Islamist militants have seized control of the northern Mozambique town of Palma, near a huge gas project involving French oil major Total and other international energy companies, security sources said on Saturday.

In their closest attack to the gas project in the three-year insurgency, the militants attacked the town in the northern province of Cabo Delgado on Wednesday, forcing nearly 200 people including foreign gas workers to be evacuated from a hotel where they had sought refuge.

"Government forces have withdrawn from Palma so the town has been taken," one security source said. Another source confirmed militants had taken the town though fighting in the area was ongoing.

Palma is about 10 kilometres (six miles) from the liquified natural gas project located on the Afungi peninsula.

Jihadists launched the surprise raid on Wednesday afternoon, sending terrified residents into nearby forests, while gas and government workers sought shelter at the Amarula Palma hotel.

But some of the expatriate workers died in an ambush during the rescue operation led by the military, security sources and some surviving workers said.

Defence ministry spokesman Omar Saranga urged people to "remain calm and follow the rescue instructions given by the authorities".

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TOTAL