A heavily armed autonomy group in eastern Libya said on Tuesday it would invite foreign companies to buy oil from seized ports and protect arriving tankers, challenging Tripoli which has promised to use force to stop them.
The announcement came just hours after Libya's defence ministry said it would destroy any tankers loading oil from eastern ports in the Cyrenaica region which are under control of the armed protesters.
The escalation adds to chaos as the weak Tripoli government struggles to rein in armed groups that helped oust Muammar Gaddafi in 2011 but kept their guns to demand power and a bigger share of the country's oil wealth.
The conflict is hurting oil revenues, which fund the OPEC nation's government and the import of wheat and other crucial food. The government has warned it will be unable to pay public salaries if the standoff continues, risking more turmoil.
On Monday, Libya's navy said it had shot at a tanker trying to load oil at the eastern Es-Sider port which was seized with two other terminals by the autonomy group in August. The three harbours accounted previously for 600,000 barrels a day.
But the group, led by tribal leader and 2011 civil war hero Ibrahim Jathran, shrugged off Tripoli's warning by inviting foreign companies to buy eastern oil.
"We welcome global oil companies ... The oil security guards will guarantee the safety of tankers," said Abd-Rabbo al-Barassi, prime minister of Jathran's self-declared eastern government.
Workers at the seized ports had returned to work, he said, without giving details on when they had left. He added that a newly founded oil company called Libya Oil and Gas Corp would be dealing with potential buyers. A new army and coast guard, made up of Jathran's battle-hardened fighters, would secure the ports.
Barassi said his group had nothing to do with the tanker shot at by a Libyan navy vessel on Sunday on its way to Es-Sider. Tripoli has said the tanker had been bound to load oil at the seized port, but Barassi called this statement a "lie."
The confrontation has raised worries that Libya, also struggling with Islamist militias and armed tribesmen, might break apart as the eastern Cyrenaica and southern Fezzan regions demand political autonomy.
But Barassi, speaking on a pro-autonomy television station late on Tuesday, said his group had no secession plans.
"We confirm we want to preserve Libya's territorial unity," he said, adding that it invited Tripoli to send a delegation to help oversee the proper sale of oil sales. "We assure all Libyans that the sale of oil will be according to the law."
The group is campaigning for a federal state sharing power and oil wealth between the Cyrenaica, the west and southern Fezzan, home to some oilfields, like in the kingdom preceding Gaddafi's rule. Oil sales were then shared between the regions.
Libya's defense ministry earlier warned potential buyers against any docking at the seized ports. "If a ship docks in one of the closed ports, and it does not leave the port again, then we will destroy it," said Defence Ministry spokesman Said Abdul Razig al-Shbahi.
"We have clear instructions. This is sovereignty of the state, even the international law will be in our side."
Tribal leaders have sought to negotiate on behalf of the government with the autonomy group. Those negotiations to end the crisis have gone nowhere despite pressure from tribal leaders, some of whom look down at Jathran as a warlord leading the country into chaos.
The risks of an escalation were clear over the weekend when the Libyan navy said it opened fire on a vessel trying to reach Es-Sider before the tanker, Baku, turned back to Malta.
The owner of the tanker said on Tuesday the vessel had been in international waters and denied it was involved in trying to smuggle crude oil.
The owner, Palmali, said a Libyan naval vessel fired warning shots even after it provided written confirmation to the Libyan National Oil Company (NOC) that it was no longer sailing to Es-Sider.
"The Libyan naval vessel continued to circle our vessel threateningly and even fired two shots," it said. "These unfortunate incidents occurred in international waters with manifest and total disrespect by the Libyan authorities for the rule of international order."
While negotiations with Jathran have failed, they worked elsewhere: Output at the southern government-controlled El Sharara oilfield rose more on Tuesday to over two-thirds of full capacity and a pipeline shipping condensate - very light crude - to a western port reopened.
Talks had ended a protest by tribesmen at El Sharara with production there climbing to 277,000 bpd on Tuesday and expected to reach full capacity of 340,000 bpd by Wednesday. Libya's output was over 1 million bpd in July before the strikes started.
"I think if we keep up at this level we will reach capacity by tomorrow," NOC spokesman, Mohamed al-Harari, said.
Protesters, who had blockaded the El Sharara field for two months, had been calling for the establishment of a local council and the granting of national identity cards for tribesmen from the Tuareg minority.
The pipeline carrying condensates from Wafa oilfield to Mellitah port, jointly operated by Italy's ENI in the West, has also been reopened after protesters briefly blocked the line, with output now at around 30,000 bpd, the NOC said.