LONDON Unrest that has already slashed Libya's oil output to the lowest levels since the 2011 civil war and more than halved its exports is now spreading, with serious implications for its economy, foreign companies and consumers of crude.
In the latest development, field workers at its Arabian Gulf Oil Company (AGOCO), with complaints over management, said late on Wednesday they would cut output by 10,000 barrels per day (bpd) every day their demands are not met.
They join a wave of strikes by oil workers and protests by people demanding work, that began in late July, shutting down the two largest terminals of Es Sider and Ras Lanuf.
The Zueitina port has been closed since mid-July, while workers at Libya's biggest refinery, at Ras Lanuf, are also on strike.
Now, with the onset of the Muslim festival of Eid al-Fitr, a trader with a foreign oil company said he did not expect either talks or oil flows to restart before Sunday.
"Eid started last night so there won't be any resolution during this period. Meetings and negotiations will take place afterwards," a trader with another oil major said on Thursday.
Libyan officials were not immediately available to comment.
Meanwhile production in Libya is now around 600,000 bpd, roughly half of July's level, an industry source familiar with Libya's operations estimated. The country has a production capacity of around 1.6 million bpd.
Exports to world markets remain at just under half of pre-disruption rates of about 1 million bpd.
Eastern Libya, with 80 percent of the oil, has seen the most protests as locals seek more influence over the sector.
MEDIUM TERM ISSUE
Although oil provides 95 percent of Libya's revenues, analysts say its economy can manage for a while.
"They are not that straightened because they have significant (monetary) reserves. It would take a couple of months of zero exports before they would not be able to pay for things. It's a medium term issue," said Crispin Hawes, director of Middle East and North Africa at consultancy Eurasia Group.
Prolonged shut-downs would risk crippling state finances. The roughly $51 billion budget for this year is strained by subsidies and spending on salaries partly to thousands of former fighters from the war that overthrew Muammar Gaddafi. Prime Minister Ali Zeidan has asked for an extra $11 billion.
Before the latest disruption Libya's oil exports brought in about $4 billion a month.
Another serious problem down the line could be the impact the disruption is having on foreign investors, who had been pleasantly surprised by the country's quick production recovery last year. Production reached just under its pre-war level of 1.6 million barrels one year after the conflict.
But the continuous outages since then have reduced the appeal of upstream investments. In an early sign, Marathon Oil, for example, is studying the potential sale of its stake in the Waha Oil Company.
Italy's Eni is the biggest foreign operator in Libya with around one third of the country's output.
Eni has said last week its output came in below targets in the first and second quarters because of Libyan unrest making it lose some $2 million a day in lost production.
"The situation in the country remains volatile and we cannot exclude further disruptions in the second half," CEO Paolo Scaroni said
Germany's Wintershall, owned by BASF, was the second largest foreign oil firm in Libya but its producing assets have not returned to pre-war levels.
Austria's OMV and Spain's Repsol had to temporarily shut in production due protests in early July.
Other players include Total, ConocoPhillips, Hess, Marathon, and Suncor.
There is a risk to Libya's reputation as a supplier that could prove costly.
"If Libyan supply consistently comes to be viewed as unreliable, then Libya will be forced to discount their crude prices for their customers," Hawes at Eurasia said.
Europe's refineries are already finding themselves short of Libya's prized light sweet crude this summer, pushing up the prices of alternatives such as Azeri or Kazakh oil.
Although Libya, even at full production, is only ranked around ninth of OPEC's 12 producers, the supply interruptions has lent extra support to benchmark Brent crude oil futures and therefore to world energy prices.
Libyan officials have repeatedly suggested that a resolution is close, but the oil sector's difficulties are part of a wider problem of labor strife and security issues across the economy.
On Monday, Oil Minister Abdelbari al-Arusi said oil output has improved to around 700,000 barrels a day and was expected to reach 800,000 bpd after Eid as the government sought to settle the disputes.
Instead, production fell again, and the major fields producing Es Sider, Amna and Sirtica crude were shut in on Tuesday due to the prolonged port closures.
(Additional reporting by Peg Mackey and Dmitry Zhdannikov in London, Feras Bosalum in Tripoli and Stephen Jewkes in Milan; Editing by Anthony Barker)