May 18, 2017 / 11:31 AM / 3 months ago

UPDATE 1-Libya's NOC chief defiant in dispute with Tripoli government, Wintershall

* Says battling to protect oil sector from interference

* Working to resolve Wintershall dispute, fix infrastructure

* National production has more than tripled since last year (Updates MAY 17 story with new NOC comment on return to arbitration)

By Aidan Lewis

TRIPOLI, May 17 (Reuters) - The head of Libya's National Oil Corporation (NOC) said he was determined to fend off an attempt by the U.N.-backed government to appropriate energy sector powers and said settling a dispute with Germany's Wintershall over a contract was a "top priority".

NOC Chairman Mustafa Sanalla also told Reuters output from NOC subsidiary Waha Oil Co could rise by some 80,000 barrels per day (bpd) in coming weeks and that staff had returned to parts of the Sirte basin for the first time in more than two years.

National output dipped this week due a power outage affecting Messla and Sarir oil fields and on Wednesday stood at 683,000 bpd, Sanalla said. But it was expected to return to its "normal" level of 800,000-820,000 bpd over the next two days.

At about 800,000 bpd, production is more than three times higher mid-2016 levels but half what OPEC member's output before a 2011 uprising plunged the North African nation into chaos.

Since 2011, NOC has had to navigate conflict, blockades and a political split between eastern and western-based factions as it tries to revive its operations.

NOC pledged to work with the U.N.-backed Government of National Accord (GNA) when it arrived in Tripoli last year. But relations soured over NOC budget disputes and after the GNA issued a decree granting itself powers over energy contracts.

Sanalla said the GNA issued its decree to help Wintershall , which he said had refused to honour an agreement to move from an expired concession contract to a production sharing deal. He said Wintershall owed NOC $1 billion in lost revenue.

The German company said its concessions were still valid and it was in contact with NOC. "There is no claim over money allegedly owed by Wintershall," the firm said in a statement.

The GNA, whose authority is challenged particularly by opponents in the eastern region of Libya, has not commented.

"This Wintershall issue is a disaster from a political point of view and this shows everybody that the politicians try to control NOC, try to interfere in the oil sector," Sanalla said.

"I am concerned that they are not going to stop their attempts to control NOC for their agenda," he said in an interview in Tripoli, which lies in the west of the country.

Sanalla said GNA had failed to implement its decree and said he welcomed a ruling by a court in the eastern city of Benghazi upholding NOC's appeal against the decree.

NOC said in a statement late on Wednesday, after Sanalla spoke, that it had met Wintershall in March and would welcome arbitration "at the earliest opportunity."

WINTERSHALL DISPUTE PRIORITY

Sanalla said he would "never permit" the GNA's move and would defend the NOC from political conflict until there was a free election in Libya. "We are a state oil company and we cannot compromise on our rights," he said.

NOC says the Wintershall dispute was blocking production of 150 million standard cubic feet of gas production and 160,000 bpd of oil, including 70,000 bpd from Rimel and Abu Attifel fields operated by NOC and Italy's ENI.

He said this was hindering efforts to achieved total output of 1 million bpd.

"Solving this dispute with Wintershall is a top priority for me," Sanalla said. "Our plan is that hopefully we can pass 1 million (bpd) ... five weeks, six weeks from now."

Sanalla said he had appointed a team to study options for bringing output from Al-Rimal and Abu Attifel online if the Wintershall dispute continued.

He said NOC teams had returned to the western Sirte basin for the first time since March 2015, where infrastructure was damaged by attacks by Islamic State militants and theft.

He said he hoped production at Waha Oil Co's Gialo field could restart within a month.

"We work very hard to repair the infrastructure, especially the pipeline network which was in bad shape due to a long shutdown," Sanalla said. (Additional reporting by Vera Eckert in Frankfurt; Editing by Mark Potter)

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