* Armed protesters plan to sell crude bypassing Tripoli
* Oil output up to 650,000 bpd but still half of what it use to be in summer
* Prime Minister warns tankers may be sunk (Adds details, quotes, background)
By Ulf Laessing
TRIPOLI, Jan 8 (Reuters) - Libya will take to court any foreign firms trying to buy oil from eastern ports seized by armed protesters and stop doing business with them, its oil minister said on Wednesday.
Tensions between the Tripoli government and an armed grouping controlling three eastern oil ports escalated when the navy fired on Sunday at a tanker trying to load crude in Es-Sider, one of the occupied terminals.
The protesters, demanding greater power and a share of the oil wealth, said on Tuesday they had invited foreign firms to buy crude from them and guaranteed the safety of any tankers coming in.
"Any firm... dealing with the armed groups which have closed the oil ports will be sued and banned from any future cooperation," Oil Minister Abdelbari Arusi told Reuters.
"There won't be any market for them in Libya anymore. We are warning all global and small firms against dealing with the armed groups," he said. "This oil belongs the Libyan people."
Arusi said the protesters had offered a firm using a Malta-flagged tanker trying to load crude in Es-Sider for around $90 a barrel, around $16 a barrel less than its official selling price set by the state-owned National Oil Corp (NOC).
He dismissed an announcements by the protesters that oil workers had resumed work at the seized Ras Lanuf, Es-Sider and Zueitina ports, which previously accounted for 600,000 bpd.
"They don't have the money, workers and engineers. All engineers and staff work for firms belonging to National Oil Corp which belongs to the Tripoli government."
The government might give tribal leaders another chance to reach a deal with the pro-autonomy group to end the port blockages but otherwise all options, including the use of force, were on the table.
"The government has negotiated and might resort to any means including force," he said.
"The Libyan people are dying because of a lack of financing. We need financing to treat sick people, we need it to buy food abroad, overhaul school, hospitals and to build roads."
"If there is no oil then the Libyan people will die," he said.
He said the OPEC producer was producing around 650,000 barrels a day of oil, of which 510,000 bpd was being exported. The rest is used to feed the Zawiya refinery, which is now back to full capacity of 120,000 bpd, and the 20,000 bpd-Tobruk refinery.
Production has surged in the past few days after the government managed to convince tribesmen to end a strike at the southern El Sharara field, feeding Zawiya refinery and a nearby port. The field now pumps around 300,000 bpd, he said.
Output is still roughly half of the 1.4 million bpd measured in July before strikes at ports and fields started.
Western powers worry Libya will slide into instability as Prime Minister Ali Zeidan struggles to reign in militias who helped topple Muammar Gaddafi in 2011 but kept their guns to occupy at will ministries or oil facilities to make demands. (Reporting by Ulf Laessing, editing by William Hardy)