China's Sinopec Engineering Company has signed a deal worth $1 billion to develop Abadan Oil Refinery, Iran's oldest crude processing facility in the southern oil-rich Khuzestan Province, the Chinese oil and gas group announced.

The engineering, procurement and construction agreement with the National Iranian Oil Engineering and Construction Company is aimed at developing the second phase of Abadan refinery, Nikkei cited a statement by Sinopec.

"The group will pursue approximately 6.86 billion yuan ($1.05 billion) of the total contract value," the report said.

According to Iranian officials, the venture will be financed by China Export and Credit Insurance Corporation, or Sinosure. The funding is reportedly part of a deal worth $3 billion to overhaul and expand the facility.

Sinosure is China's major state-owned export credit insurance company. Its financing since its establishment in 2001 has totaled $290 billion for exports and investments.

Commissioned in 1912, Abadan refinery is the longest-running Iranian crude refinery and once the largest oil refinery in the world.

The development venture is expected to be completed in four years, with mazut output to be reduced to less than 20% from the present 40%.

The refinery was heavily damaged during the 1980-88 Iran-Iraq war. It is now operating with a daily processing capacity of around 400,000 barrels.

The government of President Hassan Rouhani has earmarked $14 billion to recondition and improve some of the biggest Iranian refineries, including in Tehran, Tabriz and Isfahan.

It has also opened negotiations with foreign companies to overhaul Iran's aging refinery industry, as plans call for boosting the country's crude processing capacity from 1.8 million barrels per day to more than 3 million barrels.

Iran is pushing to renovate its oil and gas processing plants to extract higher profit from its massive hydrocarbons and fulfill its commitment under a global environmental pact to slow down climate change.

Most of Iran's refineries produce huge amounts of mazut, diesel and other fuels that offer little value-added and accelerate the climate change. The purpose is to increase the output of high-quality gasoline as part of efforts to become self-sufficient in the production of the motor fuel.

According to reports, Iran ranks 11th in the world in terms of oil processing capacity. It is the ninth producer of gasoline and 13th diesel producer. However, it tops the list of producers pumping the unwanted and environmental-unfriendly mazut.

   Isfahan Refinery Project

The much-needed finance to rehabilitate Isfahan Oil Refining Complex has been provided by South Korean banks through Iran's Bank Mellat, with South Korean conglomerate Daelim Industrial Company to start operation works in the near future, said the deputy for planning at the National Iranian Oil Refining and Distribution Company.

"Daelim received a letter of award from Isfahan Oil Refining Company to carry out the development plan worth €1.9 billion ($2.3 billion) last December," Alireza Arman-Moqadam was also quoted as saying by Shana on Friday.

According to the official, the project is aimed at building new units to curb mazut production, raise efficiency and enhance crude processing to generate high value-added products in the refinery located around 400 kilometers south of Tehran.

Pointed to the signing of an agreement in January, Arman-Moqadam said, "The Koreans will be in charge of design, equipment and material procurement, construction and financing. Construction will take 48 months after groundbreaking."

Established in 1939, Daelim Group is one of the largest companies in South Korea. The fields covered by Daelim, as one of the top engineering, procurement and construction companies in Asia, include gas, petroleum refining, chemical and petrochemical, power and energy plants, building and housing, civil works and industrial facilities.