Civic leaders in Cyrenaica, home to most of Libya's oil, have created a council to administer the eastern region, a move that could lead to confrontation with the interim leadership in Tripoli.

About 3,000 delegates at a congress on Tuesday in the eastern city of Benghazi installed Ahmed al-Senussi, a relative of Libya's former king and a political prisoner under ousted leader Muammar Gaddafi, as head of the new council.

Tuesday's declaration does not carry official force. Cyrenaica has been unhappy for many years at what it regards as its neglect by rulers in the capital.

Moves towards greater autonomy for Cyrenaica may worry international oil companies operating in Libya because it raises the prospect of them having to re-negotiate their contracts with a new entity.

The declaration in Benghazi, cradle of the uprising last year which ousted Gaddafi, did not make clear whether the new provincial council would exist within the National Transitional Council (NTC)'s institutions, or be a rival to it.

Asked to clarify that point, Mohammed Buisier, one of the organisers of Tuesday's congress, told Reuters: 'I've been in contact with people in Tripoli and I told them 'come here and negotiate'... It should be through negotiation.'

 But he added: 'We are not going to give anyone a blank cheque.'

Senior government officials were in a meeting and unavailable to comment, but the NTC said on Monday it did not support the autonomy plan and neither did most Libyans.

The declaration of autonomy adds to the challenges of the NTC, which has struggled to impose its authority on the country. Towns and militias run their own affairs with little reference to the government in Tripoli.

 The eight-point declaration adopted in Benghazi said the 'Cyrenaica Provincial Council is hereby established ... to administer the affairs of the province and protect the rights of its people'.

It said, though. that it accepted the NTC as 'the country's symbol of unity and its legitimate representative in international arenas.'

The declaration said the province wanted a federal system under which the historic provinces of Cyrenaica, Fezzan in the south and Tripolitania in the west of Libya would have a large degree of autonomy from the government in Tripoli.

It also rejected the mechanism for electing a new national assembly in June, saying it wanted greater representation for Cyrenaica.

Supporters of autonomy for Cyrenaica are seeking to recreate the system in place during the early rule of King Idris, Libya's first post-independence ruler who was ousted by Gaddafi in a 1969 military coup.

During that period, Libya was run along federal lines. Cyrenaica enjoyed prestige and influence because the monarch's family had its powerbase in the east.

People in eastern Libya complain they were sidelined during Gaddafi's 42-year rule and did not receive a fair share of the country's energy wealth. Those complaints have become even more vocal since Gaddafi was forced out in last year's rebellion.

Al-Senussi, the head of the self-declared Cyrenaica council, is the great nephew of King Idris. Gaddafi put al-Senussi in jail after he tried to stage a coup d'etat in the early 1970s.
He stayed in prison until he was pardoned in 2001.

Last year the European Parliament named al-Senussi, now a member of the NTC, as one of the winners of its annual Sakharov Prize for Freedom of Thought.-Reuters