* Kiir says South Sudan did not damage Heglig facilities
* South says Sudan-backed rebel militia attacked South on Friday
* Both countries' vital oil output is shut down
By Yara Bayoumy
JUBA, April 27 (Reuters) - South Sudanese President Salva Kiir, back from an official visit to China, said on Friday that his armed forces had not damaged the contested Heglig oilfield they seized for 10 days earlier this month because it belongs to South Sudan.
Both South Sudan, which seceded from Sudan and became independent last July, and Sudan claim the Heglig oilfield. South Sudan said its forces withdrew from the area last Friday after coming under intense diplomatic pressure to pull back.
"Panthou and the oil on top of it is ours ... it is impossible that we would damage or destroy (the facilities)," Kiir, using South Sudan's name for the Heglig oilfield, told tens of thousands of supporters after his return from China.
"One day, if there is law in this world, Panthou will come back to us by law ... That's why this talk about us damaging (the oilfield) is a lie," he said. "We have no reason to damage the oil refineries in Panthou or any other contested areas because these areas are ours."
Satellite images have shown serious damage to some of the infrastructure. Each side has accused the other of damaging the facilities, part of a war of words that has accompanied local fighting along the 1,800 km (1,100 mile) contested border in what was once Africa's largest country.
The skirmishes have threatened to escalate into a full-blown conflict, which neither can afford. Most of the two nations' economically vital oil production has been shut down. Oil provides about 98 percent of South Sudan's state revenue, and Heglig accounts for half Sudan's 115,000 bpd output.
Kiir said South Sudanese forces withdrew from Heglig only to avoid being diplomatically isolated. Their seizure of Heglig was sharply criticised by the United Nations. Sudan says its forces ejected the South's troops from the area.
"To be condemned internationally is not good," Kiir told a boisterous crowd at the John Garang mausoleum.
China, which has signifant oil and business interests in both countries, and the African Union have stepped up diplomatic efforts in the past week to try to bring the rivals back to the negotiating table.
The Greater Nile Petroleum Operating Company (GNPOC), the consortium which runs the Heglig field, is run by state-owned China National Petroleum Co (CNPC), Malaysia's Petronas and India's ONGC.
Fighting across the disputed border erupted in late March after Sudan and South Sudan failed to resolve a number of contentious issues including oil export fees and citizenship.
Since pulling out from Heglig, South Sudan has accused Khartoum of cross-border air raids, which Sudan denies. Witnesses and South Sudanese military officials said Sudanese warplanes struck the South's Unity state on Monday, killing two people.
Earlier on Friday South Sudan said a Sudanese-backed rebel militia had attacked a town in the South's oil-producing Upper Nile state, potentially broadening the conflict.
"A militia that is supported by the Sudanese Armed Forces attacked a place...near Malakal and the SPLA (South Sudanese army) has repulsed them," said SPLA spokesman Philip Aguer.
"There are no details on casualties," he said.
Sudan's army spokesman, al-Sawarmi Khalid, could not immediately be reached on his mobile phone. Khartoum denies supporting any rebels in South Sudan.
Khartoum and Juba accuse each other of supporting rebel militias to destabilize their opponents, and each denies the other's charges. South Sudan gained independence from Sudan in July after five decades of intermittent civil war.
Malakal is the administrative centre of Upper Nile, a volatile area bordering Sudan and Ethiopia. It is also a base for many U.N. agencies and international aid groups.
(Reporting by Yara Bayoumy; Editing by Tim Pearce)
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