Italy's ENI has not withdrawn from talks on developing the third phase of Iran's Darkhovin oil field, the managing director of the National Iranian Oil Company (NIOC) was quoted as saying on Wednesday.

'Negotiations continue with Italy's ENI for developing the third phase of Darkhovin,' Seifollah Jashnsaz said on the state news agency IRNA. 'ENI has not withdrawn from the project.'

Italy's Prime Minister Silvo Berlusconi said on Tuesday that ENI had cancelled an unspecified third development phase in Iran.

State-controlled ENI, which has fields at Darkhovin and the South Pars offshore site, declined to comment on Berlusconi's remarks.

An analyst who spoke on condition of anonymity on Tuesday said he believed the field in question was Darkhovin. Eni had upgrading plans to bring on line 14,000 extra barrels of oil per day. The company produced 28,000 barrels of oil per day in Iran in 2008.

A spokesman for ENI SpA in Milan declined to comment.

Italy has been one of Iran's main trading partners in Europe but Berlusconi's close ties with Israel, as well as diplomatic pressure over the ongoing nuclear dispute with Tehran, have led to a sharp reduction in Italian investments in the country.

Israel and Western countries fear that Iran's nuclear energy programme will allow the Islamic republic to acquire the ability to produce a nuclear bomb. Iran, under U.N. sanctions over the dispute, says it is only interested in generating electricity.

Italian Foreign Minister Franco Frattini told Italian television from Israel on Tuesday - where Berlusconi was an official trip - that Rome had gone so far as to suspend export credit guarantees for firms investing in Iran.-Reuters