KHARTOUM  - South Sudan on Friday ordered an end to its 10-day occupation of Sudan’s main oilfield at Heglig, a move which had sparked fears of a wider war, but Sudan said its forces had chased them out.

“They started the fighting and we will announce when it will end, and our advance will never stop,” President Omar al-Bashir told a rally in the capital attended by thousands. He dismissed a statement by his Southern counterpart Salva Kiir that the occupying troops had withdrawn. “There is no withdrawal. We beat them by force... Until now, their people are running,” Bashir, wearing an olive army uniform, said at military headquarters.

While religious leaders in the north were calling during Friday prayers for a holy war to reclaim the territory, South Sudan’s Information Minister Barnaba Marial Benjamin gave the first word that the crisis, which had sparked fierce international diplomacy to avert a wider war, was easing. “An orderly withdrawal will commence immediately and shall be completed within three days,” he said, reading a presidential statement.

Shortly afterwards, Khartoum’s Defence Minister Abdelrahim Mohammed Hussein announced on state television that his soldiers “were able to liberate Heglig town by force.”

The news sparked the biggest celebration in years in the Sudanese capital, with motorists honking horns, waving flags, and shouting “Allahu Akbar!” (God is greatest). Border clashes between Sudan and South Sudan escalated last week with waves of air strikes hitting the South, and Juba seizing the Heglig oil hub on April 10.

Sudanese troops launched a renewed counter-attack late on Thursday with air strikes against Southern troops entrenched along the frontline, Southern army spokesman Philip Aguer said. “There was fighting on Thursday evening, SAF (Sudan’s army) was advancing and they were beaten,” he said.

Until Hussein’s announcement, Sudan’s army had maintained silence for several days about the situation on the ground. International powers had called on Juba to pull back its forces but it resisted, insisting it would withdraw only after Khartoum removed its troops from the neighbouring contested region of Abyei.

On Thursday, United Nations chief Ban Ki-moon condemned the South’s taking of Heglig as an “illegal act.” But Juba still maintained on Friday that Heglig - which it calls Panthou in the local Dinka language - was its territory. “The decision to pull out of Panthou (Heglig) is without prejudice to our stand that Panthou remains an integral part of the Republic of South Sudan,” the statement added, asking for international arbitration.

Sudan’s UN envoy said on Friday that the South Sudanese leaders act with “the mentality of guerrillas,” despite having already won independence, but they must now negotiate to avoid new conflict.

Bashir’s war rhetoric sparked concern from Washington. On Wednesday he called for the overthrow of the “insect” Juba government.

Despite its seizure of Heglig, South Sudan maintained it wanted peace and was defending its borders, claiming the contested region was being used by Khartoum as a base to attack the South’s oil-producing Unity state. Kiir’s statement said that Khartoum had to end its “air bombardments and ground incursions” into South Sudan, and that the pullout was ordered “to create an environment for the resumption of dialogue with Sudan.”

Since the invasion, production at Heglig has been shut and facilities there are leaking. A processing facility bombed on Thursday by a Sudanese warplane “was burning through the night,” Aguer said.

Sudanese “troops moved towards Heglig carefully so as not to destroy what remains of the infrastructure,” said Hussein, who along with Bashir is an international fugitive wanted for alleged crimes in Sudan’s western Darfur region.

Meanwhile, fighters in Sudan’s Blue Nile - civil war allies of the former rebels who now rule South Sudan - said on Friday they had killed 79 government troops and militiamen in two ambushes in the ethnically divided state.

In Darfur, peacekeepers expressed concern that rebels were exploiting the Sudan-South Sudan border fighting.