China's biggest refiner Sinopec signed a deal with the Iranian oil ministry on Sunday on the development of the Yadavaran oilfield in southwestern Iran.

The project is estimated to cost about 1.34 billion euros, Iranian Oil Minister Gholam Hossein Nozari told the press, but added that the final cost will be decided after the offering of the tenders.

The project will be carried out in two phases which include first producing 85,000 barrels per day over a period of four years, after which output will be boosted by an additional 100,000 bpd over another three years, Nozari said. The aim is to ultimately have the field producing 185,000 barrels of oil per day.

The Yadavaran field has oil reserves of 18.3 billion barrels and gas reserves of about 12.5 trillion cubic feet, Xinhua writes. The amount of recoverable oil reserves is estimated to be about 3.2 billion barrels, according to Mahmoud Mohades from the National Iranian Oil Company (NIOC).

The Sino-Iranian deal is viewed as a key booster for the Iranian energy industry at a time when the US has been pressuring Asian and European companies to cut business ties with Iran.

The talks to finalize the deal that had been in the making since 2004 were held up by disagreements on the terms of the deal, including the rate of investment return proposed by Sinopec.

The newly signed deal shows that there is no lack of investment in Iran, Nozari said, and urged other countries looking to invest in Iran's oil and gas fields to take action.

For Iran, the oil deal is one of the biggest foreign energy contracts ever made. The country has the second-largest oil and gas reserves in the world and is actively looking to develop its oil fields.

China and Iran are expected to later discuss concluding a deal on the delivery of an annual 10 million tons of Iranian liquefied natural gas, beginning in 2009.

The Yadavaran contract was signed in Tehran by Zhou Baixiu, the head of Sinopec's international arm, and Iranian Deputy Oil Minister for international affairs Hossein Noghrehkar Shirazi.

China is the second largest importer of Iranian goods after Japan.