UPDATE 2-Libya says protesters agree to reopen oilfield; no progress in east

Thu Jan 2, 2014 2:50pm GMT

(Adds eastern autonomy movement, details)

TRIPOLI Jan 2 (Reuters) - Libya hopes to resume production at one of its largest oilfields, El Sharara, within three days after protesters agreed to suspend their two-month stoppage, officials said on Thursday.

Tribesmen calling for greater local power have blocked the 350,000-barrels-per-day field since the end of October, one of many disruptions that have crippled Libya's vital oil sector. Oil prices fell below $110 a barrel on the news and were currently trading down 1.2 percent.

But there was no sign of an end to the blockage of three oil ports in eastern Libya, with the pro-autonomy group holding them reiterating the government needed to share oil revenues with other regions of the OPEC producer.

Libya is in turmoil as the government struggles to rein in dozens of militias that helped topple Muammar Gaddafi in 2011 but kept their guns to make political and financial demands.

The protesters agreed to suspend their strike after the government said it would listen to their demands, according to a defence ministry spokesman.

"They agreed to lift the blockage," the spokesman said.

The field, located in the remote and volatile south, supplies crude to the Zawiya export terminal, unaffected by any disruption, and feeds the 120,000-bpd Zawiya refinery.

Libya's state National Oil Corp (NOC) hoped to resume output in three days, NOC spokesman Mohamed al-Harari said.

"Engineers are preparing the field to restart production," he said.

The protesters had demanded the establishment of a local council and the granting of national identity cards for tribesmen from Tuareg minority.

"Information out of Libya needs to be taken with some caution until confirmed by facts, but  this could bring a temporary increase in Libya production to about 600,000 barrels a day," said oil analyst Olivier Jakob of Petromatrix in Zug.

"Exports from Sharara would be easier to materialise if the protests are indeed lifted as the field exports from the port of Zawiya, and that port is open."

EAST

Militias and tribesmen have seized ports and oilfields across Libya to press for political or financial demands, cutting output to around 220,000 bpd, from 1.4 million bpd in July. Oil is the main source for the budget and for the funding of food imports.

There was no sign of progress in the east despite the government's announcement last month of another attempt by tribal elders to pressure an autonomy group to end the blockage of the Ras Lanuf, Es-Sider and Zuweitina ports, which accounted previously for 600,000 bpd.

Abd-Rabbo al-Barassi, prime minister of the self-declared eastern autonomy government, said Tripoli needed to look into corruption claims and share oil wealth with other regions in Libya.

He did not mention any talks to end the blockage, but criticised the government in an apparent response to a news conference on Wednesday in which the labour minister warned public salary payments were at risk due to the strikes.

"How can the government use such methods. Why don't they look into our demands," he said, appearing on an opposition news channel from eastern Libya.

The group is campaigning for a federal system sharing power among regions, similar to the arrangement in place before the Gaddafi era.

"We demand that the government preserve the oil wealth," he said.

Western powers fear the North African country will slide into instability as the government struggles to rein in militias.

Prime Minister Ali Zeidan has said the government will act against the oil strikes but its nascent army, still in training, is too weak to tackle heavily armed protesters, analysts say. (Reporting by Ulf Laessing, Julia Payne and Ghaith Shennib; Editing by William Hardy and Dale Hudson)