The controversy surrounding the release of the man convicted of the Lockerbie bombing reignited yesterday after Britain's ambassador to the US said the government regretted the Scottish decision to free Abdelbaset al-Megrahi and considered it a "mistake".

Sir Nigel Sheinwald's remarks come amid claims by a group of Democrat senators that BP lobbied the British government to release Megrahi to help it secure an oil deal with Libya.

The US secretary of state, Hillary Clinton, is to look into the allegations, while the powerful Senate foreign relations committee will question BP executives at a special session later this month. The prisoner transfer agreement with Libya was signed in 2007 – the same year BP sealed a $900m (£584m) exploration agreement with Tripoli.

Gordon Brown insisted at the time that not he but the Scottish government had taken the decision to release Megrahi, and he "respected" the Scottish ministers right to do so, a phrase that was taken as an endorsement of Megrahi's release.

Last night, Sheinwald issued a statement that made it clear that the coalition government takes a different view.

Sheinwald said: "The new British government is clear Megrahi's release was a mistake. [It] deeply regrets the continuing anguish that his release on compassionate grounds has caused the families of Megrahi's victims in the UK, as well as in the US. However, under UK law, where Scottish justice issues are devolved to Scotland, it fell solely to the Scottish executive to consider Megrahi's case. Under Scottish law, Megrahi was entitled to be considered for release on compassionate grounds. Whilst we disagreed with the decision to release Megrahi, we have to respect the independence of the process. The inquiry by the justice committee of the Scottish parliament concluded in February that the Scottish executive took this decision in good faith, on the basis of the medical evidence available to them at the time, and due process was followed.

"We have to accept that the release licence 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."

A spokesman for the Scottish executive denied it had any contact with BP before releasing Megrahi. It said it had transferred him purely on compassionate grounds because of his ill health. "We had absolutely no representations from BP. Mr Megrahi … was sent home to die according to the due process of Scots law, based on the medical report of the Scottish Prison Service director of health and care, and the recommendations of the Parole Board and prison governor."

Clinton discussed the issue with the foreign secretary, William Hague, who raised the idea of Britain explaining the circumstances to the US lawmakers, the State Department said.

Claims that Megrahi was released because of an oil deal and that medical evidence supporting his release, was paid for by the Libyan government, were not true, said Sheinwald.

Yesterday, BP acknowledged it pressed the government over the signing of the prisoner transfer agreement with the Gaddafi regime, but insisted it had made no representations about Megrahi's actual release. Megrahi was the only man to be convicted of involvement in the bombing of Pan Am flight 103, which killed 270 people in 1988. He was freed on compassionate grounds after being diagnosed with terminal cancer and given three months to live.

Libya says the guilt of the former intelligence agent has never been proven, although it paid compensation. New York Democratic senators Kirsten Gillibrand and Charles Schumer, and New Jersey Democratic senators Frank Lautenberg and Robert Menendez called for an inquiry, after reports that a cancer expert, who backed the three-month prognosis, now believed Megrahi could live for 10 or 20 years.

But yesterday, professor Karol Sikora, medical director of CancerPartners UK, said his words were taken out of context, and that the chances of Megrahi surviving for a decade were "less than 1%".

Sikora said: "There was a greater than 50% chance, in my opinion, that he would die within the first three months then gradually as you go along the chances get less and less.

"So the chances of living 10 years is less than 1%, something like that."

In a letter to Clinton, the senators questioned whether BP was prepared to "trade justice ... for oil profits".

• This article was amended on 19 July 2010. The original described Frank Lautenberg as a senator for New York. This has been corrected.