BULA Resources has announced a new exploration project in Libya, despite the US sanctions against firms investing in energy projects there. The company says its investment will not exceed the $40 million (£25 million) a year limit set by the US this week.

Bula finance director, Mr Pat Mahony, said the new sanctions bill signed by US President Bill Clinton on Monday would not affect the company's latest project.

The US law allows President Clinton to penalise any firms that invest $40 million or more a year in Iran and Libya's oil and gas industries.

"We expect our investment will be below that level," Mr Mahony said.

The Irish based company said yesterday it had agreed an exploration and production sharing agreement with the national oil corporation of Libya, covering two blocks in the Sirte Basin and one block in the Ghadames Basin.

Bula has also agreed to join with an international Canadian oil corporation in exploring for hydrocarbons on the blocks. Mr Mahony refused to name its Canadian partner because of a confidentiality arrangement but said it would be making further information available next month.

The Canadian company is expected to take over the day to day operation of the project and carry Bula's costs for the entire exploration phase and finance the development programme.

Bula has been working on securing the project for up to two years. Mr Mahony said the acreage involved was "highly attractive" and was much sought after by other international exploration groups. The Libyan venture involves the acquisition of new seismic equipment and the drilling of several wells on the blocks.

A continuation of US sanctions against companies investing in Libya was unlikely to have any long term impact on Bula, he said.

The company's main exploration activities are in Russia, where it has an interest in oil reserves.