Fierce fighting for control of Mozambique's strategic northern town of Palma left beheaded bodies strewn in the streets Monday, with heavily armed rebels battling army, police and a private military outfit in several locations. Thousands were estimated to be missing from the town, which held about 70,000 people before the attack began last Wednesday. The Islamic State group claimed responsibility Monday for the attack, saying it was carried out by the Islamic State Central Africa Province, according to the SITE extremist monitoring group. The rebel claim said the insurgents now control Palma's banks, government offices, factories and army barracks, and that more than 55 people, including Mozambican army troops, Christians and foreigners were killed. It did not provide further detail on the dead. Also read: Indonesia rebels say they took weapons from crashed chopper Earlier this month the United States declared Mozambique's rebels to be a terrorist organization and announced it had sent military specialists to help train the Mozambican military to combat them. Palma is the center of a multi-billion dollar investment by Total, the France-based oil and gas company, to extract liquified natural gas from offshore sites in the Indian Ocean. The gas deposits are estimated to be among the world's largest and the investment by Total and others is reported to be $20 billion, one of the largest in Africa. The battle for Palma forced Total to evacuate its large, fortified site a few miles (kilometers) outside of the city. The fighting spread across the town Monday, according to Lionel Dyck, director of the Dyck Advisory Group, a private military company contracted by the Mozambican police to help fight the rebels. “There is fighting in the streets, in pockets across the town,” Dyck told The Associated Press. The Dyck group has several helicopter gunships in Palma which have been used to rescue trapped civilians and to fight the rebels. “My guys are airborne and they've engaged several little groups and they've engaged one quite large group,” Dyck said. “They’ve landed into the fight to recover a couple of wounded policemen. ... We have also rescued many people who were trapped, 220 people at last count.” He said those rescued were taken to Total's fortified site on the southern African country's Afungi peninsula, where chartered flights flew many south to Pemba, the capital of Cabo Delgado province. The rebels are well-armed with AK-47 automatic rifles, RPD and PKM machine guns and heavy mortars, Dyck said. “This attack is not a surprise. We've been expecting Palma to be whacked the moment the rains stopped and the fighting season started, which is now,” he said. “They have been preparing for this. They've had enough time to get their ducks in a row. They have a notch up in their ability. They're more aggressive. They're using their mortars.” He said many were wearing black uniforms. “There have been lots of beheadings. Right up on day one, our guys saw the drivers of trucks bringing rations to Palma. Their bodies were by the trucks. Their heads were off.” Dyck said it will not be easy for the Mozambican government to regain control of Palma. “They must get sufficient troops to sweep through the town, going house-to-house and clean each one out. That's the most difficult phase of warfare in the book,” Dyck said. “It will be very difficult unless there's a competent force put in place with good command and control to retake that town. It can be done. But it ain't going to be easy.” Also read: Rebel attack on Congolese city leaves 6 dead Without control of Palma, Total's operations are jeopardized, analysts say. The battle for Palma is similar to how the rebels seized the port Mocimboa da Praia in August. The rebels infiltrated men into the town to live among residents and then launched a three-pronged attack. Fighting continued for more than a week until the rebels controlled the town center and then its port. The town, about 50 miles south of Palma, is still held by the rebels. U.N. spokesman Stephane Dujarric condemned the violence in Palma, which he said has reportedly killed dozens of people, “including some trying to flee a hotel where they had taken shelter.” He referred to those trapped at the Amarula Hotel who tried to escape in a convoy of 17 vehicles on Friday. Only seven vehicles made it to the beach, where seven people were killed. Some in the other vehicles fled into the dense tropical jungle and were later rescued. “We continue to coordinate closely with the authorities on the ground to provide assistance to those affected by the violence,” Dujarric said. The battle for Palma is expected to drastically worsen the humanitarian crisis in Mozambique's northern Cabo Delgado province, where the rebels started violent attacks in 2017. The insurgents began as a few bands of disaffected and unemployed young Muslim men. They now likely number in the thousands, according to experts. “The attack on Palma is a game-changer in that the rebels have changed the narrative,” said one expert who returned from Palma earlier this month. “This is no rag-tag bunch of disorganized youths. This is a trained and determined force that has captured and held one town and is now sustaining a battle for a very strategic center," said the expert, who spoke on condition of anonymity because of the sensitivity of visiting Palma. "They have called into question the entire LNG (liquified natural gas) investment which was supposed to bring Mozambique major economic growth over many years.” Also read: Rebel attacks in eastern Congo kill several Ebola responders Known locally as al-Shabab, although they have no known affiliation with Somalia's jihadist rebels of the same name, the rebels' violence in Mozambique, a nation of 30 million, is blamed for the deaths of more than 2,600 people and caused an estimated 670,000 people to flee their homes. “The attack on Palma has made a bad humanitarian situation worse," said Jonathan Whittall, director of analysis for Doctors Without Borders, which is working to help the displaced around Pemba, the provincial capital 100 miles south of Palma. “Across Cabo Delgado, the situation was already extremely worrying for those displaced by violence and for those who are in areas that are difficult for humanitarian assistance to reach,” Whittall said. “This attack on Palma has led to more displacement and will increase the needs that have to be addressed as a matter of urgency.” “For too long northern Mozambique has been a neglected humanitarian crisis,” Whittall said, adding that his organization is exploring ways to expand its emergency response.