Update 5 - Adds details - Malta has struck a deal with Libya to buy oil and other energy products from that country as preferential rates.

The deal, in the form of a memorandum of understanding, was signed after Prime Minister Joseph Muscat had a meeting at the Auberge de Castille with Libyan Prime Minister Ali Zeidan, who arrived in Malta this morning.

The agreement provides that Libya will supply energy products to Malta at preferential rates. That will include crude and refined oil, jet fuel and LPG. The agreement kicks in as soon as Libya resumes normal production, which is expected in the near future.

"This will shield Malta and enable it to stabilise the price of fuel amid international price fluctuations," Prime Minister Joseph Muscat said at a press conference.

He described the memorandum of understanding as 'groundbreaking'.

Malta, he said, could in the medium term, become a hub for energy supplies to the EU.

The two countries also reached an arrangement for Libyan oil and gas workers to learn English in Malta.

Progress was also reached on the outstanding problem of oil exploration in waters which both countries claim as their own. Dr Muscat said the two countries had agreed to opt for joint oil exploration.

Malta will be helping Libya in transport and civil aviation. Further talks will be held on cooperation in the health sector.

Other subjects discussed this morning included migration.

The Libyan Prime Minister renewed his commitment for this problem to be tackled in an effective manner, Dr Muscat said. This was not a Libyan issue, he said, but a regional issue, and he hoped that initiatives taken with Italy and Greece would continue and Libya would also be part of them.

Replying to questions, Dr Muscat said the new deal with Libya was independent of the government's plans to reduce energy tariffs and bring in new generating capacity, which remained on time. The difference from the past, he said, was that Malta now had an energy policy. This agreement and other initiatives which were being discussed would help the economy and also help restore Enemalta to a sound financial footing.

"The agreement signed today will have a direct impact on consumers, as it will cushion fluctuations in international oil prices, such as for petrol and diesel," he said.

The agreement on jet fuel would help make the tourism industry more competitive. The deal also offered the possibility of more favourable LPG prices.

"This is not a solution to everything, but it is a huge step forward," Dr Muscat said.

Dr Muscat said the details of the agreement still have to be worked out, including levels of supply and modality of supply. Details will be ironed out by the respective ministries without delay.

He said Malta was grateful that the agreement had been reached within a few weeks of the talks having been started.

Mr Zeidan described relations between the two countries as excellent and reiterated his country's gratitude for the support given by Malta during the Libyan uprising, including the assistance to two defecting pilots and humanitarian assistance given to the Libyan people.

He said the Libyan government was keen on improving links between the two countries including oil and gas, education, including a rehabilitation of the Ta' Giorni Institute, and other aspects. 

Mr Zeidan said Dr Muscat had shown great concern over illegal immigration. This fell within security issues which the Libyan government was giving priority to, not least because of the threat of terrorism. It was important that there was effective international cooperation and he hoped this would increase.

Replying to questions, the Libyan prime minister said immigration was both a security and humanitarian issue and cooperation was needed in various sectors.

The talks on oil procurement started in June when Dr Muscat visited Tripoli and met Mr Zeidan. At the time, Dr Muscat said there was more willingness for cooperation on energy between the two countries.

The final round of talks started last night when three Libyan ministers - Abdulgadir Mohamed (Transport), Abdulbari A. Arousi (Oil and Gas) and Mustafa M. Abofamas (Economy) arrived in Malta.

Malta also used to import oil from Libya at preferential rates under the Labour government in the early 1980s.