Libya has restarted oil production at the key El Sharara field after protesters ended a two-month blockade, the state-run National Oil Corp (NOC) said, raising the prospect of fresh badly-needed oil revenues for the North African country.

The resumption of the southern field could lift output to 600,000 barrels a day, providing a rare success for Prime Minister Ali Zeidan, who has been trying to end a wave of oilfield and port blockages. Output had fallen to 250,000 bpd from 1.4 million in July.

But highlighting the volatile situation, a different set of protesters started blocking an oil pipeline in the west to the Mellitah export port, co-operated by Italy's ENI.

Libya is in turmoil as the government struggles to rein in militias that helped topple leader Muammar Gaddafi in 2011 but kept their guns and seize oil facilities or ministries at will to make political and financial demands.

The government has warned public salaries are at risk if oil strikes continue. Oil revenues are the main source for the budget and crucial to funding essential food imports such as wheat.

Tribesmen calling for greater local powers had blocked the El Sharara field since the end of October. NOC now hopes to reach the field's maximum output capacity of around 340,000 bpd within two to three days after starting with 60,000 bpd, spokesman Mohamed al-Harari said.

Last week, the protesters at El Sharara agreed to suspend their action after the defence minister visited them and said the government would look into their demands.

They are calling for the establishment of a local council and the granting of national identity cards for tribesmen from the Tuareg minority.

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

Oil production rose to 286,164 bpd as of Saturday, the highest level for several weeks, state news agency Lana said. Up to 140,000 bpd are used for the Zawiya and Tobruk refineries.

But in a new sign of trouble, protesters blocked a pipeline near Nalut carrying condensates from the 30,000 bpd Wafa field to the western port of Mellitah, a joint-venture between ENI and NOC, oil officials said.

Harari said production of condensates remained normal as the field had sufficient storage capacity. "We hope the government will solve the problem before we have to decrease production," he said.

STALEMATE IN EAST

There is also no sign of progress in eastern Libya despite reported attempts by tribal elders to help end a blockade of the Ras Lanuf, Es-Sider and Zuweitina ports, which previously accounted for 600,000 bpd in crude exports.

The group behind the blockade, led by 2011 civil war hero Ibrahim Jathran, is demanding autonomy for the east and a greater share of the oil wealth.

A member of the parliamentary energy committee told Reuters there was no sign of progress. Tripoli had set up a committee made up of three Libyan regions to look into sharing oil revenues as demanded by Jathran but his group had rejected the nominee from the east, an oil industry veteran.

"These people who block ports don't have a unified position. They change it every day," he said, asking not to be named.

He said the government had now set Jan. 10 as deadline to lift the blockages.

Zeidan has set several such deadlines, which have passed without any action. His nascent army, still in training, is no match for battle-hardened militias, analysts say. - Reuters