LONDON - British oil major BP Plc told the UK government two years ago that slow progress in concluding a Prisoner Transfer Agreement with Libya threatened a multi-billion dollar exploration deal it was negotiating.

BP, Europe's second-largest oil company, said on Friday its advice did not refer specifically to the man convicted of the 1988 Lockerbie airliner bombing, whose release from a Scottish jail last month prompted criticism of Britain.

Libyan Abdel Basset al-Megrahi, terminally ill with prostate cancer, was flown home to Libya last month after Scotland's justice secretary released him on compassionate grounds.

The British government has denied it put pressure on Scotland's devolved government over Megrahi in the interest of better ties with Libya and its leader Muammar Gaddafi.

Megrahi's release and the joyous welcome he received in Tripoli angered the American government and U.S. relatives of the 270 people killed when Pan Am flight 103 blew up over the Scottish town of Lockerbie.

BP did bring to the attention of the UK Government in late 2007 our concerns about the slow progress in concluding a Prisoner Transfer Agreement with Libya, the company said.

Like many others, we were aware that delay might have negative consequences for UK commercial interests, including ratification of BP's exploration agreement, it added in a statement issued on Friday.

COMPASSIONATE GROUNDS

However, in making that point to the Government, we were not talking about the Al-Megrahi case because we were fully aware that this was solely a matter for the Scottish Executive and not the UK authorities, the company added.

In January 2008, Libya ratified a $900 million oil deal with BP which had first been agreed in May 2007.

British firms have become heavily involved in exploring for hydrocarbons in Libya since U.N. sanctions were lifted in 2003. Political patronage remains important for doing business in the north African state.

Britain has confirmed it told the Libyan government it did not want Megrahi to die in jail, but said there was no commercial motive and no attempt to influence the devolved Scottish authorities.

On our part, there was no conspiracy, no cover-up, no double-dealing, no deal on oil, no attempt to instruct Scottish ministers, no private assurances by me to Colonel Gaddafi, Prime Minister Gordon Brown said this week.

Britain and Libya finalized the prisoner transfer agreement in April but the Scottish authorities opted not to apply it in Megrahi's case, sending him home on compassionate grounds because he had three months or less to live.

(Additional reporting by Keith Weir; editing by Ralph Boulton)

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