By Hereward Holland and Aaron Maasho

JUBA/ADDIS ABABA, Jan 29 (Reuters) - South Sudan has

totally shut down oil output in a row with Sudan over export

transit fees and will only restart after the two reach a deal

covering border security and the disputed Abyei region, its oil

minister said on Sunday.

South Sudan seceded in July under a 2005 peace deal that

ended a civil war in which around 2 million people died. The

possibility that war could restart over the oil dispute was a

'great concern', U.N. Secretary General Ban Ki-moon said.

Both sides have failed to resolve a long list of disputes

including how to disentangle their oil industries, divide debt,

mark the poorly drawn border and decide who should control

Abyei, a region the size of Connecticut that was a major

battleground during the war.

Landlocked South Sudan took about three-quarters of Sudan's

oil output when it broke away, but still needs pipelines running

through its northern neighbour to export crude.

Juba depends on oil for about 98 percent of state revenues,

while for Khartoum transit fees are crucial since it lost the

oil fields themselves last year. That plunged it into a severe

economic crisis.

The new U.N. member state said on Jan. 20 it would shut off

its roughly 350,000 barrels per day of output after Khartoum

started taking some oil in lieu of what it called unpaid fees.

The shutdown was '100 percent complete' on Sunday, Minister of

Petroleum and Mining Stephen Dhieu Dau told Reuters in Juba.

To restart pumping, he demanded seized cargoes of oil be

released, stolen crude returned and for Sudan to cease support

for rebel groups in South Sudan, something Khartoum denies.

'Oil production will restart when we have a comprehensive

agreement and all the deals are signed,' said Dau, adding that

any deal had to be overseen by the international community and

linked to the demarcation of the border and control over Abyei.

'Sudan must recognise the 1956 border, which means they must

give back all the areas under occupation,' he said, referring to

an internal boundary used around the time of Sudan's

independence.

Speaking at an African Union summit in Addis Ababa, Ban said

he was greatly concerned that the dispute could reignite armed

conflict and blamed a lack of political will on both sides.

Their two leaders met on Friday but failed to resolve the row.

'(South Sudan) President Salva Kiir and (Sudan) President

Bashir should fully engage themselves ... making the necessary

compromise and flexibility,' he told reporters.

CONTINUED DISPUTE

Many South Sudanese see the oil dispute as a continuation of

their struggle against Khartoum. Analysts say Sudan's demands of

$36 a barrel are in well in excess of international norms. South

Sudan has proposed a fee of less than $1 a barrel.

Sudan meanwhile accuses Juba of backing rebels of the Sudan

People's Liberation Movement North (SPLM-N) in the border states

of Blue Nile and South Kordofan.

Tensions have also remained high over Abyei, where Khartoum

sent tanks and troops in May. It has since said its troops would

leave once a U.N. mission for Abyei (UNISFA), consisting of

4,000 Ethiopian troops, was fully deployed but just under half

that number are there now.

Ban urged Bashir to ensure Sudan cooperated with the United

Nations to help avoid fresh fighting there.

'We have a serious impediment in the movement of United

Nations peacekeepers in UNAMID and UNISFA because of a lack of

cooperation,' he said also referring to the joint U.N./Africa

Union force in nearby Darfur.

A spokesman for Sudan's Foreign Ministry, El-Obeid Morawah,

said the charge was 'not correct' and that the government was

not restricting the movement of peacekeepers in either region.

Industry sources say Sudan has already sold at least one

tanker-load of seized South Sudanese crude since the row broke

out, but on Saturday Khartoum said it would free other tankers

being held at port to help defuse the dispute.

Dau said that four cargoes in question had not left the port

yet, but that its agent in Sudan had been told to prepare

documentation, meaning it was possible they could leave on

Sunday or on Monday. China, their biggest customer, buys 5

percent of its crude oil imports from the two.

South Sudan was 'committed to negotiations' but first

Khartoum 'must take some steps', said Dau.

Sudanese negotiators and oil officials were not immediately

available to comment.

(Reporting by Hereward Holland and Yara Bayoumy; Writing by Ulf

Laessing and Alexander Dziadosz; Editing by Ben Harding)

((ulf.laessing@thomsonreuters.com, Khartoum newsroom, +249 927

000 086, Reuters Messaging:

ulf.laessing.reuters.com@reuters.net))

(For an interactive timeline, click on http://link.reuters.com/cex79r)

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