The leaders of Sudan and South Sudan have been urged to agree a peace deal to overcome a bitter dispute during talks in Ethiopia. UN Secretary General Ban Ki-moon called for "co-operation and mutual development", and the US said Sudan should accept an African Union border plan already agreed by South Sudan. Tensions over oil and borders have threatened to spark a new conflict. The UN has threatened sanctions if Sunday's talks do not produce a deal. The Security Council has called for an urgent agreement on a demilitarised border zone. Oil wrangle President Omar al-Bashir and his South Sudanese counterpart, Salva Kiir, are due to meet in the Ethiopian capital, Addis Ababa. Last month, the two countries agreed to re-open their land border after a closure lasting more than a year. But the border remains unmarked. On independence, the South gained two-thirds of the region's oil while Sudan retained the processing and export facilities. In January, the South shut down oil production, accusing Sudan of stealing its oil, and the two countries' economies have been damaged as a result. The BBC's James Copnall in Addis Ababa says the list of unresolved issues is formidable. However, the hope is that some degree of progress would encourage South Sudan to restart oil production, providing much needed revenue to both countries, he adds. Delegations from the two states have already been in Addis Ababa for talks since 4 September. Negotiators from both sides say a surprising amount of progress has been made before the arrival of the heads of state. Foreign diplomats are cautiously optimistic and exerting gentle pressure on both sides, our correspondent adds. Atif Keir, a spokesman for South Sudan's delegation, said talks had continued late into Saturday evening. However, an ambassador quoted by Reuters news agency said it was unlikely the two leaders would agree on borders on Sunday although a deal on resuming oil exports was possible. "The borders will take forever," the unnamed diplomat said. "They will exchange maps with experts, visit each other, go maybe into arbitration." South Sudan, which is mainly Christian and animist, fought for decades against the mainly Muslim north.