20091231

LIBREVILLE (Reuters) - Gabon warned environmental services group Veolia's SEEG unit on Wednesday to improve water distribution in the capital Libreville or risk seeing its concession frozen.

"The water distribution system faces shortages going back to 2003 as a result of obsolescence and saturation of the transport system for treated water," government spokesman Seraphin Moundounga said after a cabinet meeting.

Some Libreville districts had no water at all, while others faced cuts of up to eight hours a day, he said. Failure to make improvements would result in a "sequestration" of the contract.

He did not indicate how much time SEEG, 51 percent owned by Veolia's water services division, had to react.

SEEG has agreed to try and alleviate the problem by seeking to transfer water from a reservoir currently being used to supply the north of the city. Tests on that project began on December 28 and are due to last seven days.

Veolia has been operating in Gabon since 1997.