South Sudan oilfield seizure in Sudan row illegal: AU ADDIS ABABA (Reuters) - The African Union denounced South Sudan's occupation of a vital oil field in a disputed border region with Sudan as illegal, and urged the two former civil war foes to work to avert a "disastrous" war. Fighting between Sudan and South Sudan this week has brought the two closer to a resumption of full-blown conflict than any time since the south seceded last year under a peace deal that ended decades of devastating war between north and south. South Sudan took control of the Heglig oil field on Tuesday and was widely condemned for doing so. Sudan has vowed to retaliate if the south does not withdraw. Heglig, which the south also claims, is vital to Sudan's economy because it has a field accounting for about half of its 115,000 barrel-a-day oil output. Production there has stopped because of the fighting, a Sudanese official said on Thursday. African Union Peace and Security Council Commissioner Ramtane Lamamra said the body was demanding an "immediate and unconditional withdrawal" of South Sudan's forces from the area. "The Council is dismayed by the illegal and unacceptable occupation by the South Sudanese armed forces of Heglig, which lies north of the agreed border line of 1st of January, 1956," he told reporters following a meeting late on Thursday. The feeling within the Peace and Security Council is that it is time now for the two leaders ... to display the required leadership so that the two countries would avoid a disastrous war which the two people do not need. The African Union was helping mediate talks between the two countries over oil payments and other disputed issues, but Khartoum pulled out of the negotiations on Wednesday after Juba seized Heglig. The U.N. Security Council on Thursday added its voice to the chorus of demands that Sudan and South Sudan stop the clashes. Sudan's U.N. ambassador said South Sudan must heed to the call or Khartoum would "hit deep inside the south. The South seceded from Khartoum's rule last year, but the two sides have not agreed on issues including division of the national debt, the status of citizens in each other's territory and the exact position of the border. Landlocked South Sudan shut down its roughly 350,000 barrel-per-day oil output in January in a dispute over how much it should pay to export crude via pipelines and facilities in Sudan. Oil accounted for about 98 percent of the new nation's state revenues, and officials have been scrambling for ways to make up for the sudden loss. Some 2 million people died in Sudan's civil war, fought for decades over ideology, religion, ethnicity and oil. Reporting by Aaron Maasho; Writing by Alexander Dziadosz; Editing by Jon Hemming