* Insecurity curtails production in eastern Libya
* Seven U.S.-based firms have left or sold stakes in N. Africa
* Oil law is expected to ready by early next year
By Patrick Markey and Tarek Amara
TUNIS, Oct 22 (Reuters) - Libya's oil production is stable at around 600,000 barrels per day (bpd), where it has been for about a month, as the government works to end protests at fields and ports that have cut shipments for months, the National Oil Corp. (NOC) said.
Striking workers, militias and political protests had slashed the OPEC member's oil output to as low as 200,000 bpd, but Libya managed to resume production from some fields in the west in mid-September after reaching a deal with some protesters.
NOC board member Mustafa Sanalla said output was at 600,000 bpd with armed protesters were controlling eastern ports and halting shipments from there as part of broader unrest.
But foreign companies like France's Total and Spain's Repsol are continuing with development plans in the vast North African country despite the turmoil.
"The government is still resolving the problem to reach normal production of 1.6 million bpd by the end of the year. We have the technical capacity; it is a problem of security," Sanalla told Reuters on the sidelines of a North Africa oil conference in Tunisia.
Two years after a revolution ended Muammar Gaddafi's rule, Libya's fragile central government and nascent armed forces are struggling to contain rival tribal militias and Islamist militants who control parts of the country.
That instability was driven home earlier this month when armed militiamen briefly kidnapped Prime Minister Ali Zeidan for several hours before releasing him unharmed.
Libya's turmoil has added to the jitters of foreign oil companies already skittish about the political and investment outlook in North Africa.
Nearly three years after the Arab Spring revolts began, countries in the region are still struggling with messy political transitions.
In January, an attack by Islamist militants on the Amenas gas plant in Algeria, where nearly 40 contractors were killed, also showed the security risks from al-Qaeda-linked militants in North Africa.
At least seven companies, most of them based in the United States, have left projects or sold stakes in Libya, Algeria and Egypt in the past 18 months. But while analysts say North Africa may be less attractive for U.S. majors, the region's proximity still makes it appealing to European oil explorers.
Libya and Algeria are among Africa's top four oil producers, and alongside Egypt, are major suppliers of gas to Europe.
Sanalla said the government should finish drafting a new oil law as an incentive to foreign oil companies by the end of this year or early next year. The government said last year it would seek to improve terms for foreign companies.
With that law approved, Libya would hold another bidding round by the first half of next year, he said.
Despite security worries, firms in Libya have drilled 40 development wells and 11 exploration wells this year, he said.
Libya has reserves of over 40 billion barrels, but analysts have warned that some of the toughest terms in the business, in addition to the security concerns, could deter investors.
Exxon Mobil said in September it would cut back its staff and operations in Libya due to growing instability. That compares to the position of European majors with a strong presence in North Africa.
Total, which operates in Libya through the Mabrouk joint venture with the state NOC, still has no production at its Mabrouk field because of the ports shutdown. But its offshore al-Jurf field is producing around 40,000 bpd, said Jean-Daniel Blasco, the company's director for North Africa.
Blasco said the French operator is also on track for drilling two more Libyan offshore fields.
"We should start by the end of the year," he said.
Austria's OMV said on Monday it had struck oil in the Murzuq basin, 800 km south of Tripoli.
Libyan Norwegian Fertiliser Co (Lifeco), co-owned by Norway's Yara International, said it had increased ammonia and urea output at its operations in Brega in the east.
Lifeco has been producing below capacity due to limited storage capacity and gas shortages. But output has increased in the past few days due to better gas supplies, said Chief Technical Officer Awad Elsaber. Production of ammonia was around 1,700 tonnes a day, while urea output was around 2,400 tonnes.
After protests in western Libya were resolved, Spanish oil company Repsol says its production in El Sharara oilfield in the area is now fluctuating at around 330,000 to 350,000 bpd.
Repsol regional director for Europe, Asia and Africa, Ferdinando Rigardo told Reuters the company was pushing ahead with development plans in Libya and Algeria.
"We had to see how exactly we managed that," he said of the protests. "But we are totally involved with development ... We have to manage these unstable periods."