Sudan has turned down South Sudan's proposal of a higher oil transit fee and an $8.2bn financial deal, ruling out any comprehensive settlement of outstanding issues by the August 2 deadline.
The offer and its refusal on Monday came just days ahead of a deadline imposed by the African Union and the United Nations calling on both sides to reach agreements on issues including oil transit fees, border demarcation and security.
When land-locked South Sudan gained independence from Sudan, it took with it two thirds of the region's oil, but the pipelines and processing facilities remained in the North. In January, Juba cut off all oil production, crippling both economies.
Pagan Amum, South Sudan's chief negotiator, told reporters that Juba was ready to resume oil exports, if "reasonable" transport fees are agreed on.
He outlined a proposal whereby the Juba would pay up to $9.10 a barrel to transit its oil through Sudan.
Khartoum had earlier demanded as much as $36 per barrel, which includes tariffs and transit, processing and port fees.
South Sudan said that "in the interest of peace" it was offering Sudan a financial package, worth $8.2 billion over three years, which includes a cash payment and debt forgiveness to help fill the massive financial gap Sudan reported after the South gained independence a year ago.
'Security a prerequisite'
Sudan, however, dismissed the offer, saying that security remained their top priority and that issues such as South Sudan's alleged backing of rebels should therefore be settled before other issues are tackled.
"We think security is a prerequisite," Mutrif Siddiq, a member of Khartoum's delegation taking part to the talks in the Ethiopian capital told reporters.
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He ruled out any comprehensive deal by the August 2 deadline but said he remained hopeful in the longer term.
"It is impossible to be done within... nine or 90 days, some issues need more time to be discussed and be resolved," Siddiq said.
On Saturday South Sudan said it was cancelling planned face-to-face peace talks with Sudan after accusing Khartoum of launching a new air raid on its territory.
But Sudan on Monday said the raid was in response to the crossing of the rebel Sudanese Justice and Equality Movement - fighters whom Khartoum believes are backed by Juba - into its territory.
"We couldn't stay idle, the moment they crossed the border we engaged with them by air force, and now we are engaging with them on the ground," Siddiq said, calling the incident a "stab in the back" by Juba.
The negotiations to settle disputes stemming from the South's independence stalled after border battles broke out
in March, but resumed in May.
Other key proposals in South Sudan's offer include an international arbitration process with a strict time frame to determine where the border lies in contested - and often oil-rich - frontier regions.
However, the South demanded the disputed Abyei region must hold an AU-UN organised referendum before year end to decide if it belongs to the north or the south.
The referendum, provided for in a 2005 peace deal, was supposed to happen in 2011 but was stalled after disputes over eligibility for voting.
South Sudan said those eligible to vote would be the Ngok Dinka ethnic group - seen as Southern supporters - as well as anyone living in the Lebanon-sized area for three continuous years prior to 2005.
The deal was a "last offer, not a negotiating position," Amum said. "We are left with only nine days to August 2 ... we believe time is over for prolonging lengthy negotiations," he added.
The latest round of talks, which comes a week after Sudanese President Omar al-Bashir and his South Sudanese counterpart Salva Kiir exchanged a symbolic handshake at an AU summit, is expected to continue on Tuesday.