per day; and a 72,000 bpd plant in Switzerland. It is expanding in Africa, investing $300 million in a Kenyan refinery.

A land flowing with oil and gas

1.6 million barrels of oil per day produced by Libya

39 billion barrels in reserves but much of the country is unexplored

January 2005 first tender for exploration licences since US sanction lifted. Won by Occidental, ChevronTexaco and Amerada Hess

May 2007 BP agrees $900 million exploration deal with National Oil Corporation

53 trillion cubic feet of gas in proven reserves. Exports to Italy via Greenstream pipeline

May 2005 Shell agreed to upgrade Libya’s export plant and secured exploration rights in Sirte Basin

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