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UPDATE 1-Strikers leave Argentina's biggest oil field

* Protests caused havoc at Pan American Energy field

* Cerro Dragon is operating at below usual levels

* Field produces 15 percent of Argentine crude

BUENOS AIRES, July 6 (Reuters) - Striking workers have lifted a two-week protest at Argentina’s biggest oil field, Cerro Dragon, that forced owner Pan American Energy to cut output, a union leader said on Friday.

Cerro Dragon lies in the Patagonian province of Chubut and produces about 100,000 barrels of crude per day, or roughly 15 percent of total output in the country. Pan American, is controlled by oil giant BP Plc.

Workers, who seized control of the field and damaged company facilities last month to demand a pay raise, said they had left the site late on Thursday.

Guido Dickason, a representative of the protesting workers - nicknamed “the dragons” by local media - said they started talks on Friday with the company and the government’s labor secretariat.

“The dialogue was quite positive,” Dickason said.

Union and company officials said the negotiations would resume on Thursday.

Pan American said on Friday that it had fully restored flows to its natural gas pipelines in the area and that Cerro Dragon’s production was at around 65 percent of the level seen before the conflict erupted.

The company initially halted crude extraction altogether as a security measure after about 500 workers seized some facilities at the field. This week, the company canceled two contracts with leading service providers, blaming them for the protests.

Chubut Governor Martin Buzzi, an ally of President Cristina Fernandez, pointed a finger at Pan American for the unrest.

“Everything that happens on the inside is the responsibility of the operator,” Buzzi told reporters. “We will be watching Pan American’s conduct as a company.”

BP owns a 60 percent stake in Pan American, while the remaining 40 percent is held by Bridas, which is half-owned in turn by China’s CNOOC.

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