South Sudan rebels say they seize oil hub Bentiu; government denies it

By Aaron Maasho and Denis Dumo

ADDIS ABABA/JUBA (Reuters) - Rebels said on Wednesday they had seized the South Sudan oil hub of Bentiu as renewed fighting against government troops entered a third day, but the government said it was still in control of the town.

Thousands of people have been killed and more than a million have fled their homes since fighting erupted in December, triggered by a power struggle between President Salva Kiir and former Vice President Riek Machar.

The conflict has disrupted oil production, which provides a big portion of the government's revenue.

Diplomats and analysts say there could be a surge in fighting as the dry season approaches, after a lull in the rainy season.

"We are now in control of Bentiu, as of this afternoon," Lul Ruai Koang, the rebels' spokesman on military affairs, told Reuters in the Ethiopian capital.

Each side blamed the other for the fighting in Bentiu, the capital of the oil-producing Unity State.

"Fighting started two days ago when government troops attempted to expand areas under their control. Our presence was limited to seven or eight kilometres to the north and to the south of the city before clashes broke out," Koang said.

He said oil facilities in South Sudan's Upper Nile region could be attacked by the rebels. "Oil installations are a legitimate target," he added, because they were a source of government funding.

PEACE TALKS

The two sides are due to hold a fresh round of talks in the Ethiopian capital Addis Ababa this week, but the start date is uncertain.

SPLA Army spokesman Colonel Philip Aguer rejected the rebels' claim to have seized Bentiu.

"That is a lie, after four hours of serious fighting in Bentiu today, at around 4 p.m., our forces have managed to defeat the rebels and Bentiu is under the government control," he told Reuters in Juba.

Aguer said there were no details of casualties because there was no telephone network in Bentiu, which has changed hands between the two sides since the war erupted.

Unity State oil fields have been damaged in previous episodes of fighting, slashing output, which stands at about 160,000 barrels per day for the whole country, down from 245,000 barrels per day in December 2013.

The civil war has created a humanitarian crisis in the world's newest state, which declared independence from Sudan in 2011, and has exacerbated ethnic tensions between Kiir's Dinka people and Machar's Nuer.

A ceasefire signed in January has been broken frequently and peace talks have often stalled.

The lack of progress has frustrated Western backers of South Sudan. The European Union and the United States have imposed sanctions on commanders on both sides for violating the ceasefire.

(Writing by James Macharia; editing by Andrew Roche)