South Sudan is shutting down its oil production, to protest Sudan's seizure of its oil shipments.
Both countries depend heavily on oil.
South Sudan had seceded from Sudan last year, under a peace deal that ended decades of civil war with Khartoum.
The newly independent country took with it about 75 percent of roughly 500,000 barrels per day of oil production.
The dispute centres on how much South Sudan should pay to send its oil exports through Sudan to a port at the Red Sea.
The two countries proposed transit fees of widely differing amounts -- South Sudan thinks they should pay less than 1 US dollar per barrel, but Sudan says it should be 36 US dollars per barrel.
The row heated up this month when Sudan said it was confiscating some oil exports from South Sudan to make up for what it calls unpaid fees.
The President of Sudan Omar al Bashir and South Sudan President Salva Kir met on the sidelines of a summit in Ethiopia on Friday (January 27), but negotiations to end the dispute failed.
(SOUNDBITE) (English) SOUTH SUDAN CHIEF NEGOTIATOR, PAGAN AMUN, SAYING:
"This talks have failed basically because the government of Sudan insist to continue stealing the oil of the Republic of South Sudan and have refused the proposals made by the Government of South Sudan as a way forward to return the talks and the situation to normalcy."
South Sudan expects that oil companies would complete the shutdown by Saturday.
Michaela Cabrera, Reuters.