(Adds grenade attack, paragraphs 7-8)

By Andrew Heavens

ADDIS ABABA, April 27 (Reuters) - Ethiopian insurgents who captured seven Chinese workers in a deadly attack on an oilfield will free them as soon as the military stops activities in the area, a rebel spokesman said on Friday.

Ethiopia has sent troops to the region bordering Somalia to hunt down fighters of the separatist Ogaden National Liberation Front (ONLF), which killed 65 Ethiopians and nine Chinese workers during Tuesday's pre-dawn raid.

The assault on the Chinese-run facility was one the worst attacks to date on Beijing's growing interests in Africa.

The ONLF, fighting for independence since 1984, had contacted the Red Cross to help with the handover of the Chinese hostages who were "safe, healthy and well treated", a London-based spokesman said.

"The Ethiopian army is making lots of movements around the area at the moment. That will impact how quickly we can release them," Abdirahman Mohammed Mahdi told Reuters by telephone.

"We are trying to work out how to release the seven Chinese people safely. We cannot just leave them somewhere to be picked up. This is the Ogaden and there are lots of lions and hyenas. It would not be safe."

Underlining the tensions in the area, a government spokesman said two people were killed on Thursday when a grenade was thrown into a tent where locals were mourning the dead workers in the regional capital Jijiga.

"It is suspected that it was thrown by Eritrean-supported ONLF terrorists," said Zemedhun Tekle of the Information Ministry. No other details were immediately available.

The International Committee of the Red Cross (ICRC) said it was ready to facilitate in the handover of the hostages, but declined to say whether the ONLF had contacted it.

"The ICRC is always ready to act as a neutral intermediary for humanitarian reasons if all parties involved agree and make a request," ICRC spokeswoman Anna Schaaf told Reuters in Geneva.

The ONLF have repeatedly warned energy companies they will not allow oil and gas exploration in the area as long as the Ogaden people are "denied their rights to self-determination".

In an open letter published on its Web site, the ONLF said it wanted to "assure the people of China that your citizens are safe, healthy and well treated."

"The ONLF would like to assure the people and the government of China that your citizens will be reunited with their families as soon and as safely as possible. We have no conditions on this pledge," the statement said.

The Chinese staff worked for Zhongyuan Petroleum Exploration Bureau, part of the much larger China Petroleum and Chemical Corp. (Sinopec).

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