(Recasts with number of hostages released)

By Segun Owen

YENAGOA, Nigeria, June 21 (Reuters) - Nigerian troops killed 12 suspected militants and freed 10 hostages in a dawn raid on an Italian-operated oil facility in the Niger Delta on Thursday, the army said.

The gunmen had overrun the Ogbainbiri flow station in Bayelsa state on Sunday, in a setback to moves by Nigeria's newly-inaugurated president, Umaru Yar'Adua, to calm tensions in Africa's oil heartland.

Italian oil company Eni <ENI.MI> had originally said 16 Nigerian workers and 11 soldiers were taken hostage, but the army said it rescued nine civilians and one soldier. It was not immediately clear what had happened to the remaining hostages or if the original numbers had been incorrect.

One Agip worker drowned earlier this week trying to escape, local media reported.

"We launched a dawn attack, took over the flow station intact and rescued some hostages. The militants sustained casualties, about 12 of them," Brigadier-General Lawrence Ngubane, who commands the military in the region, told Reuters.

The casualty figure was preliminary, he added, because troops were still "mopping up" in the remote swamp area in Nigeria's far south.

Four soldiers were wounded in the gunfight, his spokesman added.

A spokesman for Eni subsidiary Agip, which operates the oilfield station, was not immediately available for comment.

OIL DISRUPTION

The invasion forced Agip to reduce oil output by 37,000 barrels a day and declare force majeure on exports from its Brass terminal, a legal step to exempt the company from its sales contracts.

The closure lifted to 711,000 barrels a day the total Nigerian oil supply disrupted by militant attacks in the world's eighth largest crude exporter.

Armed groups fighting for regional control over the delta's oil wealth have waged an 18-month campaign of kidnappings and attacks on oil facilities. The line between militancy and crime is blurred and most kidnappings have been by groups seeking ransoms.

However, the situation had begun to look up with the arrival of new President Umaru Yar'Adua on May 29, who used his inauguration speech to promise urgent attention for the region and to call for peace.

Militant groups released about 30 hostages and declared a month-long truce.

A court freed former militia leader Mujahid Dokubo-Asari on bail last week, meeting one key demand of many armed groups.

Oyeinfie Jonjon, leader of the ethnic activist group Ijaw Youth Council, said the gunmen at Ogbainbiri had demanded money from the company and were upsetting the peace initiative.

"They wanted financial negotiations. We have just had Asari released and we are working on the release of (former Bayelsa state governor Diepreye) Alamieyeseigha so if there is any action without reason they will have to face the brunt (of the law)," Jonjon said.

(Additional reporting by Tom Ashby in Lagos)

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