"A knowledgable source at the oil ministry said the two parties are going to sign an accord for developing the Azadegan field ... after four long years of discussions," IRNA said.

This added credence to a report early in Tokyo's Yomiuri Shimbun that the two countries are to reach a basic accord on the project "soon."

The newspaper said Tokyo has already dispatched Kazumasa Kusaka, head of the Agency for Natural Resources and Energy, to Iran.

The Azadegan oilfield, located in southwestern Iran, has reserves of between 35 and 45 billion barrels of oil, according to IRNA.

Yomiuri Shimbun said Kusaka will sign an official agreement with the Iranian side once the two decide on their investment ratio and finish drafting the contract.

If concluded, the project will be Japan's biggest ever oilfield development.

The move came after the United States softened its stance towards Iran, which has agreed to accept nuclear inspections by the International Atomic Energy Agency (IAEA).

Washington, which accuses Iran of secretly trying to develop nuclear weapons, had pressured Japan to drop its investment due to concerns about Tehran's nuclear programme.

Japan and Iran agreed in 2000 to start negotiations over the oilfield, but Tehran warned it might look for new partners as a period of exclusive signing privileges for the Japanese consortium expired last June.

Japanese Foreign Minister Yoriko Kawaguchi visited Tehran in early January during her trip to the Middle East and met her Iranian counterpart, Kamal Kharazi.

The two agreed they wanted to see negotiations reach a satisfactory conclusion "in the near future," Kawaguchi's official spokesman said at the time.

A Japanese government-backed oil development company hopes to begin production in 2006 with a plan to produce 500,000 barrels a day, the daily said. Japan plans to import two thirds of the output.

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