UPDATE 2-Sudan, S.Sudan leaders negotiate on border, oil - Reuters

* South Sudan says Sudan dropping weapons to rebels

* Juba accepts AU map, but Sudan says not yet resolved (Adds S.Sudan on summit deal)

By Ulf Laessing

ADDIS ABABA, Sept 23 (Reuters) - Leaders of Sudan and South Sudan met on late on Sunday to try reach a deal to end hostilities and restart oil exports but there was still no breakthrough on a key security accord after two weeks of talks in Ethiopia, officials said.

South Sudan said it expected Sudan's President Omar Hassan al-Bashir and his southern counterpart, Salva Kiir, to reach an deal on Monday, after a U.N. Security Council deadline was unofficially extended.

The armies of both nations fought for weeks in April along the unmarked and disputed border after a row escalated over how much South Sudan should pay to use northern oil pipelines.

Highlighting the deep mistrust between the neighbours, South Sudan accused Sudan of parachuting weapons at the weekend to rebels in the new African nation, which split off from its former civil war foe Khartoum in July 2011.

South Sudan's cabinet affairs minister Deng Alor said Kiir and Bashir would reach an agreement by Monday.

"Tomorrow we will be finished. There will be a deal," he told reporters after the summit started, giving no details.

The presidents were chatting to each other as they left the hotel room where their meeting was held, with Kiir wearing his trademark cowboy hat with a dark suit.

The two will meet again on Monday morning, offficials said.

Badr el-Din Abdallah, spokesman for the Sudanese delegation, earlier said there were still differences: "We have agreed on many topics but there are still issues for which we don't have a deal yet, specifically the security issue."

The two countries had to reach a comprehensive peace deal by the weekend or risk incurring U.N. Security Council sanctions.

The U.N. deadline formally expired at midnight on Saturday, but the parties effectively have until the end of the African Union-led summit to reach an agreement.

Diplomats have been trying to mediate between the rivals, which have a history of signing and then not implementing deals. Both badly need the oil revenues at stake.

The two reached an interim deal in August to restart oil exports from landlocked South Sudan through Sudan to its Red Sea ports after Juba turned off wells in a row over export fees.

But Sudan insists on first reaching a security accord.

On Saturday, Sudan raised hopes of a deal by conditionally accepting an AU map for a demilitarized border zone after objecting to it for months, but Abdallah said on Sunday the issue had not yet been resolved.

Juba has already accepted the AU map.

Bashir first met Ethiopian Prime Minister Hailemariam Desalegn on Sunday and then like Kiir, spent much of the day with his delegation.

"The points are on the table. We are quite hopeful and optimistic that things will move forward," Ethiopia's State Foreign Minister Berhane Gebrekristos said after Bashir met Desalegn.

MISTRUST

South Sudan, where most follow Christianity and animism, seceded from the mainly Muslim north in July 2011 under a 2005 peace agreement that ended decades of civil war.

Secession left a long list of issues unresolved such as marking the border, fees for southern oil fees and ending accusations of rebel support in each other's territory.

Western and African officials had hoped for broad peace accord but several rounds of talks in Addis Ababa have brought no visible progress on settling the fate of five disputed border areas. This will probably be left to a future round or possible lengthy arbitration.

South Sudan accused Sudan of parachuting eight parcels of weapons and ammunition to forces of anti-government militia leader David Yau Yau in the country's east on Friday and Saturday.

"Yesterday and today Antonov (planes) have dropped arms and ammunition around Likuangole in front of everybody, including UNMISS (the U.N. mission in South Sudan)," army spokesman Philip Aguer said.

Sudanese army spokesman al-Sawarmi Khalid denied the claim.

There was also no sign of progress in indirect talks held in Addis Ababa between Sudan and the rebel group Sudan People's Liberation Movement-North (SPLM-North) which is fighting the Sudan's army in two areas bordering South Sudan.

Khartoum accuses Juba of supporting the SPLM-North. South Sudan accuses Sudan of supporting militias in the new republic.

The two presidents are also expected to discuss a solution for the disputed border region of Abyei, where previous attempts to hold a referendum have failed because neither can agree on who is eligible to vote. (Reporting by Ulf Laessing; Editing by Sophie Hares)