UPDATE 2-Nigerian militant group declares 60-day ceasefire

* MEND to stop attacks after release of rebel leader

* Militant group wants peace talks with government

* Rebels demand military withdraw from parts of Niger Delta

(Adds fresh MEND quote, Okah background)

By Randy Fabi

ABUJA, July 15 (Reuters) - Nigeria's most prominent militant group said it would observe a 60-day ceasefire from Wednesday after the release of rebel leader Henry Okah.

The Movement for the Emancipation of the Niger Delta (MEND) said it was also halting its attacks, which have crippled Africa's biggest oil and gas industry, to allow for government peace talks.

The military last month said it would also observe a two-month ceasefire.

"Hopefully, the ceasefire period will create an enabling environment for progressive dialogue," MEND said in a statement.

Okah, arrested in September 2007 on gun-running and treason charges, was released from detention in the central city of Jos on Monday after being the first senior militant to accept President Umaru Yar'Adua's amnesty offer.

Okah's freedom has been one of MEND's key demands since launching its campaign of violence against the oil sector in early 2006.

The senior militant, who many believe is the brains behind MEND, told Reuters on Tuesday violence in the Niger Delta would likely continue until the government began talks with rebels [ID:nLE694320].

MEND, a loose faction of militant groups, said on Monday it wanted talks with the government but also threatened to intensify attacks.

Rebels on Monday sabotaged a Lagos oil dock, killing five in the first attack outside the Niger Delta since starting its latest campaign of violence.

The MEND's offensive was in response to the military's largest military offensive in the region in years last May.

MEND demanded that the military withdraw from certain areas in the Niger Delta, the heartland of the OPEC member's oil sector, before talks could begin.