Ambassador Nigel Sheinwald says his government "deeply regrets the continuing anguish" that Abdel Baset al-Megrahi's release caused the families of the bombings' victims on both sides of the Atlantic.
But in a statement published Friday, Sheinwald defended oil company BP from claims that it pressed to have al-Megrahi released.
"Claims in the press that Megrahi was released because of an oil deal involving BP, and that the medical evidence used by the Scottish Executive supporting his release was paid for by the Libyan government, are not true," Sheinwald said.
Sheinwald indicated that it was within Scotland's rights to consider Megrahi's release on compassionate grounds, and under British law "we have to respect the independence of the process."
Scotland released al-Megrahi after doctors said he had only months to live because of cancer. A doctor now says he may live as many as 10 years.
Sheinwald wrote that freeing an individual under those circumstances "does not provide a mechanism for a person who has been released on compassionate grounds to be returned to prison if they have survived for longer than the period diagnosed by the relevant medical authorities."
CBS News correspondent Elizabeth Palmer wrote yesterday that in 2007, when Megrahi was serving his sentence in a Scottish jail, it emerged that the U.K. government was negotiating a prisoner transfer agreement with Libya.
After some initial squirming, Britain's Foreign Secretary Jack Straw confirmed that Megrahi was included in the agreement.
That same year, BP had signed a $900 million oil deal with Colonel Ghadaffi's Libyan government, but couldn't begin working on its new projects until the deal got final political approval.
The Senate Foreign Relations Committee has invited BP to testify at a hearing on last year's release of al-Megrahi.
Committee Chairman Sen. John Kerry, D-Mass., said the July 29 hearing will deal with what he calls "the mistaken release" of the only person ever convicted in the bombing.
The 1988 explosion aboard Pan Am Flight 103 over Lockerbie, Scotland killed 270 people, most of them American.