(Adds rights group)

By Abdiqani Hassan

BOSSASSO, Somalia, May 11 (Reuters) - Two foreign aid workers kidnapped by gunmen in northern Somalia are in good health and their abductors are negotiating with local elders to free them, a source close to the captors said on Friday.

The source, who did not want to be named, said the Briton and Kenyan were being held near where they were seized on Wednesday, some 75 miles (120 km) south of Bossasso, the main port of the semi-autonomous province Puntland.

Both work for the CARE International relief agency.

"The hostages are fine and healthy. We have provided them with water and food, they have no problem," the source told Reuters by telephone. "Our clan elders have communicated with us and we have started dialogue with them. They have told the governor of Bari province to wait for word from them."

He gave no other details about the pair. The Briton was erroneously identified initially as from Ireland, then from northern Ireland -- Care now says he is from mainland Britain.

One maritime official says the two may have been taken hostage by local fishermen for use as a bargaining chip in a dispute with the authorities over fishing permits.

A senior U.N. official in Mogadishu for talks with the interim government said he would travel to Puntland in the north to appeal in person for the release of the hostages.

"They have to release them unconditionally," Francois Fall, the U.N. special envoy for Somalia, told reporters.

Puntland runs itself independently from the rest of Somalia and has been more peaceful than most areas in recent years.

But the whole country is dangerous for aid workers. In the self-declared independent enclave of Somaliland, two men were recently sentenced to death for their role in the murders of an Italian, two Britons and a Kenyan between 2003-2004.

Authorities generally blame militant Islamists for attacks on foreigners.

A Puntland human rights group called on Friday for the hostages' immediate and unconditional release.

"Kidnapping aid workers is a violation of international humanitarian principles and the authority here should take all possible measures in releasing the aid workers," the Puntland Human Rights Monitors said in a statement.

"We will work closely with the government of Puntland and local area elders in pursuing the release of these aid workers." (Additional reporting by Guled Mohamed in Mogadishu)

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