China's Sinopec has signed a multi-million dollar contract with Iran for the exploration and potential development of an oil block in the Islamic republic, Iranian official media reported.

Iran's President Mahmoud Ahmadinejad speaks regarding his country's nuclear programme at a news conference after participating in the Shanghai Cooperation Organization (SCO) summit in Shanghai June 16, 2006. [Reuters]

Iranian state radio said the deal to explore the onshore Garmsar block -- one of 16 oil blocks that Iran put out to tender in 2003 -- was worth between 20 million dollars and 59 million dollars and covers a four-year period.

The report said that if Garmsar is found to be viable, its development will be also awarded to Sinopec -- one of China's largest oil groups.

Another report in the Shanghai Securities News said Sinopec, China's largest refiner which is also becoming increasingly involved in exploration, has also bid on three other onshore blocks in Iran -- Khorramabad, Kuhdasht and Saveh.

The deal came after Iranian President Mahmoud Ahmadinejad's visit last week to China for a meeting of the Shanghai Cooperation Organization, a regional cooperation grouping in which it is an observer.

China and Iran have close economic ties but preliminary gas and oil deals have yet to bear fruit.

The countries are still in negotiations over a potentially huge energy deal that was tentatively inked in 2004 and involves Sinopec.

As part of the initial memorandum of understanding, Sinopec would buy 250 million tons of liquefied natural gas over 25 years, which alone could be worth more than 100 billion dollars.

In January 2001, Sinopec was awarded exploration of Zavareh-Kashan, another onshore oil block in central Iran.