BEIRUT (Reuters) -- A blast that killed at least 16 people in the central Syrian city of Hama on Wednesday was the work of militants who botched a bomb-making attempt, the state news agency said on Thursday.

The statement, citing an unnamed government official, contradicts activist reports that security forces fired a rocket at the building in violation of the country's shaky truce, killing dozens of people, possibly as many as 68 according to some counts.

Hama, a hotbed of rebellion in the year-long revolt against President Bashar Assad's rule, is hosting two United Nations observers. They are preparing for a wider UN mission that will monitor a shaky ceasefire brokered by special envoy Kofi Annan.

State news agency SANA said the blast was accidentally set off by militants preparing explosives in a building they had used to make bombs. The building collapsed and residents had to dig several victims out from beneath the rubble.

"An improvised explosive blew up last evening while it was being prepared, as part of a systematic escalation supported by regional and international powers using the tool of armed terrorist groups aimed at sabotaging international envoy Kofi Annan's mission," it said.

UN officials have provided no immediate comment on the blast.

It is impossible to independently verify the reports as Syria bars most foreign journalists.