National output could reach between 1.1 million and 1.2 million bpd if political obstacles were removed, the NOC said in a statement.

"We are able produce an average of 1.1 mln-1.2 mln (bpd) 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 in the statement.

Sanalla said the dispute with BASF's oil and gas company Wintershall was linked to a decree issued 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."

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."

No one at Wintershall in Germany could immediately be reached for comment.