By Carolyn Cohn and Martina Fuchs LONDON (Reuters) - Canadian energy producer Verenex Energy was not capable of operating in Libya and the Libyan government has broken no agreements towards it, a Libyan official said on Thursday. A dispute between Verenex and the Libyan authorities has made some investors wary about doing business in Libya. "Libya has never broken an agreement. Verenex were not capable, they were not qualified enough," Abdulmagid el-Mansuri, chairman of the industry ministry's foreign investment committee, told Reuters in an interview on the sidelines of a Libyan investment conference in London. "According to the agreement, they had to give it to a qualified investor." Verenex Energy, a small oil producer operating in Libya, is in dispute as Libyan authorities have not yet approved the C$499 million sale of the company to China National Petroleum Corp . Libya's National Oil Company has said it is considering plans to match the offer. Verenex said last month that NOC sent it a letter saying it was investigating allegations the company was improperly qualified to bid for stakes in Libya's oil fields in 2005. Verenex said it considers the allegations to be without merit. "It doesn't create panic among the big international oil companies, but it does represent a source of concern, especially for the smaller and medium-sized companies," said a London-based analyst attending the conference. Other delegates at the conference saw the business climate improving in Libya. The country gave up its banned weapons programmes in 2003 and last year agreed with the United States to settle compensation claims for attacks, including the 1988 Lockerbie airliner bombing. However, Hans Solerod, regional manager of Smith's Medical, told the conference: "You do business on their terms or not at all." SOLAR EXPLORATION El-Mansuri told Reuters Libya was talking to international investors about solar energy projects in the country. "We will soon start with exporting solar energy, I am discussing it with foreign investors. We are ready to receive any requests from international companies." The European Desertec Industrial Initiative, the world's most ambitious solar power project, aims to draw solar power from the Sahara, using mirrors that gather sunlight. The plan, launched last week in Germany, could allow Europe to source 15 percent of its power from the Saharan desert by 2050. El-Mansuri reiterated Tripoli's aims to increase crude oil production by 40 percent to 3 million bpd by 2012. He said gas production was likely to increase, but declined to give a production forecast. "(Gas companies) are discovering new gas projects every day. Now a lot of companies are interested, from Australia to Italy to France." | 
