KAMPALA, Jan 19 (Reuters) - The Ugandan government and rebels must resume talks to ensure peace in northern Uganda that has enabled hundreds of thousands of refugees to go home, British aid agency Oxfam said on Friday.

Oxfam warned of a new humanitarian crisis reversing months of progress if better efforts were not made to bring the Lord's Resistance Army (LRA) rebels back to the negotiating table after they quit talks in south Sudan.

"These talks are the best chance for peace in 20 years. It is crucial both parties do everything within their power to ensure that (they) do not collapse," Oxfam said in a statement.

The LRA withdrew from talks last week in protest at remarks made by Sudanese President Omar Hassan al-Bashir that he would "get rid of the LRA from Sudan".

A truce signed in August and renewed last month had raised hopes of an end to an insurgency that killed tens of thousands and displaced 1.7 million.

Oxfam said relative peace had greatly improved the lives of people in northern Uganda.

"Since the ceasefire the people of northern Uganda have enjoyed a semblance of normality," Oxfam said. "Roads and boreholes have been constructed and trade with south Sudan promises economic recovery."

It added that 230,000 people have returned to their homes and start a normal lives, free from fear of attack by rebels notorious for killing civilians, slicing body parts off victims and abducting children to swell their ranks.

Oxfam said 1.4 million people remained in camps.

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