United Nations, Aug 7 (IANS): UN Secretary-General Ban Ki-moon has welcomed the deal reached by the governments of Sudan and South Sudan overn oil and financial arrangements, Xinhua reported.

The oil dispute between Sudan and South Sudan began five months after South Sudan separated from Sudan last July, as Sudan decided to deduct its oil fees in arrears on the part of South Sudan in the form of crude oil.

While most of the oil wells are located in South Sudan, the pipelines and ports to export the oil are in Sudan.

In a statement issued by his spokesperson, the UN chief called the deal "an important milestone for building good neighbourly relations between the two states."

According to the agreement signed by the two Sudans at the final phase of negotiations, they agreed to an financial arrangement that relates to the export of oil from South Sudan through Sudan to Port Sudan.

The secretary-general is encouraged that the two governments have significantly narrowed their positions on the contentious issue, said the statement issued Monday.

He also urged the Sudanese and South Sudanese leaders to muster the necessary political will to resolve all outstanding issues.