I realize it's not clever at all, nor is it the special format string you're looking for, but this answer does work, given that the ouptut is fixed length:
SELECT SUBSTR(TO_CHAR(NVL(arg1 - arg2, TO_DSINTERVAL('0 00:00:00'))), 1, 1)
|| SUBSTR(TO_CHAR(NVL(arg1 - arg2, TO_DSINTERVAL('0 00:00:00'))), 9, 2)
|| ' '
|| SUBSTR(TO_CHAR(NVL(arg1 - arg2, TO_DSINTERVAL('0 00:00:00'))), 12, 12)
FROM table1;
It also just truncs the fractional seconds instead of rounding, but I assume from your example they're all just zeros anyway.
This is an even greater embarrassment, but I couldn't resist:
SELECT SUBSTR(REPLACE(TO_CHAR(NVL(arg1 - arg2, TO_DSINTERVAL('0 00:00:00')))
, '0000000', '')
, 1, 16)
FROM table1;