"Final negotiations to develop the Azadegan oil field are pressing on," the oil ministry affiliated news agency reported, adding "the talks between National Iranian Oil Company (NIOC) and INPEX began on Saturday, the final day of the deadline set to makea definitive decision on Azadegan".

Iranian Oil Minister Kazem Vaziri-Hamaneh has said that the Japanese company had until Friday to finalize the two-billion dollars deal or it would be given to Iranian oil companies.

Kamal Daneshyar, head of Iranian parliament's energy commission,also warned Saturday that Tehran would cancel the deal and give the project to Iranian corporations if Japan continued to delay the project.

The deal to exploit Iran's largest onshore oil field was signed in 2004 with Japan's INPEX Holding Inc. which was supported by theJapanese government but also has private shareholders.

According to the contract, production of the oil field in southwestern Iran was estimated to reach 260,000 bpd, which has anestimated 26 billion barrels of oil in reserve.

The two sides had previously set a final deadline on Sept. 15, but failed to reach an agreement over profit-sharing.