TOKYO/TEHRAN (Agencies) – Japan on Friday said it’s willing to hold talks with Tehran on implementation of a two-billion-dollar deal for development of the onshore oil field Azadegan, south of Iran, IRNA reported.

"For Japan the Azadegan project is of importance and due to the same reason it is considering ways to ensure progress in the talks," said Vice-Minister for Foreign Affairs Katsutoshi Kaneda in a press conference here on Friday.

Kaneda said the issue will not have the least effect on Tokyo's stances, taken in coordination with the global community, regarding Iran's nuclear issue.

He said the talks will help transactions between the Iranian and Japanese private sectors.

Japan, importing nearly all of its oil from the Middle East, has invested heavily in Iran.

In February 2004, the two sides signed a two billion-dollar agreement to develop the Islamic republic's largest onshore oil field at Azadegan.

Japan has been under U.S. pressure to abandon the deal.

Delays have also been caused by wrangling over financial terms as well as the slow pace of demining work in the area, which was heavily mined during the 1980-88 Iran-Iraq war.

Azadegan is expected to pump 150,000 barrels a day by mid-2008 and reach 260,000 bpd by early 2012. Japan plans to import two thirds of the output.

Iran extends deadline for Japan to finalize oil deal

Iran said it has given Japan 15 days to finalize an agreement on the development of the oil field after a previously extended deadline expired on Friday, AFP quoted state radio as reporting.

"Japan's request to extend the deadline for 15 days to finalize the Azadegan deal has been accepted," Oil Minister Kazem Vaziri Hamaneh was quoted as saying.

An Iranian official had previously given Tokyo a mid-September deadline to finalize the project, according to a Japanese report in May.

"If Japan pulls back from the deal, the Islamic republic will take care of the development of Azadegan on its own," he said.

Iran, facing the threat of sanctions for its nuclear program, has warned Japan, a close US ally, not to give in to U.S. pressure to scrap the two billion-dollar deal.

The United States has called for Japan to abandon the deal as Washington seeks UN sanctions on Iran over its nuclear program.

However, Japan's Economy, Trade and Industry Minister Toshihiro Nikai on Thursday suggested talks would go toward a settlement.

"It is important for us to deal with the matter considering various conditions ... Iran's role in Japan's energy program is not small and we have a great interest in it," Nikai told the Japanese daily Yomiuri Shimbun.

In February 2004, Iran and Japan's Inpex Corp. signed an agreement for the development of Azadegan oil field with estimated 26 billion barrels of oil in place.

Work was meant to start by March 2005 but has been delayed.

According to the Iranian oil minister, Inpex had chosen French company Total as its partner in the project.

Japan, the world's second largest economy, is almost entirely dependent on the Middle East for its oil, and imports about 15 percent of its total oil consumption from Iran.

Japan has expressed caution about sanctions on Iran, while calling on Tehran to be transparent about its nuclear program -- which Iran contends is for peaceful purposes.