Shell said the deal, which could see the company invest as much as $637 million (495 million euros), followed an agreement with the Libyan government 13 months ago to establish a strategic partnership.
The deal also shows how Libya's massive hydrocarbon reserves are facilitating its reintegration into the international community.
Shell has won the right to explore for gas in five blocks in the resource-rich Sirte Basin and to develop an existing liquefied natural gas (LNG) plant on the Libyan Coast with the Libya’s National Oil Corporation (NOC).
The parties hope to increase the annual output of the Marsa Al Brega LNG plant to 3.2 million tons from 0.7 million now. If sufficient gas is found at the five blocks or is secured from third parties, Shell and NOC will later develop a new LNG facility.