UPDATE 2-Verenex agrees to Libya offer as China sale blocked

* Verenex accepts Libya's C$7.09 a share offer

* Compensation for working capital could add C$0.15 share

* Approval of 75 percent of Verenex shares needed

* Shares rise 3 percent

(Adds details, analyst comment)

By Scott Haggett and Alex Lawler

CALGARY, Alberta/LONDON, Nov 5 (Reuters) - Verenex Energy Inc VNX.TO confirmed on Thursday it agreed to be bought by a Libyan sovereign wealth fund for at least C$316.8 million ($299 million), ending a months-long battle in which the Libyans blocked a better offer from China.

The Verenex dispute highlighted the determination across resource-holding countries to maximise their own returns from oil and gas, as well as the risks for foreign investors in Libya, holder of Africa's largest oil reserves.

Analysts thought both sides would welcome an end to the saga, which started in February when China National Petroleum Corp [CNPET.UL] bid C$499 million including debt for Verenex. Libya blocked the bid, offering later to buy the firm for the lower price.

"It is probably good for the company and Libya to get some closure of this saga by now," said Samuel Ciszuk, analyst at IHS Global Insight.

"Verenex was clearly left in a situation where it had little choice but to accept the offer Libya gave it, hence the deal is unlikely to fall through on Verenex's side."

Under the terms, the Libya Investment Authority (LIA) will pay C$7.09 a share for Verenex, in line with its original offer made in September, Verenex said in a statement. Shares of Verenex rose around 3 percent to C$7.03 in Toronto.

Verenex said the LIA had also agreed to compensate its shareholders for the company's working capital, an amount it expects will add at least another 15 Canadian cents to the C$7.09 per share offer.

The parties had until Nov. 6 to reach the definitive agreement and last month had postponed the deadline while negotiations continued.

NO WIN FOR INVESTORS

With the North African country blocking any other offer, Verenex's board said the price was "the best alternative reasonably available to Verenex and its security holders".

Shareholders in the company agreed.

"It's good, given all that's happened, to get something, but I don't think it's a win for shareholders when C$10 was the price originally agreed," said a New York-based investor, who could not be named because of company policy.

Verenex said its shareholders would need to approve the agreement, but LIA has deposited an irrevocable C$350 million letter of credit into escrow until all conditions on the agreement can be waived.

Shareholders holding at least 75 percent of Verenex's shares will need to approve the deal at a vote on Dec. 11. However the company's directors, executives and its largest shareholder, holding 45.2 percent of the outstanding stock, have agreed to vote in favour.

Verenex holds promising oil assets in Libya, where it has drilled 21 wells with a 95 percent success rate.

Libya has attracted a wave of interest including from Western energy companies such as BP Plc (BP.L), as well as Chinese and Japanese firms, since most international sanctions were lifted in 2004. ($1=$1.06 Canadian) (Additional reporting by Barbara Lewis; editing by Peter Galloway)