NEW DELHI (Reuters) - The Essar Group is in talks with Iran to develop the giant Azadegan oilfield, where a deal with a Japanese firm ended last year, to ensure fuel for a planned refinery and steel plant in the Islamic nation, a company official said on Friday.

Azadegan is Iran's biggest oilfield with in-place reserves of 26 billion barrels. Japan's INPEX Holdings Inc. lost control of the field in 2006 but retains a 10 percent stake.

“December-end or early January we met Iranian authorities ... We are again meeting them later this month or early next month to take forward the issue,” said Kharak Singh, head of exploration and production at Essar Oil Ltd.

Iran is drawing interest from Indian and Chinese firms, keen to help tap the world's second-largest reserves of oil and gas.

Singh said Essar officials had met National Iranian Oil Company (NIOC) Managing Director Gholamhossein Nozari and senior officials of Petroleum Engineering and Development Company (PEDEC) and Naftiran Intertrade Company (NICO) during a visit to Iran.

Iran's state-run PEDEC took over operatorship of the stalled project from INPEX at the end of last year.

He said Iranian authorities were willing to consider Essar's demand for development rights.

"How much and on what terms and conditions, these are yet to be finalized," Singh told Reuters.

He said Essar would also be bidding at an oil and gas assets auction, initiated by Iran last month. "We have identified around eight blocks for bidding."

Singh said Essar had no plans to rope in foreign partners for development of Azadegan. "They (Iran) cannot give more than 49 percent. In that case we would not like to take any global company. Rather we would prefer to give service contracts to Iranian companies."

"If we get rights to develop the field, we will get a share in oil and gas production which we can use for our (planned) refinery and steel plant," Singh added.

Essar, a diversified, family-owned holdings company with interests from telecoms to construction, plans to set up three steel plants in the Middle East, including a joint venture to build a 1.5 million tons a year steel plant in Iran.

The Indian group is also talking to Iranian officials over setting up a $2 billion, 300,000 barrels a day refinery near Bandar Abbas, in southern Iran.

Its oil refining subsidiary, Essar Oil Ltd., launched India's second private-sector refinery late last year and will ramp it up to 210,000 bpd by mid-year.

Setting up of new refineries and the upgradation of existing units are part of Tehran's $18 billion drive to meet soaring domestic fuel demand.

Iran is the world's fourth-largest crude oil producer but is also its second-largest importer of gasoline due to a lack of refining capacity and rapidly growing demand, fuelled by a young population and the world's second-cheapest pump prices.