Leaders of the autonomy movement in the eastern region, whose capital Benghazi was the cradle of the 2011 revolution that toppled longtime dictator Moammar Gadhafi, said Monday they have already set up a shadow government and established a regional oil company to handle exports separately from the shaky central government in Tripoli.
Oil fields, pipelines, terminals and ports in the east, where 60 percent of Libya's oil is produced, have been closed in a wave of protests that began in July with a strike by armed guards in the oil fields and grew into a blockade of most of the country's energy industry.
In Cyrenaica, the original economic causes of the strikes have been overtaken by the demands for an autonomous region within a federal Libya, with the east getting a larger share of the oil revenue than it got during Gadhafi's 42-year rule.
The four-province region, to be known as Barqa, proclaimed its autonomy in June as part of its demand for more political rights and more financial benefits under a federal system sharing power with Tripolitania and the southern desert region known as Fezzan.
Government officials in Tripoli, the Libyan capital which lies in the western Tripolitania region, say the country's oil production had tumbled from about 1.4 million barrels per day in the summer, slightly less than the pre-revolution level of 1.6 million bpd, to around 10 percent.
This has essentially cut off Libya's principal source of state revenue, and effectively brought the North African state to its knees.
The crisis deepened further Monday after the protesters from the long neglected Berber minority, demanding more rights and a constitutional guarantee their language will be protected, closed down the undersea Greenstream pipeline facility at the port of Mellitah that carries natural gas from the Wafa field across the Mediterranean Sea to Italy, the country's sole foreign gas customer.
That cut off one of the few remaining sources of income the Tripoli government of Prime Minister Ali Zeidan had left, prompting him to warn his troubled administration is facing an imminent budget crisis.
Libya's gas reserves are estimated at 54 trillion cubic feet, the fourth largest in Africa. Greenstream has a capacity of pumping 349 billion cubic feet a year, around 12.2 percent of Italy's annual demand.
The country's oil reserves stand at 47.1 billion barrels, the largest in Africa. Most of its exports go to Europe.
Militants from the Berber minority, known as the Amazigh, seized Mellitah, 62 miles west of Tripoli, in October and shut down oil exports.
The Greenstream complex is operated by Libya's National Oil Corp. and Italy's energy giant Eni, one of the main foreign oil companies operating in the former Italian colony.
Paolo Scaroni, Eni's chief executive, warned last week the company could shut down its gas exports to Italy entirely if the anarchy continues for much longer.
Italian Foreign Minister Emma Bonino Friday said Libya "is absolutely out of control."
It's a measure of how the crisis is steadily worsening that two weeks ago Scaroni was being notably bullish about Libya's prospects despite the nationwide chaos stemming from the inability of the Tripoli government, paralyzed by political in-fighting with Zeidan briefly kidnapped last month, to exert any real control.
The government has not been able to form an army or security force to attempt to impose control over a country where there are at least 250,000 armed Libyans in various militias and gangs on the loose and causing mayhem.
There's a serious risk that this anarchy will scupper pacification efforts and even trigger another civil war only two years after the eight-month conflict of 2011 that ended with Gadhafi being killed by a street mob.
In the east, the coalition of warlords and tribal militias that has declared virtual independence was long opposed to Gadhafi. But in the west, the late dictator still has substantial support among the tribes he pampered with money and jobs.
They oppose Zeidan's administration and want the Gadhafis -- those who are still alive -- to come back.