Shell "intends to suspend and abandon drilled wells and stop exploration in [its] Libyan licenses," a company spokesman said, confirming an internal email seen by Dow Jones Newswires.
Libya's oil production has fast recovered since the toppling of strongman Moammar Gadhafi last year. But foreign companies complain of tough contracts and of persistent insecurity.
The deals, which the new government says it won't change, had already led to the exit of several companies under the old regime. Others, like Germany's Wintershall AG, have warned the terms could impede decisions on new investments.
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But insecurity, including frequent attacks on oil officials, contributed to its decision to abandon the exploration blocks, according to people familiar with the matter.
British oil giant BP PLC (BP, BP.LN), which signed a $900 million exploration deal in 2009, has yet to resume operations in part due to insecurity, while other companies have kept the return of expatriates to a minimum. However, a BP spokesman said it still intends to return to Libya. In an internal email, Shell Libya said "severance packages will be offered to all staff."