The Libyan man convicted of the Lockerbie bombing could be freed on compassionate grounds next week, which means that his appeal, which will question the Maltese connection to the massacre, would be able to continue.

According to the BBC and Sky News, Abdelbaset Ali Mohmet al-Megrahi, who is the only person ever convicted for the 1988 bombing of Pan Am flight 103, could be released next week from the Scottish prison where he is serving 27 years.

There has been a lot of speculation over the past months over the fate of Mr al-Megrahi, who is terminally ill with cancer, after Libya filed an official request for his release under a prisoner exchange programme ratified by the UK in May.

That option, however, would have entailed him dropping his appeal proceedings in which his lawyers are expected to challenge the main evidence that secured his conviction in 2001.

Part of this evidence is the testimony of key witness Tony Gauci, a Maltese shopkeeper who had identified Mr al-Megrahi as having bought clothes from his shop that were later found wrapped around the bomb.

The news of his release was described as speculation in a statement by the Scottish government. However, the report on the BBC and other international newswires was not denied.

The statement said the Scottish government was weighing up whether to free the prostate cancer sufferer on compassionate grounds and whether to transfer him home to a jail in Libya, with a decision likely before the end of August.

But Frank Rubino, a US lawyer who has been involved in Mr Megrahi's defence, seemed to confirm the reports of his imminent release.

"I have been advised by members of the international defence team that for humanitarian reasons, (he) is being released from prison because he is suffering from a very serious, in fact fatal, disease," he said.

The BBC reported that the decision to release him was influenced by consensus on all sides that al-Megrahi should be back in Libya in time for Ramadan, the Islamic holy month next week.

Megrahi is serving life with a minimum term of 27 years over the explosion.

The blast killed all 259 on board, and 11 people on the ground, who died due to falling debris on the Scottish town of Lockerbie.

The reports of his release received a mixed reaction from commentators and victims' families, some saying it was "inhumane" to keep a seriously ill man in prison, while others were "sick of hearing about compassion and sympathy" for a "mass murderer."

Speaking to this newspaper, Robert Black, a former Scottish judge who was the architect of the original Lockerbie trial, welcomed the news.

"If it is indeed the case that Megrahi is to be granted compassionate release and returned to Libya before the beginning of Ramadan, I am delighted. I believe that he was wrongly convicted and should never have been in prison in the first place. But irrespective of his guilt or innocence, on simple humanitarian and compassionate grounds, he should be allowed to return to die in his homeland surrounded by his family and friends."

Professor Black was responsible for drawing up the framework for the trial, which was held in the Netherlands under Scottish law and which led to Mr al-Megrahi's conviction in 2001.

But he has consistently criticised the outcome, and also finds holes in the theory that the bomb left Malta.

He said, it would be a tragedy if some murky back-channel deal between the Scottish (or UK) Government has been entered into for the appeal to be abandoned in return for compassionate release being granted. "There are suggestions that this may be the case. I am, however, reluctant to believe that the Scottish (or UK) government could sink to such depths."

The ongoing appeal was ordered by the Scottish Criminal Cases Review Commission in 2007, after a four-year investigation that concluded Mr Al-Megrahi may have suffered a "miscarriage of justice".

The 57-year-old was diagnosed with prostate cancer last year.

His lawyer says it has spread to other parts of his body and is at an advanced stage, while his wife Aisha Megrahi told AFP earlier this year that he was "in danger of dying".

Five facts about Megrahi

• Al Megrahi was sentenced to 27 years in prison in 2001 for his part in blowing up New York-bound Pan Am flight 103 in December 1988, killing 259 people on board and 11 people on the ground in Lockerbie, Scotland. Mr Megrahi denies he played a part, saying he was an airline executive, not a Libyan intelligence agent as charged.

• He is held in a prison in the town of Greenock in western Scotland as he was tried and convicted under Scottish law, although the trial was held in the Netherlands.

• In November 2008 Mr Megrahi's lawyers asked a court to free him on bail, saying he was suffering from advanced prostate cancer.

• Libya lobbied for Mr Megrahi's release in 2009, saying in May it had applied to the Scottish government for him to be sent home as part of a prisoner transfer agreement. In July, Libyan leader Muammar Gaddafi asked British Prime Minister Gordon Brown for help with the case.

• Mr Megrahi, 57, is married with five children. His wife and children have been able to visit him in prison in Scotland. He speaks Arabic and English, which he learned as a student in the United States.