Rebels in a Sudanese border state say they have occupied an airport and are fighting with government troops to retake a town that became a flashpoint during the civil war, but the army denied it had lost any territory.
The SPLM-North, rebels from the south who were left in Sudan after South Sudan seceded, said their fighters had reached Kurmuk, which they lost to the Sudanese army in late 2011.
The clashes undermine African Union efforts secure a border still disputed nearly two years after South Sudan became independent, set up a military-free buffer zone and restart oil production, which the countries' economies desperately need.
Kurmuk changed hands several times during two decades of north-south civil war and its capture would be a setback for Sudan, which has been trying to develop Blue Nile. The state is rich in chrome and also a production site for gum arabic, a gum gained from trees used as stabilizer in soft drinks.
"Now we are fighting inside Kurmuk now and we occupy the Kurmuk airport," Sudan People's Liberation Movement-North (SPLM-North) leader Yasir Arman told Reuters by phone on Wednesday.
"The Sudan air force is bombarding the whole southern Blue Nile every hour."
Sudan's military spokesman al-Sawarmi Khalid denied rebels had reached Kurmuk, which is also near the border with Ethiopia.
"It is not true at all that rebels are inside Kurmuk," Khalid said. He said SPLM-North troops had launched an attack on Muffa, some 20 km (12 miles) from Kurmuk, but the army had repulsed the fighters.
Events are difficult to verify independently because of government restrictions on media, and the two sides often give conflicting versions of the fighting
The conflict in Blue Nile started in September 2011, a few months after South Sudan seceded under the 2005 peace deal that ended the civil war in which some 2 million people died.
More than 1 million people have been severely affected by the fighting, the United Nations said in a report last week. More than 200,000 have fled to Ethiopia and South Sudan.
Khartoum accuses South Sudan of backing the rebels in Blue Nile and another border state South Kordofan. Juba denies this.
Both countries agreed in September to defuse tension by setting up a demilitarized border zone after coming close to war in April. But neither side has withdrawn their army.
Arman said the SPLM-North was willing to help create the buffer zone in areas under its control but was first asking for a cessation of hostilities to allow in humanitarian relief.
"(The Sudanese army) are not welcome in our areas but we can find a formula that will achieve the directives of the demilitarized buffer zone," he said.
Sudan signed a deal with the United Nations and Arab League in August to allow food into rebel-held areas but has not implemented it.