Contractor Costain is staying put on a £950m oil and gas contract in Iran, despite reports suggesting the Iranian government is re-evaluating the project.

COGAP, the firm's oil and gas business, is part of a consortium with Spain's Dragados and local partners Sazeh and Jahanpars that won a $1.67bn (£950m) contract to develop the Bid Boland II gas treatment plant in south-west Iran.

But the allocation of new funds for the plant is thought to be under review by the new head of National Iranian Gas Company, with a decision due to be made in the next couple of months.

A spokesperson for Costain refused to discuss the future of the project but said the firm was still on the scheme and was monitoring the situation.

The project is thought to have suffered delays caused by the change of presidency from Mohamad Khatami to the more fundamentalist Mahmoud Ahmadinejad. This has led to bureaucratic delays, as many of the heads of the country's most important companies, all state appointees, have been replaced.

It could also lead to further derailments if sanctions are imposed over the development of Iran's nuclear programme.

Experts have warned of the possible withdrawal of Iranian oil from the market if the situation in the country, which is the world's fourth largest exporter, deteriorates.

The Bid Boland II project was initially expected to take four years to implement when it was awarded in the summer.