* Eastern workers, groups say reject plan to split NOC
* Benghazi calling for NOC to be moved back to eastern city
* Concern over Libya output due to disruptive protests
By Marie-Louise Gumuchian
BENGHAZI, Libya, Jan 18 Eastern Libya is rejecting a compromise proposal by the government to split the OPEC member's main oil body as popular pressure for more authority in the energy-rich region gathers pace, potentially threatening output through protests.
The National Oil Corporation (NOC) is headquartered in Tripoli and since the end of the 2011 war that ousted Muammar Gaddafi, workers in the east have called for more powers in a region accounting for around 80 percent of Libya's oil wealth.
Oil Minister Abdelbari al-Arusi has proposed splitting the NOC into an exploration and production body based in the capital and a refining and petrochemicals company in Benghazi.
But eastern oil workers and civil groups want the NOC to be transferred to Benghazi, cradle of the anti-Gaddafi uprising and where the North African country's biggest oil company, Arabian Gulf Oil Company (Agoco), was the first to restart production.
"We don't want a NOC branch, we want the whole thing," Tahani Mohammed Ben Ali, head of Agoco's Benghazi workers' union, told Reuters. Agoco has about 6,000 employees, of which around a third are in the headquarters in Benghazi.
"We have had several protests ... We haven't had any strikes in the fields yet, but they could also move."
The struggle over the NOC's powers adds to broader discontent simmering in Benghazi, Libya's second biggest city, as residents say they still feel marginalised by Tripoli.
Libya's east was starved of cash during Gaddafi's 42-year rule, and long-standing complaints the region has been deprived of its fair share of wealth have led to calls for a federal political structure rather than strictly central rule.
Opponents of the proposal want control over exploration and production and say there are fewer commercial activities in refining. Easterners like Ben Ali also cite the NOC's historical roots as one of the main reasons they want the body in Benghazi.
Its predecessor the Libyan General Petroleum Company was set up there in 1968. The NOC was established in 1970, a year after Gaddafi came to power, and relocated to Tripoli.
"We as the local council take the responsibility for trying to bring back organisations that were taken to Tripoli such as the NOC," Abdelhamid Elhadad, head of the industrial and oil committee at Benghazi local council, said.
"We refuse this offer - there is a big difference between a NOC dealing with refineries and petrochemicals and a NOC dealing with exploration and production. I cannot stop anyone from fighting for Benghazi; we just want a decision."
FINDING A SOLUTION
The east is also home to Ras Lanuf, Libya's biggest refinery, and key export terminals Marsa al-Brega and Tobruk.
In October, the NOC issued a resolution to open a Benghazi branch but its Tripoli workers protested at the powers it would be granted.
When the NOC said it would amend the resolution that sparked protests in east Libya. In November, Arusi announced the proposed split in a move seen as placating easterners' demands.
"This is something difficult that needs lots of discussion," Yussef al-Ghariani, head of the executive committee of the oil and gas workers' union, said. "As people here refused this proposal we are trying to find a solution to solve the problem."
Speaking in the building that once housed the NOC's predecessor, he proposed creating two bodies: one in charge of gas and another of oil. "We are working on a presentation we hope will be ready by the end of January."
But in a country where protests have become an effective way of changing policy, he said it would be put to civil groups who want Benghazi to become Libya's economic capital for feedback.
Oil installations have become a focal point of popular protests in the new Libya, with the latest demonstration shutting down the eastern Zueitina oil terminal.
Such disruptions risk cutting Libyan output after returning close to pre-war levels of 1.6 million barrels per day.
"We have seen time and time again over the last few months protests have shut down refineries and refineries are directly linked to oilfields... It's a cumulative effect of constant struggles like this that impact output," Amrita Sen, chief oil analyst at Energy Aspects in London, said.
"Overall we have Libya (output) flat (in 2013) but I would say... there is significant downside risk."
Libya's new rulers know they have to strike a careful balance and stress the proposal is still being discussed.
"Before we have a decision, we should submit the vision, scope and activity and the timetable... I think that's still not finalised yet," Deputy Oil Minister Omar Shakmak said.
"It is not easy, maybe it does require some more negotiations and discussions in the media and workshops to explain to people what the whole idea is."
Some activists say they are giving Tripoli until next month to decide on moving the NOC and other bodies to Benghazi. They have stopped short of threatening to cut output if their demands are not met, but some threaten "another revolution."
"They may say it's difficult to move the NOC to Benghazi," one worker at Agoco said of the government. "But some thought we would never get rid of Gaddafi, yet we did." (Additional reporting by Ghaith Shennib; editing by James Jukwey)