The state-owned China National Petroleum Group has pulled out of a project to develop phase 11 of Iran's South Pars natural gas field, reports the Chinese-language National Business Daily.

News of the withdrawal was reported by the Tehran-based newspaper Shargh on Sunday, although an Iranian official and officials from the Chinese petroleum group were said to have refuted the report in a Wall Street Journal article published on Tuesday.

On Wednesday, however, the National Business Daily claimed a source related to CNPC has confirmed that the company is indeed withdrawing from the project and has begun sending workers and experts back to China.

Iranian reports blamed the Chinese company for the split, saying that they had delayed the project for more more than three years and had not even begun preliminary work such as leveling land and putting up fencing. They were warned last year by Iran's national oil company that the project would be given to domestic companies if there were further delays. Last month, Iranian oil minister Rostam Qasemi set a deadline of March 2013 for CNPC to begin development of the project.

CNPC signed the US$4.7 billion deal with the Iranian government to develop phase 11 of South Pars in 2009, replacing France's Total, which had also been accused of lengthy delays. A spokesperson for the company admitted earlier that the company was struggling to finance the project.

South Pars is located in the Persian Gulf and is shared by Iran and Qatar. The Iranian section of the gas field holds 18 billion barrels of condensate, of which some 9 billion barrels are believed to be recoverable. The gas field accounts for half of Iran's and 8% of the world's proven natural gas reserves.

The CNPC source told the National Business Daily that pulling out of the project means foregoing a small deposit but will not cause any significant financial losses to the company. The situation regarding Iran's nuclear program and political environment, which has made investment unstable and risky, and the high degree of difficulty in developing the gas field, are the primary reasons for abandoning the project, the source said.