China National Petroleum Corp. signed an agreement in 2009 with the National Iranian Oil Co. to develop part of the Azadegan oil field, which straddles the border with Iraq.
Iran raised concerns last year about CNCP's pace. Hosseini said Wednesday the company may be taken off the project because it was an ineffective contractor.
"If the Oil Ministry comes to the conclusion that the contractor involved in the development of South Azadegan field lacks the necessary capacities, it will be dealt with legally and without hesitation," he was quoted as saying by Iran's semiofficial Fars News Agency.
The development comes as Iran tries to bring new foreign investors to its energy sector. Iran secured modest relief from Western sanctions through a November nuclear deal with Western powers, though U.S. officials have said Iran isn't yet open for business.
CNPC also has a contract to help Iran develop parts of the giant South Pars gas field in the Persian Gulf.
The Chinese company had no statement available about Iran's development concerns.