WRAPUP 3-Libya forces say closing in on Gaddafi's son
(Adds NATO comment, review of oil deals)
* Mo'tassim Gaddafi is in Sirte neighbourhood: NTC commander
* Frightened civilians still fleeing the fighting
* Pro-Gaddafi forces putting up fierce resistance
* Government says to review Gaddafi-era oil deals
By Rania El Gamal and Tim Gaynor
SIRTE, Libya, Oct 11 (Reuters) - Libyan government forces said on Tuesday they believed they had one of Muammar Gaddafi's sons cornered in the centre of the deposed leader's home town, but determined resistance was keeping them at bay.
After weeks of fighting, National Transitional Council (NTC) forces have taken most of Sirte and driven Gaddafi loyalists into a small area of the city, but international concern about civilians caught up in the fighting has mounted.
Capturing Sirte, which Gaddafi had turned into a showcase second capital, will consolidate the NTC's control in Libya and allow it to focus on rebuilding the country, but international concern about civilians caught up in the fighting has mounted.
One NTC commander said Gaddafi fighters were defending their last two districts in Sirte tenaciously because Mo'tassim Gaddafi, his father's national security adviser, was with them.
"There are a few (Gaddafi-held) pockets, mainly concentrated in the 'Dollar' neighbourhood," said Colonel Mohammed Ajhseer. "According to the information we have, this is where Mo'tassim is, with another group."
As the fighting raged in the streets, terrified families were emerging from their houses and trying to leave.
NTC fighters surrounded their vehicles and searched them for weapons -- a mark of the deep mistrust in Sirte, where many people belong to Gaddafi's tribe and opposed his overthrow.
"There are explosions all the time," said one woman, who was in a white van with seven children. "There is no water. There is nothing," she said, then started crying.
On the western outskirts of Sirte, a flat-bed truck drove out carrying about 30 people, including children clutching dolls and blankets. It was raining, and they were wet and shivering.
One of them, Abdul Menem Ahmed, from Ondurman in Sudan, said he had been working as an accountant in Libya for 14 years. "There is no food no water, no medicine," he said.
NTC forces have captured Sirte's most important landmarks, including the Ouagadougou conference hall, where Gaddafi once hosted lavish summit meetings, the hospital and the university.
Tuesday's fighting focused on Omar al-Mokhtar street, a tree-lined thoroughfare in a well-heeled neighbourhood.
A Reuters reporter said NTC fighters took cover in side streets out of sight of loyalist snipers hidden in buildings further up the road. They took turns to dart out, shouting "Allahu Akbar (God is great)", fire a few shots and rush back.
Typically for what is an amateur fighting force, the NTC effort was brave but chaotic. One thickly bearded man in a wheelchair was pushed into the main street by a comrade, fired his Kalashnikov rifle at Gaddafi loyalists, and was then pushed back to safety.
The Reuters reporter said she saw another fighter taken back into a side street bleeding heavily from a back wound after he had been firing a Soviet-designed "Dushka" heavy machinegun.
Muammar Gaddafi himself is not in Sirte, according to NTC officials coordinating the hunt for him, but is instead believed to be far to the south in the Sahara desert.
Sirte, once a fishing village, has symbolic significance because Gaddafi used it as a prop in the personality cult he built during his 42 year rule. He built opulent villas, hotels and conference halls there to host Arab and African leaders.
A commander of NATO, whose warplanes patrol the skies over Sirte and sometimes bomb Gaddafi-held targets, said the former leader's forces in the city were showing surprising resilience.
"We're all surprised by the tenacity of the pro-Gaddafi forces. At this point, they might not see a way out," General Ralph J. Jodice II was quoted as saying by the New York Times.
NATO military spokesman Colonel Roland Lavoie said it was futile for Gaddafi's followers to resist.
"It is clear that they cannot change or influence the outcome of this conflict," he told a news conference.
"Basically they have opted to choose to inflict pain on the rest of the population in Libya. From that perspective it just does not make sense to see what these few remaining forces are doing," he said.
With Libya's new rulers focused on the bruising battles for Sirte and Bani Walid, another pro-Gaddafi town, a political vacuum has emerged. There is no formal government and the process of holding elections is on hold.
Armed anti-Gaddafi factions from different regions are vying for power, complicating the NTC's task of asserting national control once the fighting is over.
Western oil firms are hoping to resume operations in Libya as stability returns, but the new government pledged a review of Gaddafi-era oil deals, which could leave some out in the cold.
Libya's oil and finance minister Ali Tarhouni told a news conference a committee would be set up to probe the scale of corruption practised by the previous government.
"The committee will scrutinise all contracts and projects to provide a view of the size of the corrupt dealing and all that emerges will be investigated and published," Tarhouni said.
Analysts said a re-allocation of contracts could paralyse Libya's oil sector and slow down a return to pre-conflict levels of oil exports. (Additional reporting by Barry Malone and Joseph Logan in Tripoli; Writing by Christian Lowe; Editing by Alistair Lyon)