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UPDATE 2-Libya oil exports restricted, efforts to end crisis falter

Lin Noueihed, Gaith and Shennib
Thursday, 31 Oct 2013 | 1:20 PM ET

* NOC lifts force majeure on Hariga oil port

* Union, port sources say exports not resumed, situation confused

* Government offers 67 pct pay rise to oil workers

* Libya producing about 250,000-300,000 bpd-oil official

(Previous SINGAPORE, adds Hariga port, pay rise details)

LONDON/TRIPOLI Oct 31 (Reuters) - Libya's efforts to end an oil crisis that has reduced its exports to a trickle faltered on Thursday after oil workers appeared to shrug off a 67 percent pay increase and a deal to reopen the eastern Hariga terminal looked close to collapse.

Libya's oil exports slowed to their lowest level since its 2011 war this week as protests which have halted terminals and fields in the east spread to the west of the country.

Months of disruptions have cost the OPEC producer billions of dollars in lost revenues and rekindled global supply worries, helping push benchmark Brent crude oil to a one-month high of $112 a barrel earlier in October.

After weeks of promises that the 110,000 barrels-per-day Hariga port would reopen, the National Oil Corp (NOC) said it had lifted its force majeure on exports from the eastern port on Thursday after operations resumed.

But Saad al-Fakhri, the deputy head of the oil workers union, said exports had yet to resume and a source at the port said it was not clear if the shaky pact would hold after some protesters and local tribes spoke up against it.

"The situation is chaotic. Protesters are still inside the port," the source said. "There is an agreement between the government and the local council but the situation on the ground is different."

Protesters are comprised of several tribes and militias who do not all see eye to eye, complicating the government's efforts to reach a lasting understanding.

The government reached a deal to reopen the western fields around mid-September but protesters shut them down again this week, raising fears in the market that any agreements to resume exports from Hariga or elsewhere would not last.

Libya had brought exports back to 450,000 bpd before this week's closures, though that level was far short of its pre-war export capacity of 1.25 million bpd. Exports are now closer to 10 percent of capacity and have been completely halted except from the offshore Bouri and Al Jurf platforms.

There was no sign of a crude oil tanker in the vicinity of Hariga, according to Reuters AIS Live ship tracking, but there was an oil products tanker near the port.

Salah Ben Ali, manager of international cooperation at the oil and gas ministry, said on the sidelines of a conference in Singapore that output was about 300,000 bpd and shipments from Mellitah in the west could resume within 10 days.

A tanker was at Mellitah on Thursday attempting to load condensates, a very light type of oil, but the usual crude blend was not available due to protests at the Wafa field.

OFFERING CONCESSIONS

Oil is the Libya's main source of revenue and three months of outages will hit the spending power and authority of an interim government that is already struggling to assert its authority in a country awash with guns and powerful militia.

In an effort to defuse the crisis, Libya's government has ordered a 67 percent increase in pay for employees of the state oil sector from the start of next year.

The offer comes a day after Prime Minister Ali Zeidan promised to build two oil refineries in the underdeveloped east and south to address regional grievances.

The government plans a 300,000-bpd refinery in Tobruk, near the Egyptian border, where protesters had blocked the Hariga port for around two months.

A 50,000-bpd refinery would be built in Ubari where workers have shut the Sharara field since the weekend. The desert area bordering Algeria, Chad and Niger was neglected for decades.

The government has struggled to satisfy hopes for a better standard of living after the 2011 ouster of Muammar Gaddafi but the longer the crisis continues the harder it will be for officials to deliver on their promises.

The oil outages have thrown Libya into a vicious cycle: workers and local interest groups blockade oil facilities to extract work benefits and political concessions, thereby weakening the economy and making it harder for an increasingly embattled interim cabinet to meet their demands.

Accounting firm KPMG has forecast Libya's consumer price inflation at a modest 3.3 percent this year but has warned that sharp public spending rises will put upward pressure on prices.

(Additional reporting by Jacob Gronholt-Pedersen and Manash Goswami in Singapore, Julia Payne in London and Ulf Laessing in Tripoli; editing by Jason Neely and James Jukwey)