Iran’s national oil company has cancelled plans for Russia’s Gazprom to develop the Azar oil field and will award the project to domestic contractors instead.

National Iranian Oil Company (NIOC) signed a memorandum of understanding (MoU) with Gazprom Neft, the Russian company’s oil production arm, in 2009.

The company was tasked with evaluating the project’s technical and economic feasibility before signing a final production contract.

But as international sanctions on Iran mounted in recent months, the NIOC repeatedly accused Gazprom of dragging its feet.

“Unfortunately, the Russian Gazprom company delayed fulfilling its undertakings and NIOC had given it repeated warnings, which were never heeded,” NIOC head Ahmad Qalehbani was quoted in the domestic press. “It was decided that we terminate our cooperation with this company in the Azar oil field, and assign the project to domestic contractors.”

The Azar field lies on the border to Iraq and holds an estimated two billion barrels of oil. Iran has access to 40 per cent of those reserves.

As Western oil companies have pulled out in the face of international sanction against the Islamic Republic, oil contracts in Iran have increasingly been awarded to domestic and Chinese companies.