Reporting by Aidan Lewis; Additional reporting by Ahmad Ghaddar in London and Vera Eckert in Frankfurt; Editing by Susan Thomas and Greg Mahlich
TUNIS (Reuters) -- Libya's oil production is running at above 800,000 bpd for the first time since 2014, the National Oil Corporation (NOC) said on Wednesday, but a commercial dispute with German oil firm Wintershall has shut in a further 160,000 bpd.
Libya's output could reach between 1.1 MMbpd and 1.2 MMbpd if political obstacles were removed, the NOC said in a statement.
"We are able to produce an average of 1.1 MMbpd to 1.2 MMbpd over the rest of this year, but for this to happen our oil must flow freely. A national effort is required," NOC Chairman Mustafa Sanalla said.
Libya's output remains well below the 1.6 MMbpd it was producing before the 2011 uprising. Armed conflict, political disputes and local blockades have made production highly volatile since then.
Sanalla said the dispute with Wintershall, BASF's oil and gas arm, was linked to a decree issued this year by the Presidency Council of the UN-backed government in Tripoli, giving it the power to negotiate investment agreements with foreign companies.
The NOC opposes the decree, Resolution 270, which Sanalla said had been "drafted with the assistance of Wintershall to benefit Wintershall."
"This is a very serious matter," Sanalla said. "We would be producing almost 1 million (bpd) if it were not for Wintershall's refusal to implement terms it agreed to in 2010."
"I have asked the Presidency Council to withdraw Resolution 270 for this reason and because it oversteps their authority. It has declined, and has instead sided with Wintershall against NOC."
There was no immediate response from the Presidency Council.
The NOC said in a follow-up statement that it had signed a memorandum of understanding with Wintershall in 2010 to extend a 50-year concession for two onshore production areas and convert it to EPSA IV terms, "in line with other foreign operators in Libya." It said Wintershall "chose not to honour its commitments."
Wintershall said its concession deals with Libya were "still valid and in full force", and that it was in contact with the NOC about a number of issues. It said it was forced to shut in some production in March after being left off shipping schedules at Libya's Zueitina terminal.
The dispute with Wintershall is also shutting in production at the Abu Attifel and Rimal fields, operated by NOC and Italy's Eni, due to pipeline configurations, a second Libyan oil source said.
Wintershall produced up to 100,000 bpd in Libya before 2011, but it has produced no more than 35,000 bpd since mid-2013. A graph published by the NOC showed Wintershall's Libyan production gradually dropping to zero since the start of this year.
Libya, along with Nigeria, is exempt from a deal agreed by the Organization of the Petroleum Exporting Countries last year to cut global production.
The country has set ambitious production targets, though these remain vulnerable to continuing political divisions and local stoppages, as well as financial constraints.
The NOC says it needs $550 MM of investment to bring production to 1.32 MMbpd by the end of this year, a further $1.8 B to raise it to 1.5 MMbpd by the end of 2018, and $18 B to produce 2.2 MMbpd by 2023.
It says most of next year's investment would be aimed at the Bahr Essalam offshore development with Eni.
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