Libya's oil production is running above 800,000 barrels per day (Mbbl/d) for the first time since 2014, the National Oil Corp. (NOC) said on May 10, but a commercial dispute with German oil firm Wintershall has shut in a further 160 Mbbl/d.

Libya's output could reach between 1.1 MMbbl/d and 1.2 MMbbl/d if political obstacles were removed, the NOC said in a statement.

"We are able to produce an average of 1.1 million to 1.2 million [bbl/d] 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 MMbbl/d it was producing before a 2011 uprising. Armed conflict, political disputes and local blockades have made production highly volatile since then.

Sanalla said the dispute with BASF's oil and gas company Wintershall was linked to a decree issued this year by the Presidency Council of the U.N.-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 [bbl/d] if it were not for Wintershall's refusal to implement terms it agreed to in 2010."

Sanalla did not say what those terms were, but a Libyan oil industry source said the NOC was asking Wintershall to fulfill a commitment signed before the revolution in 2011 to switch to a production-sharing agreement, and that Wintershall was refusing to do so.

"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," Sanalla said.

There was no immediate response from the Presidency Council.

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 that are operated by NOC and Italy's Eni, due to pipeline configurations, a second Libyan oil source said.

Wintershall produced up to 100 Mbbl/d in Libya before 2011, but it has pumped a maximum of 35 Mbbl/d since mid-2013. A graph published by the NOC showed Wintershall's Libya production gradually dropping to zero since the start of 2017.

Libya, along with Nigeria, is exempt from a deal agreed upon by OPEC in 2016 to cut global production.

The North African 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 million of investment to bring production to 1.32 MMbbl/d by the end of this year, a further $1.8 billion to raise it to 1.5 MMbbl/d by the end of 2018, and $18 billion to produce 2.2 MMbbl/d by 2023.

The NOC says most of 2018's investment would be aimed at the Bahr Essalam offshore development with Eni.